Thursday, November 28, 2013

Black Friday, Indeed

Richard Hughes over at Cowichan Conversations has posted a piece, "Ditch Capitalism and Save the Planet."   What follows is a 'train of thought' response I attempted to leave as a comment without realizing that it's far too long to be accepted.  So, here goes.  I'll contact Richard and invite him over to read it here.

Capitalism, Richard, has run its course.  That's not hyperbole.  Few recognize it but we're watching capitalism in its death throes.

One symptom of this is the transfer of wealth out of the working classes, blue and white collar, into the pockets of what has to be seen as an emerging oligarchy.  True wealth is not being created as it was during most of our lifetimes.  Much of what we consider wealth today is being acquired by transfer.

Stiglitz makes this plain in his great book "The Price of Inequality."  He demonstrates more than convincingly that the underlying cause of inequality today and the ever widening gap between rich and poor is neither merit-based nor market driven.  It is the product of legislation that, through grants, subsidies, exemptions and deferrals, allows wealth, often unearned wealth at that, to accrue to a specific category of individuals.

The beating heart of neoclassical, free-market capitalism is growth.  In our society the Holy Grail of growth has been a 3% annual target.  Find an online interest calculator.  Plug in 3% compounded interest.  Run it for 50-years, an approximation of an adult lifetime.  Now make it 100-years, and then 150 and, finally, 200-years, the span of just four adult lifetimes.  What you will find is that, in order to achieve 3% annual growth, the economy in that first lifetime must expand more than four-fold.  Because growth is a cumulative concept, by the time you've completed that fourth adult lifetime, you will have had to grow the economy about 300-times the size it was in year one.

That means 300-times the resources, 300-times the production, 300-times the consumption.  Yet we live on a finite planet with very finite resources that's utterly incapable of supporting the burden of that magnitude of growth.

Now compound that reality with other factors we're experiencing such as population growth and steady increases in per capita consumption.  Do you get the idea that this is a candle burning fiercely from both ends?

We're seeing the limits of what our earth can provide manifested in many ways. One example is the collapse of global fisheries as our industrial fishing fleets constantly "fish down the food chain". They're hunting down species today that were considered garbage just a few years ago.

The limits are evident in the spreading problem of desertification, the exhaustion of once arable  land and its transformation into sterile desert.  Around the world in many places, including China, they're basically killing their farmland.  Look at the massive dust clouds that form over China and sweep across the Pacific. These things are visible to the naked eye from space.  The same goes for deforestation - visible from space.

We're running out of resources. For everyone in the world to have something approximating a western lifestyle we would require an additional planet and a half's worth of resources.  Can't be done, doesn't exist.

Some time ago I read a paper written by a leading Chinese economist.  It focused on the emerging middle class in China (and by extension, India).  The dilemma for the Chinese government was that it could not do without these young, talented people and entrepreneurs and had to see them properly rewarded yet it could not hope to extend the elite's new lifestyle to the bulk of the population that aspired to it.

This fellow concluded that China had to find the means to institute an island of affluence floating on a sea of relative poverty without triggering massive social upheaval.

When our planet's ability to generate essential resources is exploited to its limits - as it has been today - then we are forced to shift from growth-based economics into an allocation-based economy.

There are quite well thought out models for this.  It's a school of what are known as "steady state" or "Full Earth" economics by which the economy has to be brought into equilibrium with the limits of our planet's abilities.

In this model there is no growth - at least not in production or consumption. Growth continues but in the quality of the products we make, their utility, durability and enjoyment and also in our knowledge.  We actually improve our quality of life, enhance our enjoyment of life, by not churning out all the crap that lines the shelves of Walmart.

Some years back Gwynne Dyer wrote an essay on a future based on rationing, a form of allocation-based economics.  He's probably right if only because there's no real alternatives.

What he overlooked was that societies function quite differently in allocation-based conditions than the heady world of free-market capitalism.  We experience this in times of great crisis such as major wars.

We tolerate inequality far better in free-market capitalism settings.  The 'rising tide floats all boats' sort of thing. However, when that model is displaced by an allocation system, we become far less tolerant of inequality.  I may be limited to one pound of butter a month but that rich bastard better not get the idea he can have two or three.

I could go on for hours about this but it's best I wrap it up now. I hope I've made at least a viable argument that classical capitalism has run its course.  It won't die an easy death and it will probably seek to take a good many of us with it. The faster we can realign our society out of free market capitalism and into steady state economics, the easier it will go on us.


Anyong said...

Actually, why don't we call it what it really is. Governments since the second world war have found ways to act in a dictorial manner while professing to be democratic. Lets call it Fascist. Going further, Politicans are being told how to behave and how to govern by the Fascist monied people. I suggest you listen to the episode of the "Current" on CBC this morning regarding governments providing enough money so people do not go hungry and become a drain upon the Health Care System in the long run. "Sir Michael Marmot has found evidence that status and health are entwined and he thinks governments need to intervene to mitigate health inequalities.
Sir Michael Marmot has spent decades trying to understand how income and socio-economic conditions relate to our long-term health. Our Project Money continues its look at the Contagion called Poverty with the epidemiologist who says better health lies within the grasp of every government."
Do you think for one minute, our government will understand what is being said? It is shameful that countries like Norway, Brazil, Chili and others are implimenting what Sir Marmot advocates. Healthy Canadians, healthy everything else in Canada.

