This document provides a critical analysis of capitalism. It defines capitalism as an economic system driven by profit maximization, with two fundamental classes - the capitalist class that owns the means of production, and the working class that must sell their labor to survive. Capitalists exploit wage labor to generate profit. Goods under capitalism are commodities that have both a use value and exchange value determined by the socially necessary labor to produce them. Capitalism relies on the exploitation and alienation of wage labor for profit and growth. However, its exponential growth is dependent on cheap and abundant fossil fuels, and faces dual limits of energy depletion and environmental degradation.

1. What Is Capitalism?
A Critical Analysis
Craig Collins, Ph.D.

2. Capitalism’s
Essence
Capitalism’s
Essence
• Capitalism is an economic
system driven by the
need to maximize profit.
• Two fundamental classes
dominate society:
– A capitalist class that
privately owns society’s
means of production.
– A working class that owns
no means of production &
must sell its labor power
to the capitalist class to
survive.
Capitalists make profit by exploiting wage labor.Capitalists make profit by exploiting wage labor.

3. Capitalism & the Commodity
• The goods & services
produced under capitalism
are commodities.
– Commodities are
“useful” things that are
made to be sold in a
market.
• Thus, commodities have
a dual nature:
– They have a “use value”
& an “exchange value.”

4. Use & Exchange ValueUse & Exchange ValueUse & Exchange ValueUse & Exchange Value
• Any service, resource, or
product (transformed through
labor to make it useful) has a
use value.
A haircut, water, a sandwich.
• Anything with use value that is
exchanged (sold for money or
traded for something else) has
an exchange value as well.
A Supercut, bottled water, a
Subway sandwich.
•As the capitalist market
expands, the profit motive turns
more & more useful activities &
products into commodities with
an exchange value.

5. What is a Commodity’s Exchange Value?
• The Labor Theory of Value contends that
the exchange value of a commodity is
based upon the average socially necessary
labor-time that went into making it.
• Labor is the underlying element that all
commodities have in common which
allows people to roughly compare their
relative values.
– However, actual market prices are
influenced by other secondary factors as
well: supply & demand variations,
monopolies or competition, tastes & fashion,
etc.
– Like all commodities, the value of labor
power (wages) is based on the average
socially necessary labor-time that went into
training & sustaining the workers’ capacity to
keep working (food, shelter, etc.).
• Capital (like machinery) is essentially “dead
labor”—labor embodied in the machines it
produced.
– Thus capital is a condition where “dead
labor” exploits “living labor”.

6. Capital & LaborCapital & Labor
• Capitalism’s primary
characteristic is its profit-
driven need to commodify
& exploit labor.
• This can only happen if the
producers (workers) can
be separated from their
means of production
(tools, land, etc.).
• Historically, this was done
by coercion & force.
Once separated from their tools,
workers have nothing to sell but
their labor power, which they
must sell to capitalists who now
own the means of production.
– Agri-business & farm workers
in the countryside.
– Factory owners & industrial
workers in the city.

7. Capital is a RelationshipCapital is a RelationshipCapital is a RelationshipCapital is a Relationship
• Money may OR MAY NOT be
capital.
• Capital is any form of wealth
(machinery, land, resources,
money) that is used to employ
labor for the purpose of generating
greater wealth (surplus value) for
the owners of capital (capitalists).
• Capitalists gain profits by paying
workers less for their labor power
than value of the wealth they
produced. This is the meaning of
exploitation.
– The more wealth (surplus value)
workers generate above the cost of
their labor, the more exploited they
are…the greater the “rate of
exploitation.”

8. Exploitation & Surplus Value:
Where Multiple Profits Come From
Exploitation & Surplus Value:
Where Multiple Profits Come From
• The wealth produced by workers above the value
of their wages is called surplus value.
• For capitalism to function, this surplus value must
be large enough to:
• Return a profit to the employer.
• Pay for resources & machinery.
• Generate interest for investors.
• Pay rent on property.
• Make profit for retailers,
advertisers & other “middlemen”.

