Overcoming accumulation: Is a capitalist steady-state economy possible?
Frederik Berend Blauwhof ⁎
University of Kassel, Germany
a b s t r a c ta r t i c l e i n f o
Article history:
Received 2 January 2011
Received in revised form 17 March 2012
Accepted 20 March 2012
Available online 16 April 2012
Keywords:
Steady-state economy
Capital accumulation
Capitalism
Ecological economics
Marxian economics
Growth
Crisis
Reform
Policy
This article critically reviews the case for a steady-state, zero growth economy posing the question whether
such an economy can be stable and socially just, given that in the current global economy lack of growth is
synonymous with crisis. The SSE thesis is analysed within a framework of Marxian political economy
concluding that a stable and just SSE is possible, but not feasible within the social relations of capitalism.
Using the Marxian analysis of capital accumulation, the article then considers whether the reforms proposed
by ecological economists can form an effective countervailing force to the drive for accumulation. The
conclusion is that such reforms can be successful, but only in so far as they are complemented and brought to
their logical conclusion by a wider attempt to transcend the capitalist relations of production.
© 2012 Elsevier B.V. All rights reserved.
Contents
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
2. The Debate between Richard Smith and Philip Lawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
2.1. Does ‘Profit or Die’ Mean ‘Grow or Die’? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
3. A Marxian Economic Analysis of Accumulation in the Steady-State Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256
4. Marx's Reproduction Schemes Applied to Steady-State Capitalism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258
5. Minqi Li's Long Term Profit Rate Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
6. Implications of Accumulation without Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
7. Capital Accumulation and Reform Proposals for an SSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
8. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
1. Introduction
Many ecological economists argue that a sustainable relation
between the human economy and its natural environment requires a
transition to a ‘Steady-State Economy’ (SSE). Herman Daly defines
this as an economy with “a constant flow of throughput at a sustainable
(low) level, with population and capital stock free to adjust to whatever
size can be maintained by the constant throughput” (Daly, 2008: 3).
Economic development in this context is the qualitative improvement
of human life and the goods we consume, rather than the expansion
of GDP or the quantitative amount of goods produced. Proponents of
the SSE in the sense that Daly advocates it do not reject economic
growth altogether; the problem is from this perspective that we have
entered a stage of ‘uneconomic growth’ where the loss in natural
capital (and the ecosystem services provided by them) exceeds the
benefits of increased consumption (Daly and Farley, 2004: 16, 441;
Daly, 2008, 2). So although not all proponents of the SSE are against
growth per se, the consensus is that economies should at least be able
to cope without GDP-growth.
Such arguments are rejected out of hand by mainstream
economists from the neoclassical as well as the Keynesian schools of
thought (Friedman, 1962; Krugman, 1999). For them, growth is an
intrinsic good, the only way for societies to progress and ‘develop’.
Why the idea has become so entrenched is not hard to see. After all,
periods without growth are precisely those when capitalist
Ecological Economics 84 (2012) 254–261
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doi:10.1016/j.ecolecon.2012.03.012
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economies lapse into crisis, resulting in all the unemployment,
bankruptcies, pressures on government finances and general social
want commonly associated with recessions. To be precise, ‘recession’
and ‘depression’ are defined in economics as periods of GDP
‘degrowth’. That mainstream economists would therefore reject
proposals to constrain GDP should not surprise anyone.
But the idea of the SSE is also criticised from an entirely different
perspective. Marxist economists and ecologists like John Bellamy
Foster, James O'Connor and Joel Kovel (Foster, 2009; Foster and
Magdoff, 2010; Kovel, 2007; O'Connor, 1994) argue that capitalism
cannot be made ecologically sustainable, exactly because the drive to
growth is such a central feature of capitalist reproduction. Realising an
economy that would not transgress planetary limits would, according
to these theorists, involve more than a reform of the current system; it
would require completely different, socialist relations of production.
This paper evaluates the incipient debate between proponents of
the SSE and their Marxist critics about the requirements of a
functioning, ecologically sustainable economy. Section 2 introduces
the debate by analysing an exchange between Richard Smith, who
criticises Daly's idea of an SSE within the coordinates of capitalism,
and Philip Lawn who argues that capitalism can be made to respect
the limits of an SSE (Daly, 2010; Lawn, 2011; Smith, 2010). Section 3
will proceed to elaborate the main arguments in Marxian political
economy in support of the case that a capitalist SSE is not possible.
Section 4 will look at the possibility of tracking the effects of growth
limits in Marx's reproduction schemes. Section 5 will discuss Minqi
Li's long-term profit rate model for an economy under growth limits.
Section 6 will then draw the implications for accumulation under
growth limits. Section 7 will finally test the feasibility of the SSE as
proposed by prominent ecological economists by evaluating whether
any of the main reforms proposed by the proponents of SSE makes
sense, despite Marxian critiques. This can in theory be the case if the
proposed reforms can at least form an effective countervailing force
to the underlying cause for the growth dynamic identified by Marxian
economics as the drive to capital accumulation.
2. The Debate between Richard Smith and Philip Lawn
Any serious treatment of the question whether a capitalist SSE can
work will have to identify underlying causes of the growth drive of the
world economy. In this regard, a recent exchange between Richard
Smith, Herman Daly and Philip Lawn has been highly illuminating.
Before evaluating the debate, the definitions of the words capitalism
and socialism employed in it have to be made absolutely clear.
Although they propose the same kind of steady state, Daly and Lawn
do not use the term capitalism in the same sense, and both employ
definitions of the words capitalism and socialism that differ from the
ones Marxists would use. Lawn explicitly uses the term capitalism for
his vision of the SSE, whereas Daly does not (Daly, 2010). Instead, Daly
sometimes proposes a move in the direction of what he calls “socialist
democracy” (Czech and Daly, 2004: 102), or alternatively argues that
his SSE is different from both capitalism and socialism (Daly, 2010).
