Capitalism

Capitalism is killing the planet. That’s the start of a headline of a recent Guardian op-ed by George Monbiot. Another, from March 2019, carries the headline: Ending climate change requires the end of capitalism. Naomi Klein’s popular book, This Changes Everything, is subtitled Capitalism versus the Climate. The blogger James O’Malley takes a different line: we must solve the climate problem with capitalism, he argues, for a simple reason. Capitalism is what we have right now. If we need to wait for a global anti-capitalist revolution to take serious action on climate change, then we will miss the 2050 deadline.

Who is right? Anyone who spends too much time with philosophers will predict my answer. It all depends on what you mean by “capitalism”.

Sorry to do this. But people have a bad habit of leaving the key words hazy when expressing their definite and decisive views. Not one of the sources I mentioned above gives a working definition of “capitalism”. Monbiot notes that “most people struggle to define the system that dominates our lives”, but he declines to join the struggle. Instead of a definition, he is content to assert that the great fortunes amassed under capitalism, rather than being the rewards of hard work and innovation, are the spoils of “looting, monopoly and rent grabbing, followed by inheritance.” If that kind of stuff is meant to define capitalism, then capitalism is indistinguishable from the ancient systems described in the Book of Nehemiah or the Epic of Gilgamesh.

Similarly, Klein proposes that solving climate change will involve “a shift that challenges not only capitalism, but also the building blocks of materialism that preceded modern capitalism, a mentality some call ‘extractivism.’” But that – the human striving to extract resources from the Earth without concern for consequences – predates even the agrarian systems that preceded capitalism. A famous puzzle in anthropology is why humans gave up foraging (hunting and gathering) in favour of agriculture, which requires interference with the reproductive cycles of plants and animals. Paleolithic foragers are estimated to have spent 15-20 hours per week providing for their sustenance, whereas 100-hour weeks are not uncommon for agricultural labourers. Unless our ancestors were desperate workaholics, why did they make this transition? A leading explanation involves rejecting the rosy picture of our Paleolithic ancestors as living in harmony with nature. Rather, they were forced to agriculture because they foraged unsustainably, hunting so many species of megafauna to extinction that foraging could no longer supply their needs. As Tim Flannery evocatively put it, they ate their future. However true this story is, it is hard to deny that we invented ecological unsustainability – extractivism – long before we invented capitalism.

Monbiot and Klein thus begin by blaming capitalism for the climate crisis yet end up arguing against their thesis. Both of them trace the roots of the problem to something much deeper and older.

***

Well, how should we define capitalism? I don’t think we can do better than the earliest great theorist of capitalism, Karl Marx. Capitalism is a system in which the means of production are owned or controlled by a capitalist class, to whom a class of workers must sell their labour power to earn their subsistence. Capital, for Marx, is money spent by a capitalist to make more money. At a basic level, the capitalist achieves this by paying the worker a subsistence wage and then selling the worker’s product at a mark-up over the wage bill and all other costs of production. Marx believed that workers add much more value to the product than they cost in wages; this is the source of the capitalist’s profit.

Think of a wealthy person today, and chances are you’ll think of somebody who owns non-reproducible assets.

When Marx was writing, the typical capitalist was a captain of industry, the key to whose wealth lay in reproducible assets: equipment, industrial plant, machinery, transport, etc. The force of his rhetoric gains a new lease of life in our age of accelerating inequality, but his analysis only partly applies to our economy. Think of a wealthy person today, and chances are you’ll think of somebody who owns non-reproducible assets. Either the assets are naturally non-reproducible (oil or gas fields, coal mines, forests, land), or they are artificially non-reproducible (brands protected by copyright, intellectual property protected by patents), or they are a hybrid of the two (real estate protected by zoning laws and limited space in desirable areas).

This source of wealth is difficult to write about because it has no convenient name. Classical economists referred to non-reproducible assets as land, since that was the most prevalent such asset at the time. But this becomes a very misleading term when applied to, say, Jeff Bezos’ exclusive license to produce Amazon software, and legal power to stop anybody else producing it. The key to owning reproducible assets, as defenders of capitalism stress, can be ingenuity, doggedness, the willingness to take risks, etc. The key to owning non-reproducible assets, by contrast, is power. You need a legal title and a state or a private security team to enforce it. This political or legal power is the primary source of wealth in our system, and to call it capitalism is to suggest more continuity with the industrial system known to Marx than is warranted. Rentierism would be a better name.

Of course, land remains an important part of rentierism. Think of the richest people in your social circles. Chances are, they own property in a desirable area. Once they own that, their earned income is of very limited relevance to their wealth. They simply sit on an appreciating asset. For all the obsession with building and garden renovation, the appreciation is mostly in the land, otherwise it would be harder to sell ugly and dilapidated properties in fancy capital cities at eye-watering prices.

