Who and what is the working class?

Why do they rule?

We can describe, document, and analyze the ruling class, but why do they hold power? What explains the existence of social classes? Karl Marx and Friedrich Engels, known best for their work The Communist Manifesto, begin with the assertion that “the history of all hitherto existing society is the history of class struggles.” To understand class, they start with the fundamental premise that “life involves, before everything else, eating and drinking, habitation, clothing, and many other things.” To sustain these basic needs, a society must have a reliable surplus of essential resources. Wherever there is a sustained and consistent surplus, there arises the possibility of a ruling class—a group of individuals who can live off the surplus and control how it is produced and distributed. This class may evolve slowly and take on many forms, some of which may be benevolent while others are not.

In many societies, it is clear how the surplus we create is controlled, whether through collective storage in storehouses or by tithes demanded by kings or lords. One of Marx’s most significant contributions was demonstrating how surplus value is extracted from the working class in capitalist societies. In a capitalist system, workers sell their labor power in exchange for wages. It may seem that workers receive a fair day’s pay for a fair day’s work, suggesting that they are compensated equally for their contributions. However, they are actually generating a surplus: Workers produce more value than they are paid and than they consume.

This process is often hidden in plain sight. Marx’s major contribution was to shed light on how this exploitation occurs. In Hadas Their’s must-read book, The People’s Guide to Capitalism, the concept is explained in accessible terms. Here is a brief explanation from a larger discussion:

Let’s say you work for Starbucks and they pay you $120 for an 8-hour shift. However, you can probably produce $120 worth of fancy coffee in an hour, or even in half an hour at a busy store. Even after subtracting the cost of materials and the use of equipment, ‘once you subtract the cost of materials and the use of the equipment, Starbucks doesn’t pay you anywhere near the value you’ve created (hundreds of dollars a day). They buy your labor-power from you, not the actual fruits of your labor. And you make that value back for them in an hour. The rest of your shift, you’re basically working for free! (76)

Marxists describe this dynamic as class exploitation, which refers to the appropriation of surplus value from labor. Conversations about fairness, equality, and the idea that “we are all in this together” are rooted in this fundamental relationship that is central to our society.

When workers attempt to unite, the narrative often changes. Howard Schultz, the CEO of Starbucks, referred to the union for Starbucks baristas, SBWorkers United, as “an outside organization trying to take our people.” He claimed that companies are “being assaulted in many ways by the threat of unionization.” In 2021, the ratio of CEO pay to that of a Starbucks employee was 1,579 to 1. This clearly demonstrates that we are not all in this together.

The ruling class controls the decisions regarding the creation and distribution of the goods and services we rely on, as well as how the surplus generated is managed. Currently, there is an ongoing debate about whether these decisions are made through state planning or by private companies operating in the market. I aim to examine each aspect to understand the justifications for their dominance and to analyze the legitimacy of their power.

Capitalism is commonly defined by the fact that decisions regarding production and distribution are governed by market forces. This means that most goods and services are not primarily created for their use value but rather to be exchanged in the market. While markets have existed for thousands of years, the concept of the market as a general force governing the economy is only a few hundred years old.

A key factor in the emergence of capitalism was the creation of a labor market, which involves the exchange of people’s labor for wages. For much of human history, engaging in wage labor was viewed as a sign of not being truly free. In his book From Slavery to the Cooperative Commonwealth, Alex Gourevitch documents this perspective. He quotes Aristotle, who stated, “It is the mark of a free man not to live at another’s beck and call.” Gourevitch also illustrates that Abraham Lincoln considered wage labor to be a temporary stage of work that individuals might experience in their lives. Gourevitch writes:

[T]he prudent, penniless beginner in the world, labors for wages awhile, saves surplus with which to buy tools or land, for himself; then labors on his own account another while…. [This] is free labor.” Wage-labor is at best a temporary condition on the way to truly free labor.

Today, the idea of free labor has shifted from the freedom to choose your own activities to merely selecting whom you will work for in the “free market.” This arrangement has become so widespread that it often feels natural. Mark Fisher referred to this phenomenon as Capitalist Realism which he describes as “a pervasive atmosphere, conditioning not only the production of culture but also the regulation of work and education, and acting as a kind of invisible barrier constraining thought and action.”

