Sociology has no complete, formal consensus on a specific definition of capitalism. The discipline of sociology itself arose as an attempt to understand and explain the emergence and nature of modern capitalist societies. Sociology’s founding theorists were very much concerned with the development of capitalism. Emile Durkheim sought to find the bases of new forms of morality and social solidarity in the division of labor, which capitalism both expanded and accelerated (Durkheim 1984). Karl Marx, of course, spent his adult life analyzing and criticizing capitalist society. Marx’s project was guided by his hope and expectation that capitalism would be displaced as history moved toward a socialist, and then communist, future. Max Weber, too, devoted considerable attention to the origins of modern capitalism and the historically specific character of Western society under capitalist expansion. Contemporary sociology’s treatment of capitalism is grounded in the works of these theorists. The works of Marx and Weber, insofar as they more explicitly focused attention on the dynamics of capitalism, provide a point of departure for discussing modern sociology’s approaches to capitalism.
The term capitalism is sometimes used to refer to the entire social structure of a capitalist society.
Unless otherwise indicated, it is used here with specific reference to a form of economy to which multiple social institutions are effectively bound in relatively compatible ways. Weber used the term capitalism in a very general way: ”wealth used to gain profit in commerce” (Weber 1976, p. 48). This understanding of capitalism permits the discovery of capitalism in a wide variety of social and historical settings. Weber describes this general form of capitalism in traditional India and China, ancient Babylon, Egypt, and Rome and in medieval and modern Europe. However, Weber also constructs a more specific typology that pertains to the form that capitalism has taken in more contemporary Western society. This form of capitalism is referred to as modern, or Western, capitalism. In The Protestant Ethic and the Spirit of Capitalism, Weber (1958 pp. 21-22) contends that this is ”a very different form of capitalism which has appeared nowhere else” and that it is unique in its rational ”organization of formally free labor.” Other important characteristics of modern capitalism, such as the separation of business from the household and rational bookkeeping, derive their significance from this peculiar organization of labor. In this emphasis on the importance of free labor, or the creation of a labor market, Weber’s definition of capitalism moves much closer to Marx’s use of the term.
For Marx, it is the creation of a market for human labor that is the essence of capitalism. Marx wrote that capitalism can ”spring into life only when the owner of the means of production and subsistence meets in the market with the free laborer selling his labor power” (Marx, quoted in Sweezy 1970 pp. 56-57). The emergence of the free laborer represents the destruction of other noncapitalist economic forms. Feudal or slave economies, for example, are not characterized by the recognized right of laborers to sell their own labor power as a commodity. Simple commodity production, or economies in which laborers own their own means of production (tools, equipment, etc.), are not characterized by the need for laborers to sell their labor power as a commodity. In the latter case, Weber concurs with Marx that this freedom is only formal since such laborers are compelled to sell their labor by the ”whip of hunger.”
The sociological conception of capitalism also varies with particular theoretical understandings of the nature of history. Marxists, guided by an evolutionlike vision of history, tend to see capitalism as a stage in humanity’s progressive movement to a communist future. In this manner, Marxist sociology also often refers to various phases of capitalism. Wright (1978 pp. 168-169), for example, describes six stages of capitalist development: primitive accumulation, manufacture, machino-facture, monopoly capital, advanced monopoly capital, and state-directed monopoly capitalism. The implicit assumptions of law-like forces at work in the historical process are evident in the Marxist confidence that capitalism, like all previous socioeconomic orders, will eventually be destroyed by the internal contradictions it generates. References to the current stage of capitalism as ”late capitalism” (e.g., Mandel 1978), for instance, reveal a belief in the inevitability of capitalism’s demise.
The Weberian tradition, on the other hand, rejects the assumption of history’s governance by ”iron laws.” This leads to a recognition of various types of capitalism but without the presumption that capitalism must eventually be eliminated. The Weberian tradition discovers in the history of Western capitalism a process of rationalization toward depersonalization, improved monetary cal-culability, increased specialization, and greater technical control over nature as well as over persons (Brubaker 1984). However, while the Weberian tradition can expect the probability of continued capitalist rationalization, it does not predict the inevitability of such a course for history. It is important to note that, for Weber, a transition from capitalism to socialism would probably only further this rationalization. Such developments were seen as associated with industrial society and bureaucratic forms of domination rather than with capitalism per se.
