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Can Capitalism continue?

  1. Oct 11, 2012 #1
    I heard a report that says that the earth may have passed its carrying capacity. Which means the life systems of this planet are now in decline and can no longer sustain themselves. I read that 30% of the great barrier reef has disappeared over the last thirty years.

    My question is can capitalism work as a zero to minimal growth, sustainable system, or is growth required for the capitalist system to work? The assumption that a country like the United States or any country can have 3% GDP growth till the end of time is foolish since we are living in a world in which resources are more and more scarce and areas for the expansion of markets are becoming more and more rare.

    What are some sustainable economic models?
     
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  3. Oct 12, 2012 #2

    Ryan_m_b

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    Look up steady state economics, there has been a lot of thought about this issue but I'm unsure of any solid proposals as yet. Also it's worth mentioning that some economists argue that growth can be infinite because we could decouple economic growth from physical resources e.g information technology, entertainment etc. Personally I'm skeptical of these claims.
     
  4. Oct 12, 2012 #3
    That's what Marx says, but I never read his argument. I don't see why. If the system contracts, it contracts.
     
  5. Oct 12, 2012 #4

    Ryan_m_b

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    But in the process of growth you use up resources that don't come back when you contract.
     
  6. Oct 12, 2012 #5

    russ_watters

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    Resources are used and potentially used up in any system, whether expanding or contracting. So that has nothing to do with capitalism.

    I don't see why capitalism necessarily requires growth, however I think growth is a essentially a rule of nature (again, having nothing to do with capitalism). As long as technology advances, our labor will continue to add value to any economy. Whether that results in actual growth depends on efficiency. It is conservation law applied to economics.

    Also, I'd be skeptical of any claim that we've exceeded the carrying capacity of Earth. The claim is often made wit a political and/or crackpot motive behind it.
     
  7. Oct 12, 2012 #6

    Ryan_m_b

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    I was more thinking of renewable resources that can only support a certain amount of people before they start deteriorating: rain forests for example.
     
  8. Oct 12, 2012 #7
    This is not true. Growth is not a law of nature. Growth is not a law of biology. It isn't even a law of human economics. If growth is a law at all, then it is a law of capitalism.
    It sounds like you are arguing that there is no such thing as a carrying capacity.
    The paleontological record indicates that all species of plants and animals eventually go extinct. There is no case of a species that keeps on growing without limit. There are some of the really long lived families of animals, like cockroaches. However, even these species have not grown without limit.
    Comparative anatomy and the entire study of evolution support the idea that organisms eventually run out of resources. They may specialize in various niches, making use of renewable resources that are around. However, there is nothing in nonhuman nature that suggests growth can continue forever.
    Most "primitive societies" have periodic fits of growth. However, they usually have some programmed cycle in their society that collapses their economy before carrying capacity is reached.
    I am thinkin right now of the Maring. They have periods of explosive growth where they raise as many pigs as possible. However, when the pigs start digging up their gardens, it is interpreted as a sign that the ancestors are angry and they go to war. The war itself doesn't really bring the population down sufficiently. However, the war indirectly leads to female infanticide which brings the population down.
    For a description of the Marang and others.
    Marvin Harris, "Cows, Pigs, Wars and Witches" (Vintage, 1975)
    The Marang would probably like to raise an unlimited number of pigs and raise an infinite number of children. However, there always ends up top be limit. It may largely be unconscious, but the result is that they explosively retract and start growing again.
    This is true of other primitive societies. They reach a limit, they reach a limit. They usually have some type of retraction, which could include a war, before they reach carrying capacity. If they waited for the carrying capacity to be exceeded, then they would soon be extinct.
    There are lots of societies that went extinct. Archeology has revealed all sorts of societies, some relatively advanced, that have fallen. There are lots of ancient, abandoned cities from all over the globe.
    Please notice that Marx is also wrong. None of these societies develop a state where "to each according to what he needs and from each according to what he has." Economic cycles seem pretty common for all sorts of cycles.
    I don't think economic cycles can be avoided.
    There are also crack pot theories going around about "growth being a law of nature" that exists "outside of capitalism." If you have scientific evidence about "growth being a law of nature" outside of highly industrialized societies, then please feel free to give an example.
    Furthermore, carrying capacities exist. You said that you don't believe that we have neared the carrying capacity. If there is a carrying capacity, then we will eventually reach it. You seem to be implying that it is a "law of nature" that there is no such thing as a "carrying capacity".
    Perhaps you could expand on your "growth being a law of nature." Please tell us what nature. What referred scientific journals are available where I can read about these laws. Tell us about the experiments.
     