But why does land appreciate in these areas? Certainly not because the engine of capitalism as Marx knew it – industrial production – pumps into the veins of wealth. Quite the opposite. Growth in industrial manufacturing and agriculture has steadily fallen worldwide since the 1960s. But falling growth and profits – the gradual powering-down of the industrial engine – corresponds to rising asset prices. That’s because when no more wealth is being created, existing wealth increases in scarcity-value. With industry on the wane, those with money find nothing better to invest in than property, driving prices up further and creating a positive feedback loop. Although Marx wrote of “fictitious capital”, he treated it as a bubble blown up by the bellows of industrial capitalism. We are moving in the direction of a world that is all bubble and no bellows, all rent and no profit, all wealth-extraction and no wealth-creation.

Marx focused on the exploitation of the industrial worker, and Marxists today continue to do so. They aren’t short of examples in Amazon warehouses and Shenzen factories. Grimly vast as these facilities feel from the inside, however, they are part of a shrinking sphere. Outside of it lies a type of exploitation much older than Marx’s type of capitalism, namely exploitation by rentiers.

There are key differences between the two types of exploitation. It is clear enough what industrial workers must do to earn their subsistence. Moreover, their wages can rise when production grows faster than the labour force. This is what happened in the Golden Age of Capitalism between the 1940s and the 1980s (or the 1960s and the 1980s for the developing world) – the period in which economic inequality, for once in history, declined in many places.

Rentiers, by contrast, have no real need for the workers. They don’t have to produce anything. They simply own appreciating assets. It is up to the workers, or the unemployed, to try to think of ways to capture some of that wealth by offering luxury services to the rentiers. Thus the poor family in the South Korean film Parasite strives to convince a wealthy household of its need for private tutors, drivers, cooks, etc. Urban centres are hotbeds for the cultivation of new “lifestyle goods”, which the wealthy never knew they needed: pet therapy, molecular gastronomy, adult-oriented soft-play areas, and so on. Still, it is hard for these purely manufactured desires to outgrow the labour supply, especially as increasing rural poverty drives more aspiring service-providers into the cities and competition with each other. The best hope for the poor lies in the vaulting vanity of the wealthy, as Adam Smith proposed in his Theory of Moral Sentiments.

***

Monbiot’s comments, quoted above, suggest that rentierism might in fact be what he means by “capitalism”. But where does it leave the planet? Let’s compare two visions of the future, one dystopian and one not utopian but hopeful.

In the dystopian vision, climate change drives the value of non-reproducible assets ever higher. As more land becomes unusable, more real estate is destroyed, more fossil fuels and forests are depleted or rationed through legislation, and the number of owners of non-reproducible assets shrinks while their value increases. Wealth is increasingly concentrated, industry stagnates, and the growing ranks of the have-nots scramble to catch a trickle of wealth by providing increasingly extravagant services. Some believe that this development could be reversed through a violent seizure of property, but this seems to overlook the fact that the wealthy own everything, including the machinery of war and the large part of the souls of politicians left vacant by conscience.

In the other vision, technology will permit a transition to a new energy base. This would involve an enormous formation of new capital: devices to capture renewable energy, efficient batteries to store it, warm superconductors to transmit it, new factories for producing steel using green hydrogen, electrolysis facilities to produce the green hydrogen, plants for making green concrete, or meat-substitutes, or smart irrigation and sustainable forest management technology – and then, of course, there is the massive investment required to develop and deploy whatever apparatus we use to draw carbon out of the atmosphere, whether planting vegetation in the deep ocean, building direct capture machines, or whatever else. Most likely it would also involve a new sequence of safe (Generation III or higher) nuclear reactors.

It is worth mentioning, however, that this vast new capital would have to be formed and owned mostly by the state. This wouldn’t matter much for a Marxist definition of capitalism. Marx saw the state as a mere instrument of the ruling classes, and under capitalism that means capitalists. But it is worth noting that this vision wouldn’t meet the definition of capitalism found in economics textbooks, which tend to stress private as opposed to state ownership of the means of production. Private ownership would be wildly dangerous for much of this capital (e.g. nuclear reactors), and private investment would never be able to form it. The only thing even close to a historical precedent for such an expansion of capital is the gigantic mobilisations undertaken before the Second World War. This was effectively a state takeover of the means of production – temporary, of course, but like every temporary policy never fully reversed.

This mass mobilisation, it must be noted, played a role in undermining one part of Marx’s analysis of capitalism. Marx largely held onto the classical Iron Law of Wages: wages under capitalism remain near subsistence levels, with some temperance by social convention. But the release of productive power after the world wars, plus the active involvement of governments in the economy, meant that production continuously outgrew the labour supply. If the growth in demand for labour outpaces growth in the population of workers, capitalists are forced to offer higher wages than their competitors to bid for workers from the limited pool. Marx believed that if this happened, the lower profits available to capitalists would discourage investment and reduce the demand for labour, reversing the process that threatened to drive up wages. He thus saw capitalism as inherently prone to cycles of boom and bust. When it comes to private investment, he was probably right. But state-driven mobilisation is a different story: if the government likes, it can push the expansion of production past the point where wages begin to rise and profits begin to fall. Since a democratic government is, in theory, motivated by votes rather than profits, the fall in profits need not discourage it from continued investment. On the contrary, the resulting rise in wages might win it more votes.

Current governments have demonstrated their inability to manage even a full baby-step towards carbon neutrality.

