The purpose of capitalism — and the way it functions — is to invest money in order to make more money. In other words, the motivations of investors are to make profits and accumulate, without end, ever-larger quantities of capital.
This is done through either making something or providing a service and selling the product for more than what it cost (in labor, raw materials, machinery, etc.) to produce it. Capital can also be used to make more money without producing a tangible good or service. For example, when a bank loans money to buy a car, the buyer needs not just to pay back the original loan, but also interest on the money. And much of the financial system operates making money without making a tangible product—it is essentially a giant casino in which all kinds of bets are made in the hope of making profits.
It is important to keep in mind that the purpose of the capitalist economic system is not to provide the basic needs for all people
It is important to keep in mind that the purpose of the capitalist economic system is not to provide the basic needs for all people, not to provide jobs for everyone that wants to work, not to protect the environment. As ecologist Richard Levins has explained: “Agriculture is not about producing food but about profit. Food is a side effect. . . . Health service is a commodity, health a byproduct.”
On the other hand, it is true that jobs are produced for many people and that a lot of people in advanced capitalist countries have their needs met. But this leaves out a large segment of society. And at the same time, all are damaged—including the well-off — by the competition and dog-eat-dog behavior that are encouraged in people as well as by the inequality that the system develops and maintains.
Capitalism is especially good at doing a number of things:
•Accumulating huge quantities of capital in private hands.
•Maintaining a large number of people in poverty or scraping by under precarious economic conditions. According to a report based on the 2010 United States Census, this includes one-half of the U.S. population—approximately 150 million people.
•Stimulating crises of all sorts: economic, social, political, imperial (warfare and other types of imperial activities), and ecological.
For example, economic crises (recessions, with high levels of unemployment) occur at approximately 10-year intervals. And financial crises (such as the savings and loan bank crisis of the late 1980s and the financial system crisis that began in 2007), speculative bubbles that eventually burst (the “dot.com” bubble of 2000, the housing bubble of 2005-2007) are also occurring frequently. Wars are fought (directly or using proxy armies), normally under the leadership of the strongest economic power, to try to assure access to key resources.
The unfolding ecological disaster is not just about climate change. Also important are air, water, and soil pollution, soil erosion, ocean acidification, species extinctions, etc. And as a consequence to exposure to many different pollutants, our bodies are polluted with a variety of synthetic chemicals as well as metals such as mercury.
Many of the more sophisticated environmentalists are aware that there are two overwhelming problems with the functioning of the capitalist economy that lead to environmental degradation—perpetual growth and environmental “externalities.”
Capitalist economies keeps growing without end (when not in recession) –using more of the earth’s nonrenewable resources and using even renewable resources faster than they can be replenished. As a sign at Occupy Wall Street said, “Infinite Growth on a Finite Planet is not Possible.” The more sophisticated environmentalists also understand that part of what keeps the economy growing is the far successful drive to get people to purchase more and more stuff—consumerism.
Negative unintended consequences occur naturally in the processes of production and consumption —social, environmental, and economic “externalities.” In addition to environmental harm, other “externalities” include the lack of sufficient good jobs, poverty, disparities of wealth and conditions of people, and loss of homes and savings during economic crises.
But, while admitting that a major cause of ecological havoc is the way capitalism is currently working, most environmentalists don’t believe that the problem is the fundamental way that capitalism must work. Therefore, all sorts of “solutions” are proposed that leave the system intact. These include such schemes as trying to get corporations to take into account other goals in addition to profits, encouraging “green” production practices and consumption of “green” products, trying to account for “externalities” in the prices of products, cap-and-trade using carbon trading, purchasing carbon-offsets, and so on.
However, no-growth capitalism is not possible. The way the system work it impels owners of companies to expand. Individual companies must grow to compete with others (or buy them out) for increasing market share, new companies must grow to establish themselves, and the economy as a whole has to grow. In addition, high levels of unemployment occur during periods of slow or no growth. This year (2011) the economy is expected to grow fairly slowly, between 1 and 2 percent. But even a 2% rate of growth —very modest and not sufficient to produce enough jobs to dig out of the Great Recession hole—will cause a doubling of the economy (GDP) in 36 years. At 3% annual growth, a doubling occurs in 24 years.
Ecological damage happens largely inadvertently as capitalists go about the process of extracting and processing raw materials, making product, building factories, etc. But since these effects must occur the way the system works, “externalities” are actually internal to the workings of the system.
An ecological society is one that will need to be the opposite of capitalism in essentially all aspects. In order to be ecologically sound and humane, a civilization must develop a new culture and ideology based on fundamental principles such as substantive equality. Equality is needed for moral reasons as well as an overriding practical one—we simply do not have the multiple earths necessary to provide the resources for everyone to live at a western “middle class” standard. Thus it becomes morally important for everyone to live at a similar modest standard of living. An ecological civilization will require an economic and political system truly under social control—by the people. This new society will need to stop growing when basic human needs are satisfied in the context of substantive equality, protect natural life support systems, and respect the limits to natural resources.
This essay was adapted from Fred Magdoff’s speech at Occupy Boston in late October of 2011, as a part of the Howard Zinn Memorial Lecture Series.
Here is video of Fred Magdoff’s talk at Occupy Boston in October 2011.