Economics, Society

A Rant Against Capitalism, and Why I Believe We Should Aim Higher

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

Economics, Society

The Invisible Hand of God: Evangelical Economics

It is no secret that evangelical Christianity has played a significant role in uniting poor and middle class white Americans with big business to form what is called the religious right here in the states. The rise of Reagan and Volcker in the eighties, and Greenspan in the nineties brought the doctrines of neoliberalism into alliance with a newly engaged voting bloc: theologically motivated social conservatives led by the likes of Jerry Falwell, Pat Robertson and James Dobson. Likewise supply-side economists such as Milton Friedman and Friedrich von Hayek gave the movement legitimacy, and helped neo-classical economic theory displace Keynesianism. This turn of events created an extremely powerful political coalition, which still dominates U.S. politics today.

Without the alliance with evangelicalism, it would have been significantly harder to sell lower and middle class voters on the merits of neoliberalism. Domestically speaking, free trade is code for ‘flexibility for corporations to outsource, or at least threaten to, if labor groups demand such frivolous things as living wages’. Lower taxes on the wealthy and corporations cause capital accumulation, inequality, and budget deficits which can be used as a political tool to force cuts in social spending. Likewise financial liberalization (i.e. policies that favor Wall Street over Main Street and liberal monetary policies) frees up excess capital for speculation in order to boost short-term profits for a few, while exacerbating systemic risk and socializing costs. The wealthy and opulent grafted opposition to legalized abortion and gay rights among other social issues into the Republican platform, effectively pitting the average worker’s moral convictions against their well-being, and solidifying support for these anti-worker economic policies.

In this article I’d like to explore a few ways in which evangelical theology mirrors the conservative view of the economy, and why it is such an effective alliance.

God and the market are both absolutely just, and should not be questioned.

It is widely believed that all people will be judged by God according to their actions, and rewarded or punished accordingly in the afterlife. Likewise, conservatives believe in a form of economic karma (i.e. hard work produces financial wealth and laziness produces poverty) guided by the equitable “invisible hand” of the market; a belief which establishes a selfish incentive for effort and moral grounds to blame the poor for their predicament. This belief in economic karma and it’s connection to conservatism is described in detail by social psychologist Jonathan Haidt in relation to Moral Foundations Theory.

This overreliance on mythology was put on display several weeks ago when Republican presidential hopeful Rand Paul said that “income inequality is due to some people working harder and selling more things,” This is a textbook example of what psychologists call the Fundamental Attribution Error, which may be cute when expressed by a child, but is not so appealing when you contemplate the fact that Paul wants to lead our country.

It goes without saying that the supposed justness of the market, if defined by an equitable effort-to-compensation ratio, is contradicted by some very basic facts. According to the AFL-CIO, in 2013 the average CEO earned 331 times as much as the average employee. And what is even more shocking is that they earned 774 times as much as those who earn minimum wage. If the ratio of effort-to-compensation is fairly consistent, then we should expect that the average CEO works 774 times as hard as someone making the minimum wage.

To put that in perspective, it is estimated that a 155 lb. fast food worker making minimum wage could burn more than 1,500 calories in an eight hour shift. If calories burned were proportional to compensation, then the average CEO would burn 1,161,000 calories in the same eight hour time period. To replenish those calories, the CEO would have to consume the equivalent of 2,639 McDonald’s double cheeseburgers daily; roughly five-and-a-half-burgers-per-minute over another eight hour period of time, leaving him or her with eight hours remaining to sleep and do it all over again after presumably being 774 times more productive than the average minimum wage earner.

If it isn’t sheer effort that determines compensation, one might say that it must be intelligence, ambition, and creativity; the intangibles which lead to success. But if we allow this, then what we are effectively advocating is social darwinism. It is an attitude which suggests that a person’s worth is almost entirely dictated by how well they can increase the bottom line for shareholders through utilizing the natural abilities they were born with.

I think it is fair to assume that the right series of events, partially determined by the person’s disposition, and partially by non-dispositional factors culminate in the diversity of financial outcomes we see in the market. Ultimately neither a person’s disposition, nor their environments (the product of disposition and chance) were the result of the person’s conscious choice. And how we approach this issue as a society has a lot to do with how we view human responsibility in light of the determinism vs. free will debate.

Ultimately, this obsession with rewarding an incredibly small few with a repulsively large share of our resources and punishing the many who do not rise to the top (through the “discipline of the market”,  as Chomsky likes to say) is quite fitting when you consider the projected gap in well-being between those who enter Heaven (and enjoy infinite joy) and those who enter Hell (and endure infinite torment) according to orthodox theology.

Nicholas Fitz of Scientific American reported this year that “the top 20% of US households own more than 84% of the wealth, and the bottom 40% combine for a paltry 0.3%.” He went on to add that “The Walton family, for example, has more wealth than 42% of American families combined”. Likewise Oxfam projects that the global 1% will own more than the remaining 99% by 2016. Despite these alarming figures, Americans have been indoctrinated into the belief that the outcomes are just and deserved, regardless of whether situational factors (e.g. being born into a low income household in an inner city ghetto) have greater power in predicting outcomes.

All of us deserve Hell, and likewise we all deserve poverty; so we should be grateful to God and the market for the blessings they bestow upon us, which is more than we deserve.

This low sense of self-worth can be promoted by instilling an undue sense of gratitude within a culture. Pastors tell us that we are all sinners (depraved and selfish by nature), worthy of nothing more than Hell, the just punishment for the sin of being born as a sinful human. Likewise, the average worker should not be ungrateful by asking for more than is necessary to remain productive, even if impoverished, for the wealthy elite (who are so generous to allow the selfish masses to be their wage slaves). After all, we don’t deserve anything more than poverty. Likewise God is infinitely generous in allowing all to be His slaves, and serve Him in fear and submission. He would’ve been justified in torturing us all forever.

Orthodox theologians fear populist preachers who present watered-down gospels emphasizing love without retribution, which they warn can result in a loose form of morality. Likewise politicians warn that without the threat of poverty and starvation (enforced through the curtailing of social benefits), the selfish, depraved masses would rebel against the societal order. ‘Rebellion’ in this context may be defined as protesting the form of work and degree of compensation which is optimal for growth of corporate profits. Protesting this form of work may be the right thing to do if such busyness ceases to contribute  to the well-being of society, or becomes detrimental to it. Much of our current economic activity fits this criteria.

Rigid forms of evangelicalism and conservatism discourage independent thought when such intellectual experimentation challenges authority. This is largely rooted in fear, as numerous findings in the cognitive sciences have shown us that conservatives are on average more fearful (to be fair, liberals may run the risk of being oblivious to threats). It’s easier for many to assume they are taking the safest route and avoiding the possibility of Hell and poverty by conforming to the existing social and religious order.

Nietzsche had noted that Christianity encourages and enforces a form of humble and submissive “slave morality”. Because of this it is no wonder that capitalism has thrived within Christian cultures, creating powerful growth engines fueled by submissive labor forces. This may not be a problem if you are fairly comfortable with your life, but for those who are at the bottom of the social stratum here or among the exploited workers in imperialized nations, the ever-present injustice within the global economic system must be difficult to bear.

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