Is  a  steady  state  /degrowth   economy  possible  within   capitalism?      Drawing  from     Blauwhof  (2012)   Overcoming  accumula9on:  Is  a  capitalist  steady-­‐state   economy  possible?     Ecological  Economics  84  (2012)  254–261         What  do  we  mean  by  capitalism?    Defini9ons  vary  hugely!   •  A  society  in  which  the  produc9on  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)  compe99ve  market  (Kovel,  2007:  51ff;  Smith,  2010:  31).   •  Oxford  English  Dic1onary:  “a  system  which  favours  the  existence  of  capitalists.”   •  An  economic  system  in  which  the  dominant  part  of  produc9on  of  goods  and  services  is  based  on   private  property  of  capital  and  market  exchange?  (Lawn,  2011)   •  Merriam-­‐Webster's  Collegiate  Dic1onary:  an  economic  system  characterized  by  private  or   corporate  ownership  of  capital  goods,  by  investments  that  are  determined  by  private  decision,  and   by  prices,  produc9on,  and  the  distribu9on  of  goods  that  are  determined  mainly  by  compe99on  in  a   free  market”   Richard  Smith  (2010):    ‘Grow  or  die’  is  the  law  of  survival     [C]apitalism  cannot  exist  without  constant  revolu9onising  of  produc9ve   forces,  without  constantly  expanding  markets,  without  ever-­‐growing   consump9on  of  resources.  (...)  [I]t  was  precisely  this  market-­‐propelled   “motor”  of  economic  development  that  for  Karl  Marx  so  sharply   dis9nguished  the  capitalist  mode  of  produc9on  from  all  previous   historical  modes  of  produc9on  (Smith,  2010:  29).       1.  division  of  labour  raises  produc9vity  and  output,  which  drives   producers  to  find  new  markets  for  new  products.     2.  compe99on  pushes  producers  to  conquer  market  share  to   benefit  from  economies  of  scale  and  be  able  to  re-­‐invest  more   in  technological  improvements.     3.  modern  corpora9ons  are  under  sustained  pressure  by   shareholders  to  grow  in  order  to  maximise  profits.     Similar  arguments  made  by  Marxist  economists  and  ecologists  like   John  Bellamy  Foster,  James  O'Connor  and  Joel  Kovel     Philip  Lawn  (2011)   ‘profit  or  die’,  not  ‘grow  or  die’,  is  the  law  of   survival  in  capitalist  economies!   Profit-­‐making  does  not  necessarily  mean  growth:   “[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  beker  quality  goods  and  sell  the  same   quan9ty  of  output  at  a  higher  price  (revenue  rises   and  costs  remain  unchanged);  and     (3)  produce  the  same  quan9ty  of  output  more   efficiently”  (Lawn,  2011:  10).     Lawn  argues  that  only  the  first  leads  to  growth.       How  can  a  firm  boost  profits?   £10   1.  Expand  produc9on   £10   How  can  a  firm  boost  profits?   £10   How  can  a  firm  boost  profits?   2.  Increase  quality  &  raise  price   £30   How  can  a  firm  boost  profits?   £10   How  can  a  firm  boost  profits?   3a.  Improve  resource  efficiency   £10   How  can  a  firm  boost  profits?   3a.  Improve  resource  efficiency   £8   (possible  rebound  effect)   How  can  a  firm  boost  profits?   £10   How  can  a  firm  boost  profits?   3b.  Improve  labour  ‘efficiency’     £10   How  can  a  firm  boost  profits?   3b.  Improve  labour  ‘efficiency’     £8   (possible  rebound  effect)   How  can  a  firm  boost  profits?   What  will  be  the  results  if  each  of  these   strategies  are  pursued  over  the  long  term?   