Reform Capitalism or Scrap It?

It’s not just the climate that’s damaged by capitalism
March 1, 2012

At the recent World Economic Forum at Davos, Switzerland, some among the world’s business and political élites were clearly on the defensive. Worried about the Occupy movement and rising public outrage over inequality, they wondered if their unchecked free enterprise economy was in danger.

Klaus Schwab, founder and organizer of the Davos meetings, went so far as to declare that “capitalism in its current form has no place in the world around us. We have failed to learn the lessons of the financial crisis of 2009,” he told reporters. “A global transformation is urgently needed and must begin by restoring a form of social responsibility.”

This call for humanizing capitalism, however, although supported by a few of the socially sensitive billionaires in attendance, such as George Soros and Warren Buffett, was met with stony disapproval by major corporate and political leaders.

“Capitalism is still the best system for creating prosperity,” Canada’s Prime Minister Harper insisted. He didn’t specify prosperity for whom or for how many, but did concede that perhaps some additional regulation of business activities was required.

The consensus of the gathering when it wrapped up was that capitalism was not in any real danger from the occupiers and other dissidents. As the dominant global economic system, it has had no viable challenger since the collapse of Soviet communism, and could be expected to weather the “occupy” storm as it had all previous threats.

Maybe a few patchwork changes could be made to moderate capitalism’s worst excesses. Maybe the top 1% could be persuaded to part with a few more millions to share among the 99%. Maybe further planned tax cuts for the rich could be suspended for a while. Maybe CEOs’ salaries and investors’ dividends could even be scaled back a bit.

Such token concessions have always been enough to placate critics in the past, and the plutocrats at Davos were confident they will eventually suffice to appease the occupiers, too.

This sort of complacency has prevailed for a long time. Capitalism – with the help of complicit governments – has survived all the recurring economic slumps, including the worst financial crisis since the Great Depression, and to its ideological defenders must now seem invulnerable. A bit of tinkering here and there, yes, but few of them share Klaus Schwab’s belief that the free market economy needs a major transformation.

These arrogant corporate and political nabobs remind me of the man who, like Icarus, thought he could fly, so he jumped off the roof of a 100-storey skyscraper. As he was passing the 30th floor, he waved to people on a balcony. “So far, so good!” he yelled triumphantly.

Capitalism inevitably faces the same fate. It’s not going to hit the pavement any time soon, but is obviously on an irreversible downward plunge. And this is true whether Schwab and his supporters succeed or fail in giving it the makeover they propose. Why? Because, contrary to Harper’s boast that it’s the best economic system, it is by far the worst. Particularly for a planet whose life-sustaining resources the free enterprise system is recklessly despoiling and depleting.

* * *

Capitalism was in danger in the 1930s after its avarice and financial knavery triggered the Great Depression. It was saved (against its will) by the imposition of policies that restrained its most harmful activities. Based on the caring and sharing concepts devised by economist John Maynard Keynes, and implemented by U.S. President Franklin Roosevelt and later by other national governments, these reforms made capitalism less inequitable and even comparatively benign. Economic gains were more fairly apportioned. Workers were helped to form unions and negotiate better wages and working conditions. A progressive tax system provided revenues to improve social programs.

But corporate executives, bankers, investors, and stock market traders were never content with such a constrained and (to them) unnatural version of capitalism. They had to tolerate it for the first few post-war decades, but as soon as free trade, deregulation, privatization, and new world-spanning technologies enabled them to break the Keynesian shackles, they quickly re-established capitalism as the truly ruthless and rapacious system it was designed to be.

The convenient collapse of Soviet communism then discredited its main economic challenger and gave the resurgence of laissez-faire capitalism an extra boost.

The planet has since been dominated by the overlords of what is arguably the most inequitable, iniquitous, destructive, wasteful, and barbaric economic system that could ever be imagined. That it has been perpetuated for so long -- thanks to the overpowering political influence its leaders and lobbyists have acquired -- is because its irresponsible reliance on infinite economic growth on a finite planet has yet to be stopped.

But one very harmful effect has at last become alarmingly evident. It’s called global warming. The excessive CO2 emissions spewing from the capitalist system’s industrial overproduction have steadily increased the planet’s atmospheric temperature. Already this has led to more frequent and destructive storms, floods, and droughts. Eventually, left uncurbed, the emissions will unleash nature’s wrath in all its fury, to an extent that could wreck cities, kill billions, and effectively destroy what we now call civilization.