  9. Oct 12, 2012 #8

    russ_watters

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    Sure, but you aren't saying the earth could support 7 billion capitalists or 12 billion socialists, are you?
     
  10. Oct 12, 2012 #9

    Ryan_m_b

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    The two aren't necessarily mutually exclusive. IMO the issue at hand here isn't capitalism itself but the idea of economic growth which is an inherent part of modern capitalist culture.
     
  11. Oct 12, 2012 #10
    Correct if I'm wrong, but capitalism doesn't need growth for it to exist. Under the present system we issue currency that is debt based. That's the reason why there has to be growth in the economy for it be sustainable.

    Furthermore are countries like the US really capitalst? Now I'm sure, for the most part, there has never been a "pure" system of any economical idealogy. Overall, the US has strayed away from capitalism heavily. Both parties have slowly adopted a system of government intervention with the economy via subsidization, bailouts, and granting special priviliges to corporate interest.
     
  12. Oct 12, 2012 #11

    russ_watters

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    I'm getting confused. Are you saying capitalism requires growth and if so, could you explain why? Also, saying growth is part of capitalism's culture implies it isn't a part of other systems, like socialism. Is that what you mean? That would be quite a shock to me! And is the culture necessarily part of the functioning of the system?
     
  13. Oct 12, 2012 #12

    Ryan_m_b

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    Nope, not saying it does require growth.
    Nope what I said was growth is part of our modern capitalist culture, not that it is part of capitalism necessarily.
    No not necessarily, though trying to untangle two systems that have been linked in practice for a long time can be a nightmare.
     
  14. Oct 12, 2012 #13

    russ_watters

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    Is growth a part of modern socialistic culture?
     
  15. Oct 12, 2012 #14

    Ryan_m_b

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    Yup. But why are you framing this as capitalism vs socialism (admittedly the OP is partially to blame for focusing on the former)? Aside from the fact the two are not necessarily mutually exclusive as I pointed out in my first post here this should be a discussion of growth vs steady state economics.
     
  16. Oct 12, 2012 #15

    russ_watters

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    Yes, it is because of the framing of the OP and subsequent replies. The wording implies a necessary link between capitalism and growth and that the link does not exist for other systems. The reality, instead, would appear to be that growth is a component of HUMAN culture, having nothing to do with specific economic systems. The OP's question would then need to be reworded to ask if civilization can continue and no discussion of capitalism would be involved.

    Seems to me that the focus on capitalism is a red herring.
     
  17. Oct 12, 2012 #16

    russ_watters

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    Or, perhaps this is Marx's fault?:
     
  18. Oct 12, 2012 #17

    jim mcnamara

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    This is a WHO projection on world population in the year 2100
    http://esa.un.org/wpp/Other-Information/Press_Release_WPP2010.pdf

    The estimate is 10 billion, because there is some evidence that fertility rates are converging toward a value that would indicate a steady state value of ~10B.

    If we care to assume the above is reasonable, then why do we worry if a particular model (pick you own term for this) for economics will persist due to reaching K, the carrying capacity. If population shoots past K then lots of people will die off quickly. If population growth ramps down steadily, then it will come to an equilibrium.

    See the Logistic growth model here, which is what WHO is proposing:
    http://people.richland.edu/james/lecture/m116/logs/models.html

    If there is a huge die off then the likelihood of things remaining as they are is lower than if human population reaches K gracefully. Since WHO presents a logistic growth estimate I do not see a major issue with 'what will happen if...'

    The only good answer is that stochastic process (or maybe Murphy's Law) can and will at some point trash our current economic system. And modern culture. It does not appear that population growth will do that. At least not forseeably.
     
  19. Oct 12, 2012 #18
    Marx's explanation as I heard David Harvey explain, which I vaguely understand goes something like this. In das Kapital volume ii Marx does a gedanken experiment in a society with just two classes workers and capitalist. He argues that demand comes from capitalist paying workers who then spend their money on goods and demand comes from capitalist buying means of production so total demand comes from means of production and the wage bill. The total supply that a capitalist creates in surplus is profit. Marx argues the demand for the surplus is generated by the capitalist. That is the capitalist create the surplus and create the demand for the surplus. In order for this to work it has be an expansive system by which you pay off yesterday's debts with today's expansion, a credit system. So the accumulation of capital is also the accumulation of debt.

