The social function of the economy

Image: Tatiana


In Latin America, when you try to democratize the economy, dictatorships return

“Inequality is above all a social, historical and political construction” (Thomas Piketty).

“We can certainly say that our technological proficiency far exceeds our moral, social and political development” (Oliver Stone and Peter Kuznick).

Small exploration history

The digital revolution is having as profound an impact as the industrial revolution in another era. What we call capitalism has its roots in industrialization, which involved technological transformations, but also social relations of production, with salaried work and capitalist profit, in addition to a legal framework centered on private ownership of the means of production. With the digital revolution, which involves a radical expansion of technologies, as well as the generalization of the immaterial economy, global connectivity, virtual money and precarious work, the very basis of capitalist society shifts.

In particular, the appropriation of the social product by wealthy but unproductive minorities no longer requires job creation and production of goods and services. It passes through the intermediation of money, knowledge, communications and private information. Where the factory dominated, today we have the dominance of platforms on a planetary scale, which exploit not only people, for example through indebtedness, but also the productive companies themselves through dividends paid to absent shareholders.

The present study is centered precisely on what is changing in what we call the capitalist mode of production. Industrial activity undoubtedly remains, as agricultural activity remained in the face of the industrial revolution, but the axis of domination and control is no longer in the hands of the captains of industry, it is in the hands of financial giants like BlackRock, of communication platforms like Alphabet , manipulation tools like Facebook, commercial intermediaries like Amazon.

The mechanism for appropriating the social surplus has changed, and with it the very nature of the system has changed. We are in the midst of a profound transformation of society, in its economic, social, political and cultural dimensions, generating what has been called a civilizational crisis. We are transitioning to another mode of production, and the present study systematizes the new mechanisms.


the eternal exploration

In different eras and societies, the appropriation of the social product by minorities has always been at the center of the organization of society as a whole. The starting point is the very existence of social surplus. When the productivity of a society increases, allowing it to produce more than the basic necessities for families, elites appear that claim, for some reason, and with more or less dubious justifications, the right to have more than others, appropriating a third-party product. In the slave mode of production, they appropriated what the slaves produced, an appropriation based on force, and explained as the legitimate property of people.

When Lincoln managed to get the end of slavery approved in the XNUMXth century, it was not the slaves that were compensated, but the slave owners, for losing “property”. There have always been explanations, which today we call narratives, to justify the absurdity: they were black, or wild, or they had no soul, as they said at the time, or they were captured in a “just war”, as they also said. The essential thing was that they produced a surplus, which allowed the owners to afford luxury and financed the repression of the numerous uprisings. It was the slave mode of production, unjust but stable, it lasted for many centuries, including laws that governed the property system of human beings and religions that enshrined them. The reason of the strongest always seeks to appear fair.

In the feudal system, elites appropriated the land, the basis of any economy before machines appeared. The feudal lords, for different reasons, but essentially because they had weapons and fortifications, in struggle with each other ended up delimiting the feuds, and the rural population that lived on the land would not be property of the aristocrat, but would be governed by systems complexes of obligations that prohibited them from leaving the manor. Men were servants, they served. The surplus produced was appropriated, in the Middle Ages and much of the Renaissance – in Russia until 1917 – by the “lords”. Land workers were obliged to cede a large part of their production to the aristocrats, wealth that allowed the noble to have a castle, live in luxury, and be able to pay the troops that ensured that the system was maintained. Here, too, there were numerous uprisings and repressions.

Part of the surplus also served to support the convents, in a religion that, from the fourth century onwards, had allied itself with the powerful, and justified the system as divine will. The laws ensured the coherence of the system, the rules of the game so to speak, including, for example, in Europe, the jus primae noctis, which gave the aristocrat the right to appropriate the first wedding night of a peasant woman. The powerful like legality, as long as they make the laws. And for those who contested it, there was also the inquisition and other repressive systems.

