The Problem Is Capitalism

By Fred Magdoff (Posted Sep 26, 2014)

Agriculture, Capitalism, Climate Change, EcologyMexico, VenezuelaCommentary, News

NYC Climate Convergence, September 20, 2014

A. The Environmental Crisis

The “environmental crisis” is actually a number of crises, including the following:

  1. climate change;
  2. acidification of the oceans (related to elevated atmospheric CO2 levels);
  3. pollution of air, water, soil, and organisms with harmful substances;
  4. degradation of agricultural soils;
  5. destruction of wetlands and tropical forests; and
  6. accelerated extinction of species.

These crises have generally adversely affected the poor more so than the wealthy and will probably continue to do so.  This makes it even more important to advance the fight for environmental justice as an integral part of the struggle for environmental health.

B. Proposed “Solutions” Are Based on Hypotheses as to Cause(s)

C. Suggested Causes for the Crisis

The famous Walt Kelly “Pogo” cartoon — “WE HAVE MET THE ENEMY AND HE IS US” — explains most of the “causes” that have been suggested to account for the horrendous environmental crises.  Some of these are outlined below.

The cartoon’s implication when used in the context of an environmental discussion (and I witnessed its use in that way by a leading environmental educator) is that each of us personally or all humans together are responsible for what ails the environment and us.

Here are a number of the common explanations for the environmental crises:

  • There are too many people in the world and we need to rapidly lower the population — usually this is reflected in a call for birth control in the poor countries of the world, especially in Africa.  But as an article headline in the Guardian from just a few days ago states, “It’s not overpopulation that causes climate change, it’s overconsumption.”  The article goes on to state, “Africa’s population growth is often linked to ecological risk — yet the real danger lies in the west’s infinite appetite for resources.”1  If you look into this issue a little more, you will find that World Bank economists estimate that the wealthiest ten percent of people in the world consume almost sixty percent of the resources.  Thus, you might conclude that there actually is a population problem: there are too many rich people living too high off the hog.  The problem is certainly not the poor of the world who consume so little and contribute infinitesimally to the use of resources and pollution.  Birth control among poor people — access to which should be a human right — does not help solve the environmental crises.
  • It’s just human nature — we’re too darn greedy and don’t care about the future.  For those taking that position, there is clearly nothing that can be done.
  • Some say that humans have developed a “domination ethic” and need a new set of ethics that somehow we can create and inculcate in the people in the absence of a change in the social and economic system.
  • It’s our philosophy that’s the problem — we are following a “perpetual growth philosophy” or “paradigm” and we need a new non-growth philosophy (I presume that we should study philosophy and come up with a new one).
  • People aren’t purchasing the right kinds of products — if we all bought “green” products we could solve the problem = green capitalism.  This includes purchasing more efficient cars and green household gadgets, clothes, food, etc.  So continue shopping as before, just buy better products.
  • The problem is focus of economists and pundits on growth of GDP.  If only economists would focus their attention on something else . . . like Gross National Happiness . . . then we could be guided in a better direction.  The whole concept that economic growth in a capitalist economy is somehow a result of people focusing on GDP is rather strange, to say the least.
  • Industrial society is the problem — we need to return to a pre-industrial society.  This will necessitate a lot fewer people (billions).  This is a variation of the theme that there are just too many people, but this approach has a different constituency than those who believe that there are just-too-many-people.
  • The next suggested “cause” doesn’t blame people and begins to see that perhaps the workings of the economy might be the problem.  This approach considers that the “externalities” of capitalism are the problem — not the system itself.  These “by-products” of doing business as far as companies are concerned (that they do not pay for) become social costs that affect us all, that we all pay for.  Those who maintain that the externalities are the problem (instead of symptoms) feel that we should use market-based approaches, laws, and regulations to resolve the system’s “externalities.”  These includes a) campaign finance reform (to take away the power of money in politics); b) new business models; c) making products that will be more durable, versatile, and easy to repair, with components that can be reused or recycled; d) privatizing and marketing or trading “ecosystem services”; e) tradable carbon credits; f) carbon-offset schemes; g) using the “precautionary” principle in all economic activities, etc.

And now a “prestigious” committee has found that fixing the system’s externalities really won’t cost anything at all.  A New York Times article on the report earlier this week is headlined “Fixing Climate Change May Add No Costs, Report Says.”2  It continues as follows:

A global commission will announce its finding on Tuesday that an ambitious series of measures to limit emissions would cost $4 trillion or so over the next 15 years, an increase of roughly 5 percent over the amount that would likely be spent anyway on new power plants, transit systems and other infrastructure.

