Capitalism: Benefits and Beneficiaries

Section
9. Support New, Environmentally-Aware, Economic Systems
Page
9.2

“Capitalism can be defined as the deliberate and systematic societal encouragement of the accumulation of growth capital through the use of money and debt, the enforcement of private ownership rights (especially of land and natural resources), and the proliferation of incentives and protections for investors. Once set in motion, this dynamic set of arrangements tends to be self-reinforcing…

(van Hemessen, J.S. 1553. Christ Driving the Money Changers from the Temple. Usury and associated acts of profit from others was long held to be a sin by many religions).

“A rudimentary growth machine was invented roughly 5,000 years ago with the emergence of state societies with money, writing, and slavery. A supercharged capitalist version has gotten going at least twice in history: in China in the eleventh century (though it was quickly halted by traditional authorities who saw it as a threat to their power), and in Europe starting in the sixteenth century (where the rising mercantile class eventually triumphed over ecclesiastical and aristocratic opponents).”

                                                                                                                        Heinberg, R. 20211.

 

As Heinberg points out, aspects of capitalism were evident thousands of years ago, but a larger, coherent system has been with us only for the last 400 years or so Note 1. This is important to emphasise how recent, extraordinary, and anomalous has been its rise, and to show that by no means all environmental degradation is due to its workings. The destruction of the natural world has been with us since the first humans (see ‘The Really Inconvenient Truth’, Section 1.4), and, sadly, we seem to be able to perpetrate crimes against Nature no matter what the economic system. This said, its unprecedented scale and power in the modern age makes it the unchallenged ‘main game’ when it comes to understanding in what ways, how, and why we have so profoundly altered the earth in the last few hundred years.

Webpage 9.3 will deal with these problems in detail, but before we explore these issues, it is important to clarify what capitalism does, who benefits, and perhaps, why it is so successful and addictive.

Capitalism’s key structural planks are as strong as they are appealing to the human psyche; it is every bit as much or more a belief system, as it is a technical/administrative exchange and accumulation mechanism (see Section 3). Its key planks are:

  • It is a private, individualised system that appeals to individual wants, needs and greed;
  • It applies the concept of interest to loans, allowing for capital accumulation beyond that which one produces oneself;
  • It is simple and materialistically reductionist, e.g. GDP, money, goods;
  • It is simple and temporally and spatially-reductionist, championing the ‘here and now’ (e.g. discount rates) over longer term benefits for larger areas;
  • It fetishises growth;
  • It presents its workings as cosmic, unassailable, uncontestable ‘natural’ laws;
  • It is symbiotic with, and buttresses and is buttressed by, population growth, consumption, technology and energy/fossil fuel growth.

These seven key elements are a mixture of a sort of ‘curate’s egg’, where, on the one hand, one can see aspects of benefit, sense and good, and on the other, downright immorality and delusion.

For example, the first point – capitalism’s private/individualised framework – one can imagine the appeal of same in an unstable, unjust and exploitative society. Those with little or no power have been exploited by those with the opposite for time immemorial, and any system that provides the opportunity for some personal protection, safety and gain, free from ravening overlords, chiefs, and sundry rulers, would be most attractive. The trouble is, this understandable desire, in moderation, so easily tips over into unbridled greed and selfishness and complete disregard for ‘the other’, be that other people or Nature. Similarly, point two – the slow erosion of the sin of usury and the allowance of interest on loans – has allowed for the application of large sums of pooled money and resources to large-scale and spectacular projects that would have been almost impossible otherwise, certainly for smaller and poorer societies. Major infrastructure – power stations, roads, school and health systems – can be built with this, but again, this ‘good’ is only so as long as the loan is reasonable and fair; otherwise, it tips over into the all-too-familiar crippling debt of so much of the Developing World and the further imbalance of power and exploitation of those less well-off by the well-off.  (The problems of capitalism will be explored further in the next webpage – 9.3).

Kerryn Higgs, so often referred to in T10, (e.g., see Section 1.3.4), has tried to examine the actual versus claimed benefits of capitalism in her fine book ‘Collision Course’2. In Chapter 6 she gets to the heart of the claims of the benefits of capitalism when she quotes from a report by Australia’s Department of Foreign Affairs and Trade (DFAT) to the major Australia-Pacific Economic (APEC) forum in 2007: ‘APEC and the Rise of the Global Middle Class’3. The report’s main contentions are:

  • “international integration and market liberalisation” have led to economic growth that is driving the emergence of a new middle class of + 2.2 billion people by 2030;
  • “increased purchasing power (of this new consumer class) is contributing to the recent strength of global growth and should drive stronger global growth in the future, helping to lift millions more out of poverty and build further wealth…boosting their living standards as the pool of global consumers grows”;
  • the new global middle class is presented as “the dividend” of globalisation and as “a down-payment on…the fight against extreme poverty”.

