Here are some reasons why I believe we should be devoting ourselves to the development of an alternative economic system.

Reason #1: Capitalism’s Focus on Compound Growth is Unsustainable, and Destructive to Society and the Ecosystem

A minimum of 2 to 3% GDP compound growth per year has been the average rate of economic growth in the U.S., and has been necessary to maintain a decent level of employment in a capitalist economy. But as Marxian theorist David Harvey has pointed out, compound growth eventually becomes unsustainable if you continue to run the numbers out for a sustained period of time. The economy must grow at a faster rate every year, and doing so has mostly exhausted the earth’s natural resources and destabilized the environment. Financially, it has led to expansionist economies dominated by large amounts of fictitious capital and debt in hyperinflated financial markets.

The 19th century French anarchist Pierre-Joseph Proudhon wrote  regarding the mathematics of compound interest*:

If men, united in equality, gave to one of their number the exclusive right of property, and if this single proprietor placed with humanity a sum of 100 francs at compound interest, repayable to his successors of the twenty-fourth generation after the lapse of 600 years – this sum of 100 francs would, if invested at 5 per cent., amount to the sum of 107,854,010,777,600 francs, a sum 2,696 times as large as the capital of France, estimated at 4,000 millions (50 years ago), or 20 times as large as the value of the whole globe with all movable and unmovable wealth.

Mathematically, it doesn’t take long before compound growth engulfs everything.

In order to keep the economy growing at a compound rate (through increased profits) there also must be increased exploitation of workers and devaluation of their labor power. This arguably defeats the purpose of keeping employment steady through growth. Capitalism was built on slavery, and now much of industrial production is occuring in Chinese sweatshops. Undeveloped countries are exploited by global powers in order to remain mere exporters of cheap goods or resources with little to no global bargaining power.

Domestically, the FIRE sectors (Finance, Insurance, Real Estate) contribute more to our GDP (20.2% as of 2014) than any other industry by a very wide margin. And most of this is simply funneling money from the average person to the rich through interest charges and rents. The total domination by these sectors has led to instability in the global system, as speculation accounts for an increasingly large amount of our economic activity.

Decoupling our economy from GDP and other measures of growth, and committing to the creation of a steady state economy  is a change we need to make. Such an economy would aim to stay within ecological limits and prioritize human well-being over profit.

Reason #2: Capitalism is an Inequality Producing Machine

As I mentioned in a previous post, Oxfam estimates that the richest 1% globally will own more wealth than the bottom 99% combined by 2016. Meanwhile 2.7 billion people live on less than $2 a day. In the U.S., the bottom 40% of Americans own only 0.3% of the wealth, while the top 20% own 84%. And since the recession, the trend in income inequality has been exacerbated, with the top 1% capturing  91% of all new income. Economists Piketty and Saez, among others, project that we are heading into a neo-feudalistic economy, where ownership of capital and inheritance will largely determine outcomes, and produce an increasingly disconnected plutocracy of global elites.

These elites have almost godlike powers as a result of their wealth. We have already seen them take over our political system. Gilens & Page concluded in a 2014 Princeton study that:

In the United States, our findings indicate, the majority does not rule—at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites or with organized interests, they generally lose.

Capital accumulation = power accumulation = manipulation of the political system = subversion of democracy.

Reason #3: Efforts to Reform Capitalism Through Tax Policies and Regulation Can Only Go So Far

Progressive taxes are largely an attempt to counterbalance the financial exploitation which occurs in the labor process, and reduce inequality on the back end. Regulation is an attempt to prioritize certain externalities which are often in conflict with profit seeking activities. Without changing the totalitarian, strictly hierarchical structure of multinational corporate institutions (many of which receive more revenue than the average country produces in GDP), we will remain in a losing battle with them at every turn. And without reforming our financial system, and escaping the stranglehold it has put us in, we will continue to be a nation of debtors.

Contrary to the idealized conception of capitalism as a decentralized and unplanned ‘free market’, what actually exists is a highly centralized, planned economy. The planners are located primarily in New York City. This is where most of the profits are distributed by a small handful of oligarchs (the One Percent). CEOs, shareholders, bondholders, and bank managers plan where our resources are allocated, with little interference from goverment regulators or practically nonexistent worker unions. Over the last thirty-five years these funds have almost entirely been used to inflate asset markets through massive lending and speculation, while simultaneously cutting investment in production and destroying the power of labor, along with their benefits. Investment in production, when it has occured, has been largely focused on developing technology and acquisition of cheap foreign labor power, both of which have been rapidly replacing domestic workers in numerous fields.

