Wednesday, January 15, 2014

A Reformed Capitalism for the 21st Century

What if we changed the rules of capitalism?  What if we stuck with private capital organized into corporations but required them to compete for access to resources, not according to which would pay the most, but on the basis of what they were going to do with it?

As we steadily run out of resources, we'll need to devise some sort of allocation system to replace the free market model of the past two centuries.  It would be entirely sensible, if we are to start living within the finite limits of our environment, to require those who want access to resources to justify themselves.

What do they intend to produce?  How is it superior to other products? How much research and development has gone into the product?  To what extent is it durable, upgradeable?  What will be the lifespan of the product?  How will it improve the consumer's quality of life?  What will be the resources to production ratios?  What will be the resources to utility ratios? How much of it will be made with recycled materials and how much will be recyclable at the end of its lifespan?  How will it be produced?  What will the manufacturer do to curb emissions and other forms of environmental degradation?

What if we could deter companies from making enormously wasteful, useless junk?  Imagine if we could withhold energy and resources from the production of crap?

It would still be a form of capitalism.   There would still be private investment.  There would still be profits and rewards.  However it would be capitalism harnessed into service of a steady state economy, not capitalism rampaging unchecked in a free market economy.

Yes, it's a controlled economy.  Anything short of free market capitalism must be controlled, regulated in some way or another.  This is inevitable  in a world without more than enough to go around.  It is essential to a transition to a steady state economy.  Change is frightening and the idea of giving up free market capitalism is really scary to a lot of people.  Yet standing on the edge of a cliff is scary and you have to make a decision whether to go forward or go back.  If you want to be able to make future decisions, you realize you have to step back.  Free market capitalism has brought us to the edge of that cliff and we've got a big decision to make.


I was inspired to formulate these ideas by an article in TruthOut by Richard Smith, Beyond Growth or Beyond Capitalism.   Smith sees no role for capitalism and, while I understand his reasoning, I think he's overstated his case.

This discussion is best considered with at least a working understanding of Steady State or Full Earth economics which, if we're to avoid some very ugly outcomes, is pretty much the direction we'll need to go in our overpopulated, under-resourced world.  I've provided a link to the Wiki page and, while it's a useful introduction, I would recommend that you read some of the works listed in the bibliography at the bottom of the page.  The more you learn, I'm pretty sure the less radical and less scary you'll find these concepts.


Lorne said...

While I admit to ignorance on this topic, Mound, wouldn't putting a stiff price on carbon help, at least in the interim? The idea you suggest seems to have little likelihood of realization, in that it puts severe restrictions on capitalism which we know is a sacred cow for powers both near and far.

Richard said...

Mound, I just happened to be writing what I think is a related post while you were doing this one:

Lorne: A Price on carbon will do absolutely nothing but inflate new financial bubbles for the elites to play with. Pricing carbon is meaningless when we print our money out of thin air. Need more carbon? No problem! Just print more money. Carbon pricing in all forms has been a scam since day one where the elites are taking advantage of the crisis for their own gain.

"Never let a good crisis go to waste"

Anonymous said...

The fact that, the evil Harper gets to stay in office is absolutely astounding.

The opposition is utterly useless. They stand by while, Harper is destroying Canada.

Harper's team are, useless, spineless gutless wonders as well.
We went to war so, we wouldn't have Fascism and Dictatorship in Canada. Quite frankly? Harper is not worth their dying for.

The 3 Amigo's are meeting again. We know they are working on the NAU. Big business is pushing for the NAU. That makes it easier for them to thieve, from all of the countries under one government. Big business also wants, a huge cheap labor pool, for them to victimize and exploit.

North American Union. Big business pushing for the NAU
May 18/2011

This has been talked about for years.

Harper officially endorses the NAU.
Oct 3/2008

Anonymous said...

What you're describing isn't anything remotely close to capitalism and would, fortunately, never be implemented in Canada.

Kev said...

This is perhaps the first proposal I have seen that could possibly justify the retention of a capitalist system.

A very imaginative take Thanks MoS

Anonymous said...

Nice thoughts.
It won't happen.
As humans, we'd much rather shit in our own beds than actually take care of the planet that is such an enormous rarity.
A shame really.

The Mound of Sound said...

As I've stressed, this would be a departure from free market capitalism. It entails private capital, private ownership of means of production, profits and losses.

The thing is that nothing can be produced or manufactured without access to natural resources that are the property of the public. Air and water are two prime examples. We have treated these as largely irrelevant in the past but we're coming to appreciate they have a real market value.

