capitalism and eternal growth

[politicus]

In the sentence "capitalism needs growth in order to survive" I do not understand the words "capitalism", "needs", and "survive". We are, also, probably, not on the same page as far as the word "growth" is concerned. Care to elablorate?

something ideologically sensitive and the econ. professor suddenly loses half of his vocabulary.  fascinating tactic but I'm not about to get drawn into a pedantic dissection on your territory this early on.  go with your intuition and impression.

The problem is: you original claim makes absolutely no sense to me. So, define your terms.

Why not? Can you imagine a capitalist system without growth? (if we are talking about a permanent condition).

[politicus]

Why not? Can you imagine a capitalist system without growth? (if we are talking about a permanent condition).

What's the relationship between growth and "capitalism" (whatever the latter means)? Markets, surely, do not need growth to operate. Not having growth isn't fun, but, conditional on having no growth, I would still much prefer to live in a market economy, as compared with any alternative I am aware of.

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.

A market economy with businesses controlled by worker cooperatives would for instance not be capitalist. Nor if businesses were owned by local communities.

In a shrinking economy the lack of jobs gives fewer and fewer people access to purchase the necessary goods on the market leading to increased pressure for either government allocation of resources (planned economy) or a new distribution of the means of production (non-capitalist market economy).
 

[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

[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.

[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.

[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."

[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.

[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.

[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.

Look at Japan then and enough with the theorizing.

Btw, I would recommend reading Edward Hugh on this.

Japan doesn't have zero growth when measured in resource consumption, which is what matters. GDP is irrelevant in this context.

[politicus]

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.

Who are you talking about in this post?

Its may be a Conservative era (only in the negative, conformist sense), but some of the challenges we face (especially peak population and climate change happening at the same time) demand radical changes.

[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.

Current economic model, shmurrent economic model. The economy is changing all the time. Today's institutions are quite distinct from those 100 years ago, and will, of course, change in the future, growth or no growth.  Any society that has an economy that isn't growing at an accustomed rate will have a lot of unhappy people: irrespective of what its institutions are. Both questions are about as interesting, as figuring out whether sun will come up tomorrow or not: and about as innovative. I still have no freaking clue what makes anybody find any of this anything worth talking about. Class, actual producers, what's not. Gosh.

One last question: If you find the entire topic so extremely uninteresting and pointless why do you feel the need to comment in this thread at all?

That things will change is of course a given, the way they are likely to change is not.

[politicus]

I think AG did a good job. I'd just add that if you don't want to be condescended to then don't be an idiot. Or if you insist on being an idiot, at least don't try to be arrogant about it.

Are you talking about me here? If so, say it.

Assuming you did. Why is it idiotic to want to discuss something on a principled level? Or quoting a well regarded expert on these matters like Peter Victor.

Its too cowardly writing a weiled attack like that without saying who you are talking about. Not providing any documentation or actual references to back up your claim of "idiocy" and supposed "arrogance" is problematic.

[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.

Current economic model, shmurrent economic model. The economy is changing all the time. Today's institutions are quite distinct from those 100 years ago, and will, of course, change in the future, growth or no growth.  Any society that has an economy that isn't growing at an accustomed rate will have a lot of unhappy people: irrespective of what its institutions are. Both questions are about as interesting, as figuring out whether sun will come up tomorrow or not: and about as innovative. I still have no freaking clue what makes anybody find any of this anything worth talking about. Class, actual producers, what's not. Gosh.

One last question: If you find the entire topic so extremely uninteresting and pointless why do you feel the need to comment in this thread

Because, as an actual economist (and the moderator of this board), I find it personally painful to watch. Illiteracy hurts.

Misunderstanding and twisting just about everything I said in this thread was hardly helpful.

See the bolded part my post above and your dismissive "the economy is changing all the time" comment as an example.

I quoted Tweeds argument about deflation without thinking it through, otherwise I think your claim of "illiteracy" is unreasonable.

[politicus]

And peak population is likely to be earlier than predicted... as fertility falls faster than predicted with the projected recovery not having occurred in developed nations (look at fertility trends the past 5 years in developed nations).

Unfortunately not as the African and Middle Eastern populations will stabilize later than expected. We are up from a stable world population around 2050 to stabilisation somewhere around 2100.

[politicus]

I think AG did a good job.

He basically derailed it from the start by claiming not to understand basic political and sociological concepts. The whole debate was spoiled by him feigning ignorance about basic marxist or marxist inspired concepts instead of debating them. I cant see how that is doing a good job.
 

[politicus]

I think AG did a good job.

He basically derailed it from the start by claiming not to understand basic political and sociological concepts. The whole was basically ruined by feigning ignorance about basic marxist or marxist inspired concepts instead of debating them. I cant see how that is doing a good job.
 

No he didn't. He pointed out that they are pseudo-concepts. That's all.

That they are "pseudo concepts" is an opinion and starting out claiming that you don't know what capitalism is whitout offering a decent argumentation as to why you dont recognize this basic concept was never going to get us anywhere productive.

If you start out debating terminology you almost never get anywhere remotely interesting. Its the great travesty of academic debate that so much time is wasted clarifying concepts and a major reason why its so often sterile.

Even practical concepts like "actual producers" were dismissed, as if a distinction between people who produce goods and services and those who monitor and administrate this process doesn't exist and apparently there is no "current economic model" in the world!

[politicus]

Two problems in a shrinking economy:

- deflation - basically messing up the whole system and leading to a negative growth spiral.

- lack of jobs giving fewer and fewer people access to the market leading to increased pressure for either government allocation of resources or a new distribution of the means of production.
 

