Most of the major trading nations of the world now operate, as they have for centuries, under the economic system called ‘capitalism’. A simple definition of capitalism is that it is the investing of money to get more money. In simplistic practical terms, if a person were to invest £100 at 10% for one year, that person would expect, at the end of the year, to receive £110. The big question then has to be, “Where does that extra £10 come from?”
There are numerous answers, including the devaluing of each individual pound by 10% (or thereabouts), producing goods and services more ‘efficiently’ (including outsourcing to cheaper wage economies) or from greater economic activity. The first, obviously, is undesirable, but makes the point that money itself has no inherent value, and is only useful once it is exchanged for the goods or services that it represents.
Efficiency is highly desirable but of limited scope. A manufacturing or service-providing operation can only find efficiency savings to a limited extent, notwithstanding the ambitions of politicians. And the continuing exploitation of the developing world is a subject in its own right. It is the final option to which capitalists must always eventually turn, that is to increase the overall level of economic activity, in other words, to pursue ‘economic growth’. Unsurprisingly, this is the declared aim of every major political party in every capitalist nation.
Exploitation of the global south
In the past, growth was easily achieved by the physical expansion of enterprise into new and unexplored lands and markets across the globe. By ignoring, demeaning, or redefining the rights of indigenous peoples, such new lands were regarded as simple extensions of European homelands, to be occupied and exploited at will, to provide all those ‘extra £10s’ back home.
This article is not ignoring all the spectacular failures of international capitalism that have happened, such as the South Sea Bubble and the ludicrous Darien Scheme of the early 18th century, or the sub-prime mortgage scandal of the early 21st, but is simply regarding them as examples of how the system will inevitably fail when excessive greed takes over from sensible logic.
Not only is it no longer possible to expand in this way for the simple reason that the Earth has no new territories to offer, but also because the disregarded peoples of the world are now demanding parity with their former exploiters – and why not? The disparities are still enormous, and entrepreneurs from the global North-West are still seeking to make their fortunes at the expense of the developing world, but the tide has turned and the demands for equality of opportunity and for equality of basic human rights can surely only increase.
The capitalists of the ‘core’ economies of the world, therefore, are facing the need not only to provide profits for their investors, but also to accommodate the irresistible calls for much greater economic activity and parity in the former colonies and nations of their ‘periphery’.
The problem of energy consumption
It is a basic fact that economic activity consumes energy.
This applies at every stage of every process, from the garnering of raw materials, to transporting and processing them, to distributing manufactured items, to the rapidly increasing world of electronic activity which now accompanies every action, to the purely electronic activity of the so-called ‘meta-world’ which now occupies so much of our time. It is therefore a reasonable proposition to make that any increase in economic activity will need a concomitant increase in energy consumption.
Over the centuries, this was not seen as a problem – simply dig more coal, pump more oil, and build more power stations. But now we are faced with a significant – even existential – crisis deriving from the ways we obtain that energy; humanity has no choice but to end the burning of fossil fuels which blast carbon dioxide into the atmosphere, and to do so as soon as possible. The time we have to achieve this is very limited; politicians assert that we have till 2050, but that is nothing more than a convenient guess; the longer we leave it, the worse will be the consequences.
The stark truth is that the ways we generate energy from what we call ‘renewable’ sources will come nowhere near replacing our total current energy usage from non-renewables, and this is before we account for the expected massive rises in demands from the global south. Anyone who believes that coal and oil can be phased out and replaced unit for unit by wind and solar (and the rest) is simply deluding themselves. Nuclear fusion could save us, but that is unlikely this century. And that leaves us with an enormous problem.
What is the solution?
Rising carbon dioxide levels and the climate and environmental consequences which we all can see simply demand the ending of fossil fuel burning – long before 2050.
Demands from the developing world will rise inexorably.
Arithmetic dictates, therefore, that the total usage of the wealthy world must soon rapidly be curtailed and diminished to acceptable and practicable levels. This means not only that any ambitions to increase usage through increased economic activity – i.e., growth – must be abandoned, but that overall current economic activity itself must be seriously cut back.
This is not merely the opinion of one opposed to capitalism. Capitalism itself, in the form of the Club of Rome (a precursor of the EU), commissioned a report in 1972 entitled ‘The Limits to Growth’. Summarising drastically, the report concluded that capitalism had about 50 years of growth left – and this was 51 years ago. Subsequent revisions have not substantially altered the fundamental message of the original.
We can achieve this in a number of ways ranging from the imposition of Osbornian austerity to an international agreement to implement positive degrowth.
Austerity was supposed to alleviate the effects of the sub-prime banking crisis of the first decade of this century; it effectively put the burden disproportionately onto the shoulders of those least able to afford it and equally disproportionately rewarded those who caused the crisis in the first place. In a single phrase, ‘Socialise the pain, privatise the gain’.
Professor Mark Blyth’s 2013 book, Austerity: the history of a dangerous idea, offers a thorough analysis of the policy and why it would never work; a brief synopsis of the book by Blyth himself on YouTube is still available to view.
Degrowth is altogether different from austerity in that it is not imposed top-down, it can only come about by worldwide negotiation and agreement, and that it specifically seeks not only to protect the most vulnerable, but to ‘level-up’ their current disadvantaged status.
If it is accepted that unlimited, unconfined economic growth is no longer feasible, then a practical alternative must be found. The form this could take will be addressed in Part II of this review.
Part two is available here: Business as usual, or positive degrowth: part two, degrowth