Similarly, The World Bank, produced a report at the same time4, stating that:

  • the middle class (those with incomes that allow for some discretionary expenditure) will double as a percentage of world population by 2030;
  • the percentage of poor will decrease by 20%;
  • the above represents “an unprecedented decline in poverty and an increase in affluence”4, by which it is meant ‘access to meat, car ownership (a projected 1 billion cars plus in China and India alone by 2050!), tertiary education, mobile telephony, and international travel’2.

Higgs goes on to tease apart the figures and concludes:

  • “The poor will decrease as a percentage of world population. The poor will, however, actually increase in gross numbers…More than five billion people will still be poor in 2030, according to the World Bank’s modelling4. More than five billion people who lack the latitude of discretionary spending will still be struggling to keep their families fed, clothed and housed. This does not seem to be such a ‘good news’ story after all”.
(WWF. 20205)

The graph of Gross Domestic Product 1970-2020 in the WWF ‘Living Planet Report’5 (see Section ‘State of the Environment’) would seem to support this last point: red line is ‘Least Developed’ countries, orange ‘Developing’, blue ‘Developed’, and dotted line, ‘World’. The red line shows almost no change.

Despite these challenges and difficulties, authors such as The Limits to Growth’s Jorgen Randers, say that capitalism’s benefits must be acknowledged6:

“Capitalism has done wonders for global wealth creation over the last centuries, and this system for allocation of human activity dominates the current world economy. Capitalism has successfully focussed attention and capital on organizations that are able to provide goods and services to customers who are willing and able to pay. Whenever demand shifts, the capitalistic system reallocates, again and again, thereby contributing to a continuing restructuring and growth of the societal pie.”

He goes on to admit that uncontrolled capitalism concentrates wealth in fewer and fewer hands and touches on the debate about whether this should be corrected by the system itself, or other mechanisms, such as political systems, which he acknowledges doesn’t seem to happen, or not nearly enough.

To get a worldview on how these benefits are distributed there is an excellent website called the ‘World Inequality Database’ Home – WID – World Inequality Database which has world and national maps and graphs of the distribution of income, wealth, employment, and other variables. The following maps show average wealth per adult/country, and the top 10% share of wealth/country.

(World Inequality Database. 2022. Av. adult wealth/country and top 10% share of national wealth).

 

The maps and graphs reveal numerous matters of interest, not least the vast differences in scale between the wealth of the world’s poor and rich: 100s to 1000s of times difference in wealth, in certain instances. Also, inequality is everywhere, nowhere better than the top 10% having 4 x as much wealth as the rest of a country’s population, and climbing to the top 10% owning 68-86% of a nation’s wealth! Interestingly, it is not solely capitalism at fault for these inequities: grossly unequal countries vary in their adoption of capitalism from the ‘unfettered/aggressive’ to the ‘lukewarm’. It is also worth noting the graph in the first figure of adult national wealth: the orange line rises from 2000-2008, but then falls sharply; economic growth has not kept pace with population growth.

In summary, capitalism is a growth machine that delivers vast quantities of goods and sundry material wealth to many in Developed Countries, to a rising middle class in Developing Countries, and to a handful of elites in Undeveloped Countries. A visit to any child’s bedroom in a Developed Country will confirm this as one will be checked, if not blocked, from entry by the mounds of plastic toys and associated dross on the floor, bed, walls and spilling forth from every cupboard and box. The questionable desirability of much of this material ‘wealth’ is not the province of T10, but its environmental consequences very much are, and it is to this that we turn next, in webpage 9.3.

 

(Huffington Post. 2015. Child and toys; in Developed Countries children quickly become part of the capitalist process of material acquisition).

 

1 Heinberg, R. 2021. Capitalism, the Doomsday Machine. Resilience.org. February 25th .

2 Higgs, K. 2014. Collision Course: Endless Growth on a Finite Planet. The MIT Press, Cambridge, U.S.

3 Department of Foreign Affairs and Trade. 2007. APEC and the Rise of the Global Middle Class. Aust. Govt., Canberra, Australia.

4 World Bank. 2007. Global Economic Prospects: Managing the Next Wave of Globalisation. World Bank, Washington D.C., USA.

5 WWF. 2020. Living Planet Report 2020 – bending the curve of biodiversity loss. WWF, Gland, Switzerland.

6 Randers, J. 2012. 2052 – A Global Forecast for the Next Forty Years. Chelsea Green Publishing, White River, USA.

Note 1. For a fascinating account of the rise and unbridled new power of capitalism, read William Dalrymple’s account of the world’s first shareholder, capitalist, corporation: The British East India Company. As Goodreads summarises it: “The story of how the East India Company took over large swathes of Asia, and the devastating results of the corporation running a country.”

Explore Other Economic System

9.1 Introduction

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9.3 Capitalism: Problems for the Environment

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9.5 Fatal Flaws

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9.9 Directing Money to the Environment II

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