Consumers in Capitalism

Before I address the issue of “ethical consumption” in my next post, I need to take on the topic of consumption itself.

According to neoclassical economics, a consumer is an informed individual, making rational decisions in the marketplace to maximize his/her self-interest. There’s no surplus, growth is an accident of production, and capital comes from investors beating the odds for a while. Workers and owners are just temporary categories; we’re really just individuals who come to market to meet our infinite needs, and some of us are lucky enough have extra cash on hand to sell goods to others. By demonstrating a preference for particular goods, consumers can change the way those goods are produced and distributed.

In reality, this doesn’t describe most people, who consume according to standard patterns, socialized through culture and family. However, it does describe capitalists, who come to the market as a purchaser (consumer) of labor power.

Neoclassical economics focuses on consumers, but this reflects reality only for the capitalist. Any economic theory beginning with consumers, consumption, or exchange adopts the capitalist’s point of view. This is flawed in two ways:

  1. Wages don’t create all demand: they’re just one way for capitalists to realize the capital invested in commodities. There are three other circuits that supply public and private goods at all stages of production. Most people encounter the market when they shop, so it seems natural to think that capitalism exists to satisfy their consumer needs. But while the market in consumer goods is constantly on display, exploitation is hidden. Workers matter only as providers of labor power, the source of surplus value: they’re only able to receive and spend a wage if their employer makes a profit first. Moreover, capitalists also create commodities (the means of production), that only other capitalists buy. For example: steel producers buy coal to make steel; manufacturers of coal-mining equipment buy steel to produce mining equipment; mine owners buy mining equipment to mine coal, that they then sell to steel producers. There are enormous areas of the economy where workers’ spending power has no impact at all.
  2. Money capital funds every circuit: it not only provides start-up capital but helps workers’ wages circulate by providing personal credit, increasing capital through banks and corporate self-financing. New forms of credit continue to spawn, both because industries self-finance, and because speculators can suck up surplus value that can’t be reinvested profitably. To influence this process, consumers would have to find some way of controlling investment decisions at all stages of capital circulation, including private investment and state purchase of goods. Otherwise, capitalists would pull investment dollars from the more expensive, less technically-developed, ethical local industries.

Consumer spending is a form of distribution, it represents the reproduction of workers’ own labor power, not control over the entire process. The idea that workers could control the circuit of capital repeats Ricardo’s error by assuming workers receive the full value of their labor, rather than the value of their labor power in production. Even if localist advocates convinced all workers that local consumption could change the world, workers could, at best, change the conditions of production for their own housing and durable goods, a small portion of the overall capital circuit.

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