Anyway, it was a mode of production, it also lasted centuries, defined by an economic base, the land, social relations of production, serfdom, and forms of surplus extraction in the form of impositions of various kinds. The set was governed by rules, which were largely respected. The appropriation of the surplus was based on the laws, justified by the blue blood of the nobles, sanctioned by the church with narratives, and guaranteed by military repression. Balls at Versailles or Vienna had to be financed by someone. Witold Kula, a Polish historian, wrote for the feudal system what Marx wrote for the capitalist system. It was a system, a mode of production.

Although the two systems mentioned above, slavery and feudalism, seem historically distant to us today, we need to remember that slavery in Brazil existed until the end of the XNUMXth century, in the United States until the Civil War, that the exploitation of populations colonies was general and lasted until the middle of the last century, and that the apartheid system lasted until yesterday in South Africa and still exists in Palestine. Neither the United States nor Brazil have yet managed to absorb and overcome the oppression and inequalities inherited from the slavery past, Africa is painfully facing the necessary reconstruction. The past is not that far away. It's a long tail that takes time to pass. In many nations built on countries, it is still structurally decisive.

The capitalist mode of production appears to us with another level of legitimacy. At the base of the transformation were scientific advances, the energy revolution, increased productivity and, therefore, the possibility of generating a sustained cycle of social enrichment. O Liberty, Equality, Fraternity of the French Revolution echoed around the world. With the Enlightenment, the search for values ​​in society began to open gaps in obscurantism, the number of women burned as witches reduced (“you shall not allow witches to live” instructs the Bible, Exodus 22:18), the view of enrichment as the legitimate fruit of effort, and the concept of merit as a virtue were generated. The narrative has evolved. The worker now has the freedom to ask for a job and to be exploited. The industrial revolution brought another level of productivity, increased prosperity, but not for everyone. A step forward, no doubt, and the mechanism of exploitation evolves, but it is maintained, narratives change, and repression is modernized. In particular, the most direct exploitation and violence shifts to the South.

In the study The Making of the Third World we present the global dimension that capitalism acquires, in which the industrialization of England, a very capitalist system, was based on the reproduction of slavery in the United States and other countries that supplied it with raw material. The capitalism of the British empire had no reservations about using slavery, forced labor and massacres in different parts of the world, and today we are impressed by England apologizing for what it did in India, Kenya and so many other countries, France apologizing to countries Africans for the violence of the past, the United States for what it did in Iran. Years from now they will apologize for what they did in Afghanistan. Let us remember that Belgium, in the Congo, was responsible for millions of deaths, a process documented in the study The Phantom of King Leopold. The prosperity of today's rich countries is not only due to the productivity and rationality of the capitalist system. A fraternity has clear limits. Until today, many are not aware of the primitive subsystems on which the so-called capitalist liberalism was based. Brazil contributed a lot.

In general terms, the capitalist system in rich countries was based on articulations with pre-capitalist systems in colonized or simply dependent countries. Samir Amin, in a classic book, correctly called this system 'capital accumulation on a world scale'. This dimension of accumulation allowed an appropriation of surplus, through the exploitation of workers and appropriation of surplus value in central countries, but also through direct colonial exploitation or unequal exchange, with the narrative of bringing civilization to primitive peoples, and evidently with military force.

Religion, here too, often served as a civilizing balm. That was yesterday, my university years were contemporaneous with the liberation struggles in the colonies. Today we have independent countries, which can freely decide by whom they will be exploited, whether by debt or unequal exchange systems, or both. Exploitation changes form, narratives update discourse, military control becomes more sophisticated. But we are always serving elites.


The precarious balance: produce for whom?