We do something along the lines I'm suggesting with the radio frequency spectrum for television, radio and cellular communications. Corporations vie for licensing rights whether they're CTV or Koodo. We grant them access to the public property - frequency bands - and we regulate their access to those frequencies based on 'promises of performance.' Applicants have to establish the manner in which they will serve the public interest. To say that the broadcast industry isn't capitalist is beyond foolish.

Bill Longstaff said...

Challenging concept.

Purple library guy said...

This is a sort of reformism writ large, and I don't think it can work. Even at the best of times I don't think it would be able to work for more than a couple of decades, and this is not the best of times.

The thing about private ownership in pursuit of profit is that it creates a narrow elite class with a certain set of objectives. This narrow elite class holds power by virtue of owning a lot of stuff and having a lot of money. Their objective is to get more stuff and more money. Their official purpose is to invest the stuff and money in order to increase it and get more stuff and money to invest, in an increasing spiral. That's why capitalism is built around the concept of growth. Other features of this class include power without responsibility and distance from the outcomes of their decisions.

Now you can tell those capitalists “Thou shalt not invest in such a way as to create growth or extract more resources”, but they will not want to observe those limitations. Such limitations collide directly with their whole role and their basic motivation of gaining more money and power by growing their capital. And they will still have the power that comes from their wealth and their ownership of production. So their obvious response to such a set-up which limits their profits and their ability to grow their capital, would be exactly the same as their response to the set-up we had in the sixties with progressive taxation, high-ish unionization, and moderate amounts of protectionism: Undermine that system until it stops constraining them. Buy whatever is needed to accomplish this, such as media outlets, legislators, and regulators.

Last time around, it took about 30 or 35 years for them to get things going with shredding what restricted them. This time it would be much faster, partly because things move faster nowadays and partly because they already have strongly entrenched ideologies and tools for reaching their goals. The only way to stop capitalists from pushing for growth at all costs (to others) and finding as many externalities as they can, is to get rid of “capitalist” as a role in society. Decisions reflect the interests of the people making them. If decisions are made by capitalists, they will benefit capitalists. If they are made by capitalists plus some small group of regulators, legislators, technocrats or whatever who are supposed to restrain the capitalists, they will benefit capitalists and that small group (mostly via bribes of some sort).
If you posit that the interests of people in general are served by not killing the world, the only way you are going to get decisions made to not kill the world is if people in general are making the decisions. If the means of production are privately owned by a profit-seeking elite, people in general won't be making the decisions. Your solution of trying to get both to happen at the same time cannot hold.

Al Hunter said...

The limited resource problem could be solved if the entire human race agreed that colonizing the solar system was practical, and then focusing on that goal. Stagnation is a real concern for steady-state economies. We have invested so heavily in a system that has to continually expand that survival now requires an extra-planetary solution.

The Mound of Sound said...

Lorne, I am a believer, somewhat, in carbon pricing. It has to be done right in order to deter carbon emissions and the revenues raised need to be distributed productively. I agree with Richard on most things but not on this, not yet.

@Anon 2:44, you need to get a more fulsome grasp of capitalism. You'll be hard pressed to find any aspect of a capitalist economy that is not regulated. Think.

@ Kev. Thanks. I believe the way forward requires reformation not abolition of the best aspects of the economy we have built. PLG would have us go to state ownership of the means of production. That is a hopelessly failed model. Worker-owned enterprises are taking hold in the US but they're still inherently capitalist and, according to Gar Alperovitz, usually quite profitable.

@ PLG, sorry but I disagree. Read Alperovitz' "What Then Must We Do" in which he discusses worker-owned enterprises successfully operating in a decidedly capitalist mode. It's not as black and white as you seem to see it.

@ Al. We'll be long dead before we colonize even one planet if we don't work out our problems here on Earth in the near future.

Al Hunter said...

Mound, I think that we'll be long dead as a species if we try to fix problems in the near future here on Earth before heading out to the frontier. Humanity needs an outlet, a goal, especially for our youth. We have the technological know-how to do this right now.

The Mound of Sound said...

@ Bill. It is indeed a challenging concept but it's driven out of necessity. Judging by your photograph, I'll bet that when you were born the global population hadn't quite reached 3-billion. Here we are today at 7+ heading to 9-billion. Now, if you factor in per capita consumption when you were born contrasted with today, that 7+ billion would be more than 10-billion. Global per capita energy consumption, for example, increased by half from 1950 to 2000. We have far more people each consuming far more resources.

