Strategy in Context

BHS0035H

Capitalism
Dr Anna Zueva

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Lecture overview
• Definition of capitalism
• Historical development of the capitalist system
• Capitalist value set
• Implications for strategy

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 Topic 3.1

Commodity fetishism
(learning from Karl Marx)

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What do you see?

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KitKat: What do you see?
• Link to Padlet for the KitKat discussion:
https://padlet.com/azueva/2yc5jzoiw1vhf01n

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What’s a KitKat?
• These two resources may provide you with a
different view of what a KitKat is:
– http://www.youtube.com/watch?v=KVXs-nJHz4o
– https://www.globalcitizen.org/en/content/nestle-
sustainable-palm-oil-group-suspended/

• And this is a video from Nestle itself where it

tries to defend itself:
https://www.youtube.com/watch?v=CsYGoku
Eztc
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Marx and Commodity Fetishism
• Commodity:
– Narrow sense: An undifferentiated product (e.g. gas, wheat)
– Broad/economics sense: Any product or service sold on the market.
• Commodity fetishism is the “tendency, in a capitalist commodity
system, for social relations between people to appear as a
relationship between things” (Marx,1867/1976, p. 164, cited in
Hudson and Hudson, 2003: 415).
• “From the taste of wheat it is not possible to tell who produced it,
a Russian serf, a French peasant or an English capitalist.” (Marx,
1859: 28)
• The strange character about the commodity is “in the fact that the
commodity reflects characteristics of men’s own labour as
objective characteristics of the products of labour themselves.”
(Marx, 1967: 164-165) 7
Marx and Commodity Fetishism
• Marx challenged the classical economics understanding of
value as a feature of a commodity defined by how it compares
to other commodities.
– Called for a qualitative assessment of the historical
relations of production and a move away from the
“abstract labour”.
• Capitalism conceptualises value as inherent in the commodity
itself. For Marx, value is a social relation “concealed beneath a
material shell” (Marx, 1867/1976, p. 167, cited in Hudson and
Hudson, 2003).
– Lesson: we must expand our understanding of “value” beyond money

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 Topic 3.2

Capitalism: A definition

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Capitalism: a definition
• A form of economic organization based on:
1. Private ownership of firms and society’s
productive assets.
2. The market, that is, the voluntary purchase and
sale of goods, services and factors of production
such as land, labour and capital.
3. The profit motive as the driving force.

(Bowles, 2014)

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Marx’s definition
• A system of socio-economic relations that
includes two distinct classes:
– The bourgeoisie who own/control the factors of
production
– The workers who are forced to sell their labour
and are exploited by the bourgeoisie

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Varieties of capitalism
• USA: ‘laissez-faire capitalism’ 
• Scandinavia: ‘welfare capitalism’ 
• Russia: ‘gangster capitalism’ 
• Indonesia and Brazil: ‘crony capitalism’ 
• Angola: ‘petro-diamond capitalism’ 
• China: ‘red capitalism’

(Bowles, 2014)
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 Topic 3.3

Capitalist values:
what they are and where they come from

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Adam Smith (1723-1790)
• Everybody knows this about Adam Smith:
– The Invisible Hand perspective
• But few people remember that he also said this:
– Man is ‘fitted by nature’ to subsist ‘only in society’
where all members ‘stand in need of each other’s
assistance’.
– All people should live well, flourish and be happy.

