Tuesday, August 10, 2010

"I just want to live a humble life" (Or: Capitalism Requires Growth)

The alternate title of this post -- "Capitalism Requires Growth" -- should be non-controversial to any economist, whatever their stripe ("conservative," "liberal" or whatever other label they may chose).

What I'm interested in here is (a) why the statement is true, and (b) some of the implications of it.

Part of this is motivated by a discussion I had with a friend about my first two blog posts. His reaction was along the lines of (I think) that, while it may be true that people need to process economic reality in moral and quasi-religious terms, their insight is essentially correct -- namely, we have been living too well. We need to cut back (both privately and publicly).

But it strikes me as untenable to simultaneously hold that position while also defending capitalism. And the reason is that capitalism requires GDP growth. So, if one were to conclude that we are all (either individually or collectively) living beyond our means, and that we should consume less, then it necessarily follows that we must imagine a different kind of socio-economic structure.

So, why exactly does capitalism require growth? There are lots of ways of approaching this. But it seems to me that one of the most basic is the constant imperative for capitalist enterprises to introducing labor-saving technology (in Marxian terms, to increase the organic composition of capital.) This should not be a surprising fact to anyone. Capitalist enterprises do not hire people out of beneficence. They hire people because they need their labor to produce commodities (which they then sell.) If they can figure out a way of producing the same amount of commodities with less labor, they'll do so.

One conclusion from this: if a capitalist economy did not increase its output, unemployment would rise. That is, growth in GDP is necessary merely to sustain a constant level of employment. More simply, GDP growth is required for people to have jobs.

Now, this strikes me as irrational. Just irrational. It always has. Many economic textbooks open with a description of human nature such that we are insatiable -- our desires always reach beyond what we have. "Scarcity" (which economics loves to focus on) is often defined this way. (To be sure, with respect to any particular commodity, the standard theory is that of diminishing marginal utility. As such, for consumption of any given good the standard economics approach concludes that there will be a satiation point. But with respect to consumption generally, non-satiation is often assumed.)

But what if this contention were incorrect? What if it were possible for us simply to be satisfied with what we have, and not want to consume more? The entire system would be at risk of collapse. Just reflect on that for a moment. We live in an economic system that requires endless dissatisfaction. How sane does that sound?

Not long ago, I recall reading a New York Times piece on the difficulties that Japan continues to have coming out of the pain of its "long recession." And what was the threat -- contentment. People aren't buying enough.

One Japanese college student expressed the sentiment: “I’m not interested in big spending...I just want a humble life.”And that sentiment is a threat.

Note that nothing I've said here about the irrationality of capitalism relies on one other obvious feature of it: it's continual penchant for recession, depression, and crisis. That is, my point is that even without investigating those phenomena (on massive display at this moment in history) it seems to me that we have something deeply irrational on our hands, But, of course, the irrationality is most apparent during periods of deep economic crisis -- such as todays. The outcry over joblessness is something that the political establishment is compelled to respond to. And the response is always to "grow" the economy. But note that the public demand is not for growth. It is for jobs. "Growth" under capitalism, is the only means by which work can be made available. This is something that is agreed to by both liberal and conservative economists (with the only dispute between the two regarding whether the public sector can facilitate growth.)

When I say "under capitalism" what exact definition do I have in mind? Different people have different definitions. I am using a definition by which an essential defining feature is the institution of wage-labor - i.e., what we call the "job." Put otherwise, the irrational consequences I am herein tracing follow not from the transhistorical fact that people must work to produce to produce wealth, but from the particular institution -- known as wage-labor -- in which work has been conceptualized and cabined. And cabined to the point where it has become near impossible for people to imagine it in any other form. But it is absolutely essential that people envision other institutional arrangements for labor, if we are to break free of this deep irrationality. (The whole language of "job-creation" is so ideologically limiting -- or perhaps, better put, a massive ideological construct -- that it makes it exceptionally difficult for us to think otherwise. That language is nothing short of Orwellian. I'll follow that up in another post.)

This is why I have never been entirely satisfied with anti-consumerist movements. (Such as The Reverend Billy and the Church of Stop Shopping. If you've never seen them check them out. They're very funny.)

Such movements are fine as far as they go. But they don't seem to draw out all the implications from their argument. If they are right in suggesting we should find a way to be satisfied with less, then they are, in effect, arguing for something that could cause a collapse in the economic structure. So just how sound a structure is that?