This background permits a more detailed examination of contemporary sociology’s treatment of capitalism. Already, it can be seen that sociology’s understanding of capitalism is more specific than popular conceptions of capitalism as simply ”free-market” or ”free-enterprise” systems. This is especially so insofar as sociology focuses its attention on modern society. It is the emergence of a ”free market” in human labor that sociology tends to recognize as the distinguishing characteristic of modern capitalism. For Durkheimian sociology, this market guides the normal division of labor that is the basis of social solidarity. In this view, the absolute freedom of such a market is necessary to generate the conditions of equal opportunity that are required to guarantee norms by which people come to accept capitalism’s highly developed division of labor. Under conditions of a truly free labor market, the stratification system is seen as legitimate since individuals attain their position through their own achievement and not by means of some ascribed status (e.g., caste, gender, race, ethnicity, nepotism) or political patronage. For Marxian sociology, it is in this labor market that the two fundamental and opposing classes of capitalism meet: the owners of the means of production or capitalists (bourgeoisie) and the workers (proletariat). In this view, the struggle between these two classes is the dynamic force behind capitalist development. For Weberian sociology, this market for human labor is necessary for the development of the advanced and superior calculability of capitalist economic action. This calcula-bility is, in turn, a fundamental component of the rationalization process in modern Western society.
This transformation of human labor into a commodity is the force behind both capitalism’s internal dynamism as well as its outward expansion. On the one hand, capitalism is constantly driven to enhance its productivity. This compulsion of modern capitalism continuously to develop its technical capacity to produce is not driven simply by competition among capitalists but is related to the unique role that human labor plays in capitalist production. Prior to the emergence of a market for human labor, premodern forms of capitalism exhibited no such pressure constantly to revolutionize the technical means of production. Modern capitalism’s dependence on human labor as a commodity, however, demands that this cost of production be kept as low as possible. First, technological development can lower the cost of labor as a commodity by vastly increasing the production of mass consumer goods. The subsequent reduction in the cost of items like food and clothing translates into reductions in the cost of wages to sustain laborers and their families. Another means to this end is automation, the creation of technology that can replace or enhance human labor. Such technological development also permits capitalists to circumvent the natural limits of the human body to labor and the tendency of laborers to organize and demand higher wages, especially important spurs to technological development in capitalist societies characterized by a shortage of labor. However, under such conditions the capitalist’s demand for profitability may limit the internal expansion of technology as a means of increasing production (i.e., capital-intensive production) in favor of an outward expansion that draws upon new sources of labor. This expansion of capitalism can take two basic forms. On the one hand, there is a drive toward proletarianization, or the inclusion of more and more of society’s population segments that have previously escaped the labor market. On the other hand, there is a tendency to reach outside of the society itself toward other societies, thus incorporating ever larger regions of the world into the sphere of capitalism.
In the early development of capitalist societies, peasants are freed from feudal relations and slaves are freed from slave relations to add to the available pool of labor. This transformation is rarely a smooth one. The great revolutions in Western Europe and the U.S. Civil War forced these precapitalist classes to surrender their workers to the capitalist labor market. Another major source of labor for capitalist expansion has been independent laborers or persons who ”work for themselves.” Farmers who own their own land and equipment and work without hired labor are a good example of the type of self-employed producer that sociologists commonly refer to as simple commodity producers. There are other occupations in this general classification, of course. Highly skilled laborers have at times been able to retain independence from capitalist labor markets. However, capitalism has displayed a powerful capacity to bring these laborers into the sphere of capitalist, wage labor relations. For example, carpenters, mechanics, butchers, even doctors and lawyers increasingly find themselves working for wages or a salary in a capitalist firm rather than working for themselves. From time to time, the number of self-employed appears actually to rise in certain capitalist societies (Bechhofer and Elliott 1985). This is usually the result of the introduction of some new technology or new service. Sometimes persons who strongly wish to be their ”own bosses” are able to take advantage of specific market conditions or are willing to sacrifice potential income to achieve this status. But clearly, if capitalist societies are examined over the course of the last 200 to 300 years, the tendency is strongly toward increased absorption of persons into the capitalist labor market.
