Capitalism - the dog or the tail?
home | growth dicussion | sustainability | back
What would an economic system look like...In the real world of capitalism, as opposed to theories, when there is no growth the economy goes into a recession. When there is an actual drop in demand for a period of time, there is a significant crisis.In a real sense, people are the tail on the dog of capitalism—people are at the service of the system. Investment decisions are based on whether it is probable that a certain level of profit will be made. They are not made to satisfy needs, although that might occur for people who have enough money to pay. Companies have no particular desire to satisfy the needs of people without sufficient purchasing power, not because owners or CEOs are bad people, but because the whole purpose of investment and production under capitalism is to make a profit, not satisfy human needs. Basic human needs have not changed all that much over time— food, shelter, clothing, etc. — although we have become accustomed to higher quality of these basic needs. [Of course, although shelter is a basic human need, are the 4,000 or 5,000 square foot McMansions really needed, in any meaningful sense of that word?] However, new "needs" are being created continually as new widgets of all sorts are invented every year with the hope of making profits on their sale. One of the reasons for the obscene level of resources devoted to advertising, is to convince people that they need the new widgets. As Joseph Schumpeter described it decades ago “...the great majority of changes in commodities consumed has been forced by producers on consumers who, more often than not, have resisted the change and have had to be educated by elaborate psychotechnics of advertising” (Business Cycles, vol. 2 [McGraw-Hill, 1936], 73). What would an economic system look like that actually prioritized investment and distribution decisions based on meeting the needs of all of the people--where the people are the "dog" and the the economy is at the service of the people? I don't see how it could look like anything like capitalism. FRED Magdoff (f m a g d o f f @ u v m . e d u) It's not so much the monetary system as the basic workings of capitalism. Capitalist economies have to grow--If there is no growth the system is in real crisis. I am pasting below the introduction and two sections [A. and E,; complete article] of an article I wrote two years ago with my father --they are from a part of the article under the subtitle of Why Not Capitalism?. Also, in today's [19 NOV 2007] Wall St. Journal is an article titled "Oil Officials See Limit Looming on Production." Seems like the oil companies are starting to see that there might soon be a problem. FRED The case against capitalism contains a number of facets. First, capitalism is a system that must expand—leading to colonial and imperial wars and economic domination of poorer countries. The basic working of the system creates great wealth and poverty simultaneously at national and international levels. A consequence of this is that a large part of humanity is doomed to a subservient position, with many living precarious and wretched lives. Capitalism also tends to wreak ecological havoc as it develops and grows because there is no other systemic goal than the pursuit of capital accumulation—its prime moving force. It tends to use up natural resources, both renewable and nonrenewable, without regard to their limited nature. And while the worst effects of capitalism can sometimes be mitigated, reforms can be undone when capitalists view them as barriers to capital accumulation and have the power to legislate the return to more unfettered conditions. A. Inherent Expansionism of Capitalism Trade for monetary gain and the extraction of precious metals became the dominant motive forces at the center of society in the emerging mercantile capitalism, resulting in wealth accumulation by merchants and bankers in the powerful countries. This led to struggles between social groups and wars between nations searching for more power, property, and wealth. However, the oceans set limits on European trade with other parts of the world because it was essentially confined to land routes until the late fifteenth century. The exploration of the oceans by European nations that began at this time was made possible by the development of powerful artillery, new navigational instruments, and large sailing ships that could hold significant numbers of both soldiers and cannon. “The Europeans rapidly improved upon [military technology, naval artillery, and sailing ships] before the non-Europeans were able to absorb [them]. The disequilibrium grew, therefore, progressively larger” (C. M. Cippola, Guns and Sails in the Early Phase of European Expansion 1400–1700 [Collins, 1965]). The initial motivation for the European explorations and conquests abroad was usually mercantile trade for high value products such as spices and precious minerals. It took only a few decades for the European nations to become the predominant masters of the oceans and gain entry or access to many nations around the world. They began to establish small enclaves, some of which they were able greatly to expand because of the decimation of native populations following the introduction of Eurasian germs to which there was little resistance among the people of the conquered lands. Although the push abroad started in the late fifteenth century, for the sake of convenience, 1500 is generally used to mark the start of the era of merchant capitalism. Merchant capitalism created a world market, a massive concentration of wealth (largely based on general trade as well as gold and silver stolen from the