A fair amount of the money collected by the One Percent has been used to subvert the political system, as mentioned above. This has resulted in deregulation (e.g. repeal of Glass-Steagall), and shifting the burden of taxes largely off of the wealthy (Reagan cut the top income tax rate in half) and onto the middle and lower classes (through increasing payroll taxes for example). Bank bailouts under the Bush and Obama administrations were examples of how much the financial sector has infiltrated government for the purpose of socializing the costs of their reckless activities.

The defense department likewise is largely a means of subsidizing industry, whether it be directly (e.g. Lockheed Martin), or indirectly (e.g. opening up oil markets through foreign intervention). The military has also developed much of the technology that private companies now profit from.

The poor are given enough handouts to allow them to consume (and subsidize the food industry, retail, etc.) and keep them voting for Democrats, but little in the way job training and higher education to get them on their feet and out of poverty. Since the lower classes have a higher marginal propensity to consume, there is little incentive in a consumer culture to help them move up in society. Private colleges and lenders use the market to exploit high school grads who must go deep in debt to gain an education in an economy which now has little room for non-college educated workers. Hence the hyper-inflated college tuitions (up roughly 600% since 1980).

Privatized health care has also been a way to exploit the poor and jack up prices. And likewise, the compromises capitalist reformers must make to avoid the appearance of socialism has led to the subsidization of private health insurance companies through costly Medicare, Medicaid, and Social Security benefits, and now Obamacare. A single payer system would eliminate such exploitation, but there are no insurance companies to enrich, so it stays out of the discussion.

Decentralization and democratization of profits through worker cooperatives and alternative business models is necessary if we are to tackle our economic problems head on. Capitalism as it exists doesn’t really avoid the problem of centralized power accumulation. Usually the right argues in favor of decentralization, mainly through limiting the federal goverment, and emphasizing state power; but without decentralizing the private power of capital, this only continues to weaken the one democratic institution which can act as a counterbalance to private corporate tyrannies.

Reason #4: Capitalism’s Fetishization of Profit-Seeking Degrades Us as Human Beings

Our culture celebrates activities which are profitable and add to GDP, regardless of whether such activities ultimately benefit human beings. Does our work lead to more good in the world then bad? This disconnect was described in Marx’s theory of alienation . When our work is meaningless, it demoralizes us, and degrades our communities. A sociocentric economy, which prioritizes the well-being of people over profits is necessary to achieve the world we wish to see. This means looking beyond GDP, the Dow Jones, NYSE, and even official unemployment rates for alternative measures of a good society.


*For further reading on compound interest, I recommend the economist Michael Hudson’s article The Mathematical Economics of Compound Rates of Interest: A Four-Thousand Year Overview Part I


Thank you for considering my perspective. Your opinion matters to me, and I’d love to hear from you in the comments.


The contents of this article may be used in accordance with the Creative Commons Attribution 4.0 International license. Credit should be given to thefreethinkinghuman.wordpress.com.


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23 thoughts on “A Rant Against Capitalism, and Why I Believe We Should Aim Higher

  1. Zack — yet another superb post. You wrote:

    A sociocentric economy, which prioritizes the well-being of people over profits is necessary to achieve the world we wish to see. This means looking beyond GDP, the Dow Jones, NYSE, and even official unemployment rates for alternative measures of a good society.”

    There are successful templates which America (for example) can work from, but won’t. Americans continue to vote against their own best interests. I doubt I’ll see the implementation of alternative measures of a good society in my lifetime, but I will work towards this goal for future generations.

    Liked by 1 person

    1. Yes I agree completely. I’ve been into steady state economics recently, and really there is an entire platform with policy proposals built into it. Dan O’Neill is a guy to look up. I think we seriously need a third party. I could see a Green Party or a Socialist Party, or Democratic Socialist Party rising here. It’s time to cut ties with the Democratic Party, even though they are saying the right things, Bernie Sanders seems way out of place there.

      Liked by 1 person

      1. Yeah, his only shot is in the Democratic Party this election cycle. But what could happen is if he fails to get the nomination, he has enough populist support to launch a third party, or at least endorse one and ignite a movement. If we could tap into the Occupy wing, there is plenty of room for one.

        I think Hillary may be worse. Because she would not be radical enough to make any significant changes. She would probably be Obama 2.0. That would ignite fascist elements on the right (‘First a liberal black president, now a liberal female president! Oh my!’).

        Whereas if the right won the election it would probably solidify the left around a third party or other radical agenda.

        Liked by 1 person

      2. That’s a good point, but sometimes I think the citizens of America have a form of Stockholm Syndrome. I live in the South, and it never ceases to amaze me how much people here are resistant to change, even though the current system negatively impacts their well being and the well being of their children.