9. What Is Labor Power Worth?
Workers are not paid the value of
the products they produce. If
they were, the capitalist would
make no profit, which is clearly
not the case:

10. The Labor Theory of Value’s Answer:
Labor power is worth the average socially necessary labor time
that went into creating it.
– Therefore, wages should meet the cost of the food, shelter, clothes &
transportation, etc. needed to keep workers alive & returning to
work (more, if labor went into some form of previous training or
skill).
– To maximize profit, wages must be considerably lower than the value
of the products labor produces. So capitalists avoid paying the full
value of labor.
• Wages do not cover housework or childcare, unless they are
commodified.
The unpaid labor of those who cook,
clean, care for workers & raise future
workers is externalized—usually onto
women (or society, as in public
education). Damages done to the
environment are also externalized.

11. • Workers receive wages for the products they
produce: this is an unequal exchange.
• The products workers make become the
property of the capitalists.
• Workers are “alienated” from their tools & the
products of their labor, which now face them
as commodities they must buy in the market.
• Competition also alienates them from each
other.
• While they work, their time & energy belongs
to the capitalist as well.
• This transforms the self-directed, cooperative,
creative, life-fulfilling process of useful activity
into time spent under the bosses’ control doing
whatever makes him the most profit relative to
what he pays his workforce.
• These are the conditions Marx called alienated
labor.
We Make It, They Take It

12. Alienation & Commodity Fetishism
• A fetish is the attribution of
religious or mystical qualities to
inanimate objects: crucifixes, worry
or prayer beads, statues, talismans,
etc.
• Marx referred to commodity
fetishism under capitalism.
• By this he meant the way our
economic system endows
commodities with special qualities
(like power, status, popularity,
happiness, beauty, success), while
disguising the alienation,
exploitation, toxic conditions &
environmental damage that actually

13. Capitalism’s ContradictionsCapitalism’s Contradictions
Central Contradiction:
Socially Produced Wealth vs.
Private Ownership & Control
over the Means of
Production
This produces:
– “Over-production” (bubbles, booms &
busts)
– Recessions, Depressions,
Financial/Debt Crises
– Centralization: oligopoly & the
elimination of competition. (too big to
fail?)

14. Fatal Contradictions?Fatal Contradictions?
• So far, the serious contradictions
Marx identified have not proven
fatal.
• Capitalism has side-stepped
these barriers & crises by a
process of destructive
regeneration.
• Capitalism’s “solution” to each
past crisis has been to destroy &
rebuild its forces of production
(in wars or depressions) in an
uneven process of long-term
growth.
• It seems that as long as
capitalism has the energy to
regenerate itself after each
collapse or war, it will continue
to do so.

15. Is The Labor Theory of Value Complete?
This theory assumes that only
labor exploitation generates
profit & surplus value.
• BUT IS THIS TRUE?
– Work in many forms creates
wealth & surplus value.
– Energy is the capacity to do work.
• The additional wealth that could
be produced when human work
was only supplemented with
animal, wind & water energy was
fairly limited.
• But when human labor wasBut when human labor was
subordinated to the fossil fuelsubordinated to the fossil fuel
powered industrial machine, itpowered industrial machine, it
became just a fraction of thebecame just a fraction of the
energy applied towardenergy applied toward
producing unprecedentedproducing unprecedented
amounts of wealth.amounts of wealth.

16. Why Are Fossil Fuels Special?
• Fossil fuels are a source ofFossil fuels are a source of
tremendous wealthtremendous wealth
because they possess farbecause they possess far
more useful energy thanmore useful energy than
the small fraction ofthe small fraction of
human energy necessaryhuman energy necessary
for their extraction.for their extraction.
• One barrel of oil contains
23,000 hours of work.
– That’s 12.5 years of human labor!
(at 40 hrs/week).
– We use about 85 million barrels
every day.
• One gallon of gas produces
the equivalent work of a
person laboring 8 hours day,
5 days a week, for 3 weeks.
Oil is extremely energy dense. The
energy in 13 gallons of gasoline
(about a tank full for most compact
cars) is equal to the combined work
of 1,000 people over an entire day.

17. Black Gold: A Gift From Nature
The work needed to
create fossil fuels was
done by the sun & the
Earth’s geological forces
over millions of years.
• No one had to investNo one had to invest
any money or labor toany money or labor to
to grow, harvest, cookto grow, harvest, cook
& compress billions of& compress billions of
tons of ancient plant lifetons of ancient plant life
in vast undergroundin vast underground
reservoirs.reservoirs.
One gallon of oil contains the
condensed, concentrated
energy of about 98 tons of the
original prehistoric plant life
that collected its energy over
millennia from the sun.