    Whether you believe this or not I still find it hard to believe that a steady state economic system would resort to speculative economics in such a large way.

    I think the life cycle of capitalism is like the fusion cycle of a star. At first it has access to lots of available resources to spur growth like a young star has lots of easy fuel. Then it uses up this easy fuel and starts burning more exotic fuel more fictional speculative forms of capital like synthetic credit default swaps then it runs out of fuel and dies.
     
  20. Oct 12, 2012 #19
    I did not frame my reply in terms of socialism versus capitalism. My reply was based on your statement that "growth is a law of nature."

    The OP framed his argument equating capitalism with growth. The OP may not have been scientific. Neither was your reply. You seemed to accept his equation without question. I don't know if there is a "scientific" way to compare capitalism with communism.

    There was a question underlying the OP that may be addressable by science. The question is whether any social system (not socialist!) can have unlimited growth.

    Communist and socialist societies in the industrialized world have promoted growth. From Stalin's five year plans to Maos great revolutions, they have worked hard to expand the economic production of the society. It seems to me there is at least as much pollution and destruction of resources as in capitalist societies. I may post such studies later. However, I can post at least as many studies showing how capitalist societies pillage the environment.

    In fact, the words communist, socialist and capitalist don't really refer to societies. They refer to governments. Governments don't affect the detailed interactions between people. On the level of local interactions between people, and local transactions, governments don't do all that much. In terms of cooperative action involving large groups of people, governments make a difference. However, governments can't repeal the laws of physics. A large corporation can end up doing the same things as a communist government. In fact, a "anarchist" or "libertarian" group of people can consume and pollute just as much as people led by a capitalist or a communist government.

    Primitive tribes bang their heads against limits to growth, which is why I mentioned a book describing the Marang. I don't know if one would call the Marang, or the Yanamano, or the Mayans communist or a capitalist. Primitive societies are interesting as their cultures don't always fall into the dichotomy of "communist" or "capitalist". The Marang grow trees, and we build missiles. As a fan of the space race, I prefer missiles. However, can we really keep on building missiles forever?

    A capitalist government can ban the teaching of evolution, but they can't stop evolution or natural history. A communist government can promote Lysenko heredity, but that won't make Mendelian heredity any less valid. The government can't decide what is a "law of nature". An economist can't decide what is "a law of nature." Nature decides what is a "law of nature." Scientists should be searching for these "laws of nature" based on physical evidence.

    The OP was making statements about capitalism not being right. However, right and wrong is not a scientific question. The biological questions have to be asked in terms of physics and chemistry, not Marx versus Jesus.

    The real issues that the brought up, which most readers understood, concerned economic growth. There is no physical law that distinguishes between wealth as concentrated in a few or distributed among the many. You were the one who made the comment that implied that there is no limit to growth.

    There are many questions one could ask which have nothing directly to do with capitalism versus communism. Is there such a thing as carrying capacity that an environment places on a population of human beings? Are we currently near this sustainable carrying capacity? Will the human species survive if growth expands beyond the sustainable carrying capacity?

    Your answer implied that there is no such thing as a carrying capacity for human beings. You did not mention either capitalism, socialism, or communism. You said that only kooks and jerks thought there was any limit to growth. You stated that there is a law of growth that is part of nature.

    I merely asked you to support your facts. Show us some study by a physical or biological scientist that shows that growth is a law of nature. Please don't refer to economists, as we all agree that is a soft science. Find us an actual study by a physicist, a chemist, a paleontologist or any science that involves physical fact that shows that there can be unlimited growth. Show us how energy will not run out, how fisheries don't collapse, that the oceans can't be acidified by CO2 or that man made global warming can't occur at any time. If these things are limited, then show us how we are not anywhere near these limits.

    As a retired physicist, I am really interested in "growth as a law of nature." Please provide references.
     
  21. Oct 12, 2012 #20

    Pythagorean

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    Many of the core aspects of capitalism cannot simply fail or be removed (well, not without the unlikely event of world domination). It's a system that, similar to evolving biological systems, seeks to minimize cost functions (efficiency) and propagates by appealing to human nature (marketing).

    The aspect of capitalism that will not survive is that which gives too much power to one entity (similar to the reason capitalism was born in the first place). The "too big to fail" financial institutions are currently such entities. They need to be broken up by sector so that they can't all bet on important things like food, gas, and housing at the same time. I.e., we need to take away their 'too big too fail' status. It's unlikely that any politician will, in the immediate future, move towards breaking up these companies in a meaningful way, so we get regulation. But regulation is like security in hacking. Hackers will always find a way (and financial hackers are currently the best equipped with the research to exploit "bugs" in the rules).