By capitalism, Daly means free market ideology and/or a
neoliberal configuration of the economy (Daly, 2010). With Lawn,
the term refers to an economic system in which the dominant part of
production of goods and services is based on private property of
capital and market exchange (Lawn, 2011: 2). Daly uses the term
‘socialist democracy’ as meaning a social–democratic configuration of
capitalism, and ‘socialism’ as referring to a Soviet style centrally
planned and state owned economy (Czech and Daly, 2004). Like Daly,
Lawn means by ‘socialism’ a system in which the state owns most of
the productive capital and organises the distribution of goods (Lawn,
2011: 2). Despite their differing usage of the term capitalism, Lawn
and Daly share a general vision of an SSE based on private ownership
and markets, regulated by a strong interventionist state. Such a
perspective cannot really be called socialist beyond the sense of
social–democratic, as it proposes no changes to the main characteristics
of the capitalist organisation of production.
In contrast, Marxist critics of the SSE use the word capitalism to
mean a society in which the production of goods and services is
mostly carried out by workers, wage-earners, for the profit of
employers, the owners of capital. This profit is realised through the
sale of goods and services in a (more or less) competitive market
(Kovel, 2007: 51ff; Smith, 2010: 31). This is also the definition I will
stick to in this paper. Socialism, in this vocabulary, would be a
democratic, classless arrangement of production relations in the
sense of a ‘free association of producers’ (Foster, 2009: 277; Kovel,
2007: 256; Marx, 1990: 171; Smith, 2010: 42). It is important to keep
in mind this idea of socialism, as such a conception based on
workplace democracy is fundamentally different from either a social
democratic configuration of capitalism or Soviet style bureaucratic
state ownership and planning.
2.1. Does ‘Profit or Die’ Mean ‘Grow or Die’?
In his article ‘Beyond growth or beyond capitalism?’ Richard Smith
criticises ecological economists who propose a steady-state capitalism
for assuming that economic growth is an option to be taken or
rejected by policy makers. He instead affirms the view of orthodox
economics that growth is an inherent necessity of any possible
configuration of capitalism:
[C]apitalism cannot exist without constant revolutionising of
productive forces, without constantly expanding markets, without
ever-growing consumption of resources. (…) [I]t was precisely
this market-propelled “motor” of economic development that for
Karl Marx so sharply distinguished the capitalist mode of
production from all previous historical modes of production
(Smith, 2010: 29).
Smith sees the maxim of “grow or die” as one of the fundamental
principles of capitalist development (Smith, 2010: 31).1
He has three
arguments in support of this claim. First of all, he argues with Adam
Smith that the continuously increasing division of labour raises
productivity and output, which drives producers to find new markets
for new products. Secondly, he contends that competition pushes
producers to conquer market share to benefit from economies of scale
and be able to re-invest more in technological improvements. His final
argument is that modern corporations are under sustained pressure by
shareholders to grow in order to maximise profits. Smith corroborates
this last point by reviewing the options of the auto industry to increase
profits. Automakers can enhance their profit margin by intensifying
production — by reducing the costs of inputs, wages and using
productivity — enhancing technology. Such measures, he argues, have
their limits, as competitors can employ the same strategies and wages
cannot be reduced below subsistence. On the other hand, profits can be
increased extensively, by increasing sales. He therefore concludes that,
“in the real world, (…) few corporations can resist the relentless pressure to
‘grow sales,’ ‘grow the company,’ ‘expand market share’ — to grow
quantitatively” (Smith, 2010: 34).
As capitalist economies are predominantly made up of firms
operating in this way, the drive to growth he sees in corporations
pertains just as well to the economy as a whole. He concludes that
capitalism cannot do without quantitative growth. The crisis that
resulted from the financial crash in 2008 is for him a window to what
a really-existing capitalist SSE would look like (Smith, 2010: 34), i.e. a
capitalism without growth is destructive. Consequently, Smith
1
Philip Lawn accuses Smith of misusing the term development here. It should be
clear however that Smith does not use the word to mean a “process of ‘betterment’ or
‘qualitative improvement’ [that] occurs when economic activity increases benefits more
than costs.” (Lawn, 2011: 3) Rather, what is meant is simply the process of capitalist
reproduction as it unfolds concretely through time.
255F.B. Blauwhof / Ecological Economics 84 (2012) 254–261
criticises Daly's argument that capitalist economies can be made to
develop qualitatively without having to grow quantitatively as a
highly unrealistic scenario. Reducing consumption of resources means
reducing consumption of goods, therefore cutting back on production
and so increasing unemployment and risking recession, which is why
the rat race of the consumer society needs to be kept going.
In response to Smith's criticism of the SSE, Philip Lawn offers to
my knowledge one of the best answers by pro-capitalist ecological
economists to their anti-capitalist critics (Lawn, 2011). To Smith's
argument that “the mantra of ‘grow or die’ is a law of survival”, he
replies that the real law of survival in the competitive marketplace is
‘profit or die’, not ‘grow or die’, and that profit-making does not at all
necessarily lead to growing a business (Lawn, 2011: 9).