When the secondary benefits of greener policies — like lower fuel costs, fewer premature deaths from air pollution and reduced medical bills — are taken into account, the changes might wind up saving money, according to the findings of the group, the Global Commission on the Economy and Climate.

The report itself, Better Growth, Better Environment, contains a litany of things that need to be done to deal with the “externalities.”  And some of these actually make a lot of sense . . . in a way.  For example one of the suggestions in its ten-point Global Action Plan (# 7) is as follows: “Make connected and compact cities the preferred form of urban development, by encouraging better-managed urban growth and prioritising investments in efficient and safe mass transit systems.”3  Well, who is going to argue with that aside from developers who want free rein to build what they want and where they want it?  The contents of the report, including the Global Action Plan, assume that the capitalist system is rational and things will happen because it makes sense for them to do so.  There is, however, a small problem with this assumption — the capitalist economic system is not rational and what generally happens, in the absence of massive popular struggles, is in accordance with the wishes of the wealthiest and most powerful economic forces.  And what these people are concerned with is making it easier and more profitable as they continue upon the path of accumulating capital.  We should, of course, not be surprised that a committee containing such luminaries as the former president of Mexico (Felipe Calderón, Chair), the Chairman of the Bank of America (Chad Holliday), the President and CEO of Bloomberg LP (Dan Doctoroff), and the Managing Director and CEO of the World Bank (Sri Mulyani Indrawati) might bring out a report based on the faulty assumption that the capitalist economic/political system is rational.

D. What Is Different Nowadays Compared with Pre-capitalist Environmental Harm Caused by Humans?

  • There are more people and we are spread over most of the easily habitable lands;

  • More rapid destruction is occurring in most locations of intense economic activity — extraction and processing of raw materials and production of commodities;

  • Use of modern equipment and techniques causes harm more rapidly over widespread areas (think tar sands exploitation or mountaintop removal, for example); and

  • Capitalism is an economic system that has no limits and respects no boundaries.  As far as corporations are concerned there can be no such thing as enough growth or sufficient profits.

E. What Is It About Capitalism That Makes It Such a Destructive System — Socially and Environmentally?

The ecological Achilles Heel of Capitalism is not found in the so-called “externalities,” as harmful as they are, but rather in the inner logic or inner laws of the system, the functioning of its very DNA.

There is much confusion about capitalism and conflation of the capitalist system with markets (that have existed long before capitalism) or the so-called (and nonexistent) “free market.”  There are those who believe — contrary to all evidence — that capitalism=democracy.

But for the basics of the system we need to look deeper.

Capitalism’s inner workings propels growth: the system is only “healthy” when it is growing rapidly, and in the periods without growth, or with very slow growth, the system is in crisis with many people suffering the effects.  On the other hand, slow growth is better for the environment.

This need for growth as capitalists strive to accumulate profits and the drive to accomplish it violate what ecological economist Herman Daly has called the “Impossibility Theorem” — infinite growth on a finite planet is not possible.  You will eventually run out of resources!!!  This was a good part of the thrust behind The Limits to Growth (Donella H. Meadows, et al.).  The projections made in this book have proven remarkably close to what has actually happened.

The dynamic part of capitalism — what makes it capitalism — is best characterized by M-C-M’, in which money (capital) is used to build a factory, purchase machinery supplies, hire workers, all to produce a commodity that is then sold for more than its production costs.  (Same basic story for services.)

The system is based on a drive for profits, without end.  It is based on a small portion of the population owning the means of production and the large majority needing to work for others in order to make a living.  In such a system of accumulation there is no such thing as enough profits.  Or enough gadgets or other goods and services that might be sold.  The capitalist uses some of the profits for luxury living, but invests the rest in the same or other businesses.  M-C-M’ leads to M’-C-M” to M”-C-M”’ and so on.

Companies and corporations compete with others that make the same or very similar products/services.  In order to survive in a competitive environment companies must grow their market share.  There was an article in the New York Times Sunday Magazine last year about the junk food industry and it contained a description of companies “fighting one another for what they called ‘stomach share’ — the amount of digestive space in the population that any one company’s brand can grab from the competition.”4

Competition may also lead to just buying out competitors.

But either way, there has been increasing concentration of economic activity in the hands of ever-larger corporations.  The revenue of the top five hundred global corporations is now in the range of 35-40 percent of world income.  Even though we are in the stage of capitalism known as monopoly capitalism, large firms compete with each other, although usually not by cutthroat price reductions.

Six corporations — Syngenta, Bayer, BASF, Dow, Monsanto, and DuPont — control 59.8 % of global commercial seeds and 76.1 % of agrochemicals.  The same six companies account for at least 76 % of all private-sector R&D in these two sectors.

