I'm guessing that they're using capitalism to mean: private ownership of assets and very free markets. Using this definition, can capitalism work in a non-growth economy? By “work” I'm going to define this as: “is capitalism better than a more socialistic system in a zero-sum game?” I would argue that capitalism / free markets are far better at allocating resources in a zero-sum game.
Economics is the study of allocating scarce resources. This is Econ 101. Scarce usually means “non-infinite” - it's easy to allocate infinities such as information – just copy-paste it. The difference in scarcity here is between growing finite resources and a fixed amount of resources. If we assume we can only use Earth as our source, then yes at some very high level we have a zero sum game due to the law of conservation of mass. However, we're currently not close to tapping all the resources in the Earth so we can assume a growing resource base.
What if we imposed a system where everything had to go back to its original form though? Many environmentalists support this view. If we extract coal, we need to sequester the carbon – perhaps underground again. Can free markets still allocate resources in this extreme environment? Of course.
Can value increase in a zero-sum materials game? I think we've already seen this answer. A ton of iron ore, limestone, coke, energy, etc. is worth less than the steel it creates. A car is worth more than the weight of its steel. Value is about the organization of matter into more useful forms. Materials science is showing us that ubiquitous carbon promises to be a miracle material when ordered the right way. When a sheet of properly ordered carbon a few microns thick is stronger than an 1/8” sheet of steel and was produced from perhaps 1mL of carbon powder and some electricity – I think anyone can see that value is being added above and beyond mere raw materials and labor.
If we apply this to the economy at large, we see that the zero-sum resource game actually can work quite well – thought with slower growth of course. This eliminates the argument for capitalism needing a growing pie to survive. Socialistic measures would have the same problems they experience today - improper allocation of resources due to the effects of: “some of us aren't smarter than all of us”. In other words individual economy agents make better decisions about material allocation and conversion than a leviathan of a state.
Thoughts?
A zero-sum materials world is not a zero-sum world, as you´ve just explained.
For this reason, the economy is still growing and you still need markets to keep it from stagnating. I firmly believe that in the case of an economy that has NO growth, where no new inventions are created and where durable goods are used up at the same rate as they are made and energy is poured into the system at the same rate as it is used and so on, socialism is the best system.
However, this world is every bit as much a fairy tale as one where sharing is universally a bad thing, and further either one of these places would closely match my idea of hell.
Growth doesn´t just come from cutting down trees and digging up ore. If the inputs of energy and material and technology are all fixed, you have zero growth and zero-sum games. Uncork any one of those and you don´t.
Material: Yes, material resources on a finite planet are fixed. And we´re burning through them. Also they´re getting harder to dig up. At some point we may say these become fixed, and even now we´re seeing evidence that, where possible, we should re-use material rather than find new untapped sources for environmental reasons: it´s good for us to recycle, and maybe we´ll find that running on zero-sum material resources makes sense. I´m not so sure, but I´m not dogmatic on it either.
Energy: Not unlimited either, but less limited than material. Solar flux is still vastly larger than energy used. We are so far from type I it´s not even funny. Factor in the available energy in nuclear power sources (both on the uranium end and the hydrogen end of the spectrum) and energy worries aren´t the first wall we´ll hit. Some time in the future we may find it´s useful to constrain our energy usage for some reason, but I think we´re better off recognizing when scarcity is created by technology or materials, because energy scarcity, to me at least, looks more like a function of those two at the moment than anything intrinsic.
Technology: Technology is the only thing which may in fact be endless. There may be no end to the value amplification we can get from Matter and Energy. (Einstein aside these two aren´t currently the same thing-- even modern nuclear energy is a tinker toy compared to outright E=mc^2 converson.) If technology has a limit, it is very far away. And if constraining our use of energy or matter is good for us, then so be it-- I´ll support crafting laws, incentives and institutions to achieve this aim. (I will however encourage plenty of skepticism and care with said lawcraft-- social engineering is notoriously blurry and difficult to operate.) But even doing that won´t create a zero-growth economy, because technology will, perhaps even in response to said social engineering, still be growing.
So there´s my arguments that zero-growth isn´t likely or desirable-- As to capitalism functioning well in a zero-growth environment, well, I doubt it, but I also doubt zero-growth can really happen.
Posted by: Allan Ecker | September 02, 2009 at 02:05 AM
Thanks for the comment Allen!
That's an interesting concept: a completely no growth world - what would everyone do? I'm not sure why socialism beats capitalism in such a system though. Are you suggesting this because of inequalities of resources, etc. that could form in this system? It seems to me that regulation need not be a dichotomy such as capitalism / socialism; I think that a federalized system where control is forced to the lowest possible level (by where externalities are best solved) would produce a system of free markets in the macro-level, but localities could run socialist systems. On a small scale, socialism (probably better just called co-ops or communes) can work great, but I'm also suscipious of social engineering - especially in a political landscape dominated by lobbyists.
Posted by: Nick Pinkston | September 03, 2009 at 10:03 PM