In recent times, labor markets in nations like the United States have found another major source of labor power in women. The traditional role of homemaker impeded the inclusion of women in the labor market. That role of women within the home has changed somewhat, but the role played by women in expanding the pool of labor available to capital has increased tremendously. According to Christensen (1987), for example, in 1960 30 percent of American mothers were employed; in 1986, 62 percent were employed. Ethnic minorities have often performed a similar function in expanding the size of the labor market. Succeeding waves of immigrants have frequently played an initially marginal role in the labor market, only to be gradually absorbed into more routine participation as time passes.
Capitalism’s inherent expansionary tendencies also push the capitalist society to reach beyond the borders of the nation. This expansion occurs as capitalism seeks markets for its products but also in the search for raw materials and cheaper labor to produce goods for the home market. Eventually, capitalism may simply seek profitable investment outlets outside the nation of origin. Sociology has analyzed capitalism’s transnational expansion with two general but conflicting theoretical approaches. Modernization theory views this expansion in a positive way, seeing it as a means by which undeveloped societies are enabled to begin the process of development that the developed societies have already achieved. This theoretical orientation has been especially important in shaping development policies directed at the ”third world” by many Western governments, the World Bank, and even the United Nations (Giddens 1987).
Sociology’s other basic approach to the emergence of a world-scale capitalist economy involves a more critical interpretation. This view tends to see capitalist expansion as having actually caused underdevelopment. The underdevelopment approach sees the lack of development in less-developed societies (periphery) as a consequence of systematic exploitation of their people and resources by the advanced societies (core). This process of underdevelopment is generally viewed as having occurred in three stages. The first stage, that of merchant capitalism, persisted from the sixteenth century to the late nineteenth century. Merchant capitalism, supported by military force, transferred vast amounts of wealth from the periphery to the European nations to help finance initial industrial development in what are now the advanced capitalist societies. The second stage, colonialism, persisted until about ten to fifteen years after World War II, when many colonial nations were granted formal independence. In the colonial stage, the developed societies organized economic and political institutions in the less-developed nations to serve the needs of industrial capitalism in the advanced nations. In the postcolonial period, formal political independence has been granted, but the persistent economic inequalities between developed and underdeveloped nations strongly favor the more-developed capitalist societies. Even when raw materials and finished products remain in the lesser-developed nation, the profits derived from such production are taken from the periphery and returned to the advanced core societies. Thus, the pattern of underdevelopment continues in the face of formal independence.
Traditionally, much of sociology’s attention to international capitalist expansion has focused on relations between nations. Increasingly, sociology is examining these matters with greater attention to relations between classes. This shift of emphasis reflects the increasing importance of the transnational corporation in recent times. The transnational corporation’s greater capacity to use several international sites for component production and the shift of much industrial production to underdeveloped regions are generating a process of deindustrialization in the advanced capitalist societies. While capitalism has long been a world system, many sociologists contend that the transnational, or ”stateless,” corporation has significantly less commitment or loyalty to any specific nation. Capital flows ever more rapidly throughout the world, seeking the cheapest source of labor. Modern computer technology has facilitated this trend. Asian, European, and North American capital markets are increasingly interdependent. Sociology’s shift of emphasis reflects this tendency for the U.S. capitalist to have more in common, sociologically, with the Japanese or German capitalist than the U.S. investor has in common with the American worker. Sociology’s new attention to the internationalization of capital may present a need for rethinking the usefulness of the nation as the typical boundary of a society. The emergence of the ”new Europe” and the demise of state socialism in Eastern Europe and the USSR may also lead to a more flexible notion of what constitutes a society.
The preceding discussion has focused on capitalism as a specific form of economy that is defined by the expansion of a labor market in which propertyless workers sell their labor power for money. Capitalist societies are, of course, far more complex than this. There are a number of distinct economic forms that coexist with capitalism in both complementary and conflictual relations. The capitalist economy itself may be broken down into two basic sectors, one representing big business and one representing small business. Sociologists usually refer to these as the monopoly sector and the competitive sector. This dual economy is reflected in a segmented, or dual, labor market. Monopoly sector workers are more likely to be male, unionized, receive better wages and benefits, have greater job security, and work in a more clearly defined hierarchy of authority based on credentials. Competitive sector workers are less likely to possess strong credentials, more likely to be female, receive lower pay, work under more dangerous conditions, and work without union protection, benefits, or job security.