No one asked for this. It was not a demand from the people to work for someone else at their beck and call. In his work Capital, Marx highlights the force needed to impose capitalist relations. He concludes that “Capital comes dripping from head to foot, from every pore, with blood and dirt.” He illustrates that, even at its inception, peasants were pushed off their land through the enclosure of common land into private estates. The expansion of capitalism required even more brutal force. In chapter 31, Marx further elaborates:

Whilst the cotton industry introduced child-slavery in England, it gave in the United States a stimulus to the transformation of the earlier, more or less patriarchal slavery, into a system of commercial exploitation. In fact, the veiled slavery of the wage workers in Europe needed, for its pedestal, slavery pure and simple in the new world.

The capitalist state continues to rely on force as the ultimate means of managing class relations. Legislation and ideologies encoding racism, sexism, nativism, anti-LGBT discrimination, and ableism are forcefully enforced as a divide-and-conquer strategy aimed at preventing the working class from uniting.

While it took significant effort to establish and maintain this system, it was not consciously planned from the beginning. Adam Smith did not invent capitalism. There are ongoing debates about the exact origins and dynamics that contributed to its growth; however, it was only after wage labor and market forces became widespread that people began to theorize and justify how capitalism functions. Both critical theorists and supporters of capitalism agree that competition at the heart of the market incentivizes dynamic innovation and increases productivity. Proponents also argue that the market is the most effective mechanism for meeting people’s needs. As the neoliberal economist Hayek stated, the market provides “a more efficient allocation of societal resources than any design could achieve.” A “spontaneous order” emerges from the self-interests of participants, who communicate signals to each other through the buying and selling of goods and services, with prices helping to convey information about supply and demand over distances.

Do they really rule?

What is the role of company leadership in this concept of ‘spontaneous order’? Let’s consider what Adam Smith called the “invisible hand” of the market, which, according to Adams, creates a natural stability through the exchange of products and services. It appears that the significance of planning and governance by executive management and boards of directors is lessened. Ben Tarnoff further discusses this idea in his book Internet for the People:

One of the strangest things about capitalism is the fact that the people who control the perpetual motion machine—the capitalists—do not really control it. They are like characters in a play. They have a role to perform. Different actors can perform a role differently, but the script remains more or less the same. Accumulation must continue, which means that profit must always be the primary consideration. This makes capitalists a peculiar kind of ruling class. They rule, but not completely, since they are in turn ruled by a higher power. (28)

CEOs and corporate leaders are the avatars of market forces, rewarded if they accumulate profits and punished when they fail to do so. This is the higher-order algorithm of market logic, which ultimately determines their self-proclaimed governance.

There is a fundamental contradiction at the core of market proponents that they struggle to resolve: the belief in the market’s ability to deliver essential goods and services, alongside the argument for the necessity of leadership to ensure that it actually does. Even extreme free market advocates, like Friedrich Hayek, acknowledge the need for welfare provisions.

This contradiction arises from the reality that, while profit incentives in the market can sometimes align with the need to meet human and environmental needs, they do not always correlate. The accumulation of capital is not a reliable indicator of fulfilling our basic necessities.

This contradiction is still often recognized by those in power today. They commonly attribute it to two main factors: “short-termism” and externalities.

Short-termism

Short-termism is the idea that when corporations only look out for their short-term success, they are not looking out for the bigger-picture contributions they can make to society that will make them valuable in the long run.

One way that advocates of the market try to square this circle is by discussing the morality of the corporate leaders. Ira Millstein in his book The Activist Director, traces the ethical intervention of leaders being considered a necessity of a working market from the time Adam Smith was writing. Millerstein argues:

According to Smith, as elaborated in his book The Theory of Moral Sentiments (1759), the people who inhabit the competitive market are expected to have the virtues of “prudence, justice, and beneficence,”… “temperance, decency, modesty, and moderation,” and “should be “scrupulous… never either to hurt or offend.” This was his moral philosophy and was a foundation for the market theory later articulated in Wealth of Nations. Smith understood the importance of ethics in business–he knew that ethical behavior was vital to the survival of free markets. (189-190)

Rather than mocking the absurdity of the idea that the workings of the market depend upon the temperament of some unelected leaders, Millstein and others insist on this as being our solution.

Millstein admits that this solution is a tall order, but insists that it is the only way.

I don’t suggest more intervention by regulators or so-called experts. The solution I propose is more difficult. It is to create a new breed of activist director, one who is conscious of the effects of decision-making, who will drill deeply into a corporation’s financials and culture, who will not shrink from confrontation, who will ask tough questions of the CEO when he or she veers off course or when the numbers include unexpected special write-downs. (181)

Dambisa Moyo similarly looks to the moral fiber of directors as the best way to ensure corporations look beyond short-term motivations.

