Capitalism’s failures arise from two of its defining elements. The first
is perpetual growth. Economic growth is the aggregate effect of the
quest to accumulate capital and extract profit. Capitalism collapses
without growth, yet perpetual growth on a finite planet leads inexorably
to environmental calamity.
Those who defend capitalism argue that, as consumption switches from
goods to services, economic growth can be decoupled from the use of
material resources. A paper in the journal New Political Economy, by
Jason Hickel and Giorgos Kallis, examined this premise. They found that
while some relative decoupling took place in the 20th century (material
resource consumption grew, but not as quickly as economic growth), in
the 21st century there has been a recoupling: rising resource
consumption has so far matched or exceeded the rate of economic growth.
The absolute decoupling needed to avert environmental catastrophe (a
reduction in material resource use) has never been achieved, and appears
impossible while economic growth continues. Green growth is an
illusion.
A system based on perpetual growth cannot function without peripheries
and externalities. There must always be an extraction zone – from which
materials are taken without full payment – and a disposal zone, where
costs are dumped in the form of waste and pollution. As the scale of
economic activity increases until capitalism affects everything, from
the atmosphere to the deep ocean floor, the entire planet becomes a
sacrifice zone: we all inhabit the periphery of the profit-making
machine.
This drives us towards cataclysm on such a scale that most people have
no means of imagining it. The threatened collapse of our life-support
systems is bigger by far than war, famine, pestilence or economic
crisis, though it is likely to incorporate all four. Societies can
recover from these apocalyptic events, but not from the loss of soil, an
abundant biosphere and a habitable climate.
There is no going back: the alternative to capitalism is neither
feudalism nor state communism. Soviet communism had more in common with
capitalism than the advocates of either system would care to admit. Both
systems are (or were) obsessed with generating economic growth. Both
are willing to inflict astonishing levels of harm in pursuit of this and
other ends. Both promised a future in which we would need to work for
only a few hours a week, but instead demand endless, brutal labour. Both
are dehumanising. Both are absolutist, insisting that theirs and theirs
alone is the one true God.
From March to June 2020, Amazon founder Jeff Bezos saw his wealth rise
by an estimated $48 billion. The journal might also have added that 40
million workers had filed for unemployment compensation and that prison
labor was being paid $1 per hour to fight deadly forest fires in
California.
Bezos describes his strategy similarly, asserting that “the stronger our
market leadership, the more powerful our economic model…we will make
bold rather than timid investment decisions where we see a sufficient
probability of gaining market leadership advantages.” Facebook CEO Mark
Zuckerberg has conveyed the same approach, but more to-the-point; for
many years, he allegedly ended staff meetings shouting, “Domination!”
The cliché is that we are all in this together. This is so only in the
sense that some of us own luxury yachts capacious enough to hold luxury
lifeboats while the bottom third clings to leaky life preservers. The
mortgages of even many middle-class citizens are soon to be underwater.
What does it mean to have wealth approaching six-figure billions? Sen.
Everett Dirksen once famously quipped “a billion here and a billion
there and pretty soon you are talking real money.” It is helpful to
translate these highly abstract big numbers into the real goods and
services one could command with this money.
A state-of-the-art naval destroyer costs about one billion, about the
cost of an NBA franchise. One can add a few luxury homes and still have
spent only a small fraction of one’s wealth. Clearly possession of an
ever-growing stream of goods seems to be an unlikely motivator of the
mega wealthy.
During the pandemic, as during the world finance crisis, power has been
both the means and the end of domestic and international economic
policy. During the early stages of the global economic crisis,
government responded by creating a $700 billion facility to purchase
troubled assets from banks, but only about 10 percent of these
expenditures went to lowering mortgage interest rates.
Federal Reserve treatment of the big finance center banks was much more
generous. It lowered the interest rate charged member banks to near
zero, a figure it held for almost a decade. The effects of this policy
were not neutral.
Lower rates in the financial sector were supposed to encourage new
investment in the real economy but instead did little more than
stimulate a bull market in stocks and cheap money to finance stock
buybacks and leveraged mergers and acquisitions. (Yves Smith , founder
of the blog Naked Capitalism, points out that the only industry for
which cheap money is a resource that might encourage further investment
is finance. So much for restoring the productivity of main street.)
Monopoly power and concentrated wealth do immense harm to the bottom
third of the wealth spectrum. We have returned to Franklin Roosevelt’s
one-third of a nation ill-housed, ill-clad, ill-nourished. Late last
year The Los Angeles Times reported: “New research establishes that
after decades of living longer and longer lives, Americans are dying
earlier, cut down increasingly in the prime of life by drug overdoses,
suicides, and diseases such as cirrhosis, liver cancer, and obesity… the
authors of the new study suggest that the nation’s lifespan reversal is
being driven by diseases linked to social and economic privation, a
healthcare system with glaring gaps and blind spots, and profound
psychological distress.”
So what does a better system look like? There is no complete answer, and
it also seems no one person does have. But a rough framework is
emerging. Part of it is provided by the ecological civilisation proposed
by Jeremy Lent, one of the greatest thinkers of our age. Other elements
come from Kate Raworth’s doughnut economics and the environmental
thinking of Naomi Klein, Amitav Ghosh, Angaangaq Angakkorsuaq, Raj Patel
and Bill McKibben. Part of the answer lies in the notion of “private
sufficiency, public luxury”. Another part arises from the creation of a
new conception of justice based on this simple principle: every
generation, everywhere, shall have an equal right to the enjoyment of
natural wealth.
The moral case for egalitarian reforms is overwhelming. Obscene wealth
disparities are a product of political and economic power, not virtue or
extraordinary talent. On the center Left the most popular proposals are
various versions of a wealth tax. Such proposals should surely be part
of any reform package.
A wealth tax would begin to redress the damage inflicted by four decades
of socialism for the rich. And it should be framed that way in order to
counter in advance the inevitable carping that tax reformers are
motivated by envy. Nonetheless more needs to be promoted in order to
address the causes as well as consequences of this inordinate wealth
concentration.
Trying to address wealth inequality without addressing monopoly power is
like trying to stop a boat with a hole in the bottom from sinking by
bailing out the water, but not plugging up the hole.
In addition, it is essential to develop policies that give working-class
citizens more voice in designing the economic instruments that will
produce future wealth for us all. Antitrust law, cooperatives, labor
rights to organize, and democratization of the Fed would all be parts of
such reform packages.
The moral choice seems to be, do we stop life to allow capitalism to continue, or stop capitalism to allow life to continue?
The window of opportunity to make radical changes to the defunct
Capitalist system is getting smaller by the day, and if not dealt wih
rapidly, is surely to result in civil unrest and violence of which the
likes have never been seen before.