And this, Bill, in the span of less than a single lifetime. In the process of rapidly adding vastly more people each with vastly greater consumption, we have crashed into the limits of a finite biosphere.

Today we use up half again our planet's renewable resource replenishment ability. Rich countries simply buy what they want from poor lands that are often already food insecure. If there's not enough surface water we empty our aquifers. We collapse our global fisheries, 'fishing down the food chain' relentlessly. The mark of deforestation and desertification is visible to the naked eye from space.

Yet we govern ourselves - socially, politically and economically - as though we were still in the 1970s.

If we want to live, Bill, we have to abandon what no longer serves us and adopt new ways that will.

The Mound of Sound said...

Al, we have the know how to perhaps effect a one-way journey to Mars. It's the only planet in our solar system that could conceivably be terra-formed to support our species. It's estimated that would take anywhere from several hundred thousand to upwards of a million years.

In the short term about the best we could do is to transplant amino acids on distant planets to try to seed carbon-based life elsewhere. There's not a chance in hell we could conceivably colonize another planet in a century or even two.

It's Earth, Al. We stand and live here or we stand and die.

Al Hunter said...

We don't have to actually live on the big planets. There are lots of moons & asteroids that can be inhabited, as well as free floating space habitats. I want to be excited about a possible future that allows us to push our limits. Sitting around on the Earth, living within it's physical limits, and even making it a paradise, is no way to insure our genetic future. One asteroid or super-volcano could easily wipe out everything.

Richard said...

Sorry it took so long to get back to you Mound, I've replied to your comment at

I also expanded on my position on carbon pricing.

Richard said...

I'll post the relevant section here for your readers:

From this perspective I think that its much more than just zoning out. For instance Lorne, who I'm sure has the best intentions, commented on your blog about the carbon pricing. It's nearly impossible to understand why it won't work without intimate knowledge of the currency that will be used to pay it. The very fact that when growth slows we print more money shows that if carbon pricing has it's intended effect to maintain the illusion of growth currency will just be printed to attempt to account for the carbon pricing. It's lies, wrapped within lies, wrapped within lies, and facing some of those deeper lies, if you can get past the noise and comprehend them, can end up completely changing your world view and possibly challenging constructs you thought were safe and secure but turn out being more illusionary than is comfortable.


Now in addition, as my comment wasn't really on carbon pricing but rather that was simply an example in a larger context I will add a few points to expand further.

First, B.C.'s carbon pricing is a prime example of how the drive for the energy doesn't diminish because of the pricing, it just moves. Many companies in B.C. have simply begun moving their more intensive operations out of B.C. to China. B.C. has more or less declared this a successful test of the carbon tax but the problem is that carbon is still being emitted - just not in B.C.

Now I realize the ultimate carbon pricing would have to be global but the end problem with it is it is basically trying to fit degrowth into a progrowth model. Pricing, the markets, taxes, all in their current incarnations are constructs of the infinite growth economy. None of it addresses the affordability problems the globe is experiencing as is and further hampering that affordability will simply mean more shortcuts are taken to maintain the appearance of growth. This may simply come in the form of unreported or hidden carbon emissions or it may come in more overt forms as in the currency printing mentioned above.

Lets say a carbon tax does pass, and it has its desired effect and ultimately because less carbon is burned there is less GDP in what is already described as a "slow growth" economy. Carbon consumption and GDP growth have a direct correlation has proven by Chris Martenson. Our entire technological base is oil and alternative energy is actually derivative energy. Wind Mills need steel, electronics, all of which requires oil and transportation further down the chain. Cost comparisons of these energy sources in todays economy are not accurate as all of them cost wise are subsidized in their development by oil.

So the carbon tax passes, burning carbon becomes more expensive, and growth slows. What happens? Well if recent history has been any example you can bet central banks will begin stimulating the economy, creating cheap credit which the major banks, governments and corporations gain access to first which then allows them to afford more carbon and continue growth as normal. Interest rates go even lower (if possible) and people borrow more to afford the more expensive products. It won't change a thing, because energy today is already too expensive and subsidized ( see here: ) The added cost of energy simply due to peak oil has simply meant more shell games are being played. There is no reason to believe cost increases due to carbon will do anything more but the same.

Richard said...

Sorry Mound, I didn't address the second part of your comment "the revenues raised need to be distributed productively".

