C as in Capitalism and C as in Collapse

Why the global capitalist civilization is doomed by internal and external, biophysical and social, material and ideological factors.

Below, I discuss if capitalism is a major driver of collapse. For each of the points I raise a lot more could be said, but sometimes a sketch will give a better overview than going into all details. Admittedly, my own thoughts on all this are also not completed. Writing helps me structure my mind.

Let me first define capitalism. In my view, it is an economic system based on private ownership of the means of production, capital accumulation through rents and profits, and competitive markets where most people work as salaried labourers and people get most of their necessities through markets. All three aspects need to be in place for an economic system to qualify as capitalism. In some cases, the private ownership of the means of production is absorbed by the state, but the state still manage commercial companies based on markets, and most goods and services are allocated through markets. This is how China has transformed itself into state-capitalism. Feudal lords became rich primarily through rents and not through markets and most work was not performed by wage labour and feudalism was thus not capitalism.

The market and money are essential tools for capitalism. In a market economy, the market is the dominating way for distribution of products and services and to allocate resources. There have been some markets, and money, in most societies, but the development of a market economy goes hand-in-hand with capitalism. It is even hard to envision market economy which will not develop into capitalism.*

The relationship between capitalism and modernity

Some put the “responsibility” for our current predicament on “modernity” instead of capitalism. For some, this “modernity” goes all the way back to the advent of farming, for others it goes back to Classical antiquity, while most see the root of modernity in the scientific revolution (Descartes, Bacon etc). In my use of the term “modernity”, I align with common definitions featuring industrialization, urbanization, scientific advancement, rationalism, the rise of nation-states, secularism, individualism, and a focus on progress and change. It is hard to know how radical this change was compared to what was before “modernity” developed. I am not fully convinced that all of this was so new and that part of the achievements of modernity is to vilify what was before modernity and to portray itself as a major break with the past. Having said that, the whole package taken together certainly changed a lot.

To a large extent, modernity is a value system and a view of the relationship between humanity and the rest of nature that goes hand-in-hand with capitalism. Economics, especially neoclassic economics, can in some ways be seen as the social theory of capitalism. And capitalism reproduces the economic man that is the agent in neoclassic economics. The basic assumptions of economics reflect the (perceived) rationalism, individualism and an objectification of nature as something for humans to exploit, which fits hand in glove with modernity. These are very important perspectives for the justification of capitalism. It is through the wedge between nature and humans that nature can be reduced to commodities and something you can own.

Admittedly, as demonstrated by the Soviet Union and Mao’s China, modernity can also be a value system that justify a centrally planned economy and not only a free market capitalism. But as we can see, in the end, the centrally planned economies have lost in the competition with market capitalism as they lack dynamism. Mostly, they converted themselves into capitalist economies.

Obviously, there are many aspects of modernity in a wider sense which are “good”. I would certainly not argue that scientific methods and scientific discovery are bad. It is also hard to argue that individual liberty is bad. However, a unique emphasis on any of those may still yield bad results. The prevailing scientism is arrogant and tend to look only at what we “know” and disregard all that we don’t know. Most challenges of human civilization (today and earlier) are not met by the application of science alone, in many cases not even predominantly. By putting too much attention to scientific measures and models, we tend to give too little attention to other perspectives. Individual liberty and rights are essential but when they develop into that ”my only obligation is to myself and my self-realization” it becomes both anti-social and reduces the rest of the world, including nature and other people, to tools for individual satisfaction.

The main collapse drivers of capitalism

Capitalism interacts with almost all critical functions of society in such a way that it, together with modernity, defines current societies. Below, I outline how some of the more pertinent properties of capitalism drive towards collapse.

Growth. Already in the fundamental formula for accumulation of capital by Karl Marx, M-C-M’**, it is apparent that capitalism is defined by growth. Growth, in turn, is based on increased use of various resources. Even if there are rare instances where growth is not resulting in increased use of one particular resource, the total resource use is without doubt increasing as a result of the capitalist process och capital accumulation. Even if we often in daily use equal money and capital, capital is not money but resources; machines, infrastructure and buildings, stocks of goods and other things with a material and ecological footprint.

The demand for more resources results in scarcity, direct pollution, loss of ecosystems and their functions, erosion of bio-diversity and climate change (which essentially is a combined effect of pollution and transformation of ecosystems). The trespassing of most planetary boundaries is a good measure of how capitalism wreck havoc with the Earth system.

Together with the growth of capital, the increase in labour is the other major component of growth measured as GDP. One of the most important resources for capitalism is labour and capitalism is intertwined with human population growth. While many seem to believe that rampant population growth is based on inherent desires of human beings, I would argue that the main driver of population growth is capitalism and modernity. I have explained this in more detail in the article Markets - more food and more people. But the short story is that capitalism destroyed old ways of living and the regulation of the size of the population that were part of those. In this process, children became resources as labourers, instead of being part of the natural regenerative cycles. With the rise of the market economy, agriculture production and food availability increased a lot which made the marginal costs for raising a child much lower. Advances in medicine and hygiene certainly helped.