Americas), and the beginning of colonization that affected huge segments of the overseas world. Indigenous people were wiped out by war, enslavement, and disease or were otherwise marginalized. European markets with Africa concentrated for centuries on the slave trade, which predominantly benefited Britain. Merchant capitalism created the beginnings of a world market and helped provide the accumulated wealth that gave birth to the industrial revolution of mid-eighteenth century. Thus, about two and a half centuries ago a new type of society developed in Europe—industrial capitalism—and has since spread to essentially all corners of the world. Built into the very fabric of modern, or industrial, capitalism is the need to expand control and influence to foreign shores—imperialism. There are a number of significant forces that led to the drive to expand and during various periods one or another may have been predominant. However, they are generally inseparable, because they are all derived from the workings of capitalism. Control over foreign natural resources (in competition with other capitalists and/or other nations) is needed to obtain secure sources of essential materials for production—from cotton to bauxite to oil to copper and so on. The U.S. war on Iraq and the attempt to influence the politics and economy of that country and region are incomprehensible without viewing it as part of a strategy to control Middle Eastern oil, which amounts to 65 percent of the world’s known reserves. The United States currently imports over half its oil needs, 100 percent of its needs for seventeen minerals, and relies heavily on imports for many more. The push continually to invest profits in order to accumulate more and more capital—the driving force of industrial capitalism—and production stimulated by competition among firms for market share led capitalists to develop new products and expand their markets internally. Once internal markets are saturated or close to saturation capitalists search abroad for profitable opportunities to overcome the stagnation that begins to develop. The persistent excess of investment and production relative to effective demand, the cause of capitalism’s tendency toward stagnation, was identified by Marx as a characteristic of the system. If this new accumulation meets with difficulties in its employment, through a lack of spheres of investment, i.e. due to a surplus in the branches of production and an oversupply of loan capital, this plethora of loanable money capital merely shows the limitations of capitalist production.. .an obstacle is indeed immanent in its laws of expansion, i.e., in the limits in which capital can realize itself as capital. (Karl Marx, Capital, vol. 3, 507) Investing abroad also offers opportunities to take advantage of lower-cost labor and fewer environmental restrictions, allowing more profitable production for the foreign and/or home markets. Having many operations abroad offers the opportunity for firms to allocate costs and income to various international subsidiaries in ways that minimize tax obligations. In the monopolistic stage of capitalism that arose in the twentieth century, the struggle between giant corporations for bigger shares of the markets at home and abroad was another factor contributing to the drive for expansion. Corporations frequently need external funding to feed this. Much of the surplus generated by corporations is dissipated in nonproductive ways, such as for advertising and promotion or outrageously high compensation for senior corporate officers. For example, the amount that the CEO of Wal-Mart earns every two weeks is equivalent to what an average worker in that company earns in an entire lifetime (Paul Krugman, New York Times, May 13, 2005). Hence, although corporations can still generate profits for investment internally, they frequently require access to capital for expansion of production or acquisitions of other companies. In order to attract the bankers and stock market investors they need to show significant or potential growth. Lastly, the invasion of the periphery by banks from the core capitalist countries assists foreign investment and helps foreign investors and their allies in the local ruling class transfer profits back to the core countries. Banks from the center also find it profitable to peddle loans to private and public agencies in the periphery, enhancing the development of debt peonage. Interest (plus some of the principal) equivalent to the original loan is rapidly transferred back to the center, leaving behind a long-term obligation to pay. Creating colonial control was the way emerging capitalist centers assured power over foreign resources and markets. The expansion of the more advanced industrial and military powers led to outright control of most of the globe. By 1914, colonies of the rich and industrialized countries covered approximately 85 percent of the earth’s land surface. (And people talk nowadays about “globalization” as if it were a completely new phenomenon rather than a renewed imperialist thrust!) The World Wars of the twentieth century were fought primarily over the question of the division of the world among the great powers. Bitter struggles and wars after the Second World War forced the colonial powers to decolonize. However, after decolonization, the rich nations of the center of the capitalist world economy continued to dominate the much larger underdeveloped world. A common feature of the years of colonialism and those after the former colonies gained political independence was the economic subordination of the poor nations to the needs and wishes of capital from the center. This history of colonial and imperialist domination