capitalism and eternal growth

[ag]

Ok.

1. I do hate the idiotic lables: "capitalism", "socialism" or whatever. These are not terms that have any meaning in modern economics. They do have a very dusty library smell, believe me. You want to be describing actual historic/contemporary institutions - be my guest. But then describe them - and don't post ridiculous lables.

2. Private property and markets are things I can, sort of, understand. The former means people have the right to use and/or dispose of their assets and the latter that they can actually exchange those assets if they so like. Now, in a modern world all those things come w/ zillions of limitations (technological, legal, political, etc., etc) - some of these justifiable, others not, but that's a completely separate issue. Anyway, at least these are the things I can understand.

3. Growth. Growth of what? If you mean growth of consumption of certain goods, population, etc. - well, ok, I get it. If you mean growth of GDP - that notion in itself is completely dependent on the existence of markets, because unless we have prices, we don't even know what to add up. Estimates of GDP (and its growth) for places like the old USSR or the modern North Korea have a lot of magic in them

4. Why on earth would private property and markets require growth of anything, beats me. Naturally, it is very nice when consumption is growing - societies tend to be happy-looking places in such moments. It is also not very nice, when consumption starts falling - there are a lot of unhappy people around in those cases, of course. Even a market economy cannot make people believe they are living better today than tomorrow if they have less. But, hell, it is a lot more efficient in providing for human welfare than whatever the alternatives known to humanity - except in extraordinary short-term circumstances, such as famine, war, pestilence, etc. Yes, even Churchill and Roosevelt got their ration books during WWII, in order to buy the price-controlled eggs. But, in the end, if you try to impose such emergency measures permanently, societies adapt: there emerge black markets, underground workshops, traders. You can try to kill them off (they shot an ancestor of mine for selling shirts and needles), but, in the end, you yield. In the late 1980s/early 1990s markets in Russia emerged at the time of economic collapse. Today what makes life bearable in North Korea are the illegal and semi-legal markets. It's not as if NK were growing - but the markets did. Shoot them, murder them, declare them scum: if there is scarcity, there will be traders and markets and (illegal, but nevertheless quite real) private property. That's as much of an empirical law as social science can get you.

5. Anyway, the world's economy isn't going to be growing forever. And the reason is obvious: every single estimate of the world's population dynamics is pointing to the population starting to drop within the next century. This is going to create a lot of problems we are all quite cognizant of: hard to sustain pensions and medical care for the elderly, when you do not have a supply of the younger folk entering the workforce. Mercifully, globally it won't happen in our lifetime, and locally it can be resolved through immigration. Then, of course, there are places like Japan that are already there. Japan hasn't much grown in a generation, and the population is already falling. When I was passing through recently, I didn't notice any price controls or socialized factories. Where should I have been looking?

6. I can go on and on. But the fact remains: the original statement was ridiculous, and not even remotely understood by its author, who himself had only a vague notion of what those words meant.

[ag]

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

[politicus]

Capitalism is more than a market economy. Its a form of market economy in which a class of capital owners control the means of production - or at least most of them.

I have no freaking clue what "capitalism" means. The term is entirely meaningless to me and has no descriptive value.

Well, thats why I defined it for you.

And of course it has a descriptive value. Its the all dominant economic system in todays world.

[politicus]

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

Yes please do, but dont be so bloody condescending.

[politicus]

perhaps the capitalists here can answer this question, I've never seen it properly answered, or answered at all, for that matter.  capitalism needs growth in order to survive.  this shouldn't be controversial.  from recall about 2% growth is needed to stave off deflation, job loss, and the other nasty stuff.  

yet the Earth is finite, and here we run into a problem, a 'contradiction'.  unless the esteemed capitalist innovation can overcome the first law of thermodynamics, or locate other Earth-like planets to transport people to and extract resources from, we eventually hit a wall of sorts.  the use of nature as an infinite source of raw material and dumping ground for externalized costs is necessarily finite.

when exactly this needs to be addressed could constitute a different conversation, which we can leave off for the time being.

Tweed, to save this thread from becoming a trainwreck I think you need to split the economic and political arguments and try to qualify your argument about 2% growth being necessary to prevent deflation.

I agree that capitalism would come under intense political pressure if there was no growth. Basically growth and rising living standards for "common people" is what legitimizes an unequal economic system in a democracy with otherwise egalitarian values.

