Tuesday, February 2, 2016
The Corporate Religion (Part 4: When Speed Looks Like Growth)
Let’s look at another piece of the profit puzzle. Paul Hawken made this telling observation about life in corporate capitalism: “Nothing in the modern workplace, and very little in society at large, encourages us to take our time, or be satisfied with what we have. We’re being presented instead with a future where we will have to work harder, but have even less leisure than we do today, if we are going to maintain our way of life. . . . We are speeding up our lives and working harder in a futile attempt to buy the time to slow down and enjoy it.”1 Sometimes, as we get caught up in our frantic modern lifestyle, we fall for a very fundamental illusion: we mistake speed for growth.
Let’s look at this phenomenon more closely. Despite the reasoning expressed in the previous three posts, corporate capitalism views productivity improvement as a panacea. It enables companies to compete and economies to grow. But productivity improvement, at least in advanced economies like our own, is almost exclusively dependent on technological advances. New technologies allow an individual worker to be more productive. In other words, new technologies allow a worker to produce more product in a given time period. We can also express this relationship from another perspective. New technologies allow a worker to produce the same amount of product in less time. So, which is it? Does productivity improvement make the economy grow, or does it simply speed things up. The answer, of course, is yes.
If the time it takes us to produce a given quantity of goods steadily decreases, then we must also consume those goods more rapidly. Everything speeds up. In this sense, productivity does not make us wealthier as a society. We simply produce and consume at a faster pace. There is not really more wealth in the system. It merely appears so because money and products change hands faster. The real change is that our time frame has collapsed.
Much of what we call economic growth might be nothing more than the fact that money passes through more hands this year than it did last year. It could be that capitalist growth is not really growth at all. It is merely speed. When transactions slow down, as they did for a time after the meltdown of 2008, so does growth. The economy shrunk for nearly a year then began growing slowly because people and businesses were not purchasing as frequently as they once did. In this sense, growth is a function of speed, of what we call turnover. Money is not changing hands as often as it did. Could it be that when all is said and done, profit can be extracted from the system only when the flow of transactions is accelerating? If so, what kind of future are we constructing for our children and grandchildren?
Not Everything that Grows Is Good
Every solution offered by politicians or conventional economists for our economic woes begins with the assumption that growth is necessary for a healthy economy. Herman Daly and John Cobb observe that although economists, like other scientists, claim to be value-neutral, “their shared values are [in fact] easy to identify. They are, above all, for economic growth. To challenge that goal is to place oneself outside the community of [economists].”2 Or, as I would put it, outside the corporate religion. But what if it is a false religion? What if the answer is not growth? What if all the economists and politicians have been asking the wrong questions? If so, then their answers are not merely wrong and irrelevant, but undoubtedly harmful as well.
What if endless, unlimited growth is not only impossible but lethal to us as individuals and communities? David Korten, questioning the sanity of our growth fixation, made this observation: “Growth of healthy organisms is a natural phenomenon, but unregulated and unlimited growth is found in nature only in cancers that ultimately destroy their hosts and themselves. We are creating an unregulated economic system that has become the equivalent of a cancerous tumor, and its unfortunate host is human society. In the name of free markets, prosperity, and democracy, modern society is embarked on a path that ultimately can lead only to the destruction of all three.”3
The metaphor is apt. Cancers grow by stealing sustenance from healthy tissue, by fooling the immune system, by deceiving nearby cells into forming food-bearing vessels and producing growth-enhancing chemicals, and by opening new pathways for the malignancy to spread throughout the body. In essence, cancer tricks the body into contributing to its own destruction. The unlimited-growth assumption makes corporate capitalism similar in many respects to cancer. It creates economic growth at the expense of health in other areas of social concern. And as it becomes entrenched, it converts the surrounding society into a support structure for its continued growth. Everything else is absorbed into the economic system, and self-perpetuation becomes the guiding rule.
Is there an alternative, though? Can we even imagine an economic system not dependent on perpetual growth? I suggest that we must begin to think along those lines because the growth assumption is fast reaching the end of its long, long rope. Let me introduce briefly two arguments against limitless economic growth.
