The capitalist imperative of systematic and endless wealth accumulation has often been compared to a giant squid writhing its tentacles in ever more sources of profit. Why its grip, and with what consequences?
|This post belongs to a reading series of Less is More by Jason Hickel. For quick access to 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.”
It would be a mistake to consider, from this, 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 the game of exchange-value accumulation, investors will systematically jump from one profitable asset to the next, forcing companies to be as profitable as they can year after year and quarter after quarter.
In capitalism, making money ceases to be a means to an end; it is the end. In the capitalist belief system, effective progress and human well-being are a by-product of indefinite capital growth. But if money comes first, this also means that human endeavors are second and can be overlooked for the sake of making profits. You may consider that, eventually, it will always be for the better. The basic truth is nevertheless that money is at the center of an economic game fundamentally unhinged from human needs.
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 very much, but they are speaking of compound growth. “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.”
Not only are we clueless about how such a growth trajectory can comply with planet Earth’s recycling capacities, but the capitalist logic is, at its core, a violent one. “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 is bound to steadily find new sources of growth to maintain itself. 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.
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 role 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 that 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.
During the Depression years, GDP was first used in relation to use-value—people’s welfare—so that the economy would start moving again. “It worked, and GDP went up. But growth was not a goal in and of itself.” That didn’t last long. “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.”
If growth is your sole economic rule and your idea of sustainability simply refers to that of the financial system, you can only wish for more and faster growth at any given time. This is why 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. As a consequence, the same old story repeats itself one generation after the next, such as when the OECD took the opportunity of the 1980s’ debt crisis to leverage Western powers’ dominance as creditors. They used their control over the World Bank and the International Monetary Fund (IMF) to impose “structural adjustment programs” across Latin America, Africa, and 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 the global South. 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
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“In a globalised world where capital can move freely across borders at the click of a mouse, nations are forced to compete with one another to attract foreign investment. Governments find themselves under pressure to cut workers’ rights, slash environmental protections, open up public land to developers, privatise public services – whatever it takes to please the barons of international capital in what has become a global rush towards self-imposed structural adjustment4 . . . . 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.”
The exclusive focus on GDP growth effectively creates a “productivity trap” for governments, where perpetual growth is needed to avoid societal collapse.5 As companies adjust their costs through productivity gains in dog-eat-dog market competitions, people are laid off, unemployment rises, and poverty and homelessness go up. Governments then scramble to generate more growth to create new jobs. Rather than taxing corporations and wealthy individuals to invest in public healthcare and education, they will choose the other path: GDP growth—the alleged characteristic of economic health. In the end, therefore, companies, governments, and people are all hostage to the growth imperative.
When looking at the data, the total weight of what humans extract and consume each year in biomass, metals, minerals, fossil fuels, and construction materials “reaches 35 billion tons by 1980, hits 50 billion tons by 2000, and then screams up to an eye-watering 92 billion tons by 2017.” Scientists estimate that a safe boundary would be 50 billion tons per year. By 2020, that boundary had been exceeded twice over, mostly driven by excess consumption in high-income nations—consumption organized not around use-value but exchange-value.“ According to the United Nations, material extraction alone is responsible for 80% of total global biodiversity loss.6 In fact, scientists often use material footprint as a proxy for ecological impact itself.”7 On our present trajectory, we will use 200 billion tons of material by the middle of the century. “There is no telling what kind of ecological tipping points we might trip in the process.”
Not all nations are equally responsible, obviously. “The consumption gap between the global North and global South has exploded since 1990. In per-capita terms, a full 81% of growth in material use during this period is due to increased consumption in rich nations.”
Another side to the equation is that “fully half of the total materials they consume are extracted from poorer countries, and generally under unequal and exploitative conditions.” Moreover, “The vast majority of materials that are consumed in the South ultimately originate from the South itself, even if they are cycled through multinational value chains.”8 Consequently, the net flow of resources is tremendously in favor of rich countries, whose extraction patterns are similar to those of colonial times. Instead of being seized by force, resources are “extracted and sold, for cheap, by governments that have been rendered dependent on foreign investment and beholden to the growth imperative of capitalism.”
Similar patterns of inequality play out with climate change. If looking only at territorial emissions, China emits 10.3 gigatons of CO2 per year, almost twice as much as the U.S. Per capita, though, the proportion is reversed. Americans emit 16 tons per person and Chinese 8 tons. Since the 1980s, moreover, high-income nations have outsourced their industrial production to poorer countries, thereby shifting a large chunk of their consumption-based emissions off the book. Last but not least, the stock of historical emissions stands overwhelmingly on the side of highly industrialized nations.9 So when everything is taken into account, “The United States is single-handedly responsible for no less than 40% of global overshoot emissions. The European Union is responsible for 29%. Together with the rest of Europe, plus Canada, Japan and Australia, the nations of the global North (which represent only 19% of the global population) have contributed 92% of overshoot emissions. . . . In fact, the vast majority of global South countries have emitted so little in historical terms that they are still under their fair share of the planetary boundary. India is still 90 gigatons under its fair share. Nigeria is under by 11 gigatons, and Indonesia by 14 gigatons. Even China is under its fair share, by a full 29 gigatons, although given the sheer scale of China’s present emissions it is on track to blow this budget in the near future.”