I think this article is a good short intro to the economic topics for us laymen and it has a reference to a prominent advocate of Tweeds POV.

http://www.theatlantic.com/business/archive/2013/02/the-end-of-growth-wouldnt-be-the-end-of-capitalism/273367/

The green point of view:

http://www.preservenet.com/studies/FallacyCapitalismGrowth.pdf

Intro to non-growth economy:

http://www.motherjones.com/politics/2010/05/peter-victor-deficit-growth

[Tetro Kornbluth]

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I'm pretty sure that doesn't apply to pre-monetary or Hunter-gatherer type societies or economies unless you have a very wide definition of trade and markets.

Not of course that that really matters in the context of this discussion.

Anyway, I'm with ag here - and Andre Gunder Frank of whom I believe ag shares little fondness but this is for you, anyway, Tweed:

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In Feudalism, Capitalism, Socialism. I would share the view that those three terms of pretty meaningless and should be abandoned for the purpose of analysis. Think of it as eliminativist sociology.

[politicus]

Whether the system is stable without growth also depends on whether you think it can be reformed.

Canadian economist Peter Victor who is one of the leading figures in steady state or no growth economics suggests the following policy recommendations to create a functional no growth model:

- Replacing reliance on the gains from growth to trickle down to the poor with programs that redistribute income directly and provide support for the most important items of consumptions (food, clothing and shelter).

- Enhance welfare by redirecting consumption from private, "positional goods" (keeping up with the neighbours stuff) which confer lower benefits the greater is the number of people who have them, to public goods, including a less contaminated environment,which are of value to many simultaneously.

- Investments in construction of infrastructure, buildings and the installation of new equipment should continue at the level required to replace physical capital that wears out. Replacement of worn out capital provides opportunities for continual improvements in efficiency. But the mix of investment should change so that the production of public goods is enhanced and the production of positional goods is stabilized or reduced.

- A greater proportion of future gains in productivity should go towards an increase in leisure than in the past. It lowers unemployment, which alleviates poverty, and it places less stress on the environment and scarce natural resources.

- Since globally net exports must be zero, countries that can benefit the most from increasing exports (3rd world), that have seen little of the gains from economic growth, should be permitted to pursue this goal more freely. Rich countries should moderate their efforts to export more than they import.

- In many developed countries the fertility rate has fallen below 2.1, the rate required to at least maintain a constant population. Without immigration their population would cease to grow and there would be increasing proportion of elderly people in the population who would have to rely
on a proportionately smaller labour force to support them after retirement (thereby reducing the rate of unemployment.)
The conventional response to this state of affairs is to encourage immigration of the most educated and wealthiest people from other countries. When these people come from developing countries it may help rich countries but it weakens the capacity of the countries from which the immigrants come.
So rich countries should come to terms with a stable population and address the income distribution implications of an aging population through pensions and other income support programs.

- GDP is a measure of value that is related to but not identical with growth in the physical inputs and outputs of the economy.
Despite some encouraging signs that the value of economic output and the material and energy required to produce it have become somewhat decoupled - the picture is less clear when international trade is factored in since developed countries import material intensive products that they previously manufactured themselves -  the physical inputs and outputs of the economy and the impact by humans on the habitats required by other species put pressure on the environment and on scarce natural resources.
These problems needs to be addressed by the explicit introduction of quantitative limits on inputs, outputs and land use. Quantitative, physical limits on throughput and land use offer the best way forward for ensuring that economies do not compromise the environment in which they are embedded and on which they depend.

Most of those things are politically unrealistic, so the basis for stable no-growth capitalism looks shaky, to say the least. If we enter a forced no-growth territory things look bad for our current system.

[opebo]

To be fair, the growth is necessary not for the operation of capitalism itself, and certainly not for the benefit of capitalism's 'stakeholders' (the owning class), but as a very important and perhaps indispensable part of the deception which is the defining innovation of capitalism itself.  It is possible that during a period of decline of standard of living due to 'lack of growth' portions of the servile class will realize and understand what is being done to them; at any rate such a realization does become perhaps more likely or common (though I suspect still not the norm).  

Does this mean the 'end of capitalism?  It seems unlikely - capitalism is a complex social and political (and yes, we can say 'economic' if you like) system of control that does not only depend this perception (accurate or not) of slight incremental 'improvement'.

[Ban my account ffs!]

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

The same logic can be applied to the climate change debate.  Using surface temperature as a measure for climate change, while a rough representation, does not take everything into account.

