Concentration of Wealth and Power Under Capitalism

The nature of capitalism will lead to a concentration of wealth and power

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Capital and Profit

Capital, or private ownership of the means of production, is owned to obtain a profit. This profit naturally comes directly from those who labor on the means of production. This is an important topic and will be needed later in this post. To sum it up, the workers labor while the capitalist controls. Profit is simply the difference between the value the worker produces and what is paid to the worker. This is also called surplus value. (To learn more about that exploitation go here)

Profit is often re-invested, to buy more capital. This is done to provide more profit in the future. This causes every single business that is not going bankrupt to expand. This expansion causes many problems. One is over-production. Over-production eventually causes a cascade of failures once nobody is willing or able to buy the product. One example is the housing crisis recently in the United States. Since not every company will survive this crash, they become more centralized.

Bigger business tend to be more efficient with their resources, giving them a competitive edge in markets. Physical machinery is one example. It's a lot more efficient to have 500 people in one factory than 10, especially where the costs of basic necessities are concerned, like heating, cooling and the building itself. More efficient machines for manufacturing tend to be bigger and more expensive (especially with automation). This becomes a massive startup cost, that less and less people can afford as it gets more advanced. The only way to afford it is a loan, and without some crazy new concept will put you at a major disadvantage. This leads to more and more concentration in wealth and power to those who own the biggest factories.

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The Rate of Profit

There is also the tendency for the rate of profit to fall. Marx split the production cost of goods into two parts. One invariable and one variable. The invariable one is based off of the cost of raw materials and the costs of machines. The other cost, variable, is wages. Wages can rise or fall based on market conditions. There are two ways capitalists can increase profits. By increasing the amount of raw resources and machines or by making them more efficient. When the machines are more efficient less workers are needed to produce the same amount of goods. (The more effort put into making a machine more efficient, the more complex or large is becomes. This puts bigger business at an advantage, concentrating capital as well.) This machine increases profit for a time, but eventually everyone gets one or goes bankrupt.

The key here is the ratio of the cost of human labor to the cost of material and machines. As discussed above the only value added to an object is added by those who labor on it and profit can only come out of the difference between wages and the value added to the object. As more product is produced by the worker the difference between the wages of the worker and the value of the object decrease, the profit must decrease. In other words, since the amount of labor to produce an object is the only measure of its value, and that price is a reflection of that (supply and demand will tend towards an equilibrium), as the amount of labor needed to produce an object approaches zero the ratio of profit on investment to cost of investment approaches one. To simplify that further, when no labor is required to make an object the cost is simply that of the materials and there is no profit possible. Capitalism tends towards production that takes less and less human labor, meaning this will more or less be followed in a vacuum.

The tendency of the rate of profit to fall is only that, a tendency. The economy has ways of, temporarily, managing and stopping this. Some of this is more intense exploitation of labor by lowering wages, reducing the cost of materials through trade or lowering the cost of production (starting this over again), increase in the “surplus population” (the unemployed that can be set to work, this is one reason why capitalism depends on unemployment), or share capital with other businesses. [1][2]

Taken with expansion, the tendency of the rate of profit to fall gives only two options. Monopolise the market or become imperialist in search of super-profits. Since this is only easily done with large businesses, it is more concentration. Remember, as the rate of profit falls things like loans will catch up with businesses and crush them, giving the largest yet another advantage.

The final problem of this leads into the next topic. If wages are pushed down as one of the only ways to keep profit from falling to near zero, who will buy the product? You need two large groups of people then to grow larger. A large group to buy the products and a large group with near zero wages to create the product.

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Finance Capitalism

Finance capitalism splits the world between two groups: The great powers and finance capital. Both have the goal of extracting as many resources from third world countries as possible. These are both forms of imperialism, the highest stage of both capitalism and centralization.

Finance capital is always in search of the highest return on profit. As explained above, that means it is looking for the goods that take the most human labor to produce, with the lowest wage. They eventually settled on areas to imperialise with either their military, finance capital, or both. These areas today are now known as the third world.

Finance capital must find a way to protect its profit and increase it. This is often done through a monopoly. This means that the country, even though it could produce the goods itself, must be reliant on the third world country for these goods produced in the monopoly. The massive profits from this monopoly are often actually shared with the entire population of the home country. This materialises in better living conditions and cheaper goods accessible by a greater amount of citizens, even though less is actually produced by the country. (Take the United States for example.) This is needed to keep producing profit, because without this group of privileged working class members all markets under capitalism would grind to a halt. Since it is still a group of warring factions, until one wins out they can not allow this to happen.

Giving resources to the working class in the first world countries has more than one consequence. Bribing politicians, giving workers higher wages, and giving workers a few more rights like welfare and medicine placates them. In other words, these workers do not want to drop to the level of the third world, so they fight to keep the system in place. The politicians want more money, so they fight to keep the system in place. Workers only want to survive, and they must fight to keep the medicine in place. The two party system ensures that the workers do not fight the rich for these rights, but each other. All of this together gives the rich power to control the general direction of society, while the warring workers are able to choose specifics, like the ability for gays to marry or if the poor should get one amount of scraps or a slightly larger amount of scraps. The goal of this is to prevent organization of the workers.

This has another consequence, war. Since capitalism must always expand, the finance capital invested in these third world countries will be re-invested. Eventually, third world countries will run out of industry, people, and materials to exploit. This means they must either invest in increasing the exploitation or expanding beyond that country or market. Research has lead to the claim that this is the reason for world war one, and many other, smaller, wars. Obviously, these wars have winners of some sort. These winners go on and expand into the industry controlled by the losers, increasing centralization even more. [3]

All of these together have brought a small group of people to the top of the world. Five people own more wealth than half of the world, combined. They are the rulers of this world. The rulers capitalism will always create in one way or another. The rulers are not the government, not the police, and not the military leaders. The rulers are those who own the government, not those who lead it. [4]

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