Richard Hughes said...

Hi Rob

Indeed your comment would have been a tad on the long side. ;-)

I enjoyed your post. Many of us are distances part, but hold the common realization that we are slipping into a dark place caused by unbridled capitalism.

We live in a fascist country without any of the opposition parties really calling it for what it is.

They sadly seem content to play in their well paid and comfortable boxes while the country goes down the drain.

We need a Free Enterprise-Co-op, Social Democratic style pushback.

The Liberals and the NDP must join forces federally to defeat Harper and his 'thugs in suits' that make up his cabinet.

If not, if Trudeau and Mulcair continue to put their ego's and party focus ahead of Canada then we will be in more trouble than we can imagine.

Capitalism is ruining Canada.

The Mound of Sound said...

Anyong if you haven't read it I would recommend you get "The Spirit Level" which reveals the impacts of inequality on a host of social outcomes. It's a wonderful book.

Hi Richard.

Yes it was hopelessly too long. Your suggestion of a free-enterprise co-op is dealt with by Gar Alperovitz in his terrific book, "What Then Must We Do? Straight Talk About the Next American Revolution."

In his book he writes about experiments underway across the U.S. of worker-owned enterprises regularly achieving remarkable successes for the owner/employees. It's a means of essentially ousting the rentier class and reclaiming control of the means of production and it works.

It's interesting how he details the role of local or regional institutions, including financial institutions, in supporting employee-owned enterprise. They really seem to come onside quite quickly. Another neat thing is that the model for this sort of business operation is pretty much transferable to just about any type of business.

Happy No Shopping Day, everyone.

The Mound of Sound said...

Oh yeah, one other thing. You're both right. We live in a fascist country. That's inevitable when political and corporate power merge. Perhaps the hallmark of that in 21st century Canada is the emergence of our powerful corporate media cartel.

the salamander said...

you're a brave n remarkable man MoS ..
not sure there's a windmill
or a government
that could stand against you
in a fair fight..

this is a very dirty fight .. very ..
that's not news to you
and so much at stake

lets touch base soon
backchannel ..
i will get back to you

meanwhile.. all I can say is
you are hotter than a pistol
Marshall McLuhan smiles on you
& so does Hunter S Thompson

now thats rare territory
Well deserved MoS ..

the salamanders have spoken ...

Hugh said...

I don't know if capitalism is the problem, but I do agree that the idea of infinite economic growth is crazy.

Could there be non-growth, steady-state capitalism?

The Mound of Sound said...

I think that a much different form of capitalism will emerge, Hugh. It may be the opposite of what we know as 'casino capitalism'.

There will still be value in production but more of that will be on the quality of the good produced instead of the quantity.

There are several good books on Steady State economics. I'd recommend "Natural Capital and Human Economic Survival", an anthology of papers by Thomas Pugh, Herman Daly, Robert Costanza, John Cumberland and Richard Norgaard.

Purple library guy said...

Hugh: It seems unlikely there can be non-growth, steady-state capitalism. At a theoretical level, there can't . . . the core definition of capitalism revolves around individuals investing capital in such a way as to produce a surplus, profit, which they then reinvest. It's a growth process from the get-go.

On the other hand, at a more nuts and bolts level, capitalism is about the economy being controlled by individual private citizens, wealthy ones. As private citizens, they have no responsibility built into their role. And the historical record shows pretty damn definitely that as a rule, these people have little acquaintance with the word "enough". They're in a position to grab more and more and more, and they want to do just that. All the people who control production grabbing for more and more and more means growth. And they can't be stopped without changing the rules on them, taking away their stuff and/or fundamentally redefining their role, to the point where it isn't capitalism any more.

DonMaroc said...

There is certainly no argument that when government and business work together they form our definition of fascism. Please remember that capitalism died once before, Oct. 1929. The system was unraveling as it stumbled through the 1930's. Then salvation, they started WW II. Things accidently conspired to regulate macro-finance and the US created a working middle class. They ruled until the mid-1970's, when we started seriously shipping our world-class production system overseas. By the 1980's our financial system was piling up money at several times the ability of our former production system. But financial manipulation does not create "wealth", so we replaced the working middle class with the under-employed poverty class. This kind of a society cannot last for long, the next step is meaningful evolution or revolution.

The Mound of Sound said...

Thanks for the insights, Don. I had thought of October, 1929 as a collapse of speculative capitalism, just not its death. That's an interesting way to think of it.

I certainly agree that the kind of society we have today cannot last for long. What will succeed it is subject to a confluence of forces that leave the future entirely unpredictable.

The again, Adam Smith foretold that growth-based capitalism would have a lifespan of just two centuries and we've certainly arrived at that point.