has distorted the economies of the periphery in ways that have inhibited self-development. The main feature of this dependency of the poorer nations—the extraction of wealth to support capital accumulation by the dominant powers—continues to this day. Following decolonization, new means were needed to oversee and continue to reproduce the dependence of the poor countries of the periphery. The IMF and World Bank now perform much of the enforcement role once played by colonial occupation and military force, but armed forces are still used to enforce imperial will. The importance of the global penetration of capital to the success of the system as a whole has been simply stated by Joan Robinson: “few would deny that the expansion of capitalism into new territories was the mainspring of. . . ‘the vast secular boom’ of the last two hundred years.”2 However, this expansion inherent to capitalism creates nearly perpetual warfare and subjugates the economies of the periphery to the needs of the corporations based in the system’s center. It also works to maintain a large portion of the world’s people under very harsh conditions (see below). E. Resource Limits A system that by its very nature must grow and expand will eventually come up against the reality of finite global natural resources. The water, air, and soil can continue to function well for the living creatures on the planet only if pollution doesn’t exceed their capacity to assimilate and render the pollutants harmless. Additionally, natural resources are used in the process of production—fuel (oil and gas), water (in industry and agriculture), trees for lumber and paper, a variety of mineral deposits such as iron ore and bauxite, and so on. Some resources such as forests and fisheries are of a finite size, but can be renewed by natural processes if used in a planned system that is flexible enough to change as conditions warrant. Future use of other resources—oil and gas, minerals, aquifers in some desert areas (prehistorically deposited water)—are limited forever to the supply that currently exists. Capitalists generally only consider the short term in their operations— perhaps three to five years at best. This is the way they must function because of unpredictable business conditions (phases of the business cycle, competition from other corporations, prices of needed inputs, etc.) and demands from speculators looking for short-term returns. Capitalists, therefore, act without any recognition that there are natural limits to their activities— as if there is an unlimited supply of natural resources for exploitation. When each individual capitalist pursues the goal of making a profit and accumulating capital, decisions are made that collectively harm society as a whole. For example, the well-documented decline, almost to the point of extinction, of many ocean fish species is an example. It is in the short-term individual interests of the owner of a fishing boat—some of which operate at factory scale, catching, processing, and freezing fish—to maximize their take. Although there is no natural limit to human greed, there are limits to many resources, including the productivity of the seas. The use of water for irrigation is an old practice, which only in the last fifty years has started to reach its natural limits. The capacity of some watersheds and rivers are fully exploited—so much water is withdrawn from the Yellow River in Northern China, in most years it doesn’t reach the sea. With the use of powerful pumps that can exploit the deeper aquifers and pump at higher rates, water can be withdrawn faster than it is replenished by rainfall percolating through the soil. The first people to point out that withdrawing more water than was replenished by rainfall from the Oglala Aquifer, which underlies the portion of the Great Plains from South Dakota to the panhandle of Texas, could not continue for much longer and would require deeper and deeper wells until it was impractical if not impossible to continue its use, were accused of being communists! That’s one indication of how uncapitalist it is to think about possible resource limits to economic activity. How long it will take before nonrenewable deposits are exhausted depends upon the size of the deposit and the rate of extraction of the resource. While depletion of some resources may be hundreds of years away (assuming that the rate of growth of extraction remains the same) limits for some important ones—oil and some minerals—are not that far off. For example, it is estimated that at the rate oil is currently being used, known reserves will be exhausted within the next fifty years—the 2003 ratio of reserves to annual extraction is forty-one years, down from nearly forty-four years in 1989 (British Petroleum, Statistical Review of World Energy 2004, http://www.bp.com). Iron ore production—the basic ingredient of iron and steel products used—grew by about 16 percent from 2003 to 2004. If it grows by 7 percent annually from now on, known deposits of iron ore will be exhausted in about sixty years. If the rapid increase in use of copper continues, all known reserves will be exhausted in a little over sixty years. In the face of limited natural resources, there is no rational way to prioritize under a capitalist system, in which the market—that is the wealthy with their market power—decides how commodities are allocated. When extraction begins to decline, as is projected for oil within the near future, price increases will put increased pressure on what had been until recently the boast of world capitalism, the supposedly middle-class workers of the center FRED Magdoff (f m a g d o f f @ u v m . e d u) Compare: |
ecostory |
back
ecoglobe since 1997
7n21