The question suggests two ways that capitalism can be understood: based on motives and based on positions. As this was one of the reflection questions after a lecture on Marx, I will address this issue from the perspective of the history of economic thought, and show how the answer to this question evolved. The nature of capitalism is of special interest to Marx because he was interested in the grand dynamics of capitalism and how it would eventually progress. Economists up to Marx (including the physiocrats and the classics) tended to think of the economy in terms of classes; economists after Marx tended to think in terms of individual motives (starting from the marginalists). More recently, there has been work on how society is built on the positions of individuals (through networks). Overall, a false dichotomy is presented in the question, and it would be helpful to think of capitalism as being based on classes, yet individuals within each class have some autonomy and they can move across classes.
Economists before Marx thought of capitalism in terms of classes, though the construct differed slightly between economists. As the capitalist economy formed in 18th century France, Quesnay was looking at the internal dimension of the political economy: the economy was viewed as an organism with interdependent parts, so the economists who had this view are commonly known as the physiocrats. In Quesnay’s view, the economy consisted of three classes of people: the farmers, the artisans, and the proprietors (nobles and clergy). The farmers were producing surplus grain that the artisans could purchase with the goods they produced, while the proprietors merely consumed. Beyond the physiocrats, the classics also believed that the economy operated in classes. Smith saw the economy in terms of three classes (and Ricardo subsequently followed): the landlords, capitalists, and workers. Each class provided some form of production input and was able to be compensated for that. The landlords provided land, and obtained rent for it; the workers provided labour and were compensated with wages; the capitalists provided entrepreneurship and were rewarded with profit. The interaction between these classes allowed capitalism to work coherently.
As such, Marx’s conception of capitalism in terms of classes was not new – precedence went back to Smith and the physiocrats. However, he differed on what these classes comprised of, and how they would develop over time. In capitalism, there was a tension between the proletariats (working class) and the bourgeoisie or capitalists who exploited the proletariats. The strength of investment and consumption in capitalism would then depend on the relative bargaining strengths of the capitalists and proletariats. He proposed that as division of labour continued to occur, working conditions would deteriorate as people are engaged in increasingly specific and repetitive tasks, and a large proportion of the population would be hired to work in this way – this is known as proletarianisation. As the numbers in the working class increased, they would eventually overthrow the capitalists and own the means of production for themselves. Then, in the ideal society, these workers could have a variety of tasks that they could do and have better working conditions. Evidently, this mechanism has broken down in modern capitalist societies because some of the proletariats eventually become part of the bourgeoisie as they move through the ranks: the CEO’s of large companies are often paid in company shares, so while they are technically workers, they also own the company like capitalists do. Thus, although Marx’s theory did not translate into reality, this structure of thinking about capitalism in terms of classes is still applicable, and we need to allow individuals to move across classes for this view to work.
The marginal revolution was probably the time where the dominant economic thought viewed capitalism in terms of individuals rather than as classes. The three main economists in the marginal revolution were Jevons, Menger and Walras. While they developed their respective theories independently, they commonly viewed capitalism in terms of individuals. Jevons introduced the idea of demand in market clearing and the idea of utility. This idea of utility, developed from Bentham, suggests that the value of a good is not in the amount of labour required to produce it (as the classics would argue), but in the amount of satisfaction that an individual experiences when interacting with that good. Consequently, prices in capitalism are not the result of a class output, but an individual affair. Menger takes individualism to the extreme by suggesting that individuals are very different and it is impossible to predict human behaviour. Consequently, the best thing that society could do was to allow the market to equilibrate on its own as individuals pursue their own ends, thereby allowing them to attain the outcome that is best for themselves. Walras was interested in the interdependence in the economy. The equilibrating mechanism was where an auctioneer changes the price such that individuals, when pursuing their own ends, were able to obtain an optimal allocation of a good. Thus, individuals acting in their own interest is one of the key building blocks of the marginalists’ analysis.
After the marginalists’ writing, individual motives have been the main emphasis of economic theory. A large literature in post-war macroeconomics has been constructed from micro-foundations, which often refer to optimising individuals. Post-war microeconomics was also interested in how individuals behave, and how their intention translated to action: this ranged from bounded rationality to behavioural economics.
However, more recently, there has been some work on the importance of the position of individuals, which is an interesting synthesis of the dichotomy between class positions and individual motives. Two fields that come to mind would be Lawson’s social ontology and Granovetter’s network theory. In Lawson’s view, the economy is made of individuals positioned in a social structure, connected by rights and obligations. How people behave is then a result of cumulative causation and depends on their position in society. Granovetter, while following the view of individuals as optimising atoms like the rest of mainstream economics, does analyse how individuals behave and interact strategically in networks. In more recent developments in network theory, network positions as defined by an individual’s links in the networks become rather important in explaining behaviour. As such, capitalism can be interpreted in terms of individual positioning.
It is interesting to observe how the perspective of capitalism evolved over time. This evolution of thought can be partially explained by how capitalism evolved. The class discussion of the classics, physiocrats and Marx were a product of early capitalism that just emerged from a feudal society, so traces of a feudal society like classes would still be evident in economic theories in order to make capitalism understandable. Thereafter, as countries mature, the individual component become more evident, thereby leading to more recent discussions of the economy in terms of individual motives. However, newer need not imply better. As argued above, there is still some relevance to Smith and Marx and looking at the economy in terms of classes (using the example of the proletariat CEO). This should be qualified by the fact that individuals do have a lot more flexibility and power now to move between classes according to their motivations: my parents could own land, but I would rather work for someone else because that is what I enjoy doing. Rather than outright dismissing either proposition, it is more viable to conclude then that current economics does study individual motivation, and this is the more popular way of looking at capitalism, but there is still some relevance of the class-based view. Rather than discrediting the individualistic view, we can think of it as adding another dimension to understanding capitalism.