Capital Contradiction: The Fundamental Flaw that Dooms the Corporate-Growth Economy

The corporate cheerleaders of the last stages of the dying unlimited-growth economy still argue that “growth” is necessary for a healthy economy. The role of growth in our economic culture seemed secure, until the cracks in its foundation grew ominous. Now it’s a big question.

As the argument goes, capital growth spurs technological innovation, which will allow people to work less and enjoy life more. A happy prospect – as I remember it from the 1960s. Industrial technology certainly has reduced the amount of labor needed as a component of production. So much can be produced with so much less labor than before industrial and office operations were automated.

Is All “Growth” Good?
But what are the benefits of labor-saving industrial technology for people? Who works less and enjoys life more today? Not even the capitalists, but of course they are driven not by need but by desire. The rest of us mostly work more for less pay, just to make ends meet, if that. All the benefits of efficiency have gone to the power elites. Their concerted efforts since the 1950s have destroyed the unions. So, little leverage remains for paying workers a living wage.  People don’t work less – if they have a job – they just earn less for the work they do and usually work more.

One result of less and less labor needed per unit of production is that more and more gets produced. But since less and less labor is needed, fewer and fewer jobs are available for workers. The quantity of goods produced grows right past the need for them to be consumed.  As population grows, there are more people looking for work.  But there are not more jobs. Unemployment and poverty result from overproduction when workers have a smaller and smaller role in the economy. More and more workers, regardless of education, find little meaningful employment. Many become trapped as “wage slaves” in jobs with below-subsistence buying power. This is worsened by the ability of capital to seek the lowest wage labor internationally, while most workers must find jobs where they live.

Overproduction causes pressures for people to over-consume. Many of the goods produced are not really needed – they result from manufactured wants. Less understood is the fact that many people, being under-employed or unemployed, cannot buy them anyway. The consequent loss of demand for goods is a drag on production, further weakening the demand for labor. But behavioral manipulation through marketing can be very effective in spurring consumption, as long as buyers have money. So, with depressed wages, heavily marketed easier credit availability has encouraged many to consume “beyond their means,” especially for food and rent.

A Crisis Delayed
At the dawn of the “age of automation,” back in the 1960s, enthusiasts promoted the myth that people would need to work less and have more leisure time. But many feared that factory automation and office automation would take away jobs. The great economic expansion of the 1960s through the 1980s generated more jobs and the impact of automation was dampened and delayed. The dot-com boom of the 1990s further delayed the impact of computer-aided design, production, and middle-management functions on jobs.  Capital increasingly outsourced the labor it needed to China and other low-wage nations.

But as more of the well paid manufacturing and technical jobs were lost to automation and to international outsourcing, wages continued to be depressed. Left to its own devices, capital finds ways to reproduce itself. As buying power was lost due to lower wages, consumer credit and second mortgage requirements were loosened and these forms of debt were heavily promoted. Consumption was increasingly driven by debt rather than income.

As corporate lobbying took over Washington, business tax loopholes proliferated.  With loss of revenue, government debt soared too, right along with consumer debt. Without new economic growth and rising wages, debt service becomes an increasing burden. While the corporate economy grew, wages continued to flat-line or decline, leaving worker-consumers in an ever-growing squeeze.

The march of labor-reducing technology is always assumed to be inevitable and good. Yet, with “free markets” in labor and with capital able to move globally to find the cheapest labor, a severe imbalance occurs.

Half truths are sometimes just false. For the claims of a comfortable life with fewer hours of work to be realized, the entire organization of the economy would have to be revised. Money would have to circulate much more freely among all the people. The means of distributing income and wealth would have to be altered so that not all of the benefits of increased productivity go to the top 1%.

The Time is Now
What the growth cheerleaders ignore is that we have reached a tipping point where the power of capital over labor has caused extremely depressed wages and high unemployment-underemployment. So, consumer demand is depressed. That in turn discourages investment in production – corporations are now sitting on huge piles of cash, afraid to invest without consumer demand. Well, corporations need production of a lot of the objects of artificially created ‘wants’ that marketing has generated in order to boost sales and profits. But workers have lost the necessary buying power. It’s a dead end.

As a society, we can no longer afford to produce all that stuff the remaining middle class workers keep in a storage locker because there is no more room in the garage. We need appropriate production of the objects needed in a post-growth stable ecological economy. That will in fact require a complete overhaul of the organization of the economy.