So — capitalism has two main forces propelling growth:

    1. The quest for accumulation of ever-greater wealth (capital) with most profits used to make more profits — this is the moving force of the system.  Investments are made in order to end up with more money — NOT to provide some supposedly needed good or service.  (The agriculture system is about producing profits.  Food is a by-product.)

      2. NOTE: Human beings express all sorts of characteristics from very altruistic to violent.  In order to live and thrive in capitalism, certain behaviors are useful and reinforced — individualism, competition, greed, selfishness, exploitation of others, consumerism — while downplaying the full expression of those human characteristics needed for a harmonious society (cooperation, sharing, empathy, and altruism).  The title of an article in the prestigious Proceedings of the National Academy of Sciences sums it up: “Higher social class predicts increased unethical behavior.”  The fictitious Gordon Gecko said in the movie Wall Street: “Greed is good.”  This is correct — greed is not only a good thing to have in a capitalist society but it is nearly essential to have a good dose of it if you are a capitalist.  Greed is rewarded and helps to get the juices flowing to go after profits and to compete with other companies.  And now, it turns out — not to our complete surprise — that the wealthy are greedier and that “upper-class individuals [are] more prone to unethical behavior, from violating traffic codes to taking public goods to lying.”5

    2. In most cases competition with other companies requires striving to increase market share — usually done with the sales effort which includes what Schumpeter called the “elaborate psychotechnics of advertising.”  Some 10 percent of the U.S. economy is devoted to convincing people to purchase more stuff — the “sales effort.”  Some of the competition is through “planned obsolescence” — new fashions, new car models, new razors with 5 blades, and new computer models are all part of the sales effort.

As Philip Kotler, the marking guru and author of Marketing Management (now in its 14th edition), commented:

If there are no more needs — by which I mean, everything we think of, there’s someone supplying it — then we have to invent new needs. . . .  Now, I know that’s been criticised.  People say: ‘why are you doing that to us?  Why don’t you leave us alone?’  But part of capitalism is, it’s a system where we’ve got to motivate people to want things so they’ll work for these things.  If there’s no more things they want, they won’t work as hard: they’ll want 35-hour weeks, 30-hour weeks and so on. . . .  Yes, marketing does drive us to new wants.6

What Kotler doesn’t state directly is that the “problem” isn’t really that people would work fewer hours and have all the extra time for leisure activities but that, if they did so, then they would buy less stuff and companies would suffer and the economy, one in which more and more stuff has to be sold, would falter.

OK — so growth is built into the system.  But it doesn’t always grow — or grow sufficiently.  What happens when there are periods of slow or no growth?  Unemployment becomes more and more of a problem.  While there is always unemployment in capitalist economies — with very few and brief exceptions — the problem gets worse as the economy slows.  GDP growth of two percent, or better yet, three or four percent is needed to drive unemployment levels down.  The working age population is still growing and jobs are needed for the net new entrants into the labor force.  In addition, one of the main goals of capitalists is to increase efficiency — do more with less (labor) is the watchword of the system — and to introduce practices, machines (robots nowadays), and computer software to reduce the number of workers needed for a given level of production.  Thus new jobs need to be created to absorb those who suffered layoffs because of increased efficiency.

Growth of two percent a year — as inadequate as it is to maintain a “healthy” economy in the U.S. with strong employment — means a doubling of the GDP in 35 years.  If the economy grows at a “healthier” rate of three percent, the economy would double in 23 years.  Although a doubling of the GDP does not mean a doubling of resource use and pollution, there is no doubt that it would cause a significant increase in environmental damage.

The implications of this is that no growth or “degrowth” in order to preserve the environment is not possible in a capitalist economy.  Aside from taking away capitalists’ ability to make ever greater profits — the whole driving force and goal of the system — the government would need to become the employer of last resort as no new jobs are created and the drive to greater labor efficiency continues to eliminate jobs.

There are things that sometimes can be done within the current system to alleviate environmental degradation — almost always through government regulations.  For example, rivers in the U.S. are cleaner than they were before the Clean Water Act.  The rainfall in the northeast is less acidic and carries less sulfate than in the 1970s and ’80s.  Soil erosion in the U.S. is less of a problem than it once was, due to a number of conservation programs.  These have been in response to governmental regulations to correct severe local or regional problems.  But they have been relatively easy to solve while letting business continue to operate as usual (not that businesses like these changes — in fact, they normally try to fight against or sabotage regulations).

