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On the End of Capitalism

by Ulrike Herrmann Monday, May. 04, 2015 at 8:33 AM
marc1seed@yahoo.com

The bridge from capitalism to the new "post-growth economy" is lacking. Hardly anyone reflects about the process of transformation...If the climate should be spared, flying cannot be a human right. The R-word will be unavoidable again: renunciation.

ON THE END OF CAPITALISM

By Ulrike Herrmann

[This article published on 4/10/2015 is translated from the German on the Internet, http://www.monde-diplomatique.de/pm/2015/04/10.mondeText1.artikel,a0016.idx.5. Ulrike Herrmann is an economics correspondent of “tageszeitung” and author of “The Victory of Capital,” Piper Verlag, Munich, 2015.]

Capitalism is condemned to ruin. Capitalism needs growth but infinite growth is impossible in a finite world. Many capitalism critics rejoice as soon as they hear this prognosis but the end cannot be imagined as peaceable. Capitalism will collapse in a chaotic and brutal way – according to everything that we know.

Pessimism may seem exaggerated at first. An ecological circulation economy could overcome capitalism. Renewable energy, recycling, durable goods, public transportation, eating less meat, biological agriculture and regional products are important keywords. People can renounce on consumption and this self-limitation can even be relaxing. All the studies show affluence does not make people happier – as soon as a certain income threshold at around ,500 per capita and per year is surpassed. In comparison, Germans now average ,000 per capita and Austrians over ,400. A little renunciation would be reasonable.

Thus an ecological circulation economy is possible but unfortunately one problem is still unsolved. The bridge from capitalism to this new “post-growth economy” is lacking. There is hardly any reflection about the process of transformation. Capitalism hits the wall but no one investigates the breaking distance.

Many critics believe renouncing on growth and abolishing capitalism is only a question of moral will or they regard the non-realization of the ecological circulation economy as a political problem of the hierarchy of power. There are actually purely economic reasons why a transition to a new system is so difficult or even impossible. Proposals for a post-growth society are always ultimately based on the idea of reducing labor and income. Still capitalism is not a bathtub in which one simply drains off half the water. It is not a stable system that tends to balance and produces reliable income that can be quietly lowered. Rather capitalism is a permanent process. Chaotic shriveling threatens as soon as there is no growth – which society knows instinctively.

The financial crisis from 2007 was instructive. While production hardly fell, economic packages were hectically concocted and short-time work and clunker premiums resolved to save jobs. The environment does not automatically profit when the economy staggers, as demonstrated in Greece. Because many Greeks could not afford heating oil any more, they cut down the last trees. In an economic crisis, nature is the first5 casualty.

Capitalism functions differently than advertising or even its critics suggest. The commodities that we consume are not central. The products are only expedients for a higher goal. The final goal is jobs. We work to work. Only one with work has income, security and acknowledgment.

In 1958 the US economist John Kenneth Galbraith referred to a strange phenomenon. In an economic crisis, there is never criticism that many goods were not produced because the factories were not working at full capacity. Instead the jobs that were eliminated in crisis are mourned. Supposedly we consume ourselves to death – but that is a false perception. We produce to death. The collective goal is full employment, not full consumption.

THE GOAL IS WORK, NOT CONSUMPTION

Theoretically the solution sounds simple. We work at half the rate and do not only consume half the amount. Then everyone would have the necessary livelihood to satisfy his or her needs. This idea is gladly presented as basic income. When everyone has a guaranteed income, the inclination to work would certainly decrease. However a basic income would fuel capitalism and not brake or slowdown capitalism. Today’s Hartz IV recipients (radical German welfare reform that combined unemployment benefits and income support, drastically reduced the duration of benefits and was ruled in violation of the German Basic Law by the German Constitutional Court) would have more money. Employees could not be extorted or blackmailed and would negotiate better salaries. Demand would increase and stimulate growth.

Obviously coercive measures could be taken and maximum allowed working hours prescribed or growth completely prohibited. Businesses could be limited to reinforcing certain contingents. However that would trigger chaotic and uncontrollable shriveling. The Swiss economist Hans Christoph Binswanger occupied all his life with environmental questions and the inventor of the eco-tax describes how this whirlwind functions. The question whether capitalism can renounce on destructive growth haunted Binswanger. His answer was No. The “investment chains” would break, as he explained technically. In other words, firms only invest when they expect profits. For the overall economy, profits are identical with growth. Without growth, businesses must fear losses. When profits do not arise, businesses no longer invest. Without investments, the economy collapses. An uncontrollable downward spiral would begin that calls to mind the 1929 world economic crisis. Jobs are lost, demand falls, production shrivels and more positions disappear.