The best boards are not waiting for new laws; they are already reviewing their practices and experimenting with fresh ideas. Today’s boards must be even more focused on how to prepare for the future. … Today’s board members are custodians whose job it is to strengthen the company’s foundation, upon which board members of the future will continue to grow and run the business. Ultimately, this means corporate board members must embrace humility rather than hubris, remaining vigilant and malleable as they lead in an increasingly chaotic world. (227)

These are not serious responses to the serious problems we face in an “increasingly chaotic world.” Yet this is what ruling-class apologists suggest in more or less elaborate terms again and again. We are asked to place our hope for the future in corporate leadership. And yet, look how they lead: Larry Fink, the CEO of Black Rock, a leading voice for environmental, and social governance (ESG), rejects the idea that divesting in fossil fuel companies will assist the transition to a carbon-neutral world economy. In his “Letter to CEOs on the Power of Capitalism,” Fink asserts:

BlackRock does not pursue divestment from oil and gas companies as a policy… Foresighted companies across a wide range of carbon intensive sectors are transforming their businesses, and their actions are a critical part of decarbonization. We believe the companies leading the transition present a vital investment opportunity for our clients and driving capital towards these phoenixes will be essential to achieving a net zero world.

Fink is arguably one of the most important members of the ruling class today because Blackrock invests the funds it controls in significant minority stakes of the world’s largest companies. Despite being a vocal advocate for addressing climate change, and in the position to divest from fossil fuel, Fink defers responsibility to the companies who have a vested interest in continuing fossil fuel extraction. His decision is to trust the market, which he ostensibly has as much control over as anyone. In place of serious environmental interventions, Fink and others ask that we place our faith in the ‘foresight’ of the market.

Whether we approve of the role capitalists play in shaping social policy or not, it is already the status quo as David Capara and Jane Nelson of the Brookings Institute point out:

[t]he private sector is becoming a significant player—indeed, some might say the dominant player—in shaping the global economic and development agenda. Multinational corporations with operations spanning the globe, and in some cases capacities and networks that match those of governments, have a particularly important role to play in helping to spread the opportunities of globalization and in mitigating some of its risks.

In the end, they are accountable to no one but the market. And, yet, we are asking them to protect us from the short-term incentives of that same market.

It makes no sense, and we have no time for this nonsense.

The circular arguments persist, as if this is a genuine and serious discussion. When they do recognize any limitations of the market, they shift the accountability and responsibility back to the state. In the same letter to CEOs, Fink calls on the government for guidance:

Capitalism has the power to shape society and act as a powerful catalyst for change. But businesses can’t do this alone, and they cannot be the climate police. That will not be a good outcome for society. We need governments to provide clear pathways and a consistent taxonomy for sustainability policy, regulation, and disclosure across markets.

Capitalism may be a powerful catalyst for change, but is it the change we desire? The issue lies within the market itself; we can adjust the leadership, but that won’t address the fundamental misalignment between accumulation for its own sake and production for human needs. A brief examination of the market’s shortcomings makes this clear.

Externalities

Externalities are those costs to society and nature, such as air pollution, extinction, or desertification, that are not factored into the price of commodities. For our survival, we need to take these things into account. ESG is a recognition of this imperative.

Another Nobel Prize-winning economist Joseph E. Stiglitz, writing in 1986, explained externalities and their ubiquity:

[T]he reason that the invisible hand often seems invisible is that it is often not there. Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay, or for which they are not compensated—markets will not work well. Some of the important instances have long understood environmental externalities. Markets, by themselves, produce too much pollution. Markets, by themselves, also produce too little basic research. (The government was responsible for financing most of the important scientific breakthroughs, including the internet and the first telegraph line, and many bio-tech advances.) But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always. (229)

Stiglitz has a familiar solution to compensate for the failure of the markets:

Government plays an important role in banking and securities regulation, and a host of other areas: some regulation is required to make markets work. Government is needed, almost all would agree, at a minimum to enforce contracts and property rights. The real debate today is about finding the right balance between the market and government…. Both are needed. They can each complement each other. This balance differs from time to time and place to place. (264)

It is clear that if we have a market, it will require a state. What is less convincing is the argument that we need a market at all. The main arguments in favor of a market focus on efficiency in delivering what we need to survive without having a centralized accounting of every variable in the system. While it is undeniably efficient, this efficiency does not align with fulfilling human needs; instead, it efficiently serves its primary purpose: accumulating capital.