Faced with a threat of such scope and magnitude, the world’s governments should be joining together, pooling their resources, and making the campaign against global warming their top priority. That’s not happening, of course, because any such effort, to be effective, would also require scrapping the main cause of global warming: capitalism.

This hard reality is brilliantly elucidated by Naomi Klein in the three-part series – Capitalism vs. the Climate – that is now running in The Monitor.

As she points out, “real climate solutions are ones that devolve power and control to the community level, [which] is going to require shredding the free-market ideology that has dominated the global economy for more than three decades.”

It’s not just Earth’s atmosphere that capitalism has contaminated. “We are doing the same to the oceans, to freshwater, to topsoil, and to biodiversity,” Naomi reminds us. “Global warming is a symptom of a much larger crisis, one born of the central fiction on which our economic model is based: that nature is limitless, that we will always be able to find more of what we need, and that if something runs out it can be seamlessly replaced by another resource that we can endlessly exploit.”

That fatally flawed assumption, fiercely promulgated by capitalism’s leading adherents, is what provides the flimsy justification for maintaining such a pernicious system. It also serves to rationalize all of capitalism’s other devastating effects.

At a time when international cooperation was never more desperately needed, capitalism promotes competition as the predominant form of human relations.

Competition at the international, national, regional, community, and personal levels leads to monumental waste and consumption; to the obscene accumulation of wealth by a ruthless minority; to the impoverishment of half the world’s people; to the deprivation of the poor from adequate food, shelter, education, and health care; and to the most deadly form of competition: wars and other conflicts that are fomented and waged as much for the weapon-makers’ profit as for twisted “national security” reasons.

* * *

Is this too harsh an indictment of capitalism? I don’t think so. If it was ever even minimally tolerable as a means of developing and distributing the world’s resources – during the post-war “golden decades” – it most definitely is the worst possible economic system we could have today.

What is urgently needed now is a system based instead on working together in harmony to mend the planet’s badly tattered ecosphere. That fundamental project, in turn, also entails curbing economic growth; shifting our main energy source from fossil fuels to renewables; stopping and reversing privatization and deregulation; stripping corporations of political power and the freedom to pillage natural resources; cancelling most free trade agreements; localizing production and farming; and putting an end to wasteful and needless consumption.

A formidable agenda, isn’t it? Especially so, given the immense power now held and wielded by most of the world’s corporate and political leaders. They will not willingly relinquish this power and the perks and privileges it bestows on them. We see the first signs of this obduracy in their refusal to take climate change seriously – and even, for some of them, including our own prime minister and his cabal, to deny that global warming is actually happening. They dismiss the scientific evidence and even hint darkly that the whole thing is another conspiracy by “the enemies of free enterprise.”

It’s also going to be difficult, at least initially, to engage most civil society and labour leaders – even most “progressive” economists – in this titanic endeavour. To openly excoriate the prevailing economic system, call in effect for its demolition, defy its powerful proponents, and risk the painful consequences of their retaliation on workers, families, communities, and whole nations – that will take great courage and fortitude, not to mention the derision they will probably incur from colleagues, friends, and the mainstream media.

(For an economist even to argue for limiting economic growth is a daring venture outside the traditional boundaries of economic thought. One eminent U.S. economist, Herman Daly, has pluckily taken that step, and a few others, including Peter Victor at Toronto’s York University, have followed him, but the ranks are still regrettably thin.)

To stay quiescent, however, to stand idly by while runaway capitalism carries everyone with it to the abyss – surely that will not be the conscious decision most of us make. The deterrents are formidable, yes, but I can’t believe we will be so cowed by them that we remain passive onlookers instead of striving, as strenuously as we can, to avert disaster on a planetary scale. And more than that: to replace the worst possible economic system with the best possible one (a system based on cooperation, equity, and social justice).

Naomi much more thoroughly examines these and other aspects of what is by far the overriding issue of the early 21st century. I urge CCPA members – if you haven’t already started -- to read, study, and discuss her three-part essay, and later the book on capitalism vs. the climate that she is also in the process of writing.

The future of humanity is at stake in this momentous struggle. At my advanced age, I’m unlikely to be around to witness the outcome, but my children and grandchildren, I hope, will be; and, if we succeed, so will many grateful generations to come.

(Ed Finn is the CCPA's Senior Editor.)