There are two main classes in all capitalist systems: the capitalist class (or bourgeoisie) and the working class (or proletariat).  Under some circumstances capitalism can have other classes as well, but all forms of capitalism have at least these two classes.  The capitalist class owns the means of production (or the vast majority of them), either directly or through organizations they control (such as corporations), and the working class does not.  Means of production are non-human objects that are used to produce things, such as factories, mines, land, etc.  Since workers do not have access to the means of production they must sell their labor to those who own the means of production – the capitalist class.  Members of the capitalist class, by definition, are wealthy enough that they do not have to sell their labor to survive (1).  They may choose to do so for whatever reason but are not threatened with the possibility of becoming poor if they do not.  This is the basic structure of a capitalist system.  The Hiltons, Rockefellers, Waltons, Kennedys, Mellons, Murdoch, Fords, Bushes, and Carnegies (ie. the super-rich) are all typical members of the capitalist class.

Workers are always paid less then the value of the goods they produce – this is where profit comes from.  If workers were paid an amount equal to what they produced there would be no money left over for the capitalist’s profit.  The workers are the ones who actually produce things, the capitalists contribute no productive labor.  The capitalist thus makes money without having to do any productive labor.  As that money is then used to purchase things that were produced by workers’ labor, the capitalist is living off the labor of the workers.  Hence, Capitalism is inherently exploitative.  The fruits of this exploitation are distributed to members of the capitalist class not only in the form of profit but also through dividends, interest, rent and other means.

Capitalists try to pretend this is “voluntary” or “natural” but it is no more voluntary or natural then paying taxes.  In order for a worker to survive s/he must sell his/her labor and become a wage-slave.  Otherwise s/he will not be paid and will eventually starve to death.  While some form of productive labor is necessary to produce the basic necessities needed to survive (food, shelter, etc.) there is no reason why this must be in the form of wage-labor.  For most of human history it has not.

Historically pre-capitalist societies that developed into capitalist ones have all gone through a process called proletarianization whereby the majority of the population was changed from their previous status (usually of peasants) into workers (proletarians).  This involved expropriating the land and forcing the population off it (2); thereby putting the population in a situation where they have to sell their labor to make a living (3).  If most live on the land (as they did in many pre-capitalist societies) then they will not have to sell their labor to make a living and full-fledged capitalism is impossible.

The process of proletarianization happened differently in different places and had a number of variations with more then a few bumps on the road.  In the first societies where proletarianization started it was a long process that was not originally initiated with the desire to create a capitalist society but by other historical forces.  One of the first capitalist countries, England, began this with the “enclosures” whereby lords would enclose land that formerly belonged to peasants and expropriate it for themselves (4).  In Mexico the majority of proletarianization started under President Benito Juarez and rapidly accelerated under the dictator Porfialo Diaz.  Both Juarez and Diaz were classical liberals who believed in free market capitalism and private property.  To that end, Juarez initiated a program whereby public lands and common lands held by Native Americans was expropriated and sold to the highest bidder.  Since they have more money, the majority of this land got concentrated in the hands of rich capitalists.  Small landholders were often expropriated as well (5).  In most of North America the indigenous economic systems were eventually destroyed by force, along with the indigenous people, and replaced with a capitalist system (6).  In some societies war played a significant role in uprooting peasants and transforming them into wage workers.

Capitalists sometimes defend the exploitation inherent in capitalism by claiming that the capitalist contributes to production by providing money and the means of production, which he owns, to the production process.  This is a subtle form of circular logic, since it assumes capitalist property rights in order to defend capitalism. ‘Providing the means of production’ simply means 'allowing it to be used.'  Granting permission itself is not a productive activity, it does not produce anything. If producers cease to produce, production will stop in any society, regardless of the economic system.  But if owners stop granting permission, production is impacted only if their authority over the means of production is obeyed.  Their authority derives from the violent and coercive mechanisms of the state, which ensures that capitalists have this ability to allow or deny access to the means of production by workers. Not only is "providing the means of production" not a productive activity, it depends on a system of organized, systemic coercion to maintain the capitalist's monopoly (or near-monopoly) of the means of production.  Capitalist exploitation of workers derives from the power capitalists have over the means of production, it's monopolization in their hands.  That power is used by them to gain extreme wealth at the workers' expense.  It was originally created through conquest & coercion and is maintained through state violence, typically in the form of government enforcement of property rights.

