Rise of the Juggernaut

“GDP growth is, ultimately, an indicator of the welfare of capitalism. That we have all come to see it as a proxy for the welfare of humans represents an extraordinary ideological coup.” (Jason Hickel)

The iron law of capital

For most of human history, economies were organized around the principle of “used value.” In capitalism, by contrast, the goal of buying and selling is not primarily to acquire something useful but to make a profit; it is the “exchange-value” of things that matters, not their use-value. But once the economic system stands on making profits rather than earning commodities, it is not enough to generate a steady profit. The goal is then to maximize profits by endlessly reinvesting them.

We are so used to this logic that we often conflate it with entrepreneurship itself. Here is how the author clarifies their difference:

“Take your local restaurant, for example. It makes a profit at the end of the year, but the owners are content with more or less the same profit year after year: enough to pay the rent, put food on the table for their family, and maybe go for a holiday in the summer. While such a business might participate in elements of capitalist logic (paying wages, making a profit), it is not capitalist as such, since ultimately the profit is organised around some conception of use-value. This is how the vast majority of small businesses operate. Such shops existed thousands of years before capitalism emerged.

Now consider a corporation, like Exxon or Facebook or Amazon. A corporation doesn’t operate according to the steady-state approach favoured by your local restaurant. Amazon’s profits don’t just go to putting food on the table for Jeff Bezos – they go into expanding the company: buying up competitors, putting local shops out of business, breaking into new countries, building more distribution centres, pumping out marketing campaigns to get people to buy stuff they don’t need, all to extract more profit each year than the year before. It’s a self-reinforcing cycle – an ever-accelerating treadmill: money becomes profit becomes more money becomes more profit. And this is where we begin to see what makes capitalism distinctive.”

It would be a mistake to consider that capitalism is merely about greed. The Bezos and the Zuckerbergs of the world are willing cogs of a bigger machine, and its basic functioning is quite simple: grow or die. In an exchange-value system, there is no other way to remain in the game than to colonize as much market space as possible. It is either that or others will eventually buy you off to be the ones making money. This dog-eat-dog competition is only strengthened by investors systematically jumping from one profitable asset to the next, forcing companies to keep as high a profitability as they can, quarter after quarter and year after year. By contrast, a use-value system allows room for virtually everyone since competition is based on the quality of products and services, not just how financially well-off a company is.

Making money is not a means to an end in an exchange-value system; it is the end. From a broader perspective, this logic implies that profits are the single parameter of economic health and assumes that society will always eventually benefit from maximizing them. This is a myth that Jason Hickel examines in detail later on. For now, let’s note a fundamental contradiction in the capitalist line of thinking: if money comes first and effective social progress is a by-product of indefinite capital growth, then human endeavors can effectively be overlooked for the sake of making profits. In practical terms, the “economy” can legitimately become a financial game, ignoring human needs each time financial interests see fit. There lies the contradiction. Why not, after all, consider that corporations are people?…

Chasing the net fix

Most economists agree that the growth rate ensuring a positive return to the global economy is about 3%. That does not sound like much, but they speak of compound growth. Jason Hickel explains, “Take the global economy in the year 2000 and grow it at the usual rate of 3% a year. Even at this modest-sounding increment, economic output will double every twenty-three years, which means quadrupling before the middle of the century, within half a human lifespan. And if we continue growing at that same rate, by the end of the century the economy will be twenty times bigger – twenty times more than we were already doing in the roaring 2000s. Another hundred years later and it’s 370 times bigger. Another hundred years after that and it’s 7,000 times bigger, and so on.”

No one has a clue as to how such a growth trajectory can comply with planet Earth’s recycling capacities. This irresponsibility against the global life system we depend upon is an obvious example of the brutality at the core of capitalism’s logic. Indeed, “Every time capital bumps up against barriers to accumulation (say a saturated market, a minimum-wage law, or environmental protections), then like a giant vampire squid it writhes in a desperate attempt to whip those barriers out of the way and plunge its tentacles into new sources of growth. This is what is known as a ‘fix’.¹ The enclosure movement was a fix. Colonisation was a fix. The Atlantic slave trade was a fix. The Opium Wars against China were a fix. The western expansion of the United States was a fix. Each one of these fixes – all of them violent – opened up new frontiers for appropriation and accumulation, all in service of capital’s growth imperative.”

