Extraction Capitalism – the latest phase

There is no single entity called “capitalism”. Such a concept exists only as an academic construct (see orthodox or neo-classical economics) or as part of a political philosophy (see Libertarians). To study capitalism is to examine a specific version over a defined period. One might explore mercantilist capitalism (16th to 17th century), industrial capitalism (late 18th to 19th century), late 19th to early 20th-century capitalism (also known as monopoly capitalism), welfare capitalism (mid-20th century), and the current form, neoliberal capitalism since the mid-1970s. In this present moment, we must also acknowledge several varieties of state capitalism (see China and Vietnam, for example).

Each of these versions shares commonalities such as private property, markets, wage labor, and corporations¹, for example. However, they each represent distinctly different political landscapes, where various aspects of wealth and corporate power exert influence through different emphases and structures.

In academia and on the political left, many refer to our current phase of capitalism as neoliberal capitalism. For most Americans, this is either confusing or meaningless. What the hell does “neoliberal” mean? Is this the second coming of FDR or JFK? No, the “liberal” part refers back to the liberalism of 18th-century Europe. Locke, Montesquieu, Voltaire, and Rousseau are names that pop up. Most prominent at the outset is John Locke’s Two Treatises of Government and other writings. Today, the American Libertarian Party is the most obvious home of this liberalism, emphasizing individualism, free markets, and small government. However, for most Americans liberalism refers to the bargain struck between FDR and the rich and corporations to end the Great Depression. This liberalism ended in the mid-1970s.

Extraction Capitalism

As I have argued regularly, today’s capitalism is marked by the shift in its central objectives from the production of goods and services to the extraction of money.

Taking up a barn brush here, how might we describe this capitalism?

• We see a large increase in the size and profitability of the financial sector. This is Wall Street versus the real economy, Main Street. Rent-seeking writ large.
  • Private equity firms are the epitome of extraction.
• Financialize the corporation – from production to extraction
  • Export production to low-wage countries
  • Eliminate full-time employees as much as possible
  • Restrain average worker pay. Fight unions.
  • Pay top management in enormous stock grants and options – CEOs now earn 350 times the average worker pay compared to 25 times in the 1950s and ‘60s.
  • Stock buybacks to shift profits to shareholders. $trillions just in the last decade.
  • Increase dividend payouts. This is supported by Federal tax treatment at a much lower personal tax rate.
  • Reduce reinvestment in new products and services.
• Monopolize the economy
  • Virtually every sector of the US economy is “highly concentrated” – 3 or 4 companies control 50% or more of a market. This is monopolization victorious.
  • Concentrated markets yield negative outcomes for consumers, workers, and suppliers.
    • First, consumers face higher prices and fewer options for where to shop.
    • Second, workers encounter limited employment choices, lower wages, and reduced benefits and job protections.
    • Third, suppliers to the monopolists have fewer customers, and these monopolist customers control a larger share of the suppliers’ output and often dictate the prices they can charge for their products and services.
    • Fourth, innovation suffers due to the anti-competitive nature of concentrated markets.

Intensification of insecurities for everyone except the very top of the pile.

Extraction capitalism also greatly increases the number of insecurities we face and intensifies them. Housing, food, healthcare, education, childcare, wage stagnation, jobs, retirement, family life, time, and more. All of these areas of daily life have become more difficult over the past 50 years.

Here is an illustration of the effect of this wage stagnation on middle-class incomes over the past 40 years. The conservative economics think tank American Compass has developed a Cost of Thriving Index (COTI).

“The Index measures the number of weeks a typical worker would need to work in a given year to earn enough income to cover the major costs for a family of four in the American middle class in that year: Food, Housing, Health Care, Transportation, and Higher Education.

In 1985, COTI was 39.7 weeks. Costs totaled $17,586, while the weekly income for a man aged 25 or older working full-time was $443 per week ($23,036 per year).

In 2022, COTI was 62.1 weeks. Costs totaled $75,732, while the weekly income for a man aged 25 or older working full-time was $1,219 per week ($63,388 per year.)”²

In 1985, a single male worker labored for 40 weeks to afford the essentials of middle-class life for a family of four. By 2022, that same worker needed to work 62 weeks just to cover the same basics. However, there are still only 52 weeks in a year. Consequently, he found himself $12,344 short for the essentials over the course of a calendar year.

These insecurities are a design feature of Extraction Capitalism. The rich and corporations actively employ the government to drive the change to extraction and the intensification of insecurities.