Capitalist enterprises are forever looking to expand markets not only geographically, but demographically. For once a market is satiated, others need to be found, if the economy as a whole is to continue functioning. (One of the more disturbing consequences of this is the practice of direct marketing to children. Some of the best work on this subject has been done by economist Juliet Schor. Here is just one illuminating interview with her on NPR from some years back, highlighting just how manipulative the practice is.) Now, it is all well and good to inveigh against these and similar practices of market expansion. And we most certainly should. But, as I've suggested above, the relevant question that we sometimes fail to ask is: What if we were successful in stopping these practices? I've already noted above what, it strikes me, is the inevitable conclusion -- namely, a blow to capital accumulation. Thus, if we believe that there has been excess consumption, we are, whether we realize it or not, making an argument against the purported rationality of the economic system we call capitalism. And this is where, it strikes me, "conservatives" fail to realize their own contradictory reasoning. (Namely, in holding position (a) that we all need to "cut back" and (b) that capitalism is a rational system)

[I'll conceded here that I am at risk of conflating growth in consumer goods with growth in commodity production generally. Obviously an enormous amount of economic activity is driven by growth in capital goods, not merely in consumer goods. However, I am somewhat skeptical regarding any thesis that suggests that growth in the capital goods industry, however fast it may occur, can entirely make up for any shortfall in the growth of consumer goods -- simply because, the production of capital goods cannot be profitable if, ultimately, consumers do not buy the commodities which the capital goods are used to make. Regardless, even if I am wrong, and growth can be almost entirely in capital goods, there is still the necessity for growth, when it is not growth itself that is the issue when a capitalist economy goes through a recession -- it is the fact that people need work. That's the source of the deep economic, sociological, and psychological damage -- again, growth is the only means by which to meet that need under capitalist conditions, even if increased output of commodities is not desired. (The "need" I am talking about here is a complex one, but it is at least two-fold: first, the need for material security, and, second, the need to labor. To express the latter as a "need" might seem surprising, insofar as the assumption is made that labor is a pure "disutility." And yet this disregards an essential aspect of our natures, i.e.., the aspect in which we are creators, inventors, producers. This of course is the sense in which Marx describes labor as fundamental to ourselves as a "species-being" in the 1844 Economic and Philosophical Manuscripts. Always terribly curious to me is how academic economists in particular, who clearly could be making more money in the private sector, are still happy to present work as simply a "disutility," and analyze solely in terms of its "opportunity cost" of "leisure." But perhaps that subject will be reserved for another post)]

(As for the separate question, which might be implicit above, of whether my view of the dynamics of capitalism shows an "underconsumption"-theory bias, a la Rosa Luxemburg, and fails, for example, to fully appreciate attacks on that theory by Marxist scholars the likes of, say, Anwar Sheikh -- I'll let readers conversant on the literature have at it in the comments if they like.)

Just one other point regarding the hypothesis above that our current economic problems result from the fact that we, in some sense, have all been living too well, and that we need to "cut back": this simply cannot be the result of any material constraint alone, simply because of all the wealth that has been produced in the world economy. But that wealth is distributed in a fantastically inegalitarian fashion "The combined GDPs of the world's 9 richest countries (US, Japan, China, Germany, France, UK, Italy, Russia, and Spain) totaled less in 2009 than the investible assets of the world's [High Net Worth Individuals]" notes Richard Wolff, in "Economic Recovery for the Few." The constraint therefore cannot be a material constraint; it is, rather, a social constraint, i.e., an irrational socio-economic structure that makes luxury a condition of necessity.

Now, it is all well and good to point out irrationalities inherent in capitalism. But, comes the question, What is your proposed alternative? (Since, not long ago, everyone was saying There Is No Alternative -- i.e. TINA)

It's an important question. The answers are suggested to me in movements generally called part of the Solidarity Economy. Why solidarity economy practices might be (a) more rational (b) more meritorious, and (c) less wasteful than capitalism is a subject that I'll perhaps take up in a different post.


  1. Seems related to this:

  2. Ian, thanks for that link. I agree that it is related. It's also interesting how Wallerstein puts "socialist" in scare quotes in the penultimate paragraph (which in turn relates to the comments you and James were making about socialism in my other post).
    Should we infer from this article, among other things, that, while capitalism clearly creates an imperative for growth, certain types of "socialism" can do the same? And if so, what types? Is not not *really* socialist (as Wallerstein seems to suggest) if it creates such an imperative?
    Or is it even an imperative? I'm not sure that it is. I know almost nothing about the kind of "socialism" subscribed to by Ecuador. But if a country has some kind of mechanism to ensure adequate work for all, as well as material support for all if all requisite work is supplied, then the pressure to "create jobs" could not be the kind of pressure that creates a political imperative for "growth" (and that is the dynamic I had in mind in this post). So I think the dynamic here must be different. The dynamic here is -- must we raise the standard of living or not? This seems to me a different question then whether we must "grow the economy" to "have jobs" -- since the latter question can only arise under a structure where people's very existence is dependent on the existence of a private job market.

    It suggests that perhaps it's not capitalism alone that would require increases in wealth -- but perhaps

  3. I think this country needs a serious movement for "buen vivir"!

  4. I agree Noah. Though I think it's fair to say that the "solidarity economy" movement resembles that.