In his rebuttal of Smiths' first argument of a ‘grow or die’ dynamic,
Lawn argues that Adam Smith in his time did not foresee diminishing
returns to scale, both at the level of the individual firm and that of the
economy as a whole (Lawn, 2011: 9). It is therefore not the case
anymore that the only limit for the expansion of sales is the limit of
markets. Lawn refutes the second argument of Richard Smith by
noting that there are limits to economies of scale, and that therefore
the expansion of single firms would not continue indefinitely (Lawn,
2011: 11). 2
Smith's final reason to assert firms follow the mantra
‘grow or die’ is that CEO's are under constant pressure from their
shareholders to maximise profit. Here Lawn responds that, while
shareholders are indeed interested in profit maximisation, this does
not have to lead to growth at all:
“[T]he ways that a business manager can maintain or increase the
profitability of a firm (…) can be sorted into three basic categories.
They are (1) increase output and sell more; (2) produce better
quality goods and sell the same quantity of output at a higher price
(revenue rises and costs remain unchanged); and (3) produce the
same quantity of output more efficiently” (Lawn, 2011: 10).
These options for increasing profitability correspond to Smith's
reasoning that companies can increase profits intensively, by cutting
labour and/or input costs (Lawn's option 3), or extensively by selling
more products (option 1). Of these three, Lawn argues that only the
first leads to growth. (The option to produce better quality goods is
not considered by Smith.) So Lawn seems here to show possibilities
for capitalists to make profits while not spurring economic growth. In
any case, he argues that the possibility of increasing profits without
leading to aggregate growth makes a capitalist SSE possible on a
macro-economic level. To deal with the unemployment generated by
the tendency of capitalists to cut back jobs and wages, he proposes a
government instituted Job Guarantee (a reform proposal I will deal
with in Section 7). Lawn therefore believes that a steady-state
capitalism is perfectly viable as an ecologically sustainable economy.
In what follows, I will evaluate whether Lawn points to a serious
possibility for a capitalist steady-state that develops qualitatively but
not quantitatively, i.e. profit making without (throughput) growth.
It is uncontroversial that Lawn's first course of action would lead
to growth in both throughput and GDP terms. The third does not lead
to growth at all. Instead, this option leads to a lowering of demand,
which can lead to products being left unsold. If anything, this option
leads to a reduction of GDP. This option however, does have its limits,
as wages, work hours per product and input costs cannot be cut
indefinitely, and because competitors will try to keep up with
efficiency improvements. Lawn's second option would lead to GDP
growth but not to throughput growth, as greater revenues would be
achieved by using the same amount of inputs. However, in this case
there is a build-up of the difference between the money values to be
realised in the market because of higher prices for the same amount
of products and the constant wages with which these products should
be bought, creating a lack of demand. There are two ways out of this
dilemma. Either the increase in values could be allowed to accrue to
wages instead of profits, or the profits gained by selling superior
goods could be used to consume goods rather than to reinvest.
Neither of these options makes sense from the perspective of profitmaximising
players in a competitive market. Investors are if anything
interested in lowering wages, and firms need to reinvest profits to
stay ahead of the competition.
So Lawn's argument that the profit motive of shareholders does
not have to lead to a growing economy can be characterised as
wishful thinking. Even if governments could force through regulations
that would restrict firms to developing quality goods while
providing the demand for higher prices in the market, they would put
firms within their borders at a serious competitive disadvantage and
therefore risk capital flight. The failure of the EU emissions trading
scheme to contribute significantly to the reduction of CO2
emissions
is very telling in this regard (Rest, 2011: 162). If a group of strong
industrial states like the EU cannot successfully carry out such a
limited scheme, where is the empirical basis for the belief that only a
lack of “political will” to institute an array of “Daly-like institutions”
stands in the way of a transition to a SSE?
3. A Marxian Economic Analysis of Accumulation in the Steady-State
Economy
The analysis advanced here draws on a definition of capital that is
quite different from the one used in mainstream economics and
ecological economics. Where John Stuart Mill and Herman Daly write
about a constant stock of capital, for example, they mean a constant
amount of ‘physical wealth’, including the means of production (Daly,
1972: 13f). This is a definition of capital completely different to
Marx's. Capital, in the context of Marxian political economy, is
defined as ‘value set in motion’, invested to make a profit, following
the cycle of money to commodity to money plus profit (M–C–M′). As
wealth thrown into circulation with the purpose of reaping as high a
profit as possible, capital has to go through certain stages, and can
therefore be found in different forms, whether as money, means of
production, commodities, or the labour power bought from a worker.
The simple formulation M–C–M′ shows the stages (money, commodity,
principal plus profit) that capital goes through to make a profit.
For example, profits made through (unequal) exchange exploit the
difference in prices of some good at two different times and/or places.
Different kinds of capital achieve this profit in different ways, but they
all can be reduced to the M–C–M′ cycle.
This accumulation process leads to an expansion of money values,
not expansion of throughput per se. It is therefore necessary to first
address the question whether this difference renders moot the
discussion of capital accumulation that follows. There is no denying
the possibility of improving resource use efficiency under capitalism.
Since the invention of the first steam engine, resource use efficiency
clearly has improved continuously. At the same time, however, the
increase in efficiency has historically developed at a pace slower than
GDP growth, reflecting a general rise in throughput through the
history of capitalism. The so-called ‘Jevons Paradox’ can explain this
general historical tendency (Alcott et al., 2008; Foster, 2009: 124ff).
Philip Lawn contends in the same article in which he responds to
Richard Smith that the Jevon's Paradox does not pose an insurmountable
challenge for a capitalist SSE (Lawn, 2011: 23). The reasoning
behind this claim goes beyond the scope of this article. However, it
can be argued that the possibility of decoupling throughput from GDP
growth is limited even under the best of circumstances.
Decoupling can, on paper, overcome direct limits to growth, or at
least push them further into the future. But this can only be true if the
2
Lawn also argues in the same passage that economies of scale are efficient and
desirable in a Steady State Economy as well. This argument is not included here
because it does not contradict Smith's claim that the drive to achieve economies of
scale gives firms an incentive to grow.
