Downloading PDF. Please wait... Issue 2589

The rich business – why competition makes ‘ethical capitalism’ an impossibility

This article is over 6 years, 4 months old
Issue 2589
All in it together at the 2005 World Economic Forum
All in it together at the 2005 World Economic Forum (Pic: World Economic Forum)

Right wingers are furious with Oxfam for an “anti-capitalist” tweet that slammed growing inequality.

“We have an extreme form of capitalism that only works for those at the top,” it said.

There’s no doubting the scale of the global divide between rich and poor.

The evidence was in the charity’s global wealth report, released as the ruling class gathered for their annual World Economic Forum (WEF) in Davos, Switzerland.

The report found that 42 super-rich men held as much wealth as the world’s poorest 3.7 billion people.

That’s even sharper than last year when it was 67 men—and the report underestimates the gulf between the rich and the rest of us.

Bosses and bankers hide their fortunes in offshore tax havens, as the Panama and Paradise Papers exposed in the last two years.

The leaks showed that billionaires are often four times wealthier than their official rich list ranking in Forbes magazine.


For Oxfam the solution is measures to regulate the rich, such as raising corporation tax or stopping tax avoidance. “That is why we are calling for governments to manage economies so they work for everyone and not just the fortunate few,” it said.

It is possible to narrow the level of inequality in a capitalist system, and government policies matter.

When working people struggle, and demand change, they can get results. When they are defeated and their organisations weakened then the gap grows.

After the Second World War, inequality was sharply reduced. Working class people had had enough of poor quality housing and inadequate healthcare and jobs. Fearing their anger, the bosses were forced to make big concessions.

The Labour government nationalised top industries, set up the NHS, built council housing and taxed the rich.

After that successive governments, both Tory and New Labour, pushed free market reforms and attacked unions. This increased inequality.

They have slashed corporation, income and inheritance taxes for the rich and driven down incomes for working class people.

Privatisation and outsourcing scams such as PFI shift millions of pounds into private hands.

The ruling class has greeted the prospect of Jeremy Corbyn as prime minister with a mix of fear, outrage and preparation for resistance. The solution is a socialist society that is based on meeting social needs, not maximising profits.

And Tory austerity—from freezing public sector workers’ wages to benefit reforms—made this situation worse.

After the global crisis of 2008 workers in Britain suffered the longest wage squeeze since the Great Depression—the first one, in the 1870s.

Meanwhile, the 1,000 richest individuals and families have seen their wealth more than double in the same period.

Similarly workers in the US haven’t had a real pay rise per hour since the 1970s.

A backlash against this has fuelled support for left wingers such as Jeremy Corbyn in Britain or Bernie Sanders in the US. And their policies, such as supporting a £10 an hour living wage or higher taxes for the rich, could help reduce inequality.

Just before the Davos summit Sanders issued a call to do something about spiralling inequality and climate catastrophe.

And he said, “a new and international progressive movement must commit itself to tackling structural inequality both between and within nations.”

Any such struggle would be very welcome.


But there are severe limits about how fair capitalism can be. It produces, reproduces, and widens the gap between rich and poor.

Inequality has existed in all class societies, but under capitalism it flows from the social relationship between bosses and workers.

Exploitation is at the heart of the system. Bosses own and control the “means of production”, whether that’s call centres and giant offices or factories and machinery. This means workers have to sell their ability to work—their labour power—in order to make a living.

Workers’ labour creates wealth, but bosses don’t pay workers the full value of what they create and grab a slice for themselves. The revolutionary Karl Marx called this gap “surplus value”, which capitalists’ profits are based on.

Bosses have to maximise their profits or they’d go out of business. That’s because the system is driven forward by competition between rival firms.

To get ahead of their rivals capitalists need to increase productivity—get more out of workers. That means they will always try to squeeze extra from workers, whether that’s by driving down wages, axing jobs or denying workers in-work benefits such as sick or maternity pay.

Sometimes technology helps to make workers more productive. Sometimes it’s just plain demands for more sweat.

Modern “lean production” is one example of how to extract more. In the US studies showed workers did 42 to 52 seconds of actual work per minute in automobile assembly.

Bosses demanded this was replaced by Toyota’s 57-second minute thereby “filling up the pores of the working day”.

Aside from adding seconds, management also reduced break time.

If the reduction in break-time were combined with Toyota’s 57-second minute, the employer would have gained almost two hours of extra work within the eight-hour day.

Such methods don’t make these bosses “extreme” capitalists”, they are simply following the logic of competition.

Under capitalism everything is submitted to this logic of profit and loss.

When capitalism goes into crisis, governments push through policies that increase inequality.

The likes of Thatcher and Reagan began pushing through free market reforms in the 1980s in response to a deep-rooted crisis of capitalism.

Capitalism had reached the limits of the post war boom and needed to find new ways of increasing profitability.

Reforms during the 1950s and 60s that had reduced inequality had been underpinned by an unprecedented capitalist boom.

But once the system went into crisis, the ruling class needed to claw them back. Bosses needed to squeeze more out of workers and it also fuelled an explosion in the banking sector.

This all helped the rich grab a bigger slice of the wealth and increase inequality.

Similarly, the Tories didn’t pursue austerity just because they are nasty—although they undoubtedly are.

Governments had bailed out the banks after the global crash and forced working class people to pick up the tab.

Policies that increased inequality fitted with the needs of capitalism at the time.

Right wingers are on the defensive because they are aware of the anger people feel toward them.

So they push the lie that capitalism can actually create wealth for all—and help less developed countries catch up with the West.

Apologists for capitalism argue that free markets and free trade benefits all countries, whether they’re rich or poor. All they have to do is find a product that they are good at producing and focus on exporting it.

But richer capitalist states will use their advantage to keep ahead of less developed ones.

Many countries in the Global South still suffering from the underdevelopment that decades of slavery and Western colonialism brought.

And this has been perpetuated by the International Monetary Fund (IMF), whose policies have kept them locked in poverty and debt.

In exchange for IMF loans, the countries have to push through brutal free market reforms. This is how capitalism works.

It also follows that that any serious assault on inequality will come up against the power of the ruling class.


And to win such reforms will take a war on all the mantras of the last 40 years about the need to slash taxes for companies and the rich, shrink the welfare state and weaken trade unions.

The ruling class has greeted the prospect of Jeremy Corbyn as prime minister with a mix of fear, outrage and preparation for resistance.

Imagine how they would react to a government that really started to address not just the rise in inequality but the driver of inequality in the first place—capitalism.

The solution is a socialist society that is based on meeting social needs, not maximising profits.

To uproot inequality we have to totally break from that logic—and that means getting rid of capitalism altogether using the full revolutionary power of the working class.

Sign up for our daily email update ‘Breakfast in Red’

Latest News

Make a donation to Socialist Worker

Help fund the resistance