THE  BASELINE   problem  of  deficient   demand  if  prices  rise  while   wages  dont     problem  of  deficient   demand  if  wages/ employment  falls  but   prices  don’t   problem  of  rebound  effect   if  prices  fall  but  no  caps  on   resource  use  are  in  place   Value  added  is  the  difference   between  the  sale  price  of  a  product   and  the  cost  of  outside  purchases  for   materials  and  services.  Roughly   speaking,  it’s  the  revenue  to  be   shared  between  labour  and  capital     Distribu>on  issues   •  “[W]hen  growth  is  impossible,  further   accumula9on  of  profits  by  capital  can  only   have  the  effect  of  con9nuous  transfers  of   income  from  wages  to  income  from   property.  […]  In  other  words,  if  profits   cannot  be  made  by  growing  the  pie,  it  is  to   be  done  by  cu@ng  the  rest  in  smaller   slices.”  (Blauwhof,  2012,  259)   •  Quite  apart  from  economic  jus9ce,  this  growing  inequality  presents  a   problem  for  economic  stability,  because  the  richer  you  are    the  lower   your  propensity  to  spend  (Kalecki,  1943).  Aggregate  demand  can  only   remain  stable  under  condi9ons  of  increasing  inequality  if  there  is  an   increase  in  borrowing  –  which  is  unsustainable.     •  So  therefore  we  need  to  prevent  accumula9on!  As  Herman  Daly   writes  in  ‘Towards  a  steady-­‐state  Economy’,  Accumula>on  in  excess   of  deprecia>on,  and  the  privileges  aCached  thereto,  would  not   exist”  (Daly,  1972:  27).  Similar  conclusion  reached  by  Schumpeter  and   Keynes  (Kerschner,  2010:545)!   Can  we  expect  capitalists  to  spend  profits   on  consump>on  instead  of  reinves>ng?   Gordon  and  Rosenthal  (2003)  argue  that   since  the  actual  profit  rate  is  variable  and   uncertain,  an  enterprise  which  doesn’t   invest  in  the  expecta9on  of  growing  the   value  of  outputs  ‘faces  a  future  in  which   bankruptcy  is  prac9cally  certain  in  the  long   run,  and  has  an  intolerably  high  probability   in  the  short  run,  while  providing  likle  or  no   compensa9ng  benefits  by  way  of  growth  in   income  or  wealth  un9l  bankruptcy  takes   place.’  (2003:25)     The  only  ways  to  avoid  such  miserable  prospects  are  for  firms  to     •  engage  in  a  high  rate  of  net  investment;   •  reduce  expenditure  rate  below  the  profit  rate;  or   •  reduce  the  uncertainty  around  profits  by  establishing   monopoly  power.   Some  conclude  that  we  need   therefore  to  get  rid  of  the  market   See  E.g.  See  Robin  Hahnel‘s   advocacy  of  “Participatory   Economy”,  which  would  include  a   “participatory  planning  procedure  in   which  councils  and  federations  of   workers  and  consumers  propose  and   revise  their  own  interrelated   activities  without  central    planners  or   markets,  under  rules  designed  to   generate  outcomes  that  are   efficient,  equitable,  and   environmentally  sustainable.”   See  also  Erin  Olan  Wright’s  cri9que,  and  advocacy  instead  of  “Market  Socialism”       Key  challenges  if  we  want  to  maintain   markets  and  private  ownership  of   capital   1.  how  to  prevent  overall  growth  in  environmental  impact?   –  Caps  on  fossil  fuel  use  /  rising  taxes  on  resources  /  ban  very  harmful   produc9on  processes?   2.  how  to  prevent  owners  of  capital  taking  an  ever  greater  ‘share  of   the  pie’  in  their  search  for  profit?   –  shit  to  worker-­‐owned  coopera9ves?     •  See  Erik  Olan  Wright’s  descrip9on  of  Market  Socialism  in  “Alterna9ves  to   Capitalism”  (2014)   •  See  also  D.  Schweickart,  Ater  Capitalism,  Rowman  &  Liklefield,  Oxford,  2002.   –  Strengthen  trades  unions?     –  Minimum  and  maximum  income  and  wealth  limits  (Daly,  2008)?     –  An9-­‐monopoly  laws/taxes?   3.  how  to  prevent  capital  flight?   –  capital  controls?   Is  this  s>ll  capitalism?   Further  reading   MAIN  TEXTS  REFERENCED  IN  THIS  LECTURE   Smith,  R.  (2010).  Beyond  growth  or  beyond  capitalism?  real-­‐world  economics   review,  issue  no.  53   (NB  you  can  find  a  blog  from  Daly  in  response  here:   hkp://steadystate.org/cold-­‐war-­‐let-­‐overs/)   Lawn,  P.,  2011.  Is  steady-­‐state  capitalism  viable?  A  review  of  the  issues  and   an  answer    in  the  affirma9ve.  In:  Costanza,  R.,  et  al.  (Ed.),  Ecological   Economics  Reviews,  1219.    Annals  of  the  New  York  Academy  of  Sciences,  New   York,  pp.  1–25.   Blauwhof,  F.  (2012),  Overcoming  accumula9on:  Is  a  capitalist  steady-­‐state   economy  possible?  Ecological  Economics,  Volume  84,  December  2012,  Pages   254–261   Gordon,  M.,  and  Rosenthal,  J.  (2003).  Capitalism’s  Growth  Impera9ve.   Cambridge  Journal  of  Economics.  27:  25-­‐48   Foster,  JB.  (2011).  Capitalism  and  degrowth:  An  impossibility  theorem.   Monthly  Review,  January  2011,  Volume  62,  Number  8.  Available  here: hkp://monthlyreview.org/2011/01/01/capitalism-­‐and-­‐degrowth-­‐an-­‐ impossibility-­‐theorem/       What  might  a  post-­‐capitalist  economy  look  like?     Boillat,  S.,  Gerber,  J-­‐F.,  Funes-­‐Monzote,  F.  R.  (2012)  What  economic   democracy  for  degrowth?  Some  comments  on  the  contribu9on  of  socialist   models  and  Cuban  agroecology.  Futures.  Volume  44,  Issue  6,  Pages  600–607.      NB  pp601-­‐2  of  this  ar9cle  very  briefly  introduces  a  few   different‘socialist’  models  that  might  be  more  compa9ble  with  degrowth  than   capitalism.  You  can  follow  the  references  for  more  details.       Johanisova,  N.  and  Wolf,  S.  (2012).  Economic  democracy:  A  path  for  the   future?  Futures  44  (2012)  562–570   For  a  detailed  comparison  of  Par>cipatory  Economics  and  Market  Socialism   see     Hahnel,  R,  and  Wright,  E.  (2014).  Alterna1ves  to  Capitalism:  Proposals  for  a   Democra1c  Economy.  New  Let  Project.  E-­‐book.   hkp://www.newletproject.org/index.php/site/ar9cle_comments/ alterna9ves_to_capitalism_proposals_for_a_democra9c_economy   ((NB  On  pp  64-­‐65  Erik  Olin  Wright  offers  one  possible  way  of  dis9nguishing   ‘capitalist’  system  from  ‘socialist’  or  ‘sta9st.This  book  is  free  to  download  for   kindles  but    I’ve  uploaded  a  PDF  drat  of  this  book  to  the  website  in  case  you   don’t  have  a  kindle!)         Some  high  profile  books  which  explicitly  or  implicitly  make  a  judgment   about  the  compatability  of  sustainability  and  capitalism.     You  may  not  have  9me  to  read  the  whole  books,  so  I’ve  provided  some  links   to  summaries/extracts  below:   Naomi  Klein  (2014).  This  Changes  Everything.  See  extract  in  The  Guardian   hkp://www.theguardian.com/environment/2015/mar/08/how-­‐will-­‐ everything-­‐change-­‐under-­‐climate-­‐change     Jonathan  PorriC  (2005).  Capitalism  as  if  the  world  ma7ers   And  here  is  an  ar9cle  where  he  summarises  his  posi9on:  hkps:// www.opendemocracy.net/globaliza9on-­‐climate_change_debate/ capitalism_3074.jsp       Paul  Hawken,  Amory  Lovins,  and  L.  Hunter  Lovins  (1999).  Natural   Capitalism:  Crea;ng  the  Next  Industrial  Revolu;on   "A  Roadmap  for  Natural  Capitalism"  (Downloadable  PDF-­‐745k)  readable   summary  of  the  book's  basic  business  case  reprinted  from  the  Harvard   Business  Review,  May-­‐June  1999.  (www.hbsp.harvard.edu/hbr/index.html)