256 F.B. Blauwhof / Ecological Economics 84 (2012) 254–261
adaptation of the overall technological mix employed in production,
transport and distribution leads to improvement of resource efficiency
at a rate faster than the rate of economic growth. Put more
precisely, if growth is to be accomplished under conditions of
absolute throughput limitations, then the rate of efficiency improvement
has to be higher than the rate of GDP growth.
The improvement of use efficiency, however, also has its absolute
limits, even if one assumes that there are no cost-related difficulties
associated with recycling, installing less wasteful production technologies,
reorganising the labour process to reduce unnecessary
resource inputs and the like. The second law of thermodynamics
clearly means that efficiency can never improve beyond 100%. In
practice, no technology ever even comes close to that kind of
percentage. In any conversion of energy from one form to another,
some quantity is lost as excess heat, light, etc. But, as established
above, resource use efficiency has to keep rising faster than the rate of
economic growth . So, for economic growth to be possible despite
absolute throughput limits, the economy would eventually have to be
steered towards some kind of economic infrastructure approaching a
fully operational ‘cradle to cradle’ closed loop system for using natural
resources (Braungart and McDonough, 2002).
During the transitional period, if one wants to stay within the
parameters of a capitalist mode of production, the investments
required for such a transition would need to be either carried out by
the state or (expected to be) profitable enough for private investors
to undertake them. At the same time, the state would need to
successfully avoid general economic and financial crises to create the
investment climate in which such long-term and large-scale investment
plans are actually taken. For this purpose, too, enough profitable
investment opportunities would have to be created for capital to keep
accumulating. Furthermore, one would also have to successfully limit
corporations through regulation so that they refrain from profitable
investments that do not fit the plan for achieving an SSE. As really
existing capitalism is currently having enough trouble to find
sufficient profit opportunities as it is, one can conclude that indefinite
GDP growth despite absolute throughput limits is highly unrealistic.
So how, then, does the dynamic of capital accumulation lead to
growth? The idea in Marxian political economy is that a portion of the
surplus (that part of total revenue not paid out by capitalists in wages)
must be invested in expanding production and productivity for a
company not to lose out in competition. But as Herman Daly noted in
‘Towards a steady-state Economy’, if the surplus is not to lead to
growth, “then it must be consumed[.] (…) Accumulation in excess of
depreciation, and the privileges attached thereto, would not exist” (Daly,
1972: 27). Daly draws ethical conclusions from this statement, but
oddly enough does not pursue the obvious economic implications —
that the accumulation of capital (on a protracted basis at least) could
not be possible in the SSE! But if this is so, as Minqi Li asked in his
article ‘Climate Change, Limits to Growth, and the Imperative for
Socialism’, “then what's the point of being a capitalist?” (Li, 2008: 29).
Following this perspective, the central conceptual problem with
ecological economics that stops the discipline from taking a more critical
position on the possibility of a steady-state capitalism, is the failure to
see capital as value in motion. The use of the concept of capital as a static
stock variable, implicit also in definitions of natural capital, obscures the
ongoing process of capital accumulation. According to John Bellamy
Foster, this kind of thinking is precisely why the incompatibility of
capitalism and the steady state have not been properly understood:
“The principal characteristic of capitalism (…) is that it is a system of
self-expanding value in which accumulation of economic surplus —
rooted in exploitation and given the force of law by competition —
must occur on an ever larger scale” (Foster, 2002: 36).
According to Marxists, ecological economists do not see why
growth has become such an imperative and taboo for capitalists,
governments, and mainstream economists alike in the first place. The
problem with having no economic growth in a capitalist society is
that it leaves no other process than the ‘creative destruction’ of
capitalist crisis to re-establish the basis for profit making. This leads to
losses for the owners of firms that go bust in the process, but it also
poses a threat to the capitalist class as a whole insofar as crisis leads
to the rise of political movements interested in radical change.
So how do ecological limits, especially in terms of resource
throughput, impact on the accumulation process? On this point, there
are significantly different perspectives on how to deal with the relation
between economics and ecology. The first perspective is that of the socalled
‘ecological Marxists’ grouped around the journal ‘Capitalism,
Nature, Socialism’. This school of thought within Marxism argues that
the tendency of input costs to rise because of environmental constraints
poses a “second contradiction of capitalism” in its own right, with the
potential of rising input prices to culminate in crises of underproduction
(O'Connor, 1994, 1998). Theorists like John Bellamy Foster also see the
effect of ecological limits to growth on the accumulation process as a
tendency for the prices of raw materials and energy sources to rise
(Foster, 2009). Foster however rejects focussing on the economic effects
of ecological crises as an economism that downplays the severity of the
impact of capitalism on the world ecology as such, i.e. biodiversity, the
integrity of ecosystems' regenerative capacities, and so on (Foster,
2009: 206ff). He also sees “little evidence that these costs constitute
serious, insuperable barriers to accumulation (…) today” (Foster, 2009:
208) Interesting as this debate and many others between Marxists on
various questions of ecology might be, they need not concern us here.
One can instead simply list the ways in which ecological and resource
effects play into the accumulation process.
