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.