19 June 2008

What is capitalism?

An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.

What is a pyramid scheme?
A fraudulent moneymaking scheme in which people are recruited to make payments to others above them in a hierarchy while expecting to receive payments from people recruited below them. Eventually the number of new recruits fails to sustain the payment structure, and the scheme collapses with most people losing the money they paid in.

Why is Capitalism a pyramid scheme?
Early entrants to capitalism and free trade (UK, the US, Western Europe, Japan) accumulated great wealth, but later entrants face huge problems: global warming, pollution, population growth and resource depletion, not problems when the US industrialized. The Economist projected that China will match the US as the largest economy in 2030, a straight line projection of current trends. What is unaccounted for by economists is the wealth-reducing damage to the earth that such unrestrained growth will already have caused.

Capitalism, in order to be a healthy, viable system has to sustain constant growth. A young, growing population is counted as a plus. A capitalist economy that does not grow is in a "depression." And yet, the earth has finite resources, and a finite "carrying capacity." The run up in energy and resource prices are simply indications of what is beginning to happen. Global warming is another, and portends increasing droughts in large parts of the world, reducing the amounts of food available, promoting famine.

For Americans to expect that they can continue their "way of life," when in competition for scarce resources with the huge countries of China and India is simply a fantasy. It is also a fantasy that the Chinese or Indians will someday enjoy affluent lifestyles like Americans. If the over 3 billions of people from those two countries and nearby East Asia consume and pollute even at (lower) European levels, the oceans will become deserts from over-fishing, resources that are not 100% recycled will become prohibitively expensive and global warming will render most agriculture way over-taxed to produce the necessary food (especially if the Chinese and Indians demand diets comparable to Americans). This is why capitalism is a pyramid scheme; it is not sustainable.

Capitalism as one commentator puts it:
- capitalism thrives on profitability
- profitability thrives on economic growth
- economic growth thrives on increased consumption of goods

- increased consumption of goods thrives on increased use of natural resources (capitalism loves uncontrolled population growth)

- increased use of natural resources results in eventual depletion of natural resources

Therefore, capitalism promotes the eventual depletion of natural resources (and doesn’t care about overpopulation)

What’s the best ally of Capitalism?
Organized religions that promote lots of babies.

Does Capitalism really care about the human being?
No. That’s democracy. Don’t get them confused.
Capitalism cares about profitability.

Democracy does not thrive on profitability.
It does not address profitability.
It is a model for majority representation with good or bad outcomes.


I am currently reading A New Green History Of The World by Clive Ponting. It is a concise and interesting overview of the history of humanity's relationship with the environment. The book is available for borrowing at the Singapore National Library. Here are some excerpts from the last chapter:
The number of people who have to live on less than $1 day rose from 1.2 billion in 1987 to 1.5 billion in 2000 and within the next decade the total is likely to rise to 1.9 billion or more than a quarter of the world's population. If some attempt was made to combat the glaring inequalities in the world and the standard of living of the poorest countries were to rise to current European (not American) standards then the world's consumption of resources would have to rise more than 150-fold. It is unlikely that there are enough resources in the world to sustain this level of consumption. Even if there were the consequences, in terms of industrial pollution, would be disastrous.

For example, if China were to achieve Japanese levels of car ownership (still far below US levels) then there would be 640 million vehicles in the country compared with thirteen million today. This would increase the number of vehicles in the world by over 80 percent compared with current levels. Apart from the resource consumption and pollution this would involve it would also have severe effects within China. New roads and parking areas would be required which would, given the experience of the industrialised countries, take up about thirteen million hectares of land. This is equivalent to the land area that grows half of China's current rice crop. Where would the extra land come from and how would the population be fed?......It is highly unlikely that the evolution of mass-consumption societies in the industrialised world can be replicated elsewhere...

...[Natural gas production] will peak long before reserves become exhausted - the most likely date is around 2020 followed by a long decline in output. The decline in natural gas output will occur in conjunction with the fall in oil production and this will therefore greatly exacerbate the problems that will have to be faced...

...Indeed it is difficult to see how the energy consumption required to sustain the rise in living standards and resource consumption to bring the poorest parts of the world up to European levels set out in the previous section could be sustained. The world is clearly approaching a major crossroads. The profligate high-energy societies of a small minority of the world's population that developed in the twentieth century cannot be replicated for all the world's people. Indeed it will be increasingly difficult to sustain it for the few far into the future...

...The achievements of modern industrial, urban, high-consumption, high-energy consumption societies have been remarkable. However, the other side of the coin is that the scale of the environmental problems they have created as a consequence of these achievements is unprecedented and of a complexity that almost defies solution. From a wider, historical perspective it is clearly far too soon to judge whether modern industrialised societies are environmentally sustainable.


Fitness | Design Jurulatih said...

Wow, such an informative post. THanks for putting it up.

Just my own opinion.
With the high consumption of natural resources by humans, wouldn't it likely be a competition for resources?

With resources already depleting, would nations wage war at each other for the sake of survival?

Ideally, we would be working on other viable alternatives that will meet our consumption needs. Alternatives that do not strain our natural resources, personally I do not think we can live totally without natural resources but I think there are other replacements for them.

TM said...

Yes, competition over finite resources will get violent. Expect more trade tensions and wars over commodities in the years ahead.

Our current pursuit of population and economic growth is unsustainable and will eventually collapse under its own weight as we run our of cheap fuel to power our growth. The worrying aspect of it is that Singapore is not prepared to deal with non-growth.

Speaking of alternative energies, there really are no direct substitues for crude oil to maintain our highly-consumptive lifestyles. Peak oil means that our consumerist way of life is over, and adapting to a lower-consumptive lifestyle won't be easy for us Singaporeans and the developed world. Visit

http://dieoff.org/page132.htm and
http://www.countercurrents.org/po-goodchild240906.htm and
http://www.oilcrisis.com/youngquist/altenergy.htm for more information.

Fitness | Design Jurulatih said...

Wow, thanks man for your reply. I'll look into the links you stated.

Thanks. :)