The Twilight of Capitalism  
by Natylie Baldwin
www.dissidentvoice.org
April 24, 2006



 

Kentucky farmer and writer Wendell Berry once made an astute observation about the profound flaw underlying both communism and capitalism as systems of human organization: both force humans to be subservient to a colossal institution -- in the case of communism it is the state and in the case of capitalism it is the “free market” -- a market run by anonymous and unaccountable piles of money voraciously seeking to acquire still bigger piles of money, otherwise known as corporations. (1)

Economic analyst David Korten took this observation about the nature of capitalism a step further. He described how capitalism is eerily comparable to the disease of cancer in that the economic players in a “free market” economy that is run capitalistically will forget that they are one unit of a larger network of units that comprise a systemic whole, all of which are ultimately dependent upon each other for survival. When this forgetfulness occurs in a cell in the human body, and the body’s various lines of defense against it are overridden, a tumor will develop as the cell seeks endless growth by dividing itself incessantly, eventually destroying major organs and killing the host through its selfish consumption of resources. (2)

Korten, however, does not advocate for the replacement of one form of suffocating and unsustainable control with another as is the case with traditional Marxism. He instead shows that the problem is not with markets as a vehicle for the exchange of goods and services to meet human needs but, more specifically, with capitalism as the means of organizing those markets. 

The market was not originally intended to be organized as the money-worshipping corporate nightmare it has become.  Adam Smith, widely credited as the godfather of market economics, also wrote and lectured extensively on human ethics. (3) His Theory of Moral Sentiments opens with the recognition that humans have an inclination toward concern for their neighbors as well as self-interest. (2)

The definition of self-interest, under capitalism, a term that came into wide usage only in the early 20^th century (2), is limited to material gain. The fact that human beings tend to have other interests for themselves, including spiritual connection, psychological self-actualization, and creativity is ignored outside of the ability to profit monetarily off of such desires. 

Contrary to popular mythology, “the invisible hand” is only mentioned once in the 900-page Wealth of Nations. The term “capitalism” does not appear at all.  Furthermore, Smith made it clear that his ideas about market economics and their consequent benefit to society could only be realized if certain prerequisites were met. (2)

These prerequisites include favorability of small human-scale enterprises over large monopolies, a responsibility of each economic player to avoid harming others, and restraint of those who disregard such principles. As Korten points out, many of the commonplace practices of modern businesses, especially corporations, run counter to these principles.  Proprietary laws that prevent consumers from knowing what ingredients are in the products they buy, externalization of costs, and mammoth commercial entities that operate as absentee owners while crushing competition from local enterprises with a stake in the living community are some examples that immediately come to mind. 

The economic perversion that is the capitalist system is based upon two false premises that undermine democracy as well as healthy and accountable markets: a) the idea of eternal and continued growth; and b) the idea that if all players boundlessly pursue their own selfish interests with more money as the sole measure of progress, then the best possible outcome will be achieved for all concerned (a deviant and out-of-context interpretation of Smith’s “invisible hand”). In a world of finite resources, the first premise is patently absurd and dangerous. The second premise, while equally absurd and dangerous, is trickier to untangle for people raised on the canons of capitalism. 

Classical economists, the intellectual vanguard of corporate oligarchy, revere the free market as a mechanism that produces a magical equilibrium among all buyers and sellers that result in fair prices and a balanced supply and demand relationship. Unregulated capitalism in reality, however, fosters a huge disparity in the bargaining power of various parties. This disparity was seriously tilted in favor of corporations in 1886 when a court reporter, with ties to the railroad companies, deliberately and erroneously reported that the Supreme Court had granted corporations all of the constitutional rights of natural persons (Santa Clara County v Southern Pacific Railroad).  Because no one questioned this reporting, it was published in law books and served as a false precedent for future decisions. (4) The result of this manipulation of the legal system governing capitalism is that the federal government provides and enforces a legal framework that allows corporations to increasingly operate with virtually no boundaries for their adventures in capitalism. Since the Great Depression, the government has used taxpayer-funded bailouts, bankruptcy policies and other tools, demanded by corporations under the guise of “personhood,” to rescue them from collapse. 

The free market as it actually exists is manipulated by and for the benefit of a relatively small group of people who have amassed a disproportionate amount of power over the years. (5) The ideology of capitalism dictates that they will continue to do so until they self-destruct when they bump up against the limits that nature, in her ancient and accumulative wisdom, has imposed. 

Nature’s Limits

One aspect of nature’s limits includes resource depletion. The depletion of fossil fuels perhaps provides the example with the most immediate implications for how humans organize their economic lives. The “developed” nations have created lifestyles that are dependent upon expansive amounts of cheap and plentiful fossil fuels, namely oil and natural gas. (6, 7) For instance, the size of the average American home has increased significantly since the 1950s and 1960s requiring more natural gas to heat or cool it.  Similarly, many American families have traded in their economical sized cars for large trucks and SUVs over the past ten years. But the elephant in the living room when it comes to the possibility of having diminished access to inexpensive fossil fuels is the globalized economy. 

