Are you a capitalist if you invest in stock?
How Harari confuses the labor-capital relation
[Etching by April Burke]
Part 2.3 in my critique of Harari’s Sapiens: A Brief History of Humankind.
Are you a capitalist if you invest some of your wages into the market, in a 401K, for example?
Sure—by a certain, very broad and ultimately inadequate definition.
The case of a wage-earner investing part of their wage on the stock market is rather different from a business owner investing their profits in production by hiring more workers and buying more equipment. To confuse the two is to confuse the relation between labor and capital, which Harari does—in one of the rare moments in which he mentions workers in Sapiens:
Capitalism distinguishes ‘capital’ from mere ‘wealth’. Capital consists of money, goods and resources that are invested in production. Wealth, on the other hand, is buried in the ground or wasted on unproductive activities. A pharaoh who pours resources into a non-productive pyramid is not a capitalist. A pirate who loots a Spanish treasure fleet and buries a chest full of glittering coins on the beach of some Caribbean island is not a capitalist. But a hard-working factory hand who reinvests part of his income in the stock market is.[1]
The first part sounds fine: “Capital consists of money, goods and resources that are invested in production.” And the general distinction of this definition of capital from examples of wealth also works well. Where I take issue is in the last claim: “a hard-working factory hand who reinvests part of his income in the stock market is [a capitalist].”
I take it Harari would not expect this kind of “capitalist”—the wage-earner investing in stock—to find themself on the executive board of a corporation.
How many wage-earners who invest in stock will end up living primarily off the profit of their investment? How many influence the direction of capitalist production? What kind of barrier is there to such capitalists achieving such social mobility?
Harari’s definition of capitalist hides how the capitalist economy generally works, that it operates fundamentally on a relation between labor and capital. A factory worker’s relation to the economy is categorically different from that of the type of capitalist who hires them; there’s a key distinction within the capitalist economy between those who sell their labor power to others and those who buy labor power from others.
In Marx’s definition, one is a capitalist when their primary relation to the market in any given cycle of production begins and ends with money; on the other hand, a worker’s primary relation to the market in any given cycle of production begins and ends in commodities—that is, it begins with the sale of the workers’ labor power on the market and ends in the purchasing of commodities for consumption, for use, as a means to an end: the reproduction of oneself and family, etc. In most cases, when a worker invests on the market, they do so as a means to an end: resources to consume through a retirement, for example, as a peasant would stock for the winter.
Unless they are actively trading stocks, and reinvesting profits made from one sale of stock into purchase of another, then we’re talking about, generally speaking, single time investments – a portion from one paycheck and then from another, rather than some kind of reinvestment of profits made on interest of the stocks-owned.
While the loop closes in the case of the investments of the worker, there is no end to the investments of a capitalist; hence, capital is money that is continuously re-invested in production, whereas money that is for consumption in retirement does have an end.
“The new capitalist elite”
Rather than acknowledging the capitalist class as the dominant class in society, succeeding the ruling classes of feudal society, Harari describes the overtaking of nobility by “a new elite whose members are true believers in the capitalist creed:”
In the modern era, the nobility has been overtaken by a new elite whose members are true believers in the capitalist creed. The new capitalist elite is made up not of dukes and marquises, but of board chairmen, stock traders and industrialists. These magnates are far richer than the medieval nobility, but they are far less interested in extravagant consumption, and they spend a much smaller part of their profits on non-productive activities. […] The typical venture capitalist rushes from one business meeting to another, trying to figure out where to invest his capital and following the ups and downs of the stocks and bonds he owns. True, his suits might be Versace and he might get to travel in a private jet, but these expenses are nothing compared to what he invests in increasing human production.[2]
First of all, sure, in proportion to their broader investments, capitalists “spend a much smaller part of their profits” than did medieval noblemen; however, capitalists are also obviously far wealthier overall, and the extravagant robes, banquets and carnivals of medieval noblemen pale in comparison with mega yachts, commercial rocket ship rides, etc.
Second, this comparison of noble elites—medieval noblemen vs. “the new capitalist elite”—is missing any economic distinction between the two. Rather than explaining the power of board chairmen, stock traders and industrialists as primarily economic, Harari emphasizes their being “true believers in the capitalist creed”—as if what distinguishes them from “a hard-working factory hand who reinvests part of his income in the stock market” is merely the degree in which they believed in the creed.
Primitive accumulation
While there are certainly exceptional “rags-to-riches” stories out there, the capitalist system itself presupposes the existence of capital, what Marx and other Political Economists describe as “primitive accumulation” or “previous accumulation.” Marx explains that:
the accumulation of capital presupposes surplus-value; surplus-value presupposes capitalistic production; capitalistic production presupposes the availability of considerable masses of capital and of labour-power in the hands of commodity producers. The whole movement, therefore, seems to turn around in a never-ending circle, which we can only get out of by assuming a primitive accumulation (the ‘previous accumulation’ of Adam Smith) which precedes capitalistic accumulation; an accumulation which is not the result of the capitalistic mode of production but its point of departure.[3]
So how does Harari understand this point of departure given capitalism is for him primarily a belief system? How did the original capitalists separate themselves from the rest of society and gain a dominant role within it?
The implication of Harari’s view is that they did so through dogged adherence to their ethics, as Harari describes a separate set of ethics for the rest of society, the consumerists ethics, which happens to pair with the capitalist ethics: “The capitalist and consumerist ethics are two sides of the same coin, a merger of two commandments. The supreme commandment of the rich is ‘Invest!’ The supreme commandment of the rest of us is ‘Buy!’” In describing the role of these ethics, Harari gives a crude and classist take on poor people “who stuff themselves with hamburgers and pizzas” compared with the rich “who eat organic salads and fruit smoothies.”[4]
These creeds serve Harari in developing an idealist account of the maintenance of class, and the origins story which this account implies is a variation of the moralist “two kinds of people” story for which Marx criticized the Political Economists before him in their accounts of the origins of capital.
As Marx writes, parodying this story which he thinks of as immature:
Long, long ago there were two sorts of people; one, the diligent, intelligent, and above all frugal elite; the other, lazy rascals, spending their substance, and more, in riotous living. The legend of theological original sin tells us certainly how man came to be condemned to eat his bread in the sweat of his brow; but the history of economic original sin reveals to us that there are people to whom this is by no means essential. Never mind! Thus it came to pass that the former sort accumulated wealth, and the latter sort finally had nothing to sell except their own skins. And from this original sin dates the poverty of the great majority who, despite all their labour, have up to now nothing to sell but themsleves, and the wealth of the few that increases constantly, although they have long ceased to work. Such insipid childishness is every day preached to us in the defence of property. […] But as soon as the question of property is at stake, it becomes a sacred duty to proclaim the standpoint of the nursery tale as the one thing fit for all age-groups and all stages of development. In actual history it is a notorious fact that conquest, enslavement, robbery, murder, in short, force, play the greatest part. In the tender annals of political economy, the idyllic reigns from time immemorial.[5]
Notes
[1]. Harari, Sapiens (New York: HarperCollins, 2015), 313.
[2]. Ibid, 314.
[3]. Marx, Capital: Vol. One (London: Penguin Books, 1990), 873.
[4]. Harari, 348-9.
[5]. Marx, 873-4.