This little retrospective helps us to remember the extent to which the barbarism that would shock us today – slavery, serfdom, colonialism, the apartheid – is still close, and to what extent it survives and penetrates our daily lives. Just look at the color of people in our slums or inner city neighborhoods and prisons across the United States. We must also pay attention to the impact of the various forms of organization in developing countries, not only because they remain largely specialized in primary products, which hinders modernization, but because those who export need labor only for work, not for consumption: the product goes to the foreign market, and the consumption of the elites is largely guaranteed by imported products. For those who produce for the foreign market, and import finished products, the consumption power of their workers is not essential. In the middle of the XNUMXst century in Brazil, reprimarization generates the same contempt for increasing the population's consumption capacity.

The impressive misery of the workers, something that we see until today in what we call developing countries, even with the most advanced technologies, results from this form of capital accumulation, in which boosting the purchasing capacity of the base of society is not essential, because the cycle of accumulation largely closes abroad. At the same time, technological advancement makes the need to hire labor less essential, through the replacement process. So there is technological modernization, but with little transformation of social relations, perpetuating inequality and poverty. It is the social legacy of the North-South relationship. The reader interested in this mechanism can consult my Formation of Capitalism in Brazil. The essential idea, which I had the opportunity to discuss with both Samir Amin and Caio Prado Júnior, is that the cycle of reproduction of capital in poor countries is closed abroad, the need for labor is reduced, and unequal exchange and indebtedness secure the rest. Technological modernity coexists without problems with largely prehistoric exploration.

In the industrialized countries themselves, in the so-called West which represents around 15% of the world's population, the tension between increasing exploitation and ensuring the purchasing power of the population has become strong. It took the dominant capitalist world to face the 1929 crisis so that it became aware that it is not enough to produce, it is necessary to ensure consumption, to close the cycle of capital accumulation. Exports to the poorest countries, in exchange for raw materials, would not be enough, and the New Deal of Roosevelt has in its essence the generation, through the State, of greater purchasing capacity by the general population. Sherwood, who wrote Roosevelt's speeches, detailed the program in a brilliant book, Roosevelt and Hopkins. Hopkins was instrumental in executing the New Deal.

The Civil War, in the 1860s, in addition to freeing slaves, had broken the colonial cycle of cotton exchanged for British imports, internalizing the cycle of capital reproduction, in the new relations between the industrial northeast and the raw material producer south. but it was the New Deal which generated a broad incorporation of the American population into prosperity. Consumption at the base of society, initially financed by the State, generated demand, soon a reduction in stocks accumulated in companies, and then the resumption of production, soon an increase in employment, generating even more demand, allowing a cycle of capital accumulation this time in a balanced way. Eric Hobsbawm, in the book the age of extremes, details this economic and cultural transformation.

Among Keynes' contributions that demonstrated the need to ensure aggregate demand, the impact of the success of the New Deal, and the common sense of a Henry Ford stating that good wages were necessary for his cars to be bought, a new vision was opened, that of the welfare state, Welfare State. It could no longer be said that workers would not gain from capitalism. For once, and particularly during the 30 “glorious” post-war years, we had an impressive dynamic in rich countries, with the balance between production capacity and social demand, business dynamics and public investment. In political terms, social democracy was generated.

Let us remember, once again, that for an economy that exports primary goods and imports industrialized goods, the market is abroad, and technologies replace jobs, so expanding jobs and increasing workers' wages would not be priorities. Angola exports oil and imports consumer goods for the elites. In Latin America, when you try to democratize the economy, dictatorships return. We can have democracy as long as we don't use it: the result is formal political democracy, the vote, without economic democracy. The pandemic only opened up the economic, political and social fracture. In Brazil, today one of the largest exporters of agricultural products in the world, we have 19 million people who are hungry, and 116 million in a situation of food insecurity, in the middle of 2022. With a step up in terms of technology and extraction volumes , we arrive at a new type of technocolonialism. With a few exceptions, such as China, of course, and also some Asian tigers, the planetary fracture of capitalism becomes more technical, but deepens.

* Ladislau Dowbor is professor of economics at PUC-SP. Author, among other books, of A era do capital improvutivo (Literary Autonomy).

Book excerpt Rescuing the social function of the economy: a matter of human dignity. Available in

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