Other workers, not capitalists, produced the means of production.  The capitalist obtains them with the money from previous profits.  Those profits in turn came from previous profits and so on back to the origins of capitalism.  Those original accumulations of money used to start this whole process of capitalist accumulation came from fortunes made as a result of conquest & direct expropriation (such as colonialism) as well as fortunes achieved under pre-capitalist class societies such as feudalism or slavery.  Thus from a historical perspective capitalism cannot be considered just.

A similar attempt to justify the exploitative nature of capitalism is the claim that profit is the reward for taking risks.  It is true that investing usually entails taking risks (one could lose the investment), but just because someone is taking a risk does not mean that s/he is producing anything.  Most human activity involves risks of some sort.  If a criminal robs someone at gunpoint s/he is taking a risk as well.  S/he could go to jail, the robbery could go wrong, s/he could get hurt, etc.  That does not change the fact that it is robbery. The same is true of the risks taken by capitalists.  The workers take as much of a risk, if not more, as the capitalist.  If the business fails the worker is unemployed. The worker is then usually in a worse situation then the capitalist because the capitalist is wealthy and can weather such a situation much easier then those on lower levels of the hierarchy.  In addition, many jobs entail risks to workers' life or limb, whereas investment does not.

Capitalists like to claim that their wealth is the result of them working hard by running their business, managing portfolios, etc.  A mafia boss also does lots of work to plan his robberies and keep his illicit enterprise going but his actions are still theft.  Many capitalists don’t even run a company, they derive their income solely from stocks, bonds, interest, dividends, rent, etc.  This attempt to justify capitalist exploitation completely fails in these cases because they aren’t even running a company or doing any work at all.  Manipulating portfolios doesn’t produce anything useful; sticking money in the bank and letting it accumulate interest isn’t hard work.

Some capitalists do choose to manage companies.  Since they run the business, they not surprisingly choose to pay themselves huge salaries (along with other perks) that are derived mostly from the surplus value exploited from the workers.  While some forms of production do require coordination, this does not justify capitalist forms of production or the grossly disproportionate amount of wealth capitalists are given.  In a slave society slave drivers and owners would sometimes do coordination necessary for production while making their slaves produce for them.  Just as it is possible to coordinate production without slave drivers it is also possible to coordinate production without capitalists.  Coordination can be assigned to a worker (or committee of workers), elected, recallable and mandated at worker assemblies and paid a normal wage, just like any other task.  There have been many examples of worker-run cooperatives, run on a non-hierarchical basis without capitalists, producing things just as effectively as a capitalist corporation.  There is no reason why individuals involved in coordination tasks should be given greater wealth or power than those doing other tasks, let alone given the dictatorial power bosses & capitalists have over the workplace.

Like slave owners, capitalists may spend a large portion of their time manipulating their underlings to maximize the amount of money they make, but that time neither produces anything nor justifies the privileged position of the capitalist.  Most of the “work” done by capitalists running a business is in reality manipulating workers so as to maximize exploitation (thereby maximizing profit).  Most capitalists hire people to do whatever coordination and administration is necessary for production and do little of it themselves.  In contemporary capitalism this has lead to the growth of a separate techno-managerial class that controls the workers for the capitalists.  In general the higher up the hierarchy and the farther from the point of production the less genuine coordination is done.  A thief that does a lot of scheming is still a thief.

In the United States the richest 1% of the population (the capitalist class) owns more wealth then the bottom 95% of the population combined (7).  It is physically impossible for that one percent to work harder then the other ninety-five percent.  There simply aren’t enough hours in the day.  The average American worker works around 50 hours a week; for the capitalists to work ninety-five times more then the average worker he would have to work 4,250 hours a week!  There are only 168 hours in a week; it’s not possible for this wealth disparity to be the result of capitalists working harder.