Energy and technology. There is no coincidence that industrial capitalism evolved in parallel with the use of coal. Other energy sources followed suit. Through the use of external energy resources, the productivity of labour was considerably enhanced. In many processes one person could produce the same as 100 persons before. This was primarily accomplished with the increased use of machinery, i.e. capital. What was earlier produced by independent artisans and often sold directly by them to the customers could now be made in factories. The capitalists could extract a lot more value through extraction of surplus value produced by labour and through control of the market. The more division of labour there is and the more technology that is applied, the bigger the market will be and has to be (this was observed already by Adam Smith in his seminal The Wealth of Nations). There is thus strong linkages between the technological development and globalization. And if markets shrink, the optimal technology and the optimal scale of operation will also change.

Competition forces down profits and therefore, innovation is en essential feature of capitalism. Innovation can be about making products more efficiently or making totally new products. In the latter case, the corporation can enjoy a period of market dominance and associated profits, until competition develops. The constant development of energy resources and technology are therefore essential components of capitalism.

The development of the factory with mechanization and a strict division of labour, made it harder to understand how profits were generated and also made it virtually impossible for workers to just leave the factory and produce by themselves. It is also in this you can find the reason for why some trades have been very slow to organize fully according to capitalist processes. In the case of farming, capitalism has encircled farms on the input and output side, but in most cases it has left farming itself be self-organized by independent farmers. This is changing gradually with the increased mechanization of farming and the financialization of land.

Capitalism is built on inequality. After all, if accumulation of capital is an essential feature of capitalism, it will mean that some will be much richer while others remain, relatively, poor. But as long as growth is there, even the poor will be slightly better off as times go by. Therefore, the big inequality in capitalism is accepted, by some even heralded as something good. If growth stalls, capitalists still try to accumulate, which means that the poor will become poorer. This means that they stop buying things, which in turn impedes economic recovery. This is one of the major social reasons for why capitalism will not survive any longer period of no growth or degrowth. It can restart though, as it did after the great depression or after wars leading to massive destruction of capital.

Legitimacy. In the growth society there is optimism, people expect that they will be better off than their parents. New fascinating buildings are erected, railways, road, bridges, tunnels, new gadgets appear all the time. When growth stalls people become pessimistic, societies can’t make new glorious advances. It can hardly keep up with maintenance of the infrastructure it build in the growth phase (well visible in most countries that industrialized early).

Another, underappreciated, side effect in a non-growth capitalism is that capitalists lose faith in capitalism as profit rates fall and the main avenue for success is to outcompete other capitalists. Basically, capitalists will then enter a similar treadmill as farmers have been walking for a century. For capitalism, it is a bigger threat that capitalists lose faith in it than if the common people do. Both the Russian revolution and the collapse of the Soviet Union were largely driven by the elite losing faith in the system. (I wonder if not the unlikely “coalition” of elites and poor people visible in the rise of right wing populism is an expression of this).

Marx, correctly, noted the tendency to falling profit rates in mature markets and many Marxist have seen this as the inherent killing factor of capitalism. What they underestimate is the enormous dynamism of capitalism. While there certainly is a tendency towards falling profits in mature markets, as mentioned above, innovation creates new products and thus new markets. Capitalism has also expanded geographically and encompassed the whole globe, first through colonization and imperialism and later through globalization of markets (now looking to space and deep sea exploration). It has also advanced into spheres of life and society which were never organized in markets earlier, things like education, health care, nowadays also reproduction.

By and large, the perception that there is a contradiction between a strong state and capitalism is just propaganda. Capitalism needs a strong state to enforce property rights, set up and regulate markets, currency and other institutions necessary. The state is also needed for the management of reproductive and care work as well as basic social security. These were mostly outside of government reach before capitalism, but as capitalism eroded the social fabric, governments had to step in to organize it. Lately, capitalism has found ways to also profit from these, which is the reason for the wide spread privatizations initiated in the late 1970s. Still, the government must be there to regulate and in many cases also finance.

Capitalism needs a strong state. Margret Thatcher, Photo: Leo Medvedev, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons

Economic systems are grounded in the metabolism of society and humanity, and the economy confirms and reproduces the social system and vice versa. If they don’t, the system is doomed to fail. Capitalism has proven to be very resilient as an economic system, probably because it has destruction, innovation and change as fundamental parts of it. In some perspective, this makes it more adaptable and resilient than systems based on more static economies and stable relationships. Meanwhile, it is the dynamism and constant change of capitalism that undermine other parts of society as well as humanity’s relationship with the rest of the living.

Global capitalism civilization will collapse due to...

The prevailing global civilization is shaped by capitalism. One could even say it is a capitalist civilization. I believe this global capitalist civilization is doomed from a number of contributing factors, internal and external, biophysical and social, material and ideological. They are linked together so there is little point in saying that the global capitalist civilization will collapse due to any of them alone. In the end, it seems that also most previous societal collapses can not be explained by just one cause, but by many, even if there are those that maintain a single cause both for the rise and the fall of civilizations.

In the next essay, I will formulate some scenarios for how a collapse of global capitalism could pan out.

---

* In my view it is even impossible, at least with the definitions I use, to envision a market economy that will not transform itself to capitalism. Both are based on private property. A market economy will generate profits and profits leads to capital accumulation. Capital accumulation will, in a market economy, lead to salaried labour and then you have all the components of capitalism.

** Money (M) is used to purchase commodities (C), which are then used to produce new commodities that are sold for more money (M’).