    If a good security program against these organized corporate hackers isn't put in place via regulation (or the companies are broken up to make more competition) we run the risk of continued economic instability, which leads to more social instability (Occupy Wall Street) which, if it ever reaches critical mass, could have serious consequences and bring about more dramatic change.
     
  22. Oct 13, 2012 #21
    Not only 'capitalism and socialism' are poorly defined (which country [except N. Korea] is socialistic these days? )-- but even notion of growth is ill defined.

    If population grows, then there is a need for more goods.

    Economist mean by growth 'larger GPD' (in PPP dollars) but I suspect that GROWTH is considered desirable because it brings in more taxes so governments can pay on DEBT ..

    There does not seems to be much difference between rhetorics of socialisms and capitalisms in the way these systems would deal with shrinking resources. Traditional methods, limiting population growth and beyond that -- wars are tested and universal human response to scarcity --to starvation.

    Socialism - in theory at least - is more likely to preserve egalitarian society - and so may handle
    the reduction in standard of living in a more peaceful manner.

    But capitalistic (and democratic) society can also redistribute and tax wealth (of those who own
    resources) to feed those who just gave their hands (and brains) ...

    SO

    first we would have to answer :
    Can mankind continue?
    and then define what we mean by capitalism, socialism, communism, etc
     
  23. Oct 14, 2012 #22
    I highly suggest you investigate the work of Geoffrey West. Dr. West used to head the Los Alamos High energy lab and has since turned his interests towards complex systems, namely, growth of biological systems.

    Here is a nice introduction to his work: http://www.ted.com/talks/geoffrey_west_the_surprising_math_of_cities_and_corporations.html

    We can take a few things from his talk:
    First, all biological systems tend towards growth.
    Second, some biological systems tend towards exponential and therefore unsustainable growth, leading to collapse. All businesses and empires have followed this route.
    Third, some biological systems tend towards stable growth and do not collapse. This is the route followed by cities.

    I think you will greatly enjoy this lecture, and I highly suggest you read up on some of his published works. It is awesome to see a physicist come in and 'clear the decks' in social sciences.

    Definitions are a good starting point. I see there is some confusion in this thread about exactly what capitalism, socialism, and growth might mean.

    Let me suggest you read chapter 15 of Joseph Schumpeter's book, "Capitalism, Socialism and Democracy." PF may have a general disdain of social scientists but Schumpeter is probably the best general social theorist that ever lived (important contributions in both economics and sociology that are not just foundational, but still relevant).

    We can conceive of two general categories of the social organization of production, one commercial and one socialist. Commercial society is characterized by the use of markets to coordinate the efforts of buyers and sellers to reach spontaneous organization of the supply and demand of goods. A subset of possible commercial societies is capitalist, which specifically means the introduction of banks as lenders of credit and a monetary system regulated by interest, itself regulated through supplies of government bonds.

    Socialism, on the other hand, has production and distribution controlled by a central authority. Here private property figures less prominently and 'markets' are not the primary means of coordinating suppliers with buyers and vice versa, but a central authority is. Banks might figure in a socialist mode of production but they are not necessary, since the authority doing the lending and the authority doing the borrowing are one and the same.

    We can't equivocate population growth with growth in total consumer demand, nor do either of these equate to 'GDP' or what one might call 'total economic activity'

    Growing populations require more goods but they also produce more goods. Externalizing our energy demands on fossil fuels in technology means that additional populations can always produce more goods than are required to sustain themselves, so long as the fuel lasts.

    Economic growth can mean a few different things. We normally think of it as increases in GDP, but increases in GDP don't necessarily mean we are consuming much more resources - the development of financial instruments have drastically increased total GDP but don't actually use much hard material.

    We can also talk about growths in the value of goods and services provided, with an emphasis on services. Growth in 'value' - meaning the subjective benefits of utilizing some service or thing - can continue almost indefinitely, but the easiest types of value to grow this way are the hardest to monetize. Google and Facebook have provided supremely vast amounts of value but this is difficult to monetize directly.

    The easiest value to monetize is the classical consumer goods or industrial goods. Inventing a new helicopter or toilet or what have you provides value to the user, but the user can't get it without directly paying. Value that is easily monetized is usually resource expensive with the exception of consultation services.