In the end, the best measure is to measure total energy input and total energy output of the climate system.

Using surface temperature measurements would be like measuring the air temperature in a small kitchen to test whether the pot of water on the flame is heating up or cooling down.

[politicus]

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

The same logic can be applied to the climate change debate.  Using surface temperature as a measure for climate change, while a rough representation, does not take everything into account.

In the end, the best measure is to measure total energy input and total energy output of the climate system.

Using surface temperature measurements would be like measuring the air temperature in a small kitchen to test whether the pot of water on the flame is heating up or cooling down.

Why derail the thread? Its already quite unfocused, no need to make it worse.

[ag]

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

The same logic can be applied to the climate change debate.  Using surface temperature as a measure for climate change, while a rough representation, does not take everything into account.

In the end, the best measure is to measure total energy input and total energy output of the climate system.

Using surface temperature measurements would be like measuring the air temperature in a small kitchen to test whether the pot of water on the flame is heating up or cooling down.

Would you mind clarifying, what is this about. To me (and, apparently, to some others) it appears to be a complete non sequitur.

[Ban my account ffs!]

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

The same logic can be applied to the climate change debate.  Using surface temperature as a measure for climate change, while a rough representation, does not take everything into account.

In the end, the best measure is to measure total energy input and total energy output of the climate system.

Using surface temperature measurements would be like measuring the air temperature in a small kitchen to test whether the pot of water on the flame is heating up or cooling down.

Would you mind clarifying, what is this about. To me (and, apparently, to some others) it appears to be a complete non sequitur.

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

The same logic can be applied to the climate change debate.  Using surface temperature as a measure for climate change, while a rough representation, does not take everything into account.

In the end, the best measure is to measure total energy input and total energy output of the climate system.

Using surface temperature measurements would be like measuring the air temperature in a small kitchen to test whether the pot of water on the flame is heating up or cooling down.

Would you mind clarifying, what is this about. To me (and, apparently, to some others) it appears to be a complete non sequitur.

Merely me talking to myself... trying to understand your convoluted posts by framing it in a context I better understand.

[ag]

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

The same logic can be applied to the climate change debate.  Using surface temperature as a measure for climate change, while a rough representation, does not take everything into account.

In the end, the best measure is to measure total energy input and total energy output of the climate system.

Using surface temperature measurements would be like measuring the air temperature in a small kitchen to test whether the pot of water on the flame is heating up or cooling down.

Would you mind clarifying, what is this about. To me (and, apparently, to some others) it appears to be a complete non sequitur.

Ah, just so that nobody has to recall. Inflation is growth in prices, as expressed, normally, in money. Deflation is negative inflation. If there are fewer goods out there and the money supply is unchanged, then, in general, you get INFLATION, not DEFLATION: you know, if the number of dollars hasn't changed, and the number of cows decreased, cheese will become more expensive, not less. Should I continue on the rest as well?

The same logic can be applied to the climate change debate.  Using surface temperature as a measure for climate change, while a rough representation, does not take everything into account.

In the end, the best measure is to measure total energy input and total energy output of the climate system.

Using surface temperature measurements would be like measuring the air temperature in a small kitchen to test whether the pot of water on the flame is heating up or cooling down.

Would you mind clarifying, what is this about. To me (and, apparently, to some others) it appears to be a complete non sequitur.

Merely me talking to myself... trying to understand your convoluted posts by framing it in a context I better understand.

Well, it's all very simple. When wombats fly, crocodiles sing. I think that's clear enough.

[politicus]

Good interview with no growth economist/steady state economist Peter Victor:

http://www.capitalinstitute.org/content/peter-victor

On the fence about the compatibility of capitalism and a no growth society:

You avoid expressing a point of view about whether capitalism is compatible with a world where material inputs into the economy are declining.

"This is an important question. I believe the best way to resolve it is to focus in on the changes we have to make to our use of resources, creation and disposal of waste, and land use.  We have to be very disciplined about these matters and then we will see if capitalism is compatible with the required changes.

I think 50 or 100 years from now when people look back at what happened, whatever the system is they will be living in it will look very different from what we have today. Whether it is a further evolution of something called capitalism or if the capitalist era will be over I can’t predict. But we are clearly in a process of significant change and I think it will continue."

[pbrower2a]

Capitalism is more than a market economy. Its a form of market economy in which a class of capital owners control the means of production - or at least most of them.