Another way supporters of capitalist like to distract from the authoritarianism of capitalism is to emphasize the market and downplay or ignore wage-labor & the hierarchical aspects of capitalism.  They invent a fantasy world of people producing widgets & trading them for thingamabobs and then pretend that this fantasy land has some relationship to how a real-life capitalist economy works.  We do not live in a society of independent widget producers trading their products on the market, we live in a society where most people have little or nothing to sell but their labor.  This fantasy neglects the fact that wealth is extremely concentrated and the role of wage-labor, which is extremely important as most people make their living by selling their labor.  This widget-trading fantasy ignores the inequalities of power between workers & capitalists and so presents a false picture of capitalism that makes capitalism look less authoritarian.  Just because markets exist does not make a system just.  Markets existed in most slave societies, that does not make slavery just.  Markets reflect the will of the wealthy & powerful, as more money can be made by catering to the needs of those with more money.

No industrial society can be run along the lines of this widget trading fantasy.  Industry creates things like factories, mines and other workplaces with a high division of labor and lots of people working together in the same place.  In industrial societies you have many people using the same means of production (eg. a factory).  Those means of production are too big for a single individual to be able to use them efficiently - factories require lots of people to work in them.  A society made up of independent producers presupposes that everyone has their own means of production and then trades what they produce on a market.  An industrial society, by virtue of making the means of production too big to be used by a single individual, makes such a thing impossible.  Factories and other large means of production can be privately owned, with bosses telling the workers what to do, they can be state owned, with state-appointed bosses telling the workers what to do, or they can be held in common, with the workers themselves determining what to do.

Capitalism can be contrasted with other forms of class society such as feudalism and slavery.  Class is another name for economic hierarchy.  In a class society some people have power and control over other people with regard to economic matters.  Those on the top of the hierarchy, who exploit and live off the labor of those below it, are called the ruling class.

In an economy based on slavery the ruling class is made up of slave owners who exploit the slaves they own and live off their labor.  The slave is sold once and then belongs to that master until the master decides to sell him/her.  This differs from capitalism in that the slave is sold once and for all whereas in capitalism the worker must sell him/herself repeatedly by the day or hour or some other unit of time.  If the wage contract were made to last indefinitely, instead of for a fixed period of time, it would in fact constitute full-fledged slavery.  Thus capitalism constitutes a kind of transient slavery repeated over and over, which is why capitalism is also called wage-slavery.  Examples of societies based on slavery include the Roman Empire, ancient Korea and the US South prior to the 1860s.

In feudalism society is divided into several classes with the nobility on the top and the serfs on the bottom.  The nobility lives off the labor of the serfs who must give crops and various forms of unpaid labor to their lords.  Serfs differ from proletarians in that they have their own means of production, land, and thus do not have to sell their labor to survive.  They must, however, give up a part of his/her product (crops, usually) or part of the services of her/his labor to the ruling class.  Examples of feudal societies include medieval Europe and Japan (8).

The two main classes in a capitalist economy are the capitalist class (or bourgeoisie) and working class (or proletariat).  In the United States, most people consider themselves “middle class.”  This is a useless term since almost everyone is considered middle class, regardless of their economic situation, and it is thus of no use in describing class hierarchies and their relations.  You can't have a "middle class" that constitutes over 90% of society!  The concept of the "middle class" in the United States acts to disguise the existence of classes in America.  Those who must sell their labor in order to survive and do not have the power to hire or fire are members of the proletariat.  Those who are wealthy enough that they do not have to sell their labor to survive (their income comes from stocks, bonds, rent, etc.) are members of the bourgeoisie.  Since the capitalists exploit the workers, the interests of the capitalist class and the working class are directly opposed.  In almost all capitalist countries the working class constitutes the majority of the population (9).

Sometimes other classes are present as well.  Societies that have only recently transitioned from a feudal to a capitalist economy usually have a large number of peasants inherited from the previous economic system.  Peasants do not have to sell their labor to survive because they have access to their own land and live off it.  They are not capitalists either, as they do not exploit wage laborers to make their living.  The development of capitalism usually transforms peasants into workers given enough time.