The inevitability of economic progress, whether in the predictions of Karl Marx or the vision of Adam Smith, is and always has been an ideological flaw in the thinking of those who have a particular interest in economic history. Anything is possible and some possibilities are far more problematic than others. The old assumptions must go. Only an ecological economy can work now.  How we can make that happen remains to be seen.

How to Change the Economic Culture…and Save the Planet

It’s pretty clear that the corporate state is in control of the economic culture of the U.S. and that of most other nations as well. As environmentalists try to get enough attention to explain what is obvious about climate change, the scientific information is minimized, suppressed, or distorted.  We’re told that the best solutions to “potential” climate disruption is to apply established “free market” solutions of the “growth economy.” Never mind that imaginary “free” markets are tightly controlled by giant trans-national corporations whose congressional lackeys ignore the radical disruption of the complex climate systems upon which we depend for survival.

From local building ordinances to national economic policies and ruthless trade agreements, decisions are supported by an economic ideology that always makes “economic growth” the top political priority. It is an assumption so deeply ingrained in our culture that it remains unchallenged, even as we try to find ways to mitigate the economic causes of the climate chaos that is already upon us. The ideology of economic growth and the illusion of U.S. “energy independence” allow more CO2 and methane emissions from fracking for short term production increases. We might as well be lemmings.

The scientifically aware continue to argue with the Koch brothers’ agents provocateurs as if it was merely a matter truth prevailing in rational debate. We have to face the fact that culture does not change by rational discourse when the power structure dominates the flow of “information.” All you have to do is listen to the Sunday talk shows to see who defines the culture through the media. However, sociologists and behavioral psychologists have known for decades that the most powerful way to change behavior and influence opinion is to strategically exert peer pressure. Education can help a little, but will be too late. It is no match for pervasive mass media propaganda so prevalent today. Strategic behavior of “influentials” in a community is.

While mass media control the economic culture instilled in the general population, significant numbers of young people around the world, including the U.S., are aware of the nascent climate disaster and have begun to campaign for divestiture of fossil-fuel investments by university endowments. The response from Harvard’s president Drew Foust illuminates the “generation gap,” claiming that Harvard should not be a “political actor.”  See:  http://www.harvard.edu/president/fossil-fuels  Well, investing in fossil-fuel is a political act. This is a classic case of the old established economic culture opposing the new ecological culture of sustainability.

Neither the civil rights movement nor the anti-apartheid movement succeeded by the relatively minor economic damage they inflicted – they won by exerting major political pressure. But as that battle continues – and it does have promise as one avenue to put political pressure on the fossil-fuel economy – we must find  ways to immediately divest our economic behavior from dependence on oil, gas, and coal. We face an urgent – time sensitive – crisis.

As a general principle of urgency, every effort possible is necessary. But we need a strategy that applies the facts of social science to maximize the broad adoption of innovations to drastically reduce carbon emissions. Behavioral change does not come fast by rational argument. Most people adjust their behavior when the judgment of others matters. That is what “politically correct” language is all about. When racist speech was no longer accepted in public, many Americans changed their public speech even though they did not purge their personal racism. They knew that they would be judged badly if, for example, they used “the N word” in public, even in their own segregated suburban neighborhoods. We all know folks who still harbor racist feelings but avoid expressing them in public settings.

The recent racist outbursts of L.A. Clippers owner Donald Sterling and Nevada rancher Cliven Bundy are the exceptions that prove the rule.* Initially oblivious to the offensiveness of their words, even they back-pedaled with media exposure. For the most part, overt racism is banished from public discourse. When we are able to elevate “sustainable living” behaviors, such as installing solar systems, to the level of politically correct actions, it will mean that peer pressure can be brought to bear on economic behavior that affects individuals’ self-perception in relation to those peers who are “influentials.” Open opposition will fade and support will blossom.

The “bulk Solar” strategy is an example of how this can be done. If a relatively small group of “early adopters” organizes to make bulk solar purchases, say 5 houses in a neighborhood, the installer can do the work cheaper and give a discount. The innovative “first adopters” are likely to be “influentials” who can have an impact on their neighbors. A tipping point can be reached where it becomes no longer an odd thing to ‘go solar,’ but the popular thing to do. It then becomes a new norm: to take that [personally and socially] rational step of reducing one’s carbon footprint.
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* See “What Donald Sterling and Cliven Bundy can Teach Us about Racism in America” https://thehopefulrealist.com/2014/04/30/what-donald-sterling-and-cliven-bundy-can-teach-us-about-racism-in-america/