The core issue here is that capitalism is driven to create competing pools of capital from the surplus generated by our labor. If a company fails to accumulate capital, it cannot compete and risks going bankrupt or being acquired by another firm. This fundamental mechanism operates independently of our needs. Therefore, to ensure that the market addresses our requirements, we must intervene—either as individuals or, more effectively, through legislation enacted by the state.

The State

We have seen that figures ranging from Friedrich Hayek to Larry Fink have discussed the necessity of state intervention in regulating the market to address the misalignment between market incentives and human needs. The underlying assumption is that the state’s interests are more aligned with our needs. Throughout the history of capitalism, the nature of the state has varied significantly, from the social democracies of Scandinavia to the authoritarian regime in Chile during the 1970s, and the monarchical structures in the Middle East. The state is a contested arena. However, I will argue following Marx, that in the end, the state ultimately represents the interests of the ruling class. Although it appears as a contested space, it functions as an instrument of class rule. During the formation of the US state, this objective was made quite explicit.

The United States was not designed to be a democracy

Robert Ovetz gives a detailed account of the formation of the Constitution and how it was structured to include checks and balances on any rule by the majority.  In his book We the Elites: Why the US Constitution Serves the Few, Ovetz writes:

The Framers distrusted democracy and majority rule, what James Madison called the “oppressive combinations of a majority,” and sought to prevent it. Alexander Hamilton denounced democracy as the “amazing violence and turbulence of the democratic spirit.” John Adams warned that democracy “wastes exhausts and murders itself” and even felt “terror” when he thought of elections, which were “productive of Horrors.”

Likewise, Michael Parenti observes in Democracy for the Few that the framers “agreed with Adam Smith that government was “instituted for the defense of the rich against the poor’” (5). They succeeded in creating a system that systematically favors the wealthy minority.

Ovetz shows how each of the main features of the US Constitution impedes democracy. For example:

[t]he Senate was designed as a brake on democracy in three ways. First, because all bills must pass both houses, and there are several requirements for a supermajority, the Senate serves as a check on the House. Second, it gave each state two senators who were not directly elected. Third, the equal number of senators inflated the influence of small-population states with few free whites and many slaves while deflating the influence of large-population states with few or no slaves (117)

Ovetz similarly notes:

[T]he electoral college, our bicameral Congress, supremacy power, executive veto, the Inter-state commerce clause, the President, treaty-making, and the high threshold to amend the Constitution, among many other features, are all part of the reason why the Constitution impedes political democracy.

The results are clear: Amending the Constitution is very difficult. There have been 11,000 attempts, but only 27 amendments have been successfully ratified, including the first ten in the Bill of Rights. Many of the progressive amendments were achieved only through significant social upheavals, such as the Civil War, the Great Depression, and the Civil Rights Movement.

Despite these few successes, the wealth disparity in the U.S. is striking. The top 1 percent of the population owns around 31 percent of the nation’s wealth, while the bottom 50 percent hold only about 3.2 percent. The state has certainly lived up to Smith’s expectations.

Not all states?

The U.S. is not an exception to this principle. While the market requires the state, the state is also subject to the demands of the market. This is not solely due to the personal connections between corporations and the government, though these exist in abundance. The dynamism of the market stems from the competition to accumulate capital. This drive for growth necessitates coordination and support from the state.

States do not only regulate the market; they also protect private property, enforce labor laws, and educate and police the working class. They provide these functions because capitalism requires a certain level of stability to operate effectively and to help national corporations compete on an international scale. Ultimately, market competition manifests globally as competition among states. If a state fails to provide its companies with a competitive environment, it risks failing itself.

Even countries that try to escape capitalism experience external market pressure on their economies. We saw a global capitulation to neo-liberalism among the social democracies during the last decades of the 20th century. And, those states that proclaimed themselves to be socialist or communist such as the USSR were not impervious to market imperatives. To survive, the Soviet Bloc had to compete militarily with the West and that meant producing armed forces and military equipment at competitive levels. This drove those economies to discipline their workforces and increase their productive capacity in step with the U.S. and capitalist Europe. Even smaller countries like Cuba, which no longer attempt to compete militarily, do need to trade outside their borders:he mechanism of trade introduces the influence of market logic into their economy. This would be true even if their state were more democratic.

Who rules state-owned enterprises?

There is no clear boundary between politics and the economy or between the state and the market. As long as a market exists, it will influence politics. In The People’s Republic of Walmart, Leigh Phillips and Michal Rozworski explore the UK’s National Health Service (NHS), beginning with its establishment in 1948 as a worker-run cooperative health insurance system and tracing its evolution to the present-day mix of public and private services.