The Environmental Argument
Kenneth Lux points out that our capitalist economic theory does not concern itself with human needs. In economics, need is a nonword. Economists are interested only in wants, or demand. “An important thing about wants,” says Lux, “is that they are ultimately infinite and therefore unsatisfiable.” Add to this the overall objective of conventional economics, which is to satisfy these wants, and a paradox emerges. Here is an extended version of a statement by Lux that I quoted in part 1 of this series:
It appears that economics has construed itself so as to attempt to accomplish the impossible: to satisfy that which cannot be satisfied. . . . From this we can start to see that economics, even at the level of its theory, may have something to do with why we are destroying our natural world.
We live on a finite planet. If human beings are defined as being made up of infinite wants, and the task of an economic system is to fulfill that infinity, then such a system will go on endlessly churning out goods in an attempt to reach what is from the beginning an impossible goal. When the infinite production of goods meets up with a finite planet there is bound to be a collision.4
Endless economic growth means accelerating the process of turning finite resources into products, which must then be consumed at an accelerating pace and ultimately turned into waste. This is how our market economy works. But, as economist Herman Daly has pointed out, viewing economic activity as a circular flow of production and consumption is like seeing an animal as nothing more than a circulatory system, ignoring the fact that it has a digestive tract that connects it to its environment at both ends.5 Similarly, our corporate system treats natural capital assets as if they were expenses and treats waste as if it had little impact on the earth. This is insanity, and we are in part to blame for not demanding greater depth and a long-term perspective from our elected leaders, particularly conservatives, who are notorious for not attempting to conserve anything and are primarily interested in selling a short-term vision for both the economy and the environment.
Economists, businesses, and politicians of both major parties have always operated on the assumption that the future will be similar to the past, that since the corporate capitalist economy has grown over time, it will continue to grow. They don’t consider the possibility that as the economy grows, it encounters constraints that were irrelevant or invisible when it was small. The minimal impact of industrialization on the environment when the earth was a seemingly infinite, sparsely populated place has little relevance to our present circumstances. Times change. We cannot logically expect the effects of the ever-expanding capitalist economy to remain negligible.
“If capitalism has one pervasive untruth,” declares Paul Hawken, “it is the delusion that business is an open, linear system: that through resource extraction and technology, growth is always possible, given sufficient capital and will. In other words, there are no inherent limits to further expansion, and those who wish to impose them have a political agenda. . . . [But] ever-expanding abundance is not a theory based on science, or history, or nature. It is based solely on self-interest.”6
The Natural Capital Argument
New York Times columnist Thomas Friedman suggested that perhaps the economic crash of 2008 was sending us a message.
What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall—when Mother Nature and the market both said: “No more.”
We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese . . .
We can’t do this anymore.7
I have left one piece of the profit puzzle until now for a reason. Because it is quite possibly the most relevant piece of the puzzle and may be the one that finally brings an end to endless growth. Perhaps all these things we’ve examined thus far fit together to give us a picture of why and how the capitalist economy grows: owners stealing from laborers, the introduction of innovations, the capitalist’s sabotage of the production apparatus with financial manipulations, the misalignment between revenues and expenses, expansion of the money supply, and the acceleration of the system caused by technology. But even all of these elements taken together do not complete the profit puzzle. One final element is necessary. As mentioned earlier, new resources must constantly be added to the economy. Without new resources, growth simply will not occur. The problem, as many observers have pointed out, is that a good portion of our resources are both limited and nonrenewable. So not only are we bumping up against debt ceilings and other economic limits, but we are also reaching some physical boundaries that we simply cannot cross.