Increases in oil prices, for example, are widely known to lead
predictably to increases in unemployment, which affects aggregate
demand, and so create a dialectical interplay between what ecological
Marxists call the first and the second contradictions of capitalism.3
The
approach here is to trace within a general model of the accumulation
process the different possible causes for disruption, and see where
ecological factors play into the general accumulation cycle. A good
way to schematise the accumulation process is offered by elaborating
the classical M–C–M′ scheme of accumulating profit to show the
necessary steps for the accumulation of productive capital, where M
stands for money, C stands for commodity, LP stands for labour power
in the production process, and MP for means of production:
M
1
→C LP
2;5
=MP
3;4
 
→
6
M
′
:
The numbers in superscript correspond to David Harvey's succinct
summary of the possible ways the accumulation process can derail,
leading to economic crisis: insufficient money capital (1), scarcities or
political difficulties with labour supply (2), inadequate means of
production (3), inappropriate technologies and organisational forms
(4), resistance or inefficiencies in the labour market (5), and lack of
demand backed by money to pay for products in the market (6)
(Harvey, 2010: 47).
The tendency of rising input costs is the most importantly direct
economic effect. Rising resource costs also have a direct effect on
consumers through commodities like heating gas or oil, water, or
petrol for cars. Potentially, the production of certain depleting
resources will no longer be able to expand no matter what price
increase can be met by demand. For instance, no matter how much
the price of oil will rise, oil production will still one day reach its peak.
3
This is not meant to imply that ecological Marxists are not capable of tracing such
interplays, but rather that there is no particular reason to conceptualise a new,
qualitatively different contradiction separate from the one developed by Marx.
257F.B. Blauwhof / Ecological Economics 84 (2012) 254–261
So two identified ways in which ecological limits constrain the
accumulation process are as follows:
M→C LP
2
=MP
1;3
 
→
2
M
′
1) Costs of raw materials and energy resources used in the
production process. This could be seen as a special case of point
(3) above.
2) Costs of energy resources used by consumers and households. A
rise in petrol or electricity prices lowers money-backed demand
for other products (6) and can cause labour and political struggles
to flare up (2).
3) Limits to the supply of raw materials and/or energy sources. This
could also be defined as a problem of inappropriate technologies,
in the sense that technologies can be inappropriate by requiring
insufficiently available resources (4).
Theoretically, one could go much further and start listing more
indirect effects such as productivity losses and rising health costs
from the spreading of malaria caused by climate change. The most
important thing here, though, is the outline of a framework by which
the dynamics between different effects can be traced at least
qualitatively.
4. Marx's Reproduction Schemes Applied to Steady-State Capitalism
This section will demonstrate how Marx's reproduction schemes
can be used to investigate the effects of limits on GDP growth. In
Capital, these schematic models serve to analyse capitalist reproduction
“as conditioned not just by the mutual relations of the value
components of the social product but equally by their use-values, their
material shape” (Marx, 1991: 470). All in all, Marx's reproduction
schemes are an effort to “not (…) just map out monetary flows, but
rather to establish the basic exchanges required by capitalist reproduction
as a unity of production and circulation, of use value and value, and,
above all, as a class process that is both material and social” (Burkett,
2004: 462). The following discussion sticks to the most rudimentary
form of Marx's reproduction schemes describing ‘simple reproduction’
and ‘reproduction on an expanding scale’ as presented in
Volume I of Capital. In this version, the material side of the economy
is left out for reasons of methodology and simplicity. One could,
however, apply growth limits on more elaborate reproduction
schemes in a similar manner.
Simple reproduction is precisely the ‘Stationary State’ of which John
Stuart Mill wrote (Mill, 2004). Marx, like Daly, points out that in these
circumstances all surplus value (beyond the rate of depreciation)
would have to be consumed: “If [surplus value] serves the capitalist only
as a fund to provide for his consumption, and if it is consumed as
periodically as it is gained, then other things being equal, simple
reproduction takes place” (Marx, 1990: 712). In this situation, the class
relation between capitalist and worker is reproduced in each period,
and the amount of surplus value extracted from the workforce remains
constant as well. This is not hard to visualise in a numerical example,
where C is the total capital laid out, c represents constant capital
(means of production and raw materials), v represents variable capital
(wages), and s stands for surplus value created by the workers.
Reproduction Scheme 1: simple reproduction
Period 1: 100 C→80c+20v+10s→100 C′+10s cons.
Period 2: 100 C→80c+20v+10s→100 C′+10s cons.
Etc.
But, of course, this is not the way that capitalist production is
normally conducted. The simple consumption of a constant amount
of surplus value appropriated on the basis of ownership of the means
of production (while taking care they are maintained of course) is
naturally a form of income from wealth, but it looks a lot more like
the rent of a landlord than capitalist profit. After all, no part of the
initial investment or surplus value created (by workers) is being used
to expand the value of the initial investment.
To continue the cycle through which capital can realise more value
for itself, the capitalist must re-invest part of the surplus as capital.
This process of reconversion of surplus value into capital is what Marx
calls capital accumulation (Marx, 1990: 725). For this process of
accumulation to take place, “a part of the annual surplus labour must
have been applied to the production of additional means of production
and subsistence, over and above the quantity of these things required to
replace the capital advanced” (Marx, 1990: 727). This requires either
an increase in the productivity of labour, an increase in the
workweek, or additional workers. So “surplus-value can be transformed
into capital only because the surplus product, whose value it is,
already comprises the material components of a new quantity of capital”
(Marx, 1990: 727). In another numerical example it is easy to see the
difference. Suppose that, in the example used above, 80% of the
surplus value is reinvested, while proportions between c and v
remain fixed. Assume also that the newly hired workers produce at
the same rate of exploitation (s′=s/v, which is 50% in this example),
without increases in productivity or the workweek, and 20% is
consumed. In that case, the reproduction on an increasing scale
would look like this:
Reproduction Scheme 2: expanded reproduction
Period 1: 100 C→80c+20v+10s→108 C′+2 s consumed
Period 2: 108 C→86.4c+21.6v+10.8 s→116.64 C′+2.16 s consumed
Etc.