The unemployed, or lumpen-proletariat, are another class.  Unemployment is a common byproduct of capitalism.  Having part of the population unemployed keeps wages down and makes it easier to control the workers.  If a worker knows s/he can easily find a different job elsewhere s/he will be less concerned about being the victim of a layoff and can demand higher wages, better working conditions, etc.  It is much easier to control workers when they have the threat of unemployment hanging over their heads.  A completely free market would tend to oscillate between periods of high and low unemployment.  When unemployment is low wages rise and it becomes harder to maximize the degree of exploitation and profit.  This causes many capitalists to begin to replace workers with automated machines (or find other ways of cutting costs, like layoffs), as they cost less compared to paying workers high wages.  However, implementing more automation (and most other cost cutting) throws people out of work, thereby increasing unemployment.  This causes wages to fall and makes employing workers cheaper.  Thus, eventually unemployment begins to fall again because it becomes more cost-effective to employ workers as compared with increasing automation.  This cycle then repeats indefinitely.  In practice, this cycle either does not happen or is lessened because many states implement regulations and monetary policies to ensure that unemployment does not go extremely high or extremely low.

The small capitalists, or petty bourgeoisie, (small business owners) are a different class.  Like the normal capitalists, they own means of production (though usually only a small amount) and make profit through employing wage-labor.  Unlike the capitalists they do not own enough wealth to live off it without working, but they also do not have to sell their labor to make a living.  Generally they do productive work alongside the workers they exploit, and must do so if they expect to survive.  In practice, many are dependant on the bank, which means they are dependant on large capitalists because they control the banks.

The managerial or techno-bureaucratic class controls the working class (and sometimes other classes) for the capitalist class.  This group includes most of middle management, bureaucrats, technocrats, etc.  They’re basically part-worker and part-owner.  They have to sell their labor to survive but also have the power to hire and fire workers.  Under some forms of capitalism the techno-managerial class is virtually non-existent – most of their functions are either unnecessary or performed by capitalists themselves.

The idea, supported by many on the right, that a more laissez-faire form of capitalism will fix all of it's problems is based on a selective reading of evidence.  Their methodology is to select prosperous countries, claim they are examples of the 'wonders of a free market' (no matter how extensive government intervention in the economy is) and to select poor countries and claim that they are examples of how government interventions ruin a country (no matter how little government intervention exists).  In the early 1990s supporters of 'free market' capitalism pointed to Argentina as evidence that their theories were correct - it's prosperity at the time was claimed to be proof that deregulation and the free market are the answer.  Several years later Argentina went into a depression and the economy imploded.  The "free marketers" then changed their tune - the problem, they claimed, was that Argentina had lots of extensive government interference in the economy.  Some even claimed it was "socialist."  When the country was prosperous they claimed it was 'free market' but when it became less prosperous they claimed it was 'socialist.'

The 'free market' crowd also likes to compare countries with high degrees of state intervention in the economy and countries with lower intervention in the economy, like North Korea and South Korea.  Aside from the Koreas comparison being invalid (the South received far more foreign assistance than the North) the fact that South Korea is frequently cited as a 'success story' for the 'free market' shows how selective their idea of a 'free market' really is.  South Korea industrialized through a series of five year plans.  There's another famous country that industrialized through a series of five year plans: the Union of Soviet Socialist Republics.  Their concept of a 'free market' is so fickle that it leads them to make a semi-command economy - South Korea - one of the countries they commonly cite as an example of how great "free market" capitalism is.  In reality, the reason some countries are rich and others poor has more to do with imperialism then with the degree of government intervention.  There is no correlation either way.

Their selective identification of "free markets" and "government intervention" isn't limited to comparisons between countries.  A corporation is basically a centrally planned economy.  The different parts take orders from those higher in the hierarchy, they do not trade with each other.  Modern capitalism is really a series of interlocking command economies (multi-national corporations) which trade with each other (just as the Soviet Bloc countries traded with each other).  Corporations are actually the opposite of markets, the fact that they are defended under the laissez-faire philosophy further shows how facile their support for the "free market" is.  Capitalism itself requires government intervention in the economy in the form of enforcing property rights.  Without this the system will implode.  Advocates of laissez-faire capitalism typically respond with something along the lines that it's the government's role to protect "individual rights" and so such intervention is justified.  But left-liberals and state socialists say the same thing - that the kind of intervention they advocate is justified by "human rights" or something along those lines.  The laissez-faire capitalist is no more against "big government" than the left-liberal or state socialist, they just disagree on which state policies should be implemented.  In reality, whenever people who claim to advocate "shrinking government" in favor of "free market" capitalism get in power they implement extensive government interventions that benefit the rich (beyond enforcing private property).  "Free market" regimes have a long record of giving large subsidies to big business, funding the military-industrial complex, following a foreign policy designed to help maintain a favorable foreign investment climate and even imposing tariffs when needed to support weak domestic industries.  "Free enterprise" means state protection for the wealthy and market discipline for everyone else.