    Socialism is by far the least likely to preserve egalitarian society in a situation of declining resources for the reason that production and supply of all goods are coordinated by a central authority. Members of this central authority have the power to collect for themselves all the best toys and supplies, and they do exactly this, even in times of abundance.

    Capitalism has the advantage that the system as a whole is not directly in the control of any one person. This is also the biggest disadvantage, because we essentially have to wait until the system blows itself out before we have much hope of changing it.

    I think its essential to realize that capitalist commercial society is far and above the optimal means of organizing the supply of resources to maximize total growth every year. The reasons for this can go on and on, and if your curious we can go there. But the real point is, it is a system of structured incentives that always reward the highest return on investment (i.e. growth of a fixed capital quantity), and therefore nearly impossible to reign in before it over extends itself.

    If you watch the talk by Dr. West you might keep this in mind when he explains how every business in history has failed.
     
  24. Oct 14, 2012 #23
    Just because the GDP of a country is lower does not mean that the product of particular individuals does not exceed that. There may be fewer and fewer people with 200% growth and others with a loss. Capitalism is functioning nontheless.
     
  25. Oct 14, 2012 #24

    Alright. Maybe this is all true. You are saying that capitalism always has structured incentives that reward the highest return for the highest gain. Further, any system with such incentives eventually over extends itself. Then there are three questions.

    1) What has happened after the over extension of capitalism?
    You said that businesses and empires end up collapsing, although the society drives on. However, people in the U.S. and others seem to be trying to establish a global capitalist society.


    All the Republicans seem to think that way, at least. However, they don't seem to acknowledge that there are environmental problems. Romney wants to downsize or eliminate the EPA. It is too socialist for him.

    2) What will happen to the global capitalist system when the resources, including pollution sinks, are overextended?


    While capitalism always has such incentives, socialism does not always have such incentives. You pointed out that socialism isn't usually egalitarian. However, you also pointed out that it doesn't give incentives for the highest gain. The OP was rambling about the advantages of socialism over capitalism. I addressed his other issue, about the ability to sustain growth. However, your point about over extension brings back the issue of how stable can a socialist economy be. So I have to ask the question.

    3) Does a socialist system always over extend itself?

    I think the answer to the third question is, "yes". However, I would like to hear your opinion on it. My opinion is that socialist systems always end up either collapsing or otherwise replacing itself with a capitalist-like society. By capitalist-like, I mean having the incentives for the highest rate of growth.
    Socialist systems that don't put incentives on highest gain are destroyed by the systems that do. So socialist systems that survive have to eventually place incentives for the highest gain. Like China. So they end up overextending itself anyway.


    So the fourth question:
    4) Will the human species soon go extinct?

    I as an individual like living in a world where expansion seems unlimited. However, it doesn't look viable in the long run.
     
  26. Oct 14, 2012 #25
    H2Bro says:
    Socialism is by far the least likely to preserve egalitarian society in a situation of declining resources

    But this is not supported be empirical data:


    That is not at all clear and not supported by data. After Russia adopted capitalistic model, number of
    magnates emerged - who definitely are 'more equal' then population at large and -- in contrast to post-Stalinist but
    pre-capitalistic regime, are able to deal with 'their property' as they please.
    Export it to London, buy real estate abroad etc etc.

    "Members of this central authority have the power to collect .."
    but their power is limited bu political pressure
    (if we consider somewhat democratic country).

    That is a general rule (not a law) for all post-communistic countries.
    Lorenz curve (income inequality curve) for USA (a capitalistic country)
    shows less equality then European 'socialistic countries (Norway, Sweden ..)

    You may say we are not as yet in era of declining resources but I do not see
    likely change if crisis will depend and even more people in US would become unemployed.
    They may loose their homes and become very poor - under the cold dictate of the market.

    Socialism has a program and strong bias against such trend. It pays the price in not being efficient. There are no homeless - but people may live 8 per room. I am not advocating any system. Just coming back to the question how would these two systems respond to a real decrease in resources and declining standard of living.


    "Definitions are a good starting point"
    I agree. right now - still - the use of the word socialism and communism are used differently
    in the USA, in Europe and e.g. post-communistic countries and Russia.
    Communism is now (and perhaps forever) contaminated with dictatorship.
    It became synonym with Stalinist, while it was once 'a promised land' utopia.
    Meaning of all these terms was shifting with time and place. We need some quantitative measures.
     
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