(Kaufman, 2012)
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John Locke (1632-1704)
• ‘The Father of Liberalism’
• Conducted a thought experiment:
– Imagine people in ‘a state of nature’ without any connections or obligations
to family, or nation
– How such people would interact with each other?
– Answer: They would trade freely and have a limited form of government
that would mediate disputes and protect private property.
• Promoted the ideas that the ‘natural state’ for people is
individualism and relating to each other through voluntary
contracts.
• Consequences: we imagine people without links to society.
(Kaufman, 2012) 15
Capitalist understanding of freedom
• Freedom to use one’s capital and other resources as one sees fit.
– This vs the tyranny of feudal monarchy (vassal obligations)
– Feudalism: A system of mutual obligation between seniors and vassals
• Decision-making power in in the hands of those who control the means of
production
• Understanding of people: We are all free and independent and we are free
to choose which contracts we entre in.
– Focus drawn away from our obligations to and dependencies on others in society.
– People are assumed to be self-interested, autonomous, rational economic agents.
– We are consumers rather than citizens; our happiness is conditioned upon our
consumption and consumer choices rather than social connections. (e.g. you as
students are university customers rather than members of an academic
community).
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 Feudal system of social obligations

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Source: www.dictionary.com
Is capitalism ordained by nature?

The transition from feudalism to capitalism was often violent:

• Enclosure of the commons or land privatisation in England
– Created supply of labour for large-scale manufacturing
– Thomas More: Sheep are devouring men.
– Brief video on the history of the enclosures (YouTube)
• The monarchy that resisted enclosure was subdued by ‘Glorious
Revolution’ of 1688.
– English bill of rights
• French revolution
• The breakup of the Soviet Union
• Links to the Enlightenment 18
Property as a value
• Property rights are important
• Association between right to property and the notion of freedom
• Individual accumulation
– Individualisation
– Margaret Thatcher: "They are casting their problems at society. And, you
know, there's no such thing as society. There are individual men and
women and there are families. And no government can do anything except
through people, and people must look after themselves first. It is our duty
to look after ourselves and then, also, to look after our neighbours.”
(interview in Women's Own in 1987, quoted in The Guardian).
• Other rights?

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(Bowles, 2014)
Markets as value
• The market does the matching between commercial activity
and customer needs
• Market is “free” because buyers and sellers are free to enter
into exchanges in an unregulated or largely unregulated ways.
• Competition creates efficiency
• ‘Magic’ law of supply and demand
– But you only get what you want if you have money.
– If you don’t, your ‘demand’ is invisible.

(Kaufman, 2012)

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 Topic 3.4

How capitalist values shape strategy

(particularly in commercial organisations) and
what we can do about it

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Implications for strategy
• Main strategic objective: outperforming
competition in the race to accumulate and
control capital
• Means of achieving it:
– Efficiency
– Innovation
– Quality
– Note that these are not objectives but the means of
reaching an objective
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Implications for strategy
• Accumulation of capital becomes the purpose of the organisation
– Success is measured in money
• Strategic attention is focused on the sources of monetary
enrichment.
– Demand not backed up by money remains largely invisible.
– Purchasing power is positioned as choice
• Effort is put into encouraging consumers to buy more
– Often with little regard for social or environmental costs
• Things are evaluated from the perspective of their exchange
value as opposed to usefulness/functionality/beauty
• Workers are viewed as objects (as in ‘human resources’). 23
Why should we care?
• Thinking about capitalism abstractly,
normatively and historically (Bowles, 2014)
can help us:
– Be aware of who the main beneficiaries of our
strategies are
– Consider the impact of our strategy-making on a
wider group of stakeholders
– Think about the contribution that our organisation
can make beyond capital accumulation
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References and further readings
• Bowles, P. (2014). Capitalism. Routledge.
• Hudson, I. and Hudson, M. (2003). “Removing the veil? Commodity
fetishism, fair trade, and the environment.” Organization and
Environment, 16/4: 413-430.
• Kaufman, C. C. (2012). Getting past capitalism: History, vision, hope.
Rowman & Littlefield.
• Marx, K. (1859/1970). A Contribution to the Critique of Political
Economy, Moscow: Progress Publishers.
• Marx, K. (1867/1976). Capital: A Critique of Political Economy, Volume
one, trans. Ben Fowkes, London: Penquin.
• Parker M (2018) Shut Down the Business School. London: Pluto.
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