E. F. Schumacher, among others, has pointed out that corporations are behaving recklessly in one particular regard. They are treating certain natural capital assets as if they were expenses. Any business that uses up its capital will not last long. But our economy is using up certain forms of capital at a staggering rate. The most obvious and most critical of these capital assets is the one we have built our modern economy upon: fossil fuels. We have created an entire way of life that is totally dependent on plentiful and relatively cheap oil and coal. The average person travels many miles to reach his or her place of work. And at home or on the job, electricity generated largely from fossil fuels gives us light, heat, refrigeration, entertainment, and the millions of benefits and distractions computers provide. The necessities of life—not just furniture and soap and clothing, but most of the food we eat—come not from local producers, but from far, far away. I eat bananas from Brazil, grapes from Chile, oranges from Florida, broccoli from California. I wear clothing made in Honduras and wear shoes made in China. Other necessities come from other far corners of the globe. All of these must be shipped long distances to market. And the economy is becoming more global as time passes, not less, as corporations search the world for the cheapest labor. We are treating oil as if it were merely an expense. But it is nonrenewable and will soon or later become scarce. The BP gusher on the Gulf floor in 2010 was merely a sign of things to come. Increasing earthquakes and polluted drinking water from fracking are additional signs. Already the easily obtainable oil is insufficient for our insatiable needs. As we drill in ever more precarious places or use methods, such as fracking, that may have devastating long-term ecological consequences, we will see more environmental disasters. And soon enough, we will experience severe shortages. Today, with falling oil prices, we assume we are living in a state of endless glut, but our oil reserves are indeed finite. Soon, of course, is a relative term. Not long ago some experts were suggesting that we had already reached what is termed peak oil, “the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.”8 More recent estimates, however, suggest that we now have 200 years of obtainable oil. We may conclude that this is good news, but what is the environmental toll we will pay for our ever-increasing use of carbon fuels?
Paul B. Farrell, a columnist for MarketWatch, a website sponsored by the Wall Street Journal, cites several sources to propose the radical notion that even though we have 200 years’ worth of oil, “using more than one-fifth of it will dump so much excess carbon dioxide into the atmosphere that by 2050 fossil fuel companies will kill the planet. And that’s exactly what they plan to do.”9 Farrell quotes Naomi Klein, author of Shock Doctrine: The Rise of Disaster Capitalism, who claims that for “‘the fossil-fuel industry, wrecking the planet is their business model.’ And Wall Street knows why: Oil companies need to protect the $150 billion in profits they make annually.”
“So the battle lines are drawn,” writes Farrell. “The oil industry has enough reserves for a couple centuries of earnings. But environmentalists are warning that using more than 20% of that ‘five times too much’ fossil fuels reserves will destroy the planet. So 80% of the reserves must be kept underground, not drilled or mined or otherwise released into Earth’s air. However, the oil industry will never agree to the environmentalists’ demands. [Former J. P. Morgan managing director John] Fullerton warns: that’d be like ‘writing off $20 trillion in assets.’ Exxon CEO Rex Tillerson has no intention of keeping ‘his reserves in the ground.’ Just the opposite: His ‘company plans to spend $37 billion a year through 2016 (about $100 million a day) searching for yet more oil and gas.’”
So, while our politicians bicker over the best way to grow the economy, the economy by its very nature is slowly destroying the very environment in which it must exist. Over the long term, endless growth is simply an unsustainable economic philosophy. But we cannot come to terms with this truth, and so we keep asking the wrong questions, which can never yield the right answers. Some of the wrong questions, surprisingly, involve alternative energies, the assumption being that we will simply replace carbon-based fuels with renewable energy sources when they become cost competitive. But this is not just wishful thinking; it is simplistic and unrealistic. A growing global economy will require an increasing amount of energy.
The economic downturn that began in 2008 temporarily depressed demand for oil, and we are also getting better at conserving, but if corporate capitalism is to fully heal, it must grow, and that growth is dependent, ultimately, on plentiful oil. The global economy we have built up so relentlessly since World War II requires more and more oil as it grows larger and larger. And as more nations join the global economy, they will require more and more oil. Natural gas may alleviate some of the demand for oil, but natural gas, ultimately, faces the same future as all nonrenewable energy sources.