        Liked by 1 person

      3. It has been well established, via peer reviewed studies, that people most resistant to change are those who have increased gray matter volume in their right amygdala. We need strategies that will take this into consideration. The GOP hierarchy uses this to their advantage, which is why they have been so successful in keeping Southernomic alive and well.

        Liked by 1 person

      4. Yes, I agree completely with the neuroscience on that. The trend is certainly clear. And it’s kind of sad. That’s one reason I lean towards determinism (or a form of compatibilism). We are products of our biology. And that’s why we must have compassion on all people, and bear with their flaws.

        Liked by 2 people

      5. Indeed, but we are not enslaved to our neurobiology. In his superb article “Peace Among Primates”, Robert Sapolsky states that we may be hard-wired to have a certain perception of reality, but that perception is decidedly malleable (neuroplasticity).

        Liked by 1 person

  2. I’m admitting my ignorance right here and now….. Could someone, in simple terms, tell me what exactly would you all want our government to be… If you Could snap your fingers and it would be done.

    I see how Sweden works and overall it seems pretty good, but their country is the size of one of our states, also their taxes are very high . I have a friend that still lives with her ex husband because they can not afford to sell and buy a home of their own…. And they have great jobs. I can not think of a socialist country that works well. I’m not trying to argue or debate, I’m just wanting someone to explain to me what is your desire. For the record, I don’t mind paying higher taxes if it benefits everyone, but I do see how the very rich and the very poor abuse the system and the middle class is the one that gets fucked in the end.

    Liked by 1 person

    1. Hi Sally. I appreciate you taking the time to read my post. I will respond to your questions, which are good ones.

      In simple terms, I could only outline the goals of a postcapitalist, steady state economy. The detailed policy proposals woulbd get more complicated. But they do exist.

      First we must commit to certain values as a society. It’s taken for granted that we don’t all agree that preservation of the environment and ecosystem is not a political priority for many people. Value #1 is that we live within our means ecologically. We aim to adjust our society and economy to fit within the environment, and not exceed it’s capacity, as we currently are doing.

      Value #2 would be replacing economic growth and it’s measures (such as GDP and the stock market) with measurements of societal well-being, from the Gini coefficient (which measures inequality) to poverty measurements and well-being measurements (there have been several measurements developed for this in recent years). The goal is to replace profits (the capitalist goal) with societal health (the socialist goal).

      There are many other aspects of this which I have not covered. I highly recommend the book Enough Is Enough by Dan O’Neill, which lays out a fairly comprehensive gameplan for a solid state economy and society.

      You can read about it here: http://steadystate.org/discover/definition/ and read papers on it here: http://steadystate.org/discover/briefing-papers/

      Like

      1. To fit in our environment and ecosystem, as a conservative this is what I hear and please correct me if I’m wrong. Higher taxes on energy sources… That means higher utility bills and higher gasoline prices. If people are spending more on energy, how does that help the economy grow? I believe in protecting our planet. I’ve been to 3rd world countries and i feel the US does a wonderful job in keeping our environment clean. There are ways to improve, but I do not believe we should pay higher taxes for our energy. Also, would you limit the amount of a children a couple could have? More people would mean more resources used from our planet.

        Secondly, I feel we can have both, profits and societal health. For example, I was a hair dresser before I had kids. I would skip lunch and work late because when I did, I made more money. I can promise you, if my money I brought in went into a pot and was split amongst the hairdressers… I would never work longer hours. Profits are a good motivator. Why go years of schooling to get a PhD if u will earn the same as the person that is only a high school graduate?

        If i have misunderstood, I’m sorry. Those were the things that came to mind when I read what you wrote.

        Liked by 1 person

      2. You haven’t misunderstood. I really do appreciate your tone in the discussion, as you seem interested I understanding my position. I’ll try to address your points as best I can. 🙂

        I am glad you believe in protecting the environment. That we can agree on that is the big issue. Next is the discussion of what means are most effective in producing that end.

        1) Global warming is very costly in it’s effects on our world, which our economy is dependent on. These costs are both human and economic. This should make fighting the destructive effects of climate change a priority. There are many dire predictions from large numbers of international scientists and organizations, as well as some hopeful ones IF we make the necessary changes.