If growth is prevented, capitalism would end. However the result would not be that ecological circulation economy that environmentalists hope for. It would be an economy in free fall that produces panic. People are deeply shaken when they lose their jobs and their income. All massive economic crises were extremely dangerous – for democracy.

To some growth critics, this systemic view that sees the economy from “above” is very suspect. They prefer to begin from “below” in that every individual changes his consumption and his work context. They imagine the economy as a sum in which many little niches become a new whole at the end. The “public interest economy” of the Austrian Attac founder Christian Felber functions according to this principle, issues certificates to ecological enterprises and hopes that all businesses will be certified some time or other. At first this idea seems brilliant because many businesses already produce sustainably. Heini Staudinger who manufactures comfortable and very stylish eco-shoes is one of those businesses that have become icons of the growth critics.

Still the approach of converting individual enterprises and revolutionizing the whole economy at the end does not function. Growth-critics make the same mistakes as their neoliberal opponents. They believe the economy is only a sum of all businesses. They confuse business administration with the national economy and do not understand that capitalism is a process that can only produce income when there is a prospect for growth. Binswanger correctly described this dilemma that does not disappear when it is ignored.

Concepts like “Green New Deal” or “sustainable growth” have been popular for some time since growth cannot be simply abolished. They live from the hope that growth and raw material consumption will be “uncoupled” as efficiency increases. Energy-expenditure per commodity unit should fall so the climate does not suffer and growth is possible. Suddenly the economy and ecology should not be opposites. This sounds like squaring the circle.

VERY STYLISH ECO-SHOES DO NOT HELP

The concept of “uncoupling” is not entirely out of place because energy consumption per commodity unit has been cut in half since 1970. The environment was not relieved since the “rebound or boomerang effect” occurred. Cost savings were used to extend goods production so the total energy consumption did not fall but increased.

Simply changing to renewable energy is not sufficient as an expedient. Wide areas of the economy cannot be run with eco-current. The electro-car is still in the experimental phase. Passenger aircraft can only take off with kerosene. But air traffic alone destroys every hope of reaching climate goals as shown by a simple calculation of the post-growth economist Niko Paech. If global warming should remain limited, every human earthling in the year 2050 may only have an output of 2.7 tons of CO2 per year. A flight from Frankfurt to New York entails 4.2 tons and a flight to Sydney 14.5 tons. Everyone does not undertake long-distance holidays but the trend in air traffic is strongly upward. Every German citizen now leaves behind 11 tons of carbon dioxide a year.

If the climate should be spared, flying cannot be a human right. The unpleasant R-word that threatens growth will be unavoidable again: renunciation. This cannot only be limited to flying since energy consumption can only be reduced by producing less.

All concepts of “sustainable growth” are deceptive packaging because there cannot be any growth anymore but rather more sustainability. Thus the correct term would be “growing sustainability.” Here is one example: every concept on “sustainable growth” assumes car-sharing will be carried out and public transportation will increase. But fewer cars are purchased when several families share one car or sit in the bus. The auto industry, the great pride of Germans, will shrivel.

Moreover concentrating only on climate change is not enough. The CO2 output is not the only environmental problem. Land consumption, water shortage, dying of species and toxic wastes are just as alarming. Around 100,000 different chemicals have been brought into the world; little is known about their interactions. Renunciation is without alternative if we want to save ecosystems.

A dilemma presses. The system cannot continue without growth, complete green growth is impossible and normal growth leads inevitably to ecological catastrophe. Capitalism seems like a curse. Capitalism made possible wealth and technical progress and could enable us to manage with less work. Nevertheless continued production occurs even though this leads to ruin.

Only a pragmatic defiance remains in this quandary: fly as little as possible, avoid waste, rely on wind and sun and pursue biological farming. But we should not imagine that this is “green” growth. How capitalism can be transformed without it collapsing chaotically must be first researched.

more at www.openculture.com

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