Many left-wing reformists claim that ‘regulated capitalism’ and/or a social democratic welfare state would somehow fix all the problems that come about as a result of capitalism.  It’s rather difficult to do this when the state serves the interests of the capitalists.  As a result many regulations and state programs that are put into effect frequently end up favoring large corporations rather then ordinary people, creating a corporate-welfare state.  Examples of this include the billions of dollars given by capitalist governments to corporations (both directly through subsidies and indirectly through government contracts), laws restricting the ability of workers to organized against capitalists and government manipulation of monetary policy to favor capitalists.  Such policies tend to be implemented by both left-liberal regimes and also right-wing "free market" regimes.

When unrest from the lower classes (proletarians, peasants, lumpen-proletarians and sometimes a section of the managerial class) becomes large enough it can become beneficial for the capitalist class and/or state bureaucracy to implement Social Democratic welfare measures that ameliorate the miseries of the lower classes.  This worker-friendly strategy can be implemented either by individual companies or through state programs (or both).  These policies can decrease unrest by decreasing the miseries of the lower classes (and thereby reducing their propensity to revolt).  Large amounts of unrest can disrupt production which thereby interferes in the ability of capitalists to make profits.  If this disruption is great enough it becomes more cost effective for capitalists to implement welfare policies to decrease unrest rather than put up with constantly disrupted production.  If unrest becomes great enough it can even threaten to bring about revolution and topple capitalism.  For the capitalist class a welfare state is vastly preferable to an anti-capitalist revolution and will implement one if doing so will stop a revolution.

Social democratic welfare states, however, still leave the capitalist class in charge.  If the social democratic measures do their job worker militancy and unrest will subside over timeand these welfare measures will no longer be as cost effective as they were when there was more rebellion (if worker unrest does not subside then capitalists tend to move towards imposing a right-wing dictatorship to suppress the workers, unless the workers overthrow the capitalists).  The capitalists will then begin to dismantle the social democratic state and implement policies more favorable to their interests.  Since the capitalists are still the ruling class there is little to stop them from doing this aside from renewed rebellion on the part of the exploited.  In the end social democracy ends up being at most a temporary stopgap measure – a band-aid on a cut artery.

Some who seek to reform capitalism actually claim to oppose capitalism, but what they desire to implement are in reality unusual forms of capitalism, since they retain wage-labor.  The most famous capitalist ideology claiming to be anti-capitalist is Marxism.  They advocate the creation of a centrally planned economy, with a “workers' state” (in practice a one-party totalitarian state) controlling the entire economy.  This is not anti-capitalism but state monopoly capitalism.  As most people would still be wage-labor under this system it is a form of capitalism (albeit, in a rather perverted form).  Instead of being exploited by individual companies workers would be exploited by the state, which would be the new boss.  The new capitalist class would be made up primarily of government bureaucrats, politicians and party members who would profit from the exploitation of the working class just as traditional capitalist classes do.  There is in essence very little difference between having a single corporation control the entire economy and the centrally planned economy advocated by state socialists.  Simply uniting administration of the economy into a single giant bureaucracy does not abolish capitalism.  Centrally planned capitalism is still capitalism.

The conflict between the Soviet Union and the United States in the second half of the twentieth century was, despite what the propaganda of both sides claimed, actually an inter-imperialist conflict between two rival capitalist empires.  It was not a class struggle between workers and capitalists (as Marxist propaganda claimed) or between freedom and tyranny (as American propaganda claimed) but a conflict between different capitalist classes over how they would divide the world between them.  The daily life of citizens in each empire was not greatly different; both practiced a variation of the same economic system.  Neither side was actually interested in the liberation of the oppressed.

There is a common flaw in all of these proposals to reform capitalism.  None of them actually fix the root problems of the wage system.  Workers under laissez-faire capitalism, social democracy and state socialism would still be exploited.  Authoritarian workplace relations would still exist under all these reformist proposals, workers would still be subject to an economic dictatorship.  These reformist ideas do not fix any of this, at best they just treat the symptoms.  None of these things can be changed by reforming capitalism, there are inherent in the system.  Capitalism must be abolished.