“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)
| This post is part of a reading series on Less is More by Jason Hickel. To quickly access all chapters, please click here. Disclaimer: This chapter summary is personal work and an invitation to read the book itself for a detailed view of all the author’s ideas. |
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.”