        I don’t pretend to know whose predictions are most accurate, but there have been some recent estimates that it could actually be very cheap to effectively fight global warming (that is, to minimize it’s destructive effects). Here’s a good article on that: http://thinkprogress.org/climate/2015/01/29/3616382/solving-climate-change-cheap/

        2) Taxation of energy is not really a policy of CASSE. Here are their ideas:

        “Develop a commons sector to accompany the public and private sectors. Within this commons sector, assign property rights for commonly held resources (e.g., the atmosphere, mineral resources, and forests), and establish public trusts to manage those resources for maximum long-term public benefit. (1)

        Employ cap-auction-trade systems in the commons sector for allocating basic resources. Set caps based on biophysical limits. Use auctions to distribute rights to extract resources. Equitably redistribute auction payments through public trusts. Implement a trading system for extraction rights to achieve efficient allocation of resources to those uses with the highest demand.”

        Via http://steadystate.org/discover/policies/ (I missed this, it’s a detailed l list of policies).

        By establishing democratic control over natural resources we can prevent price gouging, and better regulate their use. Ultimately it is our dependence on private oil companies that makes energy expensive. But we nee to shift our economy away from oil, and towards investment in solar, wind, and other alternative energy sources. Edison had said this. Increasing public transportation is another way to cut fossil fuel use.

        Cap-auction-trade systems can provide a budget for carbon emissions and then create a market based incentivization structure for it.

        3) CASSE does not support coercive means of controlling population size, and neither do I. There are other ways of doing that, which they discuss.

        4) We are currently overshooting our ecological limits, mainly in biodiversity loss (we are in a period of mass extinction) and climate change. We are also nearing the limits in other areas. It is estimated that we will need 2 earths to keep up with consumption levels by next year.

        The U.S. may or may not be more responsible than other nations in terms of environmental efforts (I honestly don’t know), but we have largely determined the global capitalistic structure through international free trade and monetary organizations (IMF, WTO), and military coercion of weaker nations. Hence the global system is a machine which largely feeds U.S. consumption. So we do have quite a bit of responsibility in terms of the environment. We are the largest economy in the world, and China, the second largest exists mainly as a producer and exporter of goods for U.S. consumption, and hence the U.S.-China collusion is the main driver of environmental pollution (China is one of the worst polluters). Then we have our dependence on Saudi oil as well.

        5) The profit motive can be good in it’s place, and CASSE supports markets in certain areas. I think that’s a pragmatic view. But when necessary human needs are privatized, those markets become exploitative and hyper-inflated. Look at the inflated costs of real estate, health care, medicine, energy, food, etc.

        Milton Friedman (the face of conservative economics) had summed it up best when he said the market’s ‘goal is to produce the worst possible product for the highest possible price’. Maximization of profits drives private industry today, and leads to many problems, as note in the article.

        Liked by 1 person

      3. I am not an expert in this area at all, so my tone really is about learning. I really wish world leaders and our US leaders could learn to do the same lol

        OK, I do not think all of the things you have mentioned are too crazy. I do believe in protecting our environment but I also believe in protecting our way of life. I am very libertarian…I do not like our dependence on other countries. I would be willing to pay more for things if they were made by Americans and made from our resources. I live in Alabama, our state is not as populated as other states and it is a beautiful and a clean state. I have been to 3rd world countries and I see how dirty they can be. I say this to show you, the US, is not the problem. Think about how many people the US has, then think about how much food we ship all over the world? We are doing an amazing job at using our resources and trying to keep our country clean and healthy. Do I feel we could do better, yes I do. I do not understand why states in the southeast do not invest in solar power. I think it would be a huge boost to our economy and it is clean energy. Same with other states and wind power. But for the most part, the US does a great job at keeping us clean and healthy.

        I do not like that we buy so much oil from the middle east. I think we should drill here. Make pipe lines. I know we would do a cleaner job that any other country. Also, we wouldn’t have oil being carried across our oceans. This would also provide more jobs. I hope there is a time that our vehicles use another resource, but for now oil is the best and most effective resource that we have. It isn’t evil, it has provided the US a life that we did not have 100 years ago.

        Another fear of mine, this sounds a lot like a way to spread the wealth throughout the globe. A lot of people think the US is too rich or the US sucks up all of the world’s resources and therefor they have to share what they have. Think about when there is a crisis in a part of the world, who is there to help? The US. We do not ask for any money in return, we freely give. Advancements made in the US do benefit the world. Poor countries are not poor because the US takes their stuff, they are poor because their leaders do not care about their citizens.

        I do not believe we should foot the bill on this. It is like the UN. The US puts so much money into the UN and most of those countries should not even hold a position in there. I am afraid the same will happen in this. The US will agree to new terms to get the world clean meanwhile other countries will not do anything. Do you really think Russia, China, N. Korea, any middle eastern country, or most countries in Africa will contribute? They do not even care about their own people, you think they care about clean water?

        In an utopia, I feel it is ideal. But we have countries that are upping their nuclear arsenal to hit the US, the last thing they will do is work with the US to take care of our global resources.