I agree, if this is what were done with the funds and sound money were used rather than fiat currency, this may be possible. However, I know of no entity in existence that could manage such a project that I trust under the current status-quo. It's sort of putting the cart before the horse, the pricing itself won't work because the system is corrupt and you can all but guarantee the money won't be invested properly either by the parties responsible for the corrupted system and who benefit from infinite growth in the first place.

The problem comes back to infinite growth, which if we can fix our dependence on that the need for a carbon tax should become irrelevant as efficient non-growth takes priority.

As an example: Technology that it isn't designed to break and be replaced in 5 years. Bad for growth, but good for people and degrowth.

Richard said...

I completely forgot I wrote this but "why the free market can't address peak oil" - or climate change, the problems are ying and yang.

I cover both the artificial increased cost such as carbon pricing and the more natural "right wing" free market hand thingie they like to talk about as well and the likely effects of each.

My conclusion?

Addressing peak oil and the implementation of derivative renewable energy sources will come at a net-loss, and this has to be accepted if we're to ever accomplish it. Neither side of the supply & demand theory can properly address the issue. If the price of oil is high: the price of derivative sources will likewise be high. Derivative sources are technically advanced, they require metalurgy and very modern materials only made possible by the basis of simpler oil powered large-scale production and distribution. The little incentive to switch is emotional in nature, either via fear of even higher oil prices at which a certain point becomes unaffordable, or a deeper moral obligation to "go green". It's inevitable that enough investment results in a collapse in oil price which could potentially result in a much more expensive cost-of-living or net-loss. If oil price doesn't collapse, the goal hasn't been accomplished making that situation moot. If the price of oil is low it becomes the defacto source of energy while free market incentive evaporates. While the "alternatives" during a cheap energy period would likewise be cheap, in comparison to the cost of oil they are still very expensive as their energy returned on investment is significantly lower. The cheap energy leaves a perception of room for economic growth in which our GDP model happily accomodates. Only a proactive approach, with the common understanding that the change comes at a net-loss but in the long-term provides a net-gain for everyone will accomplish our goals as a society to move away from oil. Not changing will result in the biggest net-loss, a perpetual recession and multiple lost generations.

Purple library guy said...

Mound, I don't find your counter very persuasive. First of all I've said little or nothing about state ownership. Second, you can disagree but I did actually make an argument and I didn't notice you taking it on in any way, let alone refuting it.

It is certainly true that worker-owned firms in a market environment will operate in ways that will work in a market environment; globalization deals even greater constraints. But even so they don't behave in precisely the same way capitalists do--their interests are different both because they are workers and simply because they are local, part of the local community, living in the local environment. Where a private owner deciding whether a plant should pollute need only worry about dollars, worker owners need to worry about whether their families or friends will get cancer.
But worker ownership and control are, again, only parts of the puzzle. I've occasionally noted that while people treat markets and capitalism as if they're basically the same, they aren't--you can have capitalism without markets, as in the case of much military procurement. And you can have markets without capitalism; an economy with all firms owned by their workers which still bought and sold as normal would be like that. But while I object in particular to capital, I'm deeply suspicious of markets as well. The use of markets even without private owners still seems to create incentives to make money by externalizing costs (such as environmental costs); the market price signal leaves out a lot of crucial "information", and quite specifically the kind of information that would push us away from warming the globe.

Traditionally, if you didn't like private ownership and you didn't like markets, the default remaining position was "Have the government plan everything". I don't like that either, although I won't say I want government to plan nothing--government already plans some stuff even in our economy. Or you could accept the idea that it's hard for bottom-up egalitarian decision making to scale bigger than a town and say "Therefore we have to dismember the economy down to decentralized towns". This also has its problems, although I do think a less centralized, long range economy than we have would be good.
But technology has moved on since people came up with answers like central planning or radical devolution. With internet technologies, you can scale up participatory decision making, and you can I think run a non-centralized yet non-market allocation system. Basically, I favour something along the Participatory Economics lines
And I'd like to see decisions made using tools like
and/or relying on ideas like the ones I describe here:

The Mound of Sound said...

I guess the problem I have with your idea, PLG, is that it's far too theoretical. How could we possibly transition to that model without the use of force? Do you think the people of any developed country would accept it unless under duress?

It has some interest in theory but we don't have the time to indulge in that sort of thing.

If my ideas are flawed, come up with an alternative that the public could accept voluntarily. Absent that, isn't it really just hot air?

The Mound of Sound said...

Richard, I follow you fairly well but am still left guessing at your practical solution for re-jigging our economy to meet the challenges of this century. What would you have us do? At times I feel like you've made a compelling case without stating it. What would you have us do?