Most of the food on our tables is not grown locally but is transported hundreds, even thousands, of miles to our grocery stores. (7) Much of our clothing and other accessories come from halfway around the world. It takes an awful lot of fossil fuels to keep this system going. Nations like China and India, the two most populous, now aspiring to our standard, will obviously place even greater demands on fossil fuel supplies. Without cheap and abundant energy to fuel it, the globalized “free trade” economy simply becomes unworkable. 

David Ricardo, the 19^th century economist who touted comparative advantage, the underpinning of free trade philosophy, also laid down some boundaries that are conveniently ignored in modern capitalism such as trade balance between nations, full employment, and a prohibition on the movement of production facilities and capital between partners. Thus, Ricardo’s vision of “free trade” did not involve trade deficits, the exporting of labor and profits, or any nation using a trading partner to live beyond its means. (2) However, Ricardo seemed to have a blind spot regarding certain potential ramifications of free trade, including over-extraction, exponentially increasing populations and the subsequent increase in demand of exported goods between nations requiring vast amounts of energy for transport.

Interestingly, many economists have conceded that Ricardo’s seminal work on economics, Principles of Political Economy and Taxation, is disorganized and pays little attention to actual facts or logical consistency. (3) Ricardo admittedly dealt in abstractions and demonstrates that something which sounds good in theory may in reality prove to be an unsustainable mess when natural capital limitations, among other things, are not considered in the equation.

Berry points out that, in order for a community to remain viable and sustainable, it needs not only to protect its production capacities and not import items that it can produce for itself, it must also export only what constitutes a surplus after all local needs have been fulfilled. Though “protectionism” has had a negative connotation attached to it by those who place profits above communities, he believes this is the one guarantee of balanced and equitable trade based upon human needs and the unique environmental capacity of each bioregion. He uses an observation made by Albert Schweitzer about the effects of colonialism on the native Africans to illustrate the point:

“Whenever the timber trade is good, permanent famine reigns in the Ogowe region because the villagers abandon their farms to fell as many trees as possible [for export]. These people could achieve true wealth if they could develop their agriculture and trade to meet their own needs.” (1)

In addition to economic justice and self-sufficiency, the Ogowe could also have preserved their ecological balance. Excessive extraction of resources is one of the hallmarks of unlimited capitalism, whether it takes the form of traditional colonialism or modern-day corporate globalization. When a group of people derive benefits from goods and services where the costs are tolled outside of their own communities, they will soon become accustomed to these deceptively cheap benefits and their demand will increase, thus encouraging the waste of human and natural resources as well as environmental degradation.

Productivity and Waste

Capitalism incites waste in a variety of ways, especially in the areas of increased investment toward nonproductive activity and the proliferation of nonessential goods. 

The current system long ago evolved into a stage of finance capitalism whereby capital has become increasingly controlled by those who are not engaged in useful activity but who take from the system by expanding bank lending, creating bubbles in finance and real estate markets, and betting on volatility in currency prices. The idea is to make money from money rather than through productive activity. In the process, money is no longer connected to actual concrete items of value. (2) 

As Korten explains, a bank virtually creates money out of nothing as the sum of money a customer deposits into a bank is still available to that customer even though that sum is also made available to whatever party the bank then loans it to. The bank then collects interest on the loan and makes a profit. The only thing that backs up this phantom money is the agreement of people to exchange their labor or other real wealth for it. 

The stock market works in a similarly bogus fashion as the money for most shares bought does not go into the actual company but to the previous owner of those shares after the broker takes his/her commission for the transaction. Owners of stock shares simply wait for circumstances conducive to selling those shares to a higher bidder. (2) This collective activity is known as speculation or, in less sophisticated terms, gambling. Unlike the level of wagering that typically goes on in Las Vegas or Atlantic City casinos, this club is not open to the majority of people who cannot afford to play. Stock market gains only affect approximately the top 10 percent of the population. (5) More importantly, it produces nothing of actual use to society but serves as a diversion of investment away from productive activity.

The expansion of an unstable system such as finance capitalism has been facilitated by its increasing partnership with government. The Cold War provided the impetus for a solidified corporate-government relationship resulting in a permanent war economy. With more focus and investment on military projects, capital goods industries like machinery, tools, railroad and civilian shipping equipment, in addition to other items that enable other industries and, therefore, form the basis of productive economic self-sufficiency were neglected. Foreign suppliers are now relied upon for the fundamental components of our basic infrastructure while a large portion of investment has been concentrated on instruments of destruction, only a tiny percentage of which would be necessary to annihilate the entire earth -- all with the hope, of course, that it will sit idle somewhere without ever being used. Ironically, those who have studied the economy of the former Soviet Union will recognize the actual systemic similarities between these two enemies, despite the ideological rhetoric of each. (5)

On the more visible end of the waste spectrum, there is the glut of pointless items made available and sold to the public everyday. Most of the massive amounts of garbage created from these items stem from packaging, one aspect of marketing. In fact, marketing -- the process by which capitalists constantly seek to convince people of the need or desire for such vapid products -- accounts for the majority of waste in terms of labor, materials and money. (8) 

Also contributing to incredible waste is the practice of planned obsolescence and the trend toward more disposable goods. In order to maintain an artificially large and continual market for (formerly) durable goods, manufacturers intentionally make products that will wear down much faster or, conversely, they will contrive “improvements” so that a higher quantity of the product will be sold more often. (8) Other products, usually made from non-biodegradable materials like plastic, are designed to simply be used a limited number of times and thrown away.