Different results would of course obtain if one introduced different
parameters. In the real world those parameters change all the time.
But here this example suffices to show the effect of re-investment
(above the rate of depreciation) in relation to simple reproduction.
The concrete result of capital accumulation (assuming here that
growth is possible) is thus both the realisation of capitalist profit, and
economic growth. “The cycle of simple reproduction alters its form and,
in the words of Sismondi, changes into a spiral” (Marx, 1990: 727).
Having reviewed Marx's stylised extrapolation of what happens
without and with capital accumulation, i.e. simple reproduction and
reproduction on an increasing scale, one can apply these schemes to
what happens when capital accumulation is attempted under
conditions of environmental constraints that do not allow growth to
take place. Here the contradiction between capital accumulation and
the SSE comes back into view. Let us first of all consider this situation
along the lines of the investigation of simple reproduction and
reproduction on an increasing scale.
Reproduction Scheme 3: accumulation with growth limit
Period 1: 100 C→80c+20v+10s→108 C′+2 s consumed
So what would happen in period 2? Because we must assume the
economy cannot grow, no investment in new machines and workers
is possible, nor is an increase in productivity. Therefore the extra 8C′
cannot be invested profitably, and is either consumed, devalued, or
both. The only way for capital to keep accumulating at the same rate
(C+s=118.80), therefore, is to pay workers less for the same
amount of output, thereby increasing the rate of exploitation (s/v)
while the sum of v+s remains equal (30). And because c+v has to
add up to the total investment laid out (C=100), the composition of
the capital laid out has to be as follows:
258 F.B. Blauwhof / Ecological Economics 84 (2012) 254–261
Period 2: 100 C→88.80c+11.20v+18.80 s→116.64 C′+2.16 s
cons.
In the real world, the reduction of wages could also be complemented
by firing workers if productivity rises, reducing benefits,
increasing efforts to avoid taxation, successful lobbying for state
subsidies, etc. All these possible ways to squeeze out or obtain extra
surplus value, however, are necessarily limited, and on the long run
socially unsustainable. It therefore seems unavoidable for this reason to
expect the rate of profit to fall under zero growth, and ultimately
approximate 0.
5. Minqi Li's Long Term Profit Rate Model
Apart from reproduction schemes as applied above, there are
other attempts at models capturing the contradiction between capital
accumulation and growth. Economist Minqi Li came up with a simple
model designed to shed light on precisely this question: “Can a zero
growth society be compatible with an economic system based on the
pursuit of profit and accumulation?” (Li, 2007: 26) This model
described the long-term (Limt → ∞) profit rate (R), for any given
percentage of profits in total GDP (ΠY) as dependent on the growth
rate (ΔY/Y) and the share of net investment in profit (ΔK/Π). In
formula form, the model looks like this:
Limt→∞R ¼ Π=Yð Þ Ã ΔY=ΔKð Þ ¼ ΔY=Yð Þ= ΔK=Πð Þ
(Li, 2007: 28)
If Li's model is accurate, the long-term average profit rate would
fall to zero if either the rate of growth were zero or if the share of net
investment of profits would fall to zero. These two possibilities are
precisely the two explored above in the reproduction schemes. In
case of growth limits, the profit rate would eventually fall to zero. We
can trace this back to the third reproduction scheme (accumulation
with imposed growth limits) to see a quantitative reason why this is
so; when growth is impossible, further accumulation of profits by
capital can only have the effect of continuous transfers of income
from wages to income from property. The other possible cause of the
profit rate falling to zero would be that the net share of investment in
profits would fall to zero. This is precisely the case if all surplus would
be consumed (beyond replacing worn out capital goods), which is the
case in simple reproduction.
These implications corroborate, from a Marxian theoretical
perspective, there is a fundamental contradiction between capital
accumulation and the limited nature of the planet. For Li, they also
shed a new light on Marx's law of the tendency of the rate of profit to
fall: “Given positive net investment shares, a zero or negative economic
growth rate implies that the profit rate would have to fall towards zero.
This would confirm the ‘law of the tendency for the rate of profit to fall’”
(Li, 2007: 29). The results obtained from Li's model again clearly
indicate a tendency towards prolonged crises rather than a harmonious
stable equilibrium in which there is room for redistribution and
a focus on qualitative improvement of use values (Li, 2007:33).
6. Implications of Accumulation without Growth
The final conclusion about accumulation under zero growth can
now be drawn: Accumulation without GDP growth can only be
sustained through crisis, which has the effect of transferring income
and wealth from (the state and) workers to capital. In other words, if
profits cannot be made by growing the pie, it is to be done by cutting
the rest in smaller slices. The only way out of this for those who want
to continue earning income from surplus value is to somehow stop
accumulation altogether and settle for a constant surplus as described
by reproduction scheme one. I agree here with Li that such a solution
would be quite unlikely: “Under normal conditions, it seems always
‘rational’ for individual capitalists to use a portion of their profit for the
purpose of accumulation. One might say that the capitalist class as a
whole faces an insoluble ‘prisoners'’ dilemma” (Li, 2007: 30). But even if
the capitalist class resolved its prisoners' dilemma and successfully
agreed to refrain from accumulation, simple reproduction should not
be relied upon as an equilibrium that is in any way stable:
“However, given the unstable nature of the capitalist economy,
instead of leading to a stable state with zero net investment, the
fall of the profit rate could lead to a general collapse of the
investors' confidence. In that case, the net investment share could
become negative (…) Not only there would be no more capital
accumulation, but capitalism would also fail to maintain simple
reproduction” (Li, 2007: 30).