Although launched in 1948, by the 1960s, the NHS faced funding issues from the government. During the 1970s, the oil crisis and global economic downturn increased pressure to privatize parts of the NHS. While these privatization efforts were resisted, the service still struggled with underfunding. By the 1990s, the pressure from neo-liberal ideologies to privatize certain aspects of the NHS began to materialize. The internal planning meant to address the healthcare needs of the British public became separated from democratic oversight, leading to a situation where “purchasers,” now referred to as “commissioners,” gained full independence from the NHS hierarchy, diminishing voter accountability. Phillips and Rozworski write:

Today, after nearly three decades of market reform, each year the NHS manages healthcare less, while managing competition more. It plans by proxy. Less room for strategic planning means decisions are made by smaller, independent units that are enmeshed in growing webs of contracts. (146)

The results have been disastrous. Today the NHS is in full-blown crisis. NHS staff are leaving because of terrible conditions, and hospitals and ambulance services are unable to deliver timely care. In November 2022, “37,837 patients waited more than 12 hours to be admitted to hospital after the decision was made to admit them – up 255% in 2021.” This is not evidence that the system should be even more privatized; in the U.S. with a largely private system, the outcomes are even worse. The life expectancy of people in the UK is around 3 years more than in the U.S., where we spend more than twice as much per capita on health.

We live in a world where the logic of the market rules. Moving services into state control does not shield us from market influence. The same struggle that Moyo and Fink are purportedly waging to assert long-term humanistic and environmental priorities against the short-term interests of capital accumulation pervades the entire political system.

So the answer to the question, “who rules?” becomes clear. The market rules.

COPs and Robber Barons

This matters for many reasons, but today even more so. We face planetary emergencies of climate change and mass extinction. We have to transform our energy supply, transportation, housing, food production, industrial production – every sector has work to be done. A study by the notorious consulting firm McKinsey estimates that getting to net-zero emissions by 2050 (a dubious and conservative goal), would require an annual increase in spending “equivalent to half of global corporate profits and one-quarter of total tax revenue in 2020.”

The decisions that we make are critical. Unfortunately, we are not really making them – the market is dictating them. Larry Fink may want to leave the transition to a fossil fuel free energy system up to the benevolent leaders of the fossil fuel industry, but the consequences of that are predictable.

Every year at the UN climate summit an increasing number of fossil fuel lobbyists attend. At Cop26 in Glasgow, there were 503, and at Cop27 there were 636. [Since this talk was given, more than 2400 fossil fuel lobbyists attended Cop28 in Dubai and  1,773 at Cop29 in Azerbaijan] What are they doing there?  According to The Economist, “mainly shilling gas.”

Meanwhile, we know what needs to be done to avert the environmental crisis and we are not doing it. The UN Environment Programme Emissions Gap Report shows:

Updated national pledges since COP26 – held in 2021 in Glasgow, UK – make a negligible difference to predicted 2030 emissions and that we are far from the Paris Agreement goal of limiting global warming to well below 2°C, preferably 1.5°C. Policies currently in place point to a 2.8°C temperature rise by the end of the century. Implementation of the current pledges will only reduce this to a 2.4-2.6°C temperature rise by the end of the century, for conditional and unconditional pledges respectively.

It is not just that the regulators are being lobbied; the politicians also carry the assumptions of the market evangelists. Environmental policy is shaped by the need to be economically efficient. As Adrienne Buller puts it in her excellent critique of Green Capitalism, The Value of a Whale:

By simply asserting that efficiency is necessary, and that market-based mechanisms are efficient while direct regulatory approaches are inefficient, the assertion has become accepted ‘fact’ in the common sense – the assumption is the conclusion.

The perennial debate about where to draw the line between the market and the state is moot. As long as there is a market, its logic will assert itself. If it is profitable to keep polluting, then there is a built-in incentive to pollute. Overriding this logic by state intervention can be done, but unless it is done internationally then the corporations in one country are at a competitive disadvantage against other countries.

Even if the pollution is regulated away, the incentive is still there. This is why we see companies as large as Volkswagen deliberately trying to pollute without detection. There will be a constant struggle for regulation by people looking out for human needs and corporate lobbyists to prevent it as long as the incentive is there.

The market incentive for profit is the problem. The state has been an instrument of class rule in all societies. Under capitalism, it is no different. It may allow for limited challenges to ruling class power, but ultimately it is a vehicle to reproduce that power.

Featured Image credit: Library of Congress; modified by Tempest.

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