Companies are even getting into the act to show how green they are.  Earlier this week Dunkin’ Donuts and Krispy Kreme have announced that they will only use “rainforest friendly” oil to fry their doughnuts.  They will not buy oil derived from plantations created out of former rainforest lands.  But even if this is carried out well (not all greenish claims are accurate), such declarations are used mainly as marketing ploys to sell more of their “rainforest friendly” fried products — still devoted to growth.

Business interests are as powerful as they have ever been — politically and economically.  Thus curtailing their power significantly at this point is as unthinkable as a different type of society.  If the forces (the stars?) are ever aligned to make it possible to institute laws and regulations that could somehow eliminate all environmental “externalities” (leaving aside the social externalities caused by the system), why not just change the system?  As the economist Joan Robinson once explained, “Any government which had both the power and the will to remedy the major defects of the capitalist system would have the will and the power to abolish it altogether.”

When considering the environment, Walt Kelly’s Pogo cartoon should be reworded to “WE HAVE MET THE ENEMY AND IT IS CAPITALISM.”

F. Replacing Capitalism with Another Economic/Political/Social System Does Not Guarantee an Ecologically Sound Society — People Must Continue to Work Towards It.

Such a system will need to be different from our current economic/political system in almost every way.  For those desiring a more detailed discussion of proposed characteristics and procedures for an ecologically sound and socially just economic/political system, you might find my article in the current (September) issue of Monthly Review to be of interest — “An Ecologically Sound and Socially Just Economy.”7

Such an economic and political system must be under meaningful social control, in which communities, regions, and multi-regional areas strive for:

  1. Regulation of the economy and politics by meaningful democratic processes;

  2. Production of goods and services for the purpose of meeting the basic human needs of all people;

    3. This will necessitate economic planning — not central (top-down) planning, but rather planning at the community, regional, and multiregional levels.  An economy that has a social purpose must involve considerable active management.  Planning for short-term and longer-term needs begins at the community level — as with the over thirty thousand Community Councils of Venezuela — and is intertwined and coordinated with other communities in a regional plan.  Once there is social purpose for an economy — as opposed to individuals making decisions that are aimed almost exclusively towards obtaining as large profits as possible — there is no way to rationally operate without planning.  In the absence of a planning system for production and distribution how can we ensure that all people have adequate housing, clean water, sanitation, health services, clothing, and enough food?

  3. Self sufficiency at the community or regional level for critical life needs (even though complete self sufficiency is not needed or desirable);

  4. Self-governing of workers in workplaces and involving the surrounding community in all workplace issues that might concern them;

  5. Economic equality in which all people have their basic human needs — but no more — met.  (NOTE: this is below what has been called a “middle class western standard of living.”  We would need more than four earths for everyone to live at that standard.); and

  6. Application of ecological approaches to production, living, and transportation.

G. Getting There

It is going to be a long road to travel, with much mass struggle, to replace capitalism with a socialist society — one under social control.  One of the best things that people can do now is to join the struggles for environmental sanity and social justice — the two naturally do (and must) go together.  But it is critical not just to join in this common struggle — and attend events such as tomorrow’s climate march.  We must begin talking with others in the fight and perhaps form study groups.  In this way we can expand the number of people who understand that capitalism is truly the problem and must be replaced by an ecologically sound and socially just society.

 

1  Fred Pearce, “It’s Not Overpopulation That Causes Climate Change, It’s Overconsumption,” Guardian (September 19, 2014).

2  Justin Gillis, “Fixing Climate Change May Add No Costs, Report Says,“ New York Times (September 16, 2014).

3  The Global Commission on the Economy and Climate, Better Growth, Better Climate: The New Economy Report, The Synthesis Report (September 2014).  This can be accessed at static.newclimateeconomy.report/TheNewClimateEconomyReport.pdf.

4  Michael Moss, “The Extraordinary Science of Addictive Junk Food,” New York Times (February 20, 2013).

5  Paul K. Piffa, Daniel M. Stancatoa, Stéphane Côtéb, Rodolfo Mendoza-Dentona, and Dacher Keltnera, “Higher Social Class Predicts Increased Unethical Behavior,” Proceedings of the National Academy of Sciences, 109: 4086-4091 (2012), doi:10.1073/pnas.1118373109/-/ DCSupplemental.

6  Richard Tomkins, “Kotler’s Feast of Ideas,” Financial Times (May 29, 2003).

7  Fred Magdoff, “An Ecologically Sound and Socially Just Economy,” Monthly Review 66.4 (2014): 23-34.

Fred Magdoff is professor emeritus of plant and soil science at the University of Vermont and a long-time commentator on political-economic topics.  He is coauthor, with John Bellamy Foster, of The Great Financial Crisis (2009) and What Every Environmentalist Needs to Know About Capitalism (2011) — both published by Monthly Review Press.