Such an argument can also be supported with concepts from
neoclassical macroeconomics that are designed to capture the same
observed tendency — that capital will generally be invested around
the world where expected gains are highest. This is what formulae
like the covered and uncovered interest rate parities are meant to
express (Gärtner, 2006: 127). So to expect capital not to withdraw
from an investment without any basis for gains at all would discount
quite a bit of economic reality and theory. From this generally
Marxian perspective, then, it seems that the only other way out of the
contradiction is to intervene in the accumulation process, and change
the exploitative social relations in the workplace that makes this
process possible to begin with. But ecological economists have also
proposed reforms to deal with the regressive tendencies of the SSE.
These need to be judged on their ability to deal with the problem of
accumulation as laid out above.
7. Capital Accumulation and Reform Proposals for an SSE
The Marxian analysis locates the problem of economic growth and
the capitalist economy's relation to nature in a dynamic that is
overlooked by most other disciplines, including ecological economics.
The proposals made by ecological economists are therefore not
specifically designed to deal with the dynamic of capital accumulation.
But capital, even with the benefit of full capital mobility, cannot
operate in a social and legal vacuum. Society is not 100% dictated by
‘the law of value’. Legislation, policy regulation as well as technological,
ecological and social conditions slow down and set limits on the
process. Instead of being dismissed out of hand (Foster and Magdoff,
2010: 13), the socio-economic reforms proposed by ecological
economists should be re-considered with the benefit of the insights
offered by Marxian analysis. A — non-exhaustive — list of social–
economic reforms proposed by ecological economists would have to
include:
1. Minimum and maximum income and wealth limits (Daly, 2008)
2. Progressive income taxes (Daly and Cobb, 1989; Daly, 2008)
3. Public employment programmes such as a Job Guarantee (Lawn,
2009)
4. Basic income (Daly, 1972)
5. Reducing the workweek (Daly, 1972)
6. Spreading ownership of wealth and businesses (Daly, 2008)
7. Organising Businesses as Producer Cooperatives (Booth, 1995)
How, then do these proposals impact on the accumulation
dynamic? Proposals 1 to 4, and possibly 6 and 7 as well, can be
summed up as measures taken by an interventionist state to
redistribute the original distribution resulting from the existing
configuration of the market. Rephrasing this concept in a way that
links back to the Marxian analysis, this consists in the state taking part
of the surplus produced in firms. Whether through benefits, public
work schemes or a basic income plan, the effect of reforms (1), (2),
(3), (4), and (6) is to take part of the surplus produced in firms and
259F.B. Blauwhof / Ecological Economics 84 (2012) 254–261
redistribute it to the poor and the unemployed. In one respect, public
work schemes are a special case as they allow for the possibility of
determining politically what kind of use values should be created
independently from market pressures. Even so, the distribution effect
of such schemes is still precisely the same: to redistribute part of the
surplus to create jobs for the unemployed.
Reducing the workweek (5) would not redistribute surplus but
rather limit the amount of surplus that can be extracted from the
workforce, with the objective of spreading jobs and enabling more
leisure. So it is clear that these kinds of measures have the necessary
effect of reducing the amount of profits investors can make and
therefore endanger their bottom line. They would certainly have to if
they are to keep the drive to accumulation in check. Nevertheless,
history proves that there is at least limited political leeway for these
reforms. In more interventionist (western) welfare states or ‘developmental’
states in ‘developing’ or ‘underdeveloped’ countries, such
policies have been implemented, and they have certainly made a
difference to income distribution and public welfare. There are
however two problems with those ‘statist’ solutions to the problems
of capitalism.
First of all, in a capitalist society the state itself is not an
independent actor, but highly dependent on capital for a series of
reasons. Beyond the degree to which politicians and officials have
ideological dispositions favourable to the business class, or personal
ties with it, there is the widespread, institutionalised lobbying that
spurred political scientist Thomas Ferguson to formulate an ‘investment
theory of parties’ for the United States (Ferguson, 1995). But
there is also an even more structural way in which states are
dependent on capital. Proposed reforms result in either taking an
increased part of the surplus as taxes, or reducing the amount of
surplus that can be produced by limiting the workweek. Ultimately,
the activities and power of the state cannot be funded in another way
than through taking part of the surplus. That makes the state in a
capitalist society dependent on capital investment to create taxable
income-creation in the first place (with the one possible exception of
profits gained through public industry) (Harman, 1991). Indeed, most
governments in the world have ministries of economic affairs whose
principal job it is to make their country ‘competitive’ by creating the
kind of ‘investment climate’ that convinces business to invest in the
country. This creates an interest and a dependency that directly
undermine and contradict the aim of slowing down accumulation.
After all, firms strive to increase profits by increasing the surplus in
relation to wages and other costs, while the reforms dealt with here
would cut back the amount of surplus firms can generate and retain
as profits.
The other reason why such welfare state reforms are flawed as a
strategy is that, historically, other conditions (apart from growth)
have to be in place for legislation so hostile to business to be
implemented and defended. In most cases, advocates and beneficiaries
of such reforms have to draw upon public support and be
organised politically (and industrially). Even when such regulation is
won, one leaves the structure of the capitalist class in place, with
every incentive and all the resources to undo the regulation that
restricts its expansion and reduces profit margins. Economist Rick
Wolff points out that after the Great Depression in the 1930s, farreaching
reforms were introduced by the US government that were
aimed at establishing both social security and full employment
(through the Public Works Administration, for example, or the GI
Bill). Legislation was also introduced to prevent the kind of financial
speculation that led to the stock market collapse of 1929, i.e. the
Glass–Steagall Act (Wolff:, 2010). Roosevelt, who originally ran for
president as a moderate balanced budget candidate, pushed through
such radical reforms because of pressure from mostly illegally
organised workers, populists, and socialists (Smith:, 2006). But, as
Rick Wolff argues, the internal organisation of the corporation was
not changed, and therefore the capitalist class was left with the
resources and incentive to undo the legislation, which is precisely
what happened. The process sped up in the 1980s during the turn to
‘neoliberalism’ that enabled the current crisis to develop:
“The 1970s crisis of a state capitalism allowed business to shift
from evading to abolishing them. That was the content of the
“Reagan revolution” begun in 1980. Together with wage stagnation
and globalisation, profitability then commenced an historic
upward surge.” (Wolff, 2009: 7)
Many authors, like Naomi Klein and David Harvey, have documented
the implementation and consequences of the Washington
Consensus in other parts of the world (Harvey, 2005; Klein, 2007).
