153
Few would disagree that beneath today’s political turbulence there lies a profound economic malaise. Growth rates in the advanced economies are stagnating; when pumped by stimulus, the gains go disproportionately to upper-income brackets. Oligopolistic firms have repositioned themselves at the pinnacles of global value chains, retaining property rights while outsourcing the processes of production to ever-cheaper bidders, forced to compete among themselves. Large portions of corporations’ retained earnings are no longer invested domestically but channelled into financial assets, ‘de-risked’ by public bailout. Meanwhile, investment decisions that will shape the future of life on earth—geo-engineering, artificial intelligence, carbon capture, nuclear power—are taken by tiny private coteries, incentivized to back the riskiest long shots.footnote1
Underlying this vertical trend towards the oligopolistic consolidation of economic power, there has been a secular horizontal shift in economic activity, from manufacturing into services—health, education, retail, administration—where productivity growth rates are lower and profitability can only be maintained through intensified exploitation or higher prices. Deindustrialization has been unfolding for a half-century in advanced economies. Symptoms of ‘premature deindustrialization’, long entrenched in Brazil and South Korea, are now appearing in China. And everywhere, falling birth rates mean fewer young workers and consumers, shrinking future markets and weakening incentives for private investment in expanding productive capacities just as care burdens rise. Unmet social needs proliferate; material wants like poverty, hunger, disease and inadequate housing compound growing levels of ecological degradation, social alienation and psychological stress. If there is ever to be a left break beyond the current political impasse—the liberal-capitalist establishment locked in a wrestler’s embrace with the ultra-capitalist right—it will ultimately require the elaboration of an economic system beyond capitalism itself.footnote2
Historically, the defence of capitalism has rested on its results. Its ruthless focus on profitability has never been only about exploiting workers or extracting resources to enrich coupon-clipping investors. Especially in earlier periods, the drive for profit also served socially useful ends—chief among them the pursuit of economic efficiency, both in static terms (minimizing costs and maximizing revenues) and in dynamic ones (developing more efficient production methods and entirely new products). Capitalism’s profit drive helped generate extraordinary leaps in material living standards—reflected not only in rising monetary incomes, but also in a proliferation of transformative process and product innovations. The former includes the assembly line, container shipping and computer-numerical control; the latter, indoor plumbing, electricity, railroads, cars, planes, washing machines, computers, pharmaceuticals, ready meals and fast fashion. In the richest countries, average real incomes have expanded by a factor of twenty since the 1820s and across the world as a whole by a factor of more than ten.
Capitalism is thus more than a system of market exchange rooted in exploitation and extraction. It is a distinctive type of market economy—based on concentrated private property and wage-dependent labour—in which firms must compete for market share, and hence for profit. Profit is not just a reward for efficiency-focused activity, but also a source of investment funds which highly efficient firms use to expand their operations.footnote3 The search for monetary returns on investment engendered an economic dynamism without historical parallel. Earlier modes of production, even those with significant markets, developed at a far slower pace, with cycles of demographic expansion and contraction spanning centuries, while agricultural practices remained stagnant for generations. Capitalism’s profit imperative, by contrast, compelled firms to pursue continual innovation—both in processes that reduce costs and liberate resources, and in products that redirect those resources towards new forms of revenue generation. Together, these dynamics produced a sustained trajectory of economic growth.
But capitalism’s very successes have generated problems that the pursuit of profit is not equipped to solve. The vast build-out of manufacturing and urban growth, compounded by rising fossil-fuel consumption, threaten the planet’s environmental and climatic systems. The entry of billions of new rural workers into the capitalist labour force puts downward pressure on wages, while the glut of productive capacity speeds capital’s flight into financial assets. Soaring longevity, thanks to medical advance, and falling birth rates, as horizons opened for women beyond hearth and home, combine in a demographic drag-weight of care.footnote4 With the global engines of growth now faltering, the defence of capitalism by its results is increasingly hard to mount.
When an economy built around economic efficiency runs out of efficiency gains, it stagnates. Inequality rises; speculative excess intensifies. Socially destructive profit-seeking strategies—externalizing costs onto the environment, suppressing wages, entrenching monopoly power—are always present, but they grow more aggressive, as capital turns towards exploitation, extraction and enclosure. As growth recedes, the human needs and aspirations bracketed by capitalism’s exclusive pursuit of profit-driven efficiencies are left exposed. Its defenders had always argued that capitalist growth would supply the best means to deal with broader social challenges, whether political, cultural or environmental.footnote5 Yet attempts to incorporate other principles into capitalist operations—ethical consumption, esg investing, corporate social-responsibility programmes—remain constrained by the system’s profit-driven logic. Qualitative goals are reduced to quantitative targets, producing performative compliance with little tangible effect. Similarly, broader state-backed reforms aim to ameliorate the system by introducing secondary goals—social-democratic measures, environmental regulation—while leaving the logic of ‘single-criterion optimization’—that is, production for profit—unchanged. These programmes can play a welcome role in mitigating exploitation and ecological harm, but they remain at the mercy of capitalism’s profitability requirements and will be scythed by public-spending cuts should state revenues fall short.
But then, the deeper problem is not just that capitalism is failing to live up to its promise of rising living standards—the issue is that living standards are understood in an extremely narrow way: in terms of incomes, as measured by gdp per capita. Organizing a society around a single metric will always be an impoverished way of structuring collective life. The same logic would apply to any economy organized around a single guiding principle. Even a post-capitalist social order that abandoned profit maximization while maintaining output maximization as its organizing goal would still operate through single-criterion optimization. No matter which metric is chosen, the result is always a radical simplification of the multi-dimensional problems we face.