This is one way to understand what happened in the Golden Age of Capitalism. John Maynard Keynes, writing in the mid-1930s, even dreamt of a “euthanasia of the rentier”. Why, instead, did we end up with a decline into rentierism? There are certain historical events that catch the eye: the final collapse of the Gold Standard for the US Dollar in 1971, the 1973 Oil Crisis, and so on. But what is less visible is what Aaron Benanav notes in Automation and the Future of Work: an international coordination failure. As nation after nation – the United States, Japan, Germany, South Korea, China, India, Indonesia – pursued a path of development through manufacturing exports, each ended up duplicating productive capacity already in existence somewhere else. Eventually the world as a whole ended up with far more productive capacity than it needed, leading to a global decline in productive investment. There was a corresponding increase in services, but, again, the business model for many services is to attempt to coax rentiers sitting on idle-yet-appreciating assets into dispersing some of their hoarded wealth.

***

The great perversity here is that while the world languishes in stagnating investment and a decline into rentierism, it is at the same time awash in investment opportunities. It is crying out for a new, carbon-neutral capital base. Moreover, these are mostly opportunities for state-led investment, which need not switch off at the first sign of falling inequality the way that private investment does (at least according to Marx).

The sticking point, of course, is government. Current governments have demonstrated their inability to manage even a full baby-step towards carbon neutrality. So we need different governments. How could that come about?

In most countries there is a mechanism for changing the government: the democratic process. Those who link capitalism with climate change point out the corrupting influence of money in politics. That, however, is hardly a speciality of capitalism; I refer you again to the Book of Nehemiah. No doubt the fossil fuel industry wields immense power over governments. In European law, for instance, they can now sue governments for making policies that injure their profits. Still, most politicians would choose getting the government sued, or foregoing a personal bribe, over losing an election. In the 1980s, Samuel Bowles and Herbert Gintis identified capitalism and democracy as two overlapping and competing systems. With a sufficiently-motivated electorate, there should be no contest between them. No amount of corporate lobbying can move the bottom line. As a politician in a notoriously corrupt nation once put it to me: if you’re popular, you can turn down the cash.

The trouble lies in motivating the electorate. In Against Political Equality, Tongdong Bai presents climate change as the Achilles heel of the democratic system. Since the direct victims of climate change are still in the minority – or not yet old enough to vote – self-interested voters don’t drive politicians to act by punishing inaction at the ballot box. They don’t care enough to turn climate change into a decisive electoral issue. They can, he admits, be nudged to care more, through campaigning. But this requires what he calls “inflammatory nudging”. Since voters haven’t responded enough to the real threat, the only way to nudge them is to exaggerate the threat. Forecasts of a runaway greenhouse effect (rather than an unacceptably high but stabilising level of warming), or human extinction (rather than a mass extinction of non-human species), or a miserable future for all of humanity (rather than life remaining guiltily comfortable for middle-class citizens of developed nations) all seem to fit this category. The subtitle of Monbiot’s book, How to Stop the Planet Burning, is inflammatory nudging in more than one sense.

But inflammatory nudging is, Bai argues, “self-defeating at best and destructive at worst”. It is self-defeating because exaggerated claims by climate-change activists are seized upon by climate-change deniers as evidence that the whole thing is a hoax. It is destructive because demagoguery is divisive. A grandstanding demagogue must make the issues appear obvious and morally urgent, thus representing opponents as evil and/or stupid. They retaliate in kind, and soon we end up with what Oliver Cromwell called “providential enemies”, who can accept no solution that doesn’t involve the total elimination of the other side (preferably by conversion).

Bai uses this as an argument against pure democracy. But what it really shows is that we can preserve democracy at the price of exercising more restraint in our rhetoric. Inflammation, in both physiology and politics, can serve a useful purpose at first before becoming a problem in itself. The claim that climate change is the inevitable outcome of capitalism is, I think, part of a general inflammation of rhetoric around the issue. Politicians could begin today to mobilise the economy for decarbonisation, if they chose to do so. In the process they could create jobs and drive growth fast enough to pressure wages and reduce inequality, thus slowly eroding the concentrated wealth and power of the elites who obstruct their way. The institutions for doing this are already there, as Ann Pettifor argues in The Case for the Green New Deal.

What is missing is motivation. Through elections, we have the power to motivate politicians, so long as we can motivate ourselves. But for this, divisive rhetoric about capitalism is not helpful. If by “capitalism” you just mean greed, corruption, injustice, extractivism, and ecological unsustainability, then capitalism is as old as humanity. And so is your complaint. But change requires fresh thinking, not ancient Jeremiads.

Alexander Douglas is a lecturer in the School of Philosophical, Anthropological, and Film Studies at the University of St Andrews. He studies early modern rationalism, particularly various forms of Cartesianism and especially that of Spinoza. He is also interested in critiques of political economy and is the author of The Philosophy of Debt. Website: https://axdouglas.com

Twitter: @alexxdouglas

From The Philosopher, vol. 110, no. 1 ("The New Basics: Planet"). Read more articles from The Philosopher, purchase this issue, or become a subscriber.