Noncapitalist economic forms also exist alongside this dual capitalist economy. The self-employed reflect a form distinct from modern capitalism that sociologists commonly refer to as simple commodity producers or petite bourgeoisie. These people produce goods and services (commodities) for sale on the market, but they work for themselves and use only their own labor in production. Most capitalist societies also contain cooperative economic organizations that are distinct from capitalist enterprises. Cooperatives are commercial, nonprofit enterprises, owned and democratically controlled by the members. The nonprofit status and democratic distribution of control (one member, one vote) set cooperatives apart. The cooperative is an especially important form of economic organization for those simple commodity producers, like farmers, described above. All capitalist societies today also contain elements of socialist economy. Key social services, such as health care, and even some commodity production are provided by the state in many societies commonly recognized as capitalist. The United States is perhaps among the most resistant to this movement toward mixed economy. Yet even the United States has, to some extent, socialized education, mail delivery, libraries, police and fire protection, scientific research and technological development, transportation networks (e.g., highways, airports, urban transit), military production, industrial infrastructure provision, and so on. The mixed character of this economy is further indicated by the common practice of the government contracting capitalist firms to produce many goods and services. In a related way, the development of welfare has influenced the nature of capitalist society. The increased intervention of government into the economy has generated the notion of the welfare state. While popular conceptions of the welfare state tend to focus on the role that government plays in alleviating the impacts of poverty on individuals, sociology also recognizes that welfare reduces the cost of reproducing the commodity— labor. In this sense, welfare functions, in the long run, as a subsidy to capital. Further, many of the socialized sectors of capitalist economies function to ensure a profitable environment for capitalist firms (O’Connor 1973; Offe 1984). In many instances, such subsidization of capital is biased toward the largest corporations.
Some sociologists have contended that the rise of the large capitalist corporation, with its dispersed stock ownership and bureaucratic form of organization, has eroded the power of individual capitalists to control the corporation in which they have invested their capital. Instead, it is argued, bureaucratic managers have gained control over corporate capital. Such managers are thought to be relatively free of the drive to maximize profits and are willing to accept average rates of profit. In this way, the ruthless character of earlier forms of capitalism are seen as giving way to a capitalism that is managed with broader interests in mind. Further, the dispersal of ownership and control is said to eliminate the misuse of capital in the interests of an elite and wealthy minority. This ”managerialist” position complements pluralist political theory by providing greater authority for institutions of representative democracy to control the allocation of society’s resources.
This view is challenged in a variety of ways. Other sociologists contend that while management may have gained some formal independence, its job requires devotion to profit maximization, and its performance is assessed on this criteria. In this view, the larger companies’ executives and owners are able to use interlocking directorates and their common class background (e.g., elite schools, private clubs, policy-planning organizations) to minimize price competition and thus sustain high profit levels. Others argue that those informal ties are of less consequence than their common dependency on banks. In this view, banks, or finance capital, play a disproportionately powerful role in centralizing control over the allocation of capital resources. This position strongly opposes the managerialist arguments and those who envision an independent corporate elite whose power lies in the control of corporate bureaucracies rather than in personal wealth (Glasberg and Schwartz 1983). Further, to the extent that it is valid, this argument is particularly important given the increasing internationalization of capital discussed above, since a great deal of that development has occurred in the sphere of finance capital.
These sorts of arguments reflect an important shift in sociology’s understanding of the relationship between capitalism and democracy. Sociology’s Enlightenment roots provided a traditional legacy of viewing capitalism and democracy as intertwined in the process of modernization. While this parallel development is certainly recognizable in early forms of modern capitalism, more recent forms of capitalism call into question the extent to which capitalism and democracy are inevitably bound together. Indeed, recent works suggest that capitalism and democracy are now opposed to one another (e.g., Piven and Cloward 1982). This view holds that the tremendous inequality of wealth generated by modern capitalism impedes the possibility of political equality. Even conservative writers (e.g., Huntington 1975) have noted the problematic relationship between contemporary capitalism and democracy, suggesting a retrenchment of democratic forms in defense of capitalism. The future of capitalism will be shaped by this tension with democracy, but that tension itself is located in an increasingly global economy. At the moment, the politics of capitalist society seem to lag behind the economic changes. The individual is increasingly pressured to sell his or her labor as a commodity on a world market, yet at the same time that individual remains a citizen, not of the world, but of the nation. The transnational capitalist enterprise and the flow of capital, on the other hand, are ever more free of such national borders.
