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Capitalism in The United States

Relations of Production

  • Definition: relations of production are the social and technical relationships required to produce goods and services; can be voluntary or involuntary.
    • Voluntary social: friendships, voluntary associations.
    • Involuntary social: family, nation.
    • Voluntary technical: tools and skills you choose to use (e.g., hobby woodworking).
    • Involuntary technical: required tools/relationships for production you cannot opt out of.
  • In capitalism, the relations of production create an antagonistic employer–employee dynamic: the employer seeks higher profits and lower wages, the worker seeks higher wages and better conditions.
  • Government protection historically tends to favor the owning class (in the US, major corporations) over workers; under socialism the dynamic would reverse in theory.
  • Schatz-Schneider on class consciousness: businessmen as the most class-conscious, highly organized and unified to defend privileges; others are less organized and polarized.
  • Wealth concentration in the US:
    • Top 1% own about 30\% of wealth; bottom 50% own less than 3\%.
    • Top 400 own as much as the bottom 50 combined.
  • Economic indicators: productivity rising while workers’ share of GDP stagnates or falls.
  • Political voice and power:
    • Interlocking directorates: leaders sit on multiple boards across sectors.
    • Revolving door: personnel move between industry, government, and policy roles to shape favorable regulations.
    • Media framing and Overton window: wealthy groups steer narratives and limits of debate.
    • The “middle class” is shrinking or hollow; debt and paycheck-to-paycheck living are common across income levels.
  • Legal and racial/class oppression historically reinforced production relations:
    • Post-C Civil War: transition from slavery to planter class; sharecropping and free labor with coercive controls.
    • Black codes, vagrancy laws, debt peonage, convict lease systems; literacy tests and segregation reinforced inequality.

Key historical trajectory of government–society relations in the US

  • 1862 Homestead Act: free land to westward settlers to support rail expansion.
  • 1862 Pacific Railway Act: approx. 1.75\times 10^{8} acres granted to railroad companies; land subsidies to build the rails.
  • Post-Civil War: former slaveholders become planters; free laborers lack access to means of production; formal slavery ends but coercive labor structures persist.
  • 1873 Panic of 1873: crisis of overproduction leads to railroad bankruptcies; strikes erupt; federal troops suppress strikes to protect corporate interests.
  • Progressive Era: trusts and big corporations dominate; concerns about lack of free competition; calls for reform grow.
  • WWI (1914–1918): government–business–labor policy committees; peak industrial growth; pent-up demand after war boosts postwar economy.
  • Great Depression (1929): mass unemployment due to reduced demand; Hoover’s hands-off stance vs FDR’s New Deal.
    • New Deal: Keynesian deficit spending, job creation (WPA, etc.), social safety nets (unemployment insurance, Social Security).
  • WWII and postwar era (late 1940s–1970s): US as global economic leader; high productivity and strong unions; “Golden Age” of capitalism; rising living standards.
  • 1970s stagflation: high unemployment and high inflation coexist; policy response shifts to market-oriented approaches.
  • Reagan era (1980s): market fundamentalism and supply-side economics; emphasis on deregulation, tax cuts for the wealthy; debate over the effectiveness of debt management.
  • Debt dynamics across eras:
    • Keynesian era: debt-to-GDP fell from about 0.90\ (90\%) toward 0.33\ (33\%).
    • Reagan/Bush era: debt-to-GDP climbs toward 0.75\ (75\%) and beyond by later years.
    • Post-2008 and beyond: debt-to-GDP around 1.20\ (120\%) and rising.
  • Economy shift: move from manufacturing to a service/finance-based economy; financialization grows; bailouts and extraordinary monetary/fiscal actions shape outcomes.
  • Modern context: media framing and political voice favor the wealthy; ongoing inequality and questions about long-term sustainability of debt-financed growth.

Market fundamentalism vs Keynesian economics

  • Market fundamentalism (often linked to supply-side economics):
    • The market is rational: price equals intrinsic value; profit motives ensure efficiency.
    • The market is self-correcting: regulation is unnecessary; prices adjust through entry/exit of firms.
    • The system is beneficial to society when left alone.
  • Keynesian economics (demand-side):
    • Mass unemployment reduces demand, which worsens the cycle; government should stimulate demand via spending and deficits.
    • Tools include public works, welfare programs, unemployment insurance, and social safety nets.
  • Debt/development data illustrate differences:
    • Keynesian period debt-to-GDP: from 90\% down to 33\% of GDP.
    • Reagan era debt-to-GDP rises to 75\%; post-2008 around 120\% and rising.
  • Result: market fundamentalism contributes to rising inequality and volatility; Keynesian approaches historically mitigated downturns but faced political opposition.

Crises of overproduction: common (and often illusory) solutions

  • Unemployment and the idea of a natural rate (cyclical/frictional) around 5\%; some argue this is design to maintain profit margins.
  • Minimum wage as a tool to keep profits high by suppressing worker purchasing power.
  • Job precarity and labor restructuring:
    • Transforming careers into temporary/leased positions.
    • Two-tier contracts; benefits for current workers but worse terms for future workers.
    • Wage theft: workers clock out and perform hours off the clock; off-the-clock work without pay.
  • Outsourcing and offshoring to cheaper labor; wage theft and exploitation persist.
  • Shifts in retirement planning: move from pensions to 401(k) plans as a control mechanism.
  • Prison labor and suppression: move some jobs into the prison system (referred to in later units).
  • Imperialism and global competition as a strategy to maintain access to markets and cheap resources.
  • Note: these are strategies to preserve class disparity, not universal solutions.

Quick reference: essential terms and ideas

  • Relations of production: social/technical links that shape production and distribution.
  • Bourgeoisie vs proletariat: ruling owning class vs working class.
  • Class consciousness: awareness of one's class position and interests.
  • Interlocking directorates: cross-appointments on many corporate boards.
  • Revolving door: movement between industry and government to shape policy.
  • Overton window: frame of acceptable political debate.
  • Homestead Act: land grants to settlers; Pacific Railway Act: land grants to railroads.
  • Sharecropping and planter class: post-Civil War labor and property relations.
  • Debt peonage, vagrancy laws, convict lease: coercive labor practices after emancipation.
  • Stagflation: simultaneous high unemployment and high inflation (1970s).
  • Market fundamentalism: faith in self-correcting markets with minimal regulation.
  • Supply-side vs demand-side economics: tax cuts and production-led growth vs stimulus to boost demand.
  • Debt-to-GDP ratio: ext{Debt}/ ext{GDP} as a measure of fiscal burden (examples: 0.90\to0.33\;\text{(90% to 33%)} during Keynesian era; 0.75\$ to \;0.75 later; 1.20 post-2008).