Those who suggest that renewable energy will take the place of oil in our global economy are living in a dream world. Newsweek’s Sharon Begley cited the work of energy chemist Nate Lewis, pointing out the enormous challenge we face.10 The world used 14 trillion watts (or terawatts) of power in 2006. But even assuming minimal population increase, slow economic growth, and a staggering 500 percent improvement in energy efficiency worldwide relative to current U.S. levels, the world will use 28 terawatts of energy in 2050.
Where will this energy come from? Nuclear power? We would have to build 10,000 nuclear reactors, completing one every other day, to get just 10 terawatts. Wind? To get just 3 terawatts of power, we would need to erect a million state-of-the-art turbines, and we would also have to invent a way to store that power. Solar? “To get 10 terawatts by 2050, Lewis calculates, we’d need to cover 1 million roofs with panels every day from now until then.”
Are you getting the picture? Oil, natural gas, and coal are the only sources of energy that can enable us to maintain our current economic system. Renewable energy will not provide even enough power to keep up with a conservative increase in demand that will occur as global corporate capitalism seeks to grow endlessly. And as we use fossil fuels at an increasing rate, we will simultaneously cause environmental disaster. In other words, no source of energy known to us at this time can provide the amount of energy the corporate religion will need in order to enable its worship of growth and to survive without destroying the conditions capitalism requires to endure.
So what do we do? There is only one solution. We must stop growing. It is going to happen anyway. We are reaching both economic and physical limits to growth. We can either embrace a new type of economy—a nongrowth economy that is local rather than global, sympathetic rather than self-interested, and democratic rather than corporate—or we can live in denial. But we will be forced to change sooner or later anyway. The change will be much less painful, however, if we begin now and begin willingly with a spirit of unity and bipartisan cooperation. But in these dire circumstances, we can’t even get the Republican Party to stop denying what 97 percent of climate scientists are telling us. Such is our challenge.
So, is there a different path to heaven than the one our current economic religion offers? On the fringes of economics, certain voices in the wilderness are talking about something called a “sustainable” economy. This is supposedly an alternative to our current growth-based system and recognizes the inherent limits of living on a finite planet. Unfortunately, these voices are almost totally ignored by mainstream economists and by virtually all politicians, who are steeped in the myths and superstitions of a false creed.
Converting to a nongrowth, or sustainable, economy would be something akin to changing religions. If we are to succeed, we must give up cherished beliefs, even supposed deities, such as endless growth, and adopt different beliefs and new goals. The corporate system we have enthroned for so long now is reaching the end of its unfortunate life. It is no longer, pardon the double entendre, sustainable. Even though this appears to be heresy, we must cast aside our current economic theology and take a leap of faith.
1. Paul Hawken, The Ecology of Commerce: A Declaration of Sustainability (New York: HarperBusiness, 1993), 126.
2. Herman E. Daly and John B. Cobb Jr., For the Common Good: Redirecting the Economy toward Community, the Environment, and a Sustainable Future (Boston: Beacon Press,  1994), 131.
3. David C. Korten, “A Deeper Look at ‘Sustainable Development,’” World Business Academy Perspectives 6, no. 2 (1992): 36; adapted by Willis Harman from “Sustainable Development,” World Policy Journal, Winter 1991–92, 157–90.
4. Lux, Adam Smith’s Mistake, 9.
5. Herman Daly, “Sustainable Development: Definitions, Principles, Policies,” 37–38, available at http://library.uniteddiversity.coop/Measuring_Progress_and_Eco_Footprinting/Ecological_Economics_and_Sustainable_Development-Selected_Essays_of_Herman_Daly.pdf.
6. Hawken, Ecology of Commerce, 32–33.
7. Thomas L. Friedman, “The Inflection Is Near?” New York Times, March 7, 2009; http://www.nytimes.com/2009/03/08/opinion/08friedman.html?_r=1.
8. “Peak Oil,” Wikipedia, http://en.wikipedia.org/wiki/Peak_oil.
9. Paul B. Farrell, “Big Oil is Earth’s Public Enemy No. 1,” MarketWatch, August 3, 2012.
10. Sharon Begley, “We Can’t Get There from Here,” Newsweek, March 23, 2009, 48.