I have no freaking clue what "capitalism" means. The term is entirely meaningless to me and has no descriptive value.

Capitalism -- the idea that those who own the assets have the right to determine how they are to be used.

In practice it is always constrained to some extent so that such practices as Ponzi schemes, blackmail, and insider training may be outlawed. There might (US after 1865) or might not (much of the US before 1861) be laws against the acquisition, possession, sale, and use of slave labor.

[politicus]

Capitalism is more than a market economy. Its a form of market economy in which a class of capital owners control the means of production - or at least most of them.

I have no freaking clue what "capitalism" means. The term is entirely meaningless to me and has no descriptive value.

Capitalism -- the idea that those who own the assets have the right to determine how they are to be used.

In practice it is always constrained to some extent so that such practices as Ponzi schemes, blackmail, and insider training may be outlawed. There might (US after 1865) or might not (much of the US before 1861) be laws against the acquisition, possession, sale, and use of slave labor.

Nah, the definition I gave is correct. You need a capitalist class or institution (like a state) that is different from the actual producers.

In your definition a market economy controlled by worker cooperatives would be "capitalist", which doesn't make sense.

[pbrower2a]

Capitalism is more than a market economy. Its a form of market economy in which a class of capital owners control the means of production - or at least most of them.

I have no freaking clue what "capitalism" means. The term is entirely meaningless to me and has no descriptive value.

Capitalism -- the idea that those who own the assets have the right to determine how they are to be used.

In practice it is always constrained to some extent so that such practices as Ponzi schemes, blackmail, and insider training may be outlawed. There might (US after 1865) or might not (much of the US before 1861) be laws against the acquisition, possession, sale, and use of slave labor.

Nah, the definition I gave is correct. You need a capitalist class or institution (like a state) that is different from the actual producers.

In your definition a market economy controlled by worker cooperatives would be "capitalist", which doesn't make sense.

It could be that there are different national ideas of what constitutes capitalism. The United States is lurching toward a pure plutocracy in which people eat or starve at the whim of owners and managerial elites. Is such sustainable? I hope not! If such is capitalism, then to Hell with it! Mammon is as false a God as any.

The profit motive is not enough. Thieves, gangsters, and embezzlers have the profit motive as surely as any entrepreneur.

Worker cooperatives  fostered by the State would be examples of hybrid socialism and capitalism.  As a rule, economic orders might adopt some socialistic tendencies to preserve the capitalist order in general; humanistic tendencies, one hopes, would establish some moral restraints. States of course must mediate disputes of property rights. 

[Tetro Kornbluth]

Why do people - especially scientists who dip their toes in social science - always seem to think that we are now living through TEH MOST EXCITING TRANSFORMULATION ERA EVAR!!!111? I? I don't see it personally. This is - except in regards to technology - an incredibly conservative era compared to any time between 1920 (or maybe even the 1890s) and 1979. And I don't see much cultural change on the horizon, growth or not.

[politicus]

The interesting aspect of all this is whether the current economic model can survive in a non-growth context, or rather which parts of it will have to be reformed/changed.

This is far more interesting than the capitalism stuff IMO.

[politicus]

3. Growth. Growth of what? If you mean growth of consumption of certain goods, population, etc. - well, ok, I get it. If you mean growth of GDP - that notion in itself is completely dependent on the existence of markets, because unless we have prices, we don't even know what to add up. Estimates of GDP (and its growth) for places like the old USSR or the modern North Korea have a lot of magic in them

Growth of psychical products, energy and land use are the most relevant elements because they are using limited resources that can not be regenerated in sufficient amount at the moment.
The global economy has been using more resources than can be regenerated since 1983, this is the basis for the non-growth argument.


5. Anyway, the world's economy isn't going to be growing forever. And the reason is obvious: every single estimate of the world's population dynamics is pointing to the population starting to drop within the next century. This is going to create a lot of problems we are all quite cognizant of: hard to sustain pensions and medical care for the elderly, when you do not have a supply of the younger folk entering the workforce. Mercifully, globally it won't happen in our lifetime, and locally it can be resolved through immigration. Then, of course, there are places like Japan that are already there. Japan hasn't much grown in a generation, and the population is already falling. When I was passing through recently, I didn't notice any price controls or socialized factories. Where should I have been looking?