Richard said...

You're probably not going to like my answer..

I don't disagree with the original concept of the post, steady state, resource based, economics would be ideal. However, how do we get from here to there? Especially with a status-quo so hell bent on keeping it as is.

I've spent a lot of time contemplating that question and my conclusion is always the same. We can't simply get from here to there without some significant rejigging of everything from our top-down control structure to the economy to the distribution of information so people can make informed decisions.

In recent history I've only witnessed one threatening event to the status-quo and that was the occupy movement. Not because of the protests but because of the unintended effect of creating tent villages and the implantation, aided by technology, of real direct democracy.

It is very possible now to allow everyone to have a say in everything.

I don't think asking me what I would have you do is proper. I am only 1 person on a planet with 7 billion. It's not my place, or anyone's place, to say what should be done. That is how dictators arise in times of turmoil. Instead I would counter with what are you willing to do? How far are you willing to go? Are you willing to sacrifice the conveniences offered by the current system in a larger effort to ultimately destroy and recreate it?

There is a reason police targeted the tent cities. They represented something that is a true threat to the status-quo - some people literally gave up living in their comfortable house to go stay in these tents for months on end. That is a threat, a major threat, because if more and more people started doing that and started trading within this new tent village with whatever they deemed to be sound money (probably gold, silver, bitcoin) then the status-quo becomes irrelevant. The biggest threat of occupy was that in the end there was no demands, just people helping people and doing what they needed to do to get shit done.

That concept now has been destroyed, and I fear were long past the point where something similar can occur.

So from my point of view the question becomes what are _people_ willing to do and how much are they wiling to sacrifice to move us forward once fully informed of the situation?

For a new system to be born this one must collapse, completely, and it is within this small window that leaders both good and bad will arise, new ideas will flourish and as a society we'll either follow a wrong or right path. We may end up following some self-absorbed dictator or perhaps we'll implement steady state economics, there is really no way to know and it's naïve to think you or I will have any control over the path chosen when the choice comes. The best you or I can do is try to get as much information out there as possible so people understand _why_ the system is doing what it's doing and hopefully from that make smart decisions based on that information but they may just as likely make very bad decisions in their own supposed self-interest. I as a person can't really make anyone do anything, nor would I want to.

There isn't a lot of time left to start trying to design and implement alternative economies and political structures now. It's nice to think about, it's a good thought exercise but really the only thing I'd have you do is prepare for the event we don't get one and are left to our own devices to continue on as is looking like the most likely outcome at this point in time.

The Mound of Sound said...

@ Richard. I don't know that there's any feasible way to get to a modified form of capitalism except as part of some greater social and political reformation.

Absent some progressive renaissance it's hard to imagine this sort of transformation. That said, we are heading to some type of change in distribution and, unless it is regulated for the public good, it will mean impoverishment for the weakest. If we can be broken down into a more stratified society, if our former cohesiveness can be dissolved, that might just happen.

You're right, there isn't much time left.

Purple library guy said...

Mound, I don't see how we can get to your idea without the use of force, so that leaves us fairly even.
But actually, the problem with my ideas is not that people would have to be forced into it. It is, as you say, that it's all pretty theoretical. The main problem with anything new is that it hasn't been tried.

But when it comes to the substance of it, I think most people would rather like that--it's just so different that it's hard to wrap one's head around the idea that it's possible at all. But if you ask someone, "How would you like to not have bosses, and have a say in how anything you care about is decided?" I don't think they'd be violently resistant.

There are elements of what's happening in Venezuela that are heading in the direction of my kind of political economy. And that's happening largely through popular action from below, certainly not by violence--although there has been some violence, for instance by landowners trying to restore the status quo.

But Mound, you're still not even handwaving the basic structural problem with your approach. You want to turn capitalism on its head just by regulating it. All previous attempts to do this are eroding rapidly as we speak, even in Scandinavia. Regulatory restriction is precisely the kind of opponent that capital is geared up to block and destroy. How and why do you propose yours will work?
Not that I'm against reform. If any reforms are on offer, I'll support 'em. But it's treating symptoms, and worse it's treating symptoms when the disease has ways of making symptom-treatment ineffective over time, and is already geared to cream the kind of symptom-treatment you're prescribing.

It would be nice if your approach would work. But then, it would also be nice if global warming weren't happening. You're willing to face the unpalatable truth that global warming is really happening. To my mind, the unpalatable truth is that capitalism is not something that can be used to create a steady state, environmentally friendly economy.