Now, as a homework assignment: try figuring out what is the relationship between growth, deflation, and jobs.

What is the noun’s placed in the human senses that are in competition to capitalize on each other?

This thread is already a trainwreck, there is no point in dragging old post out and asking silly questions.

[politicus]

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?

Well that's just it. Japanese capitalism may be on the verge of a major crisis; their best hope is to inflate things away and impose an "austerity of higher prices", particularly higher import prices.

What happens if they take the route Herman Daly and Peter Victor prescribe with lower working hours, the loss in productivity partly off set by technological gains but obviously still leading to less productivity, but also less resource comsumption and more time to care for children and elderly and therefore much less pressure on the public budgets.
The housing market goes down to a lower level and this hurt savings, so this debt has to be reduced somehow.

PV estimates it takes 20 years to go through this transformation and reach a new equilibrium with low debt, low poverty and close to zero unemployment.

(This process is of course very hard to get implemented in a democracy, but if we disregard that.)

http://www.web.ca/~bthomson/degrowth/peter-victor-na-nature-11.pdf

[politicus]

Maybe this Peter Victor quote can help bring this thing back on track:

"There is debate about whether capitalism is compatible with steady-state or degrowth economies. A shrinking economy brings a real risk that profit-seeking companies and their shareholders will be disappointed, credit ratings will suffer, the financial system will be in jeopardy, trade will shrink and the whole capitalist system could spiral to collapse. Whether this would happen remains an open question. Solow, for one, sees no reason why capitalism could not survive with slow or even no growth. Others are more sceptical — especially about the survival of capitalism in degrowth societies. It is worth noting that even in a shrinking economy, some sectors— such as renewable-energy development —will flourish."

So do you agree that those factors might cause the system to collapse?

[politicus]

As far as the economic growth being necessary for the capitalist economic system argument goes, I've only heard it in relation to the massive population boom of the past two hundred years attributable to industrialization and the massive increase of agricultural output.  The human population two hundred years ago was a seventh what it is today, it stands to reason that we had to expand our global economy at least sevenfold (in actuality much more than that) to keep the standard of living from plummeting too far.  

As the industrial world allows for a higher and higher maximum population, especially agricultural production needs to expand at a similar absurd rate to prevent a Malthusian crisis, but fewer and fewer people are needed to grow more and more crops, so there also has to be a large and ever-expanding field of non-agricultural employment available to ensure that as the population rose, unemployment wouldn't shoot up along with it.

As ag points out, population growth is slowing and might well peak in the latter part of the coming century, at which point the above dynamic loses some of its meaning.

Thats a good summary of the broad pattern. I have a few qualifications:

- Industrialism and capitalism are not the same thing. In principle this technology driven industrialisation could have happened within a different economic system.

- A stable world population will not end the demand for growth and we have already been using more resources than can be regenerated since 1983 (not counting non-renewable resources here). So the growth dilemma wont end with peak population. Degrowth might even be necessary.

- The amount of jobs depends on the hours per full time job. Part of the reason the economy grows so fast is that we havent had the transformation of increased productivity to increased leisure that John Stuart Mill and Keynes predicted. We have shorter working days, but the cut in work time has been far less than the increase in productivity. Hence the "need" to keep creating new types of jobs in the West at such a high rate.

[politicus]

OK, lets avoid the term capitalism and try looking at two of the elements of the economy, that some of the more radical "no growthers" believe will have to change in a no growth/degrowth context.

(but remember that some sectors will grow even in a "no growth economy" such as recycling ad renewable energy)

Assumption: Two fundamental structural features of the present economic system drive growth and resource depletion.

1. Private finance.

Private finance inevitably demands interest as compensation for risk, and therefore requires continuous growth for proper functioning.

If one agrees with this statement private finance must be replaced by community finance in which risk is socialized so that we do not have to demand interest as the price of creating and maintaining useful infrastructure and production.

2. Competitive accumulation of domestic consumption rights.

The problem with private savings is that society as whole does not save other than relatively small inventories of manufactured goods and raw materials.
The only real savings is in the build up infrastuctre (incl. production capacity) of society and in the resource base which supports that infrastructure. So the competition to obtain lots of savings is a competition to build up infrastructre and use it to produce lots of goods and services. Society as a whole can decide that it has sufficient infrastructure. But for the individual economic actor seeking personal security and economic independence, anxiety about the future drives a constant desire for the further accumulation of consumption rights (which obviously requires growth).

So the competitive accumulation of domestic consumption rights may have to be replaced by work and income sharing (which could be called "socialism"). The older people whose productivity drops are supported by younger people who are in their productive prime. "This condition of mutual dependence is a physical reality and until we give up our quest for a delusory economic independence we will find no solution to the ecological dilemmas which face us". In other words: retirement should be funded by community, not by private savings.

Is there any truth to this line of reasoning? If there is it would mean a more collectivist economy (which some of us would consider non-capitalist  )

To Tweed: When you said capitalism, was this the factors you thought about, or was it more than that?

[politicus]

oh no, this might fit (help) the premise here,

Take a bow, capitalism.

This story was talked about on that Big Wing Radio thing.

http://www.economist.com/news/leaders/21578665-nearly-1-billion-people-have-been-taken-out-extreme-poverty-20-years-world-should-aim

I think you got this all wrong. No one denies that capitalism is efficient at creating economic growth - and thereby raising living standards. This is not a capitalism vs. socialism debate, but a discussion of whether the current economic system can function in the no growth/degrowth situation we might face in the future - either by choice (in order to prevent an ecological breakdown) or due to lack of resources - in the long run this includes labour.