18. Fossil Fuels & Economic Growth
• Notice below how the
rate of economic
growth mirrors the rise
& fall of oil production.
• Notice above how GDP climbs
after 1900, as new sources of
fossil fuels are consumed by
the US economy.

19. Energy & Labor Exploitation
Petroleum powered machines are the
essential for:
• Replacing wage labor (automation).
• Increasing output per labor/hour.
• Allowing production to continue year-
round, day & night.
• Creating global chains of production,
trade & communication.
• Keeping the working class weak & wages
low by:
 Mechanizing agriculture: driving people
off the land (surplus labor).
 Reducing the cost of food = lower wages
 De-skilling work.
 Accessing distant labor pools by
reducing transport costs.
All of this works only if fossil energyAll of this works only if fossil energy
remains abundant & cheap.remains abundant & cheap.
“Machinery becomes the most powerful weapon in the war of capital against the working class.” -Engels

20. Industrialism & “Free” Labor
Commodified (wage) labor is
well suited to rapidly
changing, high-energy
production because it is:
• Disposable & mobile.
• Cheap to reproduce.
• Desperate & competitive.

21. Cheap Energy Intensifies Exploitation
• Capitalism uses cheap, abundant
fossil fuels to intensify labor
exploitation, increase surplus
value & concentrate wealth at
the top.
• After 1982, cheap energy was
used to computerize, automate
& outsource production.
– This destroyed the bargaining
power of labor & undermined
unions.
– It also decimated the industrial
base of the US economy.
• Thus productivity & profits rose
over the last 3 decades while
wages remained stagnant.

22. Petro-Powered Industry Favors Globalized, Profit-
Driven Production Relations
Profit-driven production for a
world market :
• Demands rapid, flexible
mechanization to maximize
labor productivity &
exploitation.
• Encourages globalized
chains of production to
move capital wherever
resources & labor are
cheapest.
• Fosters a globalized market
to consume industrial
output & maintain profits.
These factors disadvantage
nationally bound, industrial
economies that don’t exploit labor
& resources on a global scale.

23. Economic Growth & Fossil Fuels
Capitalism’s exponential growth metabolism
relies on carboniferous energy.

24. Fossil Fuels & Global Domination
• Carboniferous energy fuels
worldwide chains of
extraction, production,
consumption & coercion.
– Factories, mines, cities, farms,Factories, mines, cities, farms,
aqueducts, railways, electricityaqueducts, railways, electricity
grids, pipelines, freeways,grids, pipelines, freeways,
harbors, airports,harbors, airports,
communication networks,communication networks,
prisons, governments & militaryprisons, governments & military
bases cannot operate withoutbases cannot operate without
them.them.
• This global system is
dominated by financial
institutions, MNCs & powerful
core states that control access,
flow & use of energy.
• No petroleum, no power.

25. Malignant Metabolic Accelerators
Motivators of exponential growth:
• Maximizing the rate of return on
invested capital. (accumulation &
profit)
• Debt + interest based monetary
system.
• Market competition & hyper-
consumption.
• International rivalry for energy & other
vital resources.
These accelerators have depleted
industrialism’s hydrocarbon energy
base within a few centuries by
rewarding rapid, wasteful expansion &
discouraging conservation.

26. Running on Empty--The Symptoms
• Capital Scarcity
– Energy sector claims bigger share of
available capital.
• Demands greater subsidies & military
protections.
• Energy Famine-Economic Crisis
– We now consume 6 barrels of oil for
each one we discover…but demand
still soars!
– Rising energy prices
– Inflation-stagnation-recession
• Diminishing Returns
– Rising extraction costs & declining
returns (EROEI*--net energy)
• Before 1950: 100 to 1
• Today 6 to 1 (worldwide)
• In the US, .8 to 1
*Energy Return On Energy Invested

27. Dual Limits of Industrial Capitalism
• Energy base depletion:
– There are no known substitutes
for fossil fuels that will permit
exponential growth.
– If substitutes were discovered,
they would only accelerate…
• Ecocide:
– Climate chaos
– Ecosystem destruction &
biodiversity collapse
– Environmental toxicity
– Over-population/consumption
• Resource depletion