What has been happening, in other words, is a process of atmospheric colonization with devastating consequences for poor countries that contributed the least to climate change. “According to data from the Climate Vulnerability Monitor, the South bears 82% of the total costs of climate breakdown, which in 2010 added up to $571 billion in losses due to drought, floods, landslides, storms and wildfires. Researchers predict that these costs will continue to rise. By 2030 the South will suffer 92% of total global costs, reaching $954 billion.” This is envisioned for a 1°C temperature rise worldwide. Two degrees will be a death sentence for much of the global South, given that rainfalls are shifting North due to climate change.
How to think about “limits” in the 21st century
On the face of it, growth sounds good. It’s life. It’s strength. But referring to growth in the abstract is playing on a false analogy. Natural growth always levels off once maturity has been reached; it never goes on an endless exponential curve. Oddly enough, at least in its conventional perspective, the economy is supposed to have no end—in the sense of both no maturity and no purpose. As Donella Meadows, the systems thinker, once said, “Growth is one of the stupidest purposes ever invented by any culture.” In the real world, basic questions such as the growth of what? For what? How much? How? would be answered first. Devoid of that common sense, conventional economics’ growthism is like a duck running without its head.
Those who cringe at the idea of limits to growth, often argue that “if we can find new reserves, or substitute new resources for old, and if we develop methods of improving the yields of renewable resources, then we don’t have to worry about those limits. Sure, this process of substitution and intensification can only go so far – at some point we’ll reach an absolute limit – but for all we know that could be a long way off.” They miss the main point. The problem is not just that economic growth might eventually run out of resources; it is that economic growth progressively degrades the integrity of ecosystems. The Earth’s biosphere is an integrated system that can withstand significant pressures, but past a certain point, it begins to break down. The notion of limits should, consequently, be substituted by that of balance as the main parameter to refer to.
“In 2009, a team led by Johan Rockström at the Stockholm Resilience Centre, the US climatologist James Hansen, and Paul Crutzen, the man who coined the term Anthropocene, published a groundbreaking paper describing a new concept they referred to as ‘planetary boundaries’.10 . . . Drawing on data from Earth-systems science, they identified nine potentially destabilising processes that we have to keep under control if the system is to remain intact: climate change, biodiversity loss, ocean acidification, land-use change, nitrogen and phosphorous loading, freshwater use, atmospheric aerosol loading, chemical pollution and ozone depletion.” For example, one of these boundaries is that atmospheric carbon concentration should not breach 350ppm for the climate to remain stable (we hit 421ppm in May 202211).
These boundaries are not hard limits; once breached, the Earth’s systems do not immediately shut down, but we are definitely “entering a danger zone where we risk triggering tipping points that could eventually lead to irreversible collapse.” Unfortunately, “According to the most recent data, we have already shot past four of the planetary boundaries: for climate change, biodiversity loss, deforestation and biogeochemical flows. And ocean acidification is nearing the boundary.”
Though necessary, limiting our consumption of material resources is the wrong way to look at the issue of sustainability. Because of how ecology works, we need to entirely rebuild our relationship with nature by integrating the economy into its cycles and balance. Abandoning the extractive and exploitative pattern of growth for the sake of growth, we must learn to work from the inside out, as nature does.
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- David Harvey, A Brief History of Neoliberalism (Oxford University Press, 2007).
- For more on the story of post-colonial developmentalist policy in the South, and its reversal beginning in the 1980s, see Jason Hickel, The Divide, Chapters 4 and 5.
- Jason Hickel, Global inequality: do we really live in a one-hump world? Global Policy, 2019.
- For more on how this works, see Jason Hickel, The new shock doctrine: Doing business’ with the World Bank, Al Jazeera, 2014.
- Tim Jackson and Peter Victor, Productivity and work in the ‘green economy’: some theoretical reflections and empirical tests, Environmental Innovation and Societal Transitions 1(1), 2011, pp. 101–108.
- International Resource Panel, Global Resources Outlook (UN Environment Programme, 2019).
- In aggregate, the total mass of material use is tightly coupled to ecological impact, with a correlation factor of 0.73. See E. Voet et al., Dematerialisation: not just a matter of weight, Journal of Industrial Ecology, 8(4), 2004, pp. 121–137.
- Christian Dorninger et al., Global patterns of ecologically unequal exchange: implications for sustainability in the 21st century, Ecological Economics, 2020.
- Jason Hickel, Quantifying national responsibility for climate breakdown: An equality-based attribution approach to carbon dioxide emissions in excess of the planetary boundary, Lancet Planetary Health, 2020.
- Rockström et al., Planetary boundaries; Steffen et al., Planetary boundaries: Guiding human development on a changing planet; see also Planetary boundaries, Stockholm Resilience Center.
- Carbon Dioxide Peaked In 2022 At Levels Not Seen For Millions Of Years, Forbes, June 5, 2022.