This violence is not primarily that of individuals but of the capitalist system, which exists by steadily finding new sources of growth. Companies that cheat with the law, damage the environment, and destroy people’s lives are, first and foremost, companies that need to survive under the iron law of constant profitability (while, oddly enough, finding the resources to lavishly reward their CEOs).

From private imperative to public obsession

Though the inner dynamics of capitalism explain the “grow or die” iron law in the private sector, governments play a role also in maintaining the pressure. “After all, enclosure and colonisation were ultimately backed up by the force of the state. But beginning in the early 1930s, during the Great Depression, something happened that added real fuel to these flames. The Depression devastated the economies of the United States and Western Europe, and governments found themselves scrambling for a response. In the United States, officials reached out to Simon Kuznets, a young economist from Belarus, and asked him to develop an accounting system that would reveal the monetary value of all the goods and services that the US produced each year.” That came to be the Gross Domestic Product or GDP metric.

Kuznets duly warned that GDP is far from a perfect tool. First, it tallies up only monetized activity, whether useful or destructive. Second, it does not include the actual cost of production, such as the toll that too much work or pollution can take on people and nature. Third, it does not consider free but essential contributions to the economy, such as the work of parents raising their children. Kuznets consequently thought GDP should be improved by including human well-being as measurable data. When WWII struck, however, governments needed to focus on monetized activities to evaluate with precision the productive capacity available for the war effort. At the Bretton Woods Conference in 1944, this more aggressive vision of GDP was enshrined as the key indicator of economic progress—exactly what Kuznets had warned against.

In the aftermath of the Great Depression, GDP was first used for use-value—people’s public and private welfare—so the economy would start moving again. “It worked, and GDP went up. But growth was not a goal in and of itself,” says Jason Hickel. At the time, GDP was used as a tool and did not dictate economic goals. But soon enough, since the tool’s efficiency had become undisputable during the Depression and the war eras, GDP surreptitiously morphed into the definitive metric of economic health in the minds of officials in power. Intellectually tempting, reducing the economy to monetary flows made growth its by-default goal. This is why, for instance, “When the OECD was founded in 1960, the top goal in its charter was (and remains) to ‘promote policies designed to achieve the highest sustainable rate of economic growth’. Suddenly the objective was to pursue not just higher levels of output for some specific purpose, but the highest rate, indefinitely, for its own sake.”

Contrary to Western powers’ constant official optimism, making growth the absolute of economic life would not work out well for the rest of the world. Not only is the goal shortsighted, but the game is also rigged. The story is a well-known old one: when those who detain capital say that they compete within the frame of the law, they usually omit to mention that they are the ones writing the law.

During the 1980s’ debt crisis, for example, the OECD leveraged Western powers’ dominance as creditors, using their control over the World Bank and the International Monetary Fund (IMF) to impose “structural adjustment programs” across Latin America, Africa, and several parts of Asia. “Structural adjustment forcibly liberalised the economies of the global South, tearing down protective tariffs and capital controls, cutting wages and environmental laws, slashing social spending and privatising public goods – all to break open profitable new frontiers for foreign capital and restore access to cheap labour and resources.”² Meanwhile, the sugar-coated narrative destined to the public was, as usual, one of “free trade,” “free market,” and “economic opportunities.” As far as capital was concerned, it worked like a charm or, rather, as an efficient fix for Western growth rates at the expense of less affluent countries. As a result, “The real per capita income gap between the global North and global South is four times larger today than it was at the end of colonialism.”³

1. See David Harvey, A Brief History of Neoliberalism (Oxford University Press, 2007).
2. For more on the story of post-colonial developmentalist policy in the global South and its reversal beginning in the 1980s, see Jason Hickel, The Divide, Chapters 4 and 5.
3. Jason Hickel, Global inequality: do we really live in a one-hump world? Global Policy, 2019.