Considering that we are in a new structural crisis made possible by
another laissez faire form of capitalism, Wolff argues that it would be
foolish to simply call for regulation again, expecting different results.
Rather, “a new left strategy would enlarge its pursuit of classic state
capitalist reforms to include transforming enterprises' internal organizations
of production. The strategic goal would be for workers inside enterprises to
displace their boards of directors and become their own collective boards of
directors” (Wolff, 2009: 14). This brings us to the only reform proposal
not yet reviewed here.
The idea of producer cooperatives is, instead of relying on the state
to act as a regulating limit for capital accumulation after the fact, to
change the way in which the surplus is owned and allocated by
democratising the way businesses are organised. Producer coops tend
to maximise income-per-worker instead of corporate profits (Booth,
1995: 227). Unlike capitalist corporations, coops can deal with a zero
growth situation, as workers have no interest in firing themselves as
soon as profitability slumps. But workers in producer cooperatives do
produce for a competitive market and have an interest in profits. They
even tend to invest more in expansion to create jobs, at least as long
as there is significant unemployment (Booth, 1995: 234). This
observation of a tendency to growth is also corroborated by Gorm
Winther's and Richard Marens' study of cooperatives in the states of
New York and Washington (Winther and Marens, 1997).
So how can the tendency towards growth in cooperatives be
restricted? Booth, who is concerned with limiting economic growth,
seems to argue that this tendency to re-invest the surplus in
expansion can be limited by a policy of self-restraint on the part of
the producer cooperative:
“By reducing the rate of forced savings through the immediate
distribution of some portion of annual surplus earnings to
workers, the pressure to grow could be reduced by reducing the
pool of available capital” (Booth, 1995: 234).
Here Booth does not take into account the pressures of a
competitive market that will force cooperatives to invest in
expansion, under normal economic conditions. As long as cooperatives
still have an incentive to grow, cooperatives would seem to be in
the same kind of prisoner's dilemma as capitalist corporations. This
problem would require, if not a complete abolition of commodity
production for the market, at least some kind of effective regulation,
whether provided by a state or an umbrella organisation set up by the
cooperatives themselves. So replacing the structure of the corporation
with the cooperative per se will not be enough to deal with limits
to growth. It is unrealistic in any case to imagine such a change
without similar transformations on various other levels of society.
When cooperatives spread, they tend to form a conscious political
movement, with much wider social, cultural and political ideas, aims
and impacts (Lavaca Collective:, 2007).
The recent experience of the Argentinean cooperative movement,
which is by far the most promising example, illustrates that success
depends on both industrial and political self-organisation but also on
legislators and the judiciary (Lavaca Collective:, 2007).
260 F.B. Blauwhof / Ecological Economics 84 (2012) 254–261
Expropriations were won by first defending occupied factories from
the owners and police, and then by winning expropriation in court.
Assuming the capitalist class will not let themselves be replaced
without a political struggle, any movement that aims to promote the
cooperative form of organisation in existing workplaces needs to be
supported through other institutions, whether those of a state or new
forms of political organisation, to survive.
8. Conclusion
In this paper I have argued that capitalism cannot be expected to
lead to qualitative development within planetary limits. But does the
re-evaluation of the socio-economic reforms in Section 7 lead to a
conclusion that advocating welfare state reforms is useless because
they fail to deal with the dynamics of capitalist reproduction, as
Foster seems to argue (Foster and Magdoff, 2010)? Not exactly, at
least not that way. Such reforms can be a step on the way to solving
the problem, but are not capable of overcoming the basic problem
permanently, which is the drive to accumulation. Neither can the
single solution be proposing a cooperative form of business organisation.
Instead, the strategies of redistributing surplus through
reforms and changing the way it is produced and decided over
should be seen as necessarily complimentary. Rick Wolff sums up this
point rather well:
“As the savviest reformers and revolutionaries always understood,
posing the issue as reform or revolution is a mistake. Revolution
should rather be grasped as that supplement to reform which is
indispensable to securing such reforms as can be won.” (Wolff,
2009: 14)
If a revolutionary social change is what is required to make a truly
ecologically sustainable economy possible, the question is which
actors would be capable of making this change happen. Here I am of
the opinion that, environmental movements would do well to ally
themselves with trade union struggles inside workplaces. This
strategic orientation is central because workers, as the creators of
the products and profits of corporations, are in a unique position to
gain control over the qualitative decisions about what, how and for
what purpose goods and services are produced. Widely dispersed
homogeneous movements fighting for specific ecological issues might
do very important work, but will not be able to make this kind of
change happen without joining forces with a workers' movement
that is once again on the rise in the context of a global economic crisis.
A coalition like that could start to lead the way to a kind of socialism
that is based on democracy at the workplace, the details of which are
developed further by theorists like Albert (2003) and Devine (1988).
In such a society, the vast majority of people around the world could
participate in a collective decision making process about what kind of
use values should be created according to people's needs and the
limits of the planet's resources and ecosystems.
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