Non-growthers would say that we cant wait for the global population to drop before we stop growth in the rich world - or even scale back the economy. Its not sustainable and the effects will be too severe. At the moment it looks like the global population isnt going to drop before 2100, thats much too far out in the future.

The relevant question is if capitalism can handle a stop for per capita growth, not a decreasing population.

Another factor is that old people generally consume less than young people (they already bought what they need and are less active). So age related growth stop is not the best case.

[anvi]

I've only read a handful of books on economics on my own and never studied it formally, so if the following doesn't make sense, there would be no surprise in it.  But I've assumed for a while, based on reading a book by Heilbroner ages ago, that "capital" is something like "money in use," that is to say, money that is being used to make more money through the production and sale of goods, investment and so on.  So the intention of the employment of "capital" is thus by definition to achieve growth, even though 1.) growth doesn't always happen and 2.) an economy may very well continue to be "capitalist" without growth or with contraction, so long as the cycle of investment-production-reinvestment is continuing.  But "capitalism," an economic framework in which institutions are systematically designed for such an employment of "capital," can exist under a number of different economic and political configurations.  Mixed economies can be "capitalist," as can state-run economies as can laissez-faire economies, insofar as they all exhibit different relationships between the state and markets, but all would rely on "capital" in various ways relative to, for example, their valuations of different kinds of "goods," different degrees of market regulation and so on.  So, i suppose, the OP is really about whether a relatively laissez-faire capitalist system that suffers from prolonged stagnation or contraction can continue to be viable.  But then, in principle, I think that question could be raised for any economic system that suffered from long-term stagnation or contraction. Everything from minor adjustments to major changes are often necessary in stagnating economies.  The same approach to things doesn't work under all conceivable or actual circumstances.          

[Tetro Kornbluth]

The interesting aspect of all this is whether the current economic model can survive in a non-growth context, or rather which parts of it will have to be reformed/changed.

This is far more interesting than the capitalism stuff IMO.

Look at Japan then and enough with the theorizing.

Btw, I would recommend reading Edward Hugh on this.

[Filuwaúrdjan]

Why do people - especially scientists who dip their toes in social science - always seem to think that we are now living through TEH MOST EXCITING TRANSFORMULATION ERA EVAR!!!111? I? I don't see it personally. This is - except in regards to technology - an incredibly conservative era compared to any time between 1920 (or maybe even the 1890s) and 1979. And I don't see much cultural change on the horizon, growth or not.

The Forward March of Labour Halted. No question mark.

[Tetro Kornbluth]

Why do people - especially scientists who dip their toes in social science - always seem to think that we are now living through TEH MOST EXCITING TRANSFORMULATION ERA EVAR!!!111? I? I don't see it personally. This is - except in regards to technology - an incredibly conservative era compared to any time between 1920 (or maybe even the 1890s) and 1979. And I don't see much cultural change on the horizon, growth or not.

The Forward March of Labour Halted. No question mark.

That, of course, is a major cause of that. I wouldn't deny that. Not the only one though.

[© tweed]

Why do people - especially scientists who dip their toes in social science - always seem to think that we are now living through TEH MOST EXCITING TRANSFORMULATION ERA EVAR!!!111? I? I don't see it personally. This is - except in regards to technology - an incredibly conservative era compared to any time between 1920 (or maybe even the 1890s) and 1979. And I don't see much cultural change on the horizon, growth or not.

David Sprintzen in his http://www.amazon.com/Critique-Western-Philosophy-Social-Theory/dp/1137035633 takes the position that we are in the midst of a fundamental transformation akin to the Protestant Reformation / Scientific Revolution of four and five centuries ago.  he writes

we are participant-observers to the apparent end of the following essential structures of the modern Western world...

-classical science with its Copernican solar system and Newtonian mechanical causality;
-an Earth-centered cosmos;
-traditional monotheistic religions and biblical "History";
-the purposeful, even providential, unfolding of cosmic development and human history;
-the nation state and what was left of economic autonomy;
-the dominance of the "free" market;
-the ability to treat nature as essentially raw material and a substitutable factor of production;
-relatively insular and homogenous societies;
-the doctrine of individualism and the social contract;
-"liberal" democracy and local self-government;
-the mind-body duality and the autonomous self;
-relatively fixed and apparently biologically determined gender and even species identities.


as opposed to being a "scientist dipping his toes in social science", he is more of a social scientist who dips his toes into natural science, and taking the position you described.