With these kinds of practices rampant, it is clear that capitalism only recognizes the natural world as an eternal source of materials and as a bottomless garbage dumpster.

Economic Reorganization

So how do we go about reorganizing our economy to effectively meet our community needs while responsibly maintaining the larger natural system that we must live within? It is intriguing when a family farmer, an ecologist, and a former economic development consultant can all approach this question from their own distinct angles and come to strikingly similar conclusions on what the broad outlines of such a reorganization would look like. 

These outlines consist of three basic ideas: re-localization, reducing human consumption to a much more sustainable level in terms of the ecological resource-sink cycle, and the use of alternative fuels. 

Re-localization is the process of turning toward the local for fulfillment of as many basic needs as possible. The emphasis is on economics of a smaller scale that would break people’s dependence upon ecologically unsound practices. Such an emphasis would have the ancillary benefits of deepening a sense of community and culture rooted in place, more efficient utilization of each community member’s talent, and a feeling of usefulness and participation.   

Turning toward the local to fulfill basic needs is, of course, not feasible if we don’t first make an honest determination of what constitutes real human needs. A lifestyle based upon endless consumption of frivolous products and wasteful practices will be curtailed; it is simply a matter of how and when.  The better solution to this challenge is to tackle it sooner rather than later with as much discussion with our neighbors and democratic input as possible. Many individuals and communities across the country are beginning to do exactly this. 

One of the first considerations in the process of re-localizing and deciding the what-and-how of our needs involves energy. The amount and type of energy available is probably the most significant factor in how societies organize themselves as far as size and complexity are concerned. (9) This is due to the critical role that energy plays in all aspects that sustain life, from the simplest microorganism to the most complicated human trappings.  

The self-limiting and cooperative behavior implicitly required for a scaled-down, localized and sustainable economic reorganization is a tall order, particularly in a country like the United States that has not only grown accustomed to the most energy-intensive lifestyle in history but is characterized by an ethos of rugged individualism and competition -- an ethos that has been reinforced by and provided a breeding ground for capitalism. Ecologist Richard Heinberg points out in his book, Powerdown, that anthropological history indicates that the quality of competitiveness, though not necessarily an anomaly in nature or humans, becomes a destabilizing force in a community when it goes beyond certain boundaries. (6) This is reminiscent of the pathological dynamics of cancer cells described earlier.

Cooperative democratic behavior among both human and non-human creatures is crucial to social and ecological sustainability. (10) Such stable communities tend to be self-limiting in regards to population and consumption.  Competition, on the other hand, tends to predominate in ecologically disturbed environments or with the successful invasion of a competitive culture, which then creates disincentives for self-limiting behavior and ultimately yields less stable societies. (6)  

The good news is that humans have the ability to adjust their behavior constructively over time, even after setbacks, as well as a highly developed language capacity. These two faculties make it possible to communicate the need for and implement such adjustments more quickly. (6) When political and economic systems become ends unto themselves rather than means to serve humanity and its interdependent life webs, it is time for a change.  How the future plays out in terms of the related problems of global warming, fossil fuel depletion, poverty, and overpopulation will depend upon the collective choices we make now.        

Natylie Baldwin is a writer and activist living in the SF Bay Area. This is her second article in a series on democracy, sustainability and economic localization. She is currently working on the third installment focusing on the economic localization movement in Northern California. She can be reached at: baldwinsznn@aol.com. 

ENDNOTES

1. Wendell Berry, “The Idea of a Local Economy,” Orion Magazine.

2. David Korten, The Post-Corporate World:  Life After Capitalism (California: Berrett-Koehler Publishers, Inc.; Connecticut: Kumerian Press, Inc., 1999).

3. Robert Lekachman, A History of Economic Ideas (New York: McGraw-Hill Book Company, 1959).

4. Thom Hartmann, Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights (New York: Rodale Books, 2002).

5. Seymour Mehlman, After Capitalism: From Managerialism to Workplace Democracy (New York: Alfred A. Knopf, 2001).

6. Richard Heinberg, Powerdown: Options and Actions for a Post-Carbon World (Canada: New Society Publishers, 2004).

7. Gregory Greene, The End of Suburbia: Oil Depletion and the Collapse of the American Dream (Canada: Electric Wallpaper Co., 2004).

8. Douglas Dowd, The Waste of Nations: Dysfunction in the World Economy (Colorado: Westview Press, 1989).

9. Joseph Tainter, “Complexity, Problem Solving, and Sustainable Societies” adapted from Getting Down to Earth:  Practical Applications of Ecological Economics (Washington, DC: Island Press, 1996).

10. Natylie Baldwin, “The Renaissance of Cooperative Democracy,” Peace Journalism, November 28, 2005.

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