        In the end, I really do wish the two sides could work together to make the US better. But I do not think they like to compromise. It is either my way or no way at all. And for that reason, we can not move forward in any direction.

        Liked by 2 people

      4. I’m no expert either. I just read a lot and listen to lectures. It’s always appropriate to be skeptical, so I hope I can merely give you some food for thought from a different perspective.

        I also would rather us make our own products primarily. Or at least approach global trade in a way that prioritizes workers in all countries. Since trade itself is not bad. It is the exploitative trade structures that are bad.

        A nation, or state for that matter can be clean and still pollute. The United States is the second largest polluter in the world, right ahead of China, which is essentially our foreign manufacturing sector. And a lot of the technology we have created is used by other countries to pollute more.

        “Professor Corey Bradshaw, University of Adelaide’s environment institute said that the small countries were better in ranking. Environmental pollution has a direct proportionality with the wealth. The richer you are, more damage you will do to the environment. The growing economies pollutes the environment heavily.”

        http://www.environmentabout.com/58/list-of-top-10-worst-environmental-polluters-in-the-world

        That is why shifting the focus of off growth is crucial. In the big picture, our industrial goals are in conflict with the ecosystem.

        There is a paradox regarding our current global economic system shich has been noted by scholars. It is at the same time highly extractionary and exploitative of the vulnerable, yet also produces a lot of humanitarian efforts. it’s difficult to separate one or the other and say that it is all bad or all good. But the astounding levels of inequality and poverty provide a scoreboard which shows the effects of global capitalism. And it looks pretty grim.

        As far as resources, I am glad you are for alternative energy. I see you are pragmatic, and I respect that. I still drive a regular car because I am pragmatic and poor. Haha. It’s not easy to transition, but one mistruth perpetuated is that we cannot afford to make these changes. When in reality it is our failure (mostly intentional) to properly tax the vast wealth in this country since Reagan that has hurt our ability to invest. And it is the privatization of our resources that has insured political opposition to green energy.

        You had mentioned that poor countries are poor because their goverments do not care about their citizens, and not because the U.S. takes their stuff. While I certainly agree that many governments do not care about their citizens, I would encourage you to look into global neoliberalism and how the IMF, WTO, and World Bank have leveraged the power of the developed nations against smaller ones in order to craft exploitative trade deals, which literally do impoverish citizens for the sake of transnational corporations. We have done this extensively in Central America and now there has been a growing anti-capitalist (or more accurately anti-neoliberalism) movement in the region as a result.

        Here’s a good short video on that: https://youtu.be/sKTmwu3ynOY

        As mentioned previously, within Europe this is even happening financially with Germany and other EU countries destroying Greece for the benefit of private bondholders. The rich under capitalism get rich mainly by exploiting the vulnerable and the earth. Our economy was originally built on slavery.

        Whether other countries will cooperate with environmental reforms or not is hard to know. But we either fight for ecosystem or we are fucked. Given our status in the world economy we hold a LOT of power, so it TV is possible that we could make most of the difference, and also compel China to follow along.

        These aren’t easy solutions, but americans are tired of no solutions being offered by their leaders. It is precisely because they will be difficult that most prefer mythology about free markets or future technological salvation. There needs to be a recognition that our problems can’t be fixed by doing the same things expecting different results.

        Pragmatically, a progressive reform movement within capitalism (think Sanders and Warren) can do a lot in making things comfortable and preventing premature collapse of our society under right wing austerity, but probably will not be radical enough to solve the big problems. I see that as a stepping stone to a revived left.

        Like

    2. The most successful societies today are mainly in Scandinavia. These are mostly social democracies with mixed economies. They excel in most all measures of societal well being. Yet they are stil tied to capitalism, and hardly stand on their own. Global capitalism is heavily financialized and unstable. They are unlikely to rise above it’s struggles over time.

      Like

      1. Sorry to reply again, lol. Do you feel the US could have the success that Sweden has had because of our size? I read that the Dutch have a city for people with dementia….. I thought that was such a wonderful idea.

        Liked by 1 person

      2. I honestly am not sure. I believe Sweden is the most capitalistic of the Scandinavian countries. I believe much of Scandinavian success is due to their status as creditor nations. Financial institutions exploit other nations, especially in the EU where countries are not allowed to have central banks, and must borrow from foreign private investers to finance their budget deficits. This is what Greece is dealing with, as their economy is being carved up to pay private bankers.

        But not all of Scandinavia’s success is due to economic activity, as many of them have significantly lower GDP per capita (Denmark in particular), but their strong social benefits provide a solid foundation for their societies.

        Liked by 1 person

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