Capitalism Can’t Grow Forever!

One of the inherit features of any healthy capitalist economy is growth. The gross domestic product (GDP) has to consistently be expanding in order for the economy to create jobs. If there is an economic downturn and productivity becomes stagnant or slows down then workers get laid off, businesses close and no one is happy. Businesses must remain profitable and reinvest some of their realized profits in expansion in order to grow and remain competitive in the world of aggressive, cannibalistic competitors. Most economists agree that the compound rate of growth required for a healthy economy is around 3% per annum. “Growth! Growth! Growth!”That’s what is barked at us every time we hear Mitt Romney or President Obama speak about the economy.

Theoretically and historically it makes sense. Ever since merchants and traders began to sow the seeds of free trade that would help usher in the fall of feudal overlords, oppressive monarchies and slavery in the New World, there was what seemed like infinite growth for capitalism to expand and for trade to flourish. Over the last several hundred years the spread of capitalism helped fuel colonization, imperialism and wars for cherished resources. Not to delve too deep into the historical evolution and growth of capitalism, let us simply say that when capitalism was confined to several small regions, such as Western Europe, it was easy and justifiable to view economic growth as something infinite. When capitalism was confined to the textile factories of Manchester, or the shipyards and port of Liverpool, one did not think or pay any mind to the limits to capitalism’s potential for growth.

Fast-forward to 2012. Capitalism is everywhere. Virtually every country on Earth has an economy that is either capitalist in some way or is operating in a global economy that is dominated by it. It becomes plain to see that the growth that was so easy to attain during the last few centuries, or even since the end of WWII up until the 1970s, has become increasingly more difficult to maintain. It is ludicrous for proponents of capitalism to continue to think that a compound rate of growth for the economy can continue on a planet with finite resources. The “ecological footprint” test has shown that if every person on Earth consumed as much as the average person in the U.S., then we would need at least five more Earths in order to accommodate the levels of consumption. Everyone knows that that is an impossible task to realize but the dogmas and belief in capitalism  has billions in the developing world chasing the illustrious model of North American prosperity. And who can blame them? The U.S. was able to achieve its wealth and status with complete disregard for the natural world or the limited amounts of finite resources that exist on this planet so why should China or India act differently? There are only so many trees, cobalt mines and oil reserves to exploit and the leaders in the U.S. are more than proud that they snatched them up first. As stated above, for a system that depends on exponential growth, about 3% per annum, in order to survive, it is a lofty pipe dream to think that we can continue to use the same metrics for economic growth without completely depleting the Earth of all its resources while drastically sharpening the geographical conflicts that will arise as resources become more scarce.

The metrics used to determine the health of an economy must soon transcend the current model of infinite growth with limited resources. A system or a business that becomes more profitable the more that it consumes must be inverted somehow. Harmony with nature and a system that is serious about sustainability must be advocated for. What we currently have cannot last much longer given the rates of resource depletion, climate damage, and human suffering.