Must We Outgrow Our Pot?

The concept of “continuous economic growth” must be questioned. Capitalists pose growth as a necessity for economic survival. Why must there be continuous growth in the economy? It implies inflation, boundless population growth, and continuously increasing consumption. Like a flower outgrowing its pot. This is not a sustainable model. Earth’s resources are finite, and uncontrolled exploitation leads to environmental destruction, pollution of air, land, and water, and extinction. There are those who believe, or want to believe, that any, or all, of these problems can be solved by technology, but technology is part of the problem. Technology may provide benefits to society, but it also has detrimental unintended consequences. At times it serves only to create wealth for capitalists, and increased demand for resources. Before resources are committed to any new technology, studies and analyses should be used to assess the benefits of the technology for society versus its cost in resources and social impacts.

For society globally, these issues are critical. Competition for limited resources leads to wars where the most aggressive and affluent nations overpower the weaker ones and exploit their resources. This has occurred throughout history and continues today; however, the impacts of an ever-increasing population, dwindling resources, and environmental destruction ensure that none will be spared, because even the wealthy and the strong cannot restore nature’s destroyed resources. Is it possible to establish a political and economic system based on positive elements of capitalism and socialism, that will avoid the destructive effects of continuous growth.

The capitalist view of money as a commodity, rather than a tool for trade, facilitates continuous growth, but leads to the type of financial system abuse that produced the Great Recession. When financial institutions can buy money at low interest rates, e.g., the Fed short term lending rate is presently 0.05%, and sell this money, i.e., make car loans, mortgages, etc., at high interest rates, e.g., mortgages for >5%, credit cards >20%, the incentive is to buy and sell money rather than invest to produce goods and services that serve the economy. Instead of being a tool to facilitate trade, money is a product that is traded. The development of instruments to increase profits for financial institutions drains the economy of investments needed for goods and services. 

Creating wealth in this way is like gambling, e.g., mortgage securities, collateral debt obligations, credit default swaps, all of which treat money as a commodity and provide new, lucrative means of gaining it. Leveraged buyouts of well-capitalized businesses are presented as opportunities for investors or speculators to take over businesses that supposedly could be made more profitable by restructuring. Owners/shareholders are coerced into approving a sale with offers of per share returns greater than market value. The buyer need invest as little as 5% of the purchase price and can borrow the remaining 95% using the business as collateral. The formerly solvent company becomes heavily mortgaged and must increase productivity and reduce operating costs to survive. These businesses often fail because of their debt burden. Buyers recoup their investment at the start and workers and employers suffer the losses if the business fails. Speculators prey on the economy, threatening the stability of the nation, and the livelihood of the people. Wealth accrues to a select few investors; losses are borne by the many. For capitalism to serve the economy, financial institutions, must be regulated so that extremism is prevented. This requires government to serve and balance the needs of society, economy, and environment, and not answer only to serve only wealthy business leaders and corporations.