Economic growth under capitalism might be coming to an end. This might not be a bad thing. A proposed future economic system pans both socialism and capitalism as overly dependent on growth.
“Growth is going to come to an end, either suddenly or in a controlled way,” declared naturalist David Attenborough at the Davos Summit this January.
Climate change is coming, whether we like to admit it or not. Humanity’s current rates of consumption and production are already unsustainable with current technology. Even renewable technology, such as wind, has an enormous carbon cost. Climate change’s result will damage our food and water supplies and will increase war between existing nations due to lack of resources.
Only a five degree Celsius change triggered the last Ice Age, according to Andrew Dressler in his book “Introduction to Modern Climate Change,” and the upper limit of the rather conservative current estimates (the International Panel on Climate Change typically only publishes conservative estimates due to the uniform agreement required to publish its results) predict that we will almost hit this by the end of the century.
Industrial production is creating a net decline in human chances for survival by increasing the rate of global warming. A Nature study from 2007 documented that Climate Change risks up to thirty percent of the world’s species in an extinction event. It is quite possible that humans may be part of that group. It may be that without revolution, we are facing a possible extinction.
To make things worse,the world is beginning to face other non-climate change-induced resource crises. While most people are familiar with the fear of global energy scarcity, nobody talks about peak construction. It is clear that global consumption either requires reduction or technologies to better manage our resources.
There are technical solutions emerging to confront these problems. There is a project to develop renewable construction. Another project seeks to turn agriculture against carbon emissions. There are definitely technological improvements that will benefit humanity in the 21st century, yet big problems are often uncovered in what were thought to be solutions. Problems bugged the hydrogen combustion engine, which could use water to revolutionize cars and upend fossil fuels, yet practical concerns limit its use.
Technological solutions have their place, yet we cannot count on them to allow us to maintain our current level of growth. We cannot count on technological solutions solely to prevent climate change. If we place too much trust in a technological solution, yet ignore the growth problem, we might be too late to curtail the impact.
If Attenborough and an ever-growing number of scientists are right about the end of economic growth, we might see the greatest economic revolution in human history. If growth dies, so does capitalism.
This isn’t really my interpretation. This is the interpretation of Adam Smith, in the book “Excerpt from the Wealth of Nations,” about his perception of how natural markets work with zero growth. If Smith had no answers for how societies should adjust for zero growth, it is pretty clear that capitalism does not have the answer to such a scenario either.
Other classical economists and philosophers tried to predict such a society. David Ricardo believed that a stationary economy was bad and inevitable in a capitalistic system in the long run, but it should be avoided at all costs.
John Stuart Mill, the most famous liberal philosopher of all time, actually wrote pretty positively about stagnation. He actually proposed that humanity should strive for stagnation.
He was also against the idea of humans naturally being competitive. Arguing against the idea that the world requires “trampling, crushing, elbowing, and treading on each other’s heels,” instead, he actually assumed that stagnation was the final understanding of man’s natural limits.
According to Mill, stagnation merely meant the end of profit-focused capitalism, yet this was a good thing. Mill reasoned that the human race cannot progress as a species until it can evolve morally and psychologically.
Zero growth naturally forces society into a zero-sum game.
This zero-sum game will end the ability to perpetuate an inequitable society. If humanity is going to be able to deal with poverty, necessarily, we will have to redistribute wealth. This redistribution is explained below.
First, the goal of a steady state model is to limit growth in consumption. Climate change, with all its negative effects is centered largely on the consumption of the Western consumer. Individual human consumption is boundless, unless it is limited either artificially or naturally through resource depletion.
To limit consumption while maintaining resources, society must prevent people from consuming too much by imposing consumption taxes.
Second, while consumption taxes might limit individual consumption, they will not stop economic growth through production.
As a result of economic growth, opposite to the current problem of individual overconsumption, humanity may find that population growth tied to economic growth will only increase consumption in the same Ricardian pattern. Income taxes are a way to prevent this excess production. This is basically creating a sort of natural limit to the wealth that leads to excesses in both production and procreation.
Third, in a zero-sum game, wealth redistribution is necessary to avoid the death and destruction of the impoverished. A zero-sum game means that anyone getting wealthier will mean everyone else getting poorer, so the average citizen is brought down by a concentration of wealth in the hands of a few. Under a capitalistic system, economic inequality-induced poverty could be limited through excess growth, yet under a steady state model this growth is impossible.
This wealth redistribution is easy to achieve, though, by using the same taxation that limits individual wealth to achieve a basic income system. This system would allow humanity to satisfy most basic needs and wants.
Society, by avoiding a necessity of increased work for survival, in turn ending the world’s focus on material growth, would instead turn to moral and intellectual growth, at least according to Mill.
Climate change and resource scarcity may be inevitable. This may cause a catastrophic failure to market- and socialist-based growth economies, yet the long-term effects of climate change may still be reversible. If this can be done in a timely way, then the period of global scarcity could be much shorter than otherwise. Capitalism and socialism face challenges of survival in a stagnant economy. The problems of growth, inequality and resource scarcity will take public modification of these systems. This modification may end up leading to a steady state model, but that might not be a bad thing. It may be inevitable that a steady state model is not just desirable, but the only practical system.