Decadence of the profits system: why economic activity needs a different purpose

Recent posts on this blog have tended to stress the increasingly outmoded orientation of traditional market capitalism, with its inescapable emphasis on the ever more futile objectives of both enhancing enterprise profitability and asset valuation while at the same time boosting economic growth overall. What they have perhaps failed sufficiently to do, however, is point out the profoundly anti-social and immoral consequences of this weakness, such as to pervert and damage the whole tendency of society. In other words, while it has been demonstrated that capitalism is incapable of delivering the benefits that its advocates claim for it in terms of economic efficiency, it has not been shown clearly enough that it has brought serious dis-benefits that render it positively harmful from a social perspective.

These negative impacts have in fact long been recognised, explicitly or implicitly, through the regulation of markets, although it is notable that any consequential restraints on particular activities – e.g. gambling – have been relaxed in recent years (see below). Such market liberalisation, it can be inferred, is usually the result of pressure from commercial interests, although naturally this is seldom if ever spelt out.

These dis-benefits include:-

  1. A compulsive tendency to promote economic growth, often at the expense of more socially desirable objectives. This arises from the inherent need for capitalist enterprises to accumulate ever more capital and the concomitant requirement constantly to amass profit – necessarily at the highest rate possible in order to appeal to investors in a competitive market. This in turn explains why it has long been a central assumption of Western policy makers that the promotion of maximum growth is of over-riding importance. However, this goal, always questionable from the perspective of the general public, is now looking absolutely untenable in face of the dire environmental consequences of economic growth increasingly in prospect – particularly bearing in mind the compelling necessity to end, if not reverse, the unsustainable rise in global heating. Equally growth has become increasingly constrained by the dwindling potential for further expansion of consumer demand, especially as that for traditional goods and services dries up.
  1. Support for armaments / war production.

Of all the questionable or anti-social activities which capitalist enterprises have a natural vested interest in exploiting those associated with war or “defence” are undoubtedly among the most egregious. This is reflected in the historic fact that war or preparation for war has very often coincided with booms in economic activity, while conversely the ending of such conflict has led to downturns. The latter was notably the case in Britain after the end of the Napoleonic War in 1815 and of the 1914-18 War. In contrast, after World War II the leadership of the victorious United States, evidently anticipating a possible post-war depression, moved to establish what has been dubbed the National Security State, which they were at pains to justify as a response to the supposed Soviet threat in the context of the Cold War. As will be elaborated in our next blogpost, such tendencies point to the conclusion that, while war is damaging to any society, it is all the more dangerous to a capitalist one, given that, in combination with the relentless propensity to pursue growth, it incentivises adoption of an aggressive foreign policy.

  1. Speculation / gambling.

One of the sectors that has been encouraged to grow in recent decades to compensate for the lack growth in traditional markets is gambling. It should be self-evident that gambling is of the essence of the capitalist economic model, given that market values are inherently subject to fluctuation and that capturing positive movements is at least as important an opportunity for profit as the margin on sales. What has only quite recently become apparent is the importance of gambling as an industry (comprising casinos, betting shops etc.) in its own right. Previously this was properly viewed as in many respects a form of vice and as such essentially discouraged except to the extent that “risk taking” was regarded as a capitalist virtue. What remains true is that gambling (speculation) only adds economic value to the extent that it increases the accumulated profit and market value of those enterprises engaging in promoting it as a main activity. Otherwise it is rightly seen as a potentially dangerous activity that can cause at least as much social harm as alcohol or tobacco consumption, without adding to the sum of human wealth. This danger has been largely lost sight of in relation to the National Lottery in Britain, which is generally regarded as a public good, especially as it is used to finance the efforts of British athletes participating in the Olympic Games – without regard to the dangers posed to those gambling excessively.

  1. Pornography

Much debate has occurred in recent years surrounding the apparently increasing incidence of

the abuse – particularly sexual abuse – of women, culminating in the “ Me Too “ movement from 2018, which has resulted in the exposure of Harvey Weinstein and other systematic abusers of women. To a lesser extent the same is true of the abuse of boys, notably in football and other sports, where the possibility /dream of achieving stardom, and with it vast wealth, often make them willing victims (see also below).

While it is fair to point out that such abuse occurs in non-capitalist economies, it is self-evident that such a tendency is greatly enhanced by the institutionalised profit motive. Equally it has, like gambling, been one of the sectors encouraged to expand so as to compensate for the drying up of more traditional areas of demand growth. Hence the progressive relaxation, since the 1970s, of restraints on pornography and the increasing sexual content of movies and television can undoubtedly be seen as driven by commercial interests in the competition for audiences. Although a causal relationship between this tendency and the rise in sexual violence is hard to establish – since rape statistics are notoriously unreliable – there is a strong suspicion that there must be a link between the two.

  1. Needless and damaging commercialisation of sport and other forms of entertainment.

This has been most conspicuous in the case of football (soccer), by far the world’s most popular sport (but has adversely impacted other sports – notably cycling – as well). This has been enabled to develop as a global spectator sport on a huge scale through the medium of television. In the process it has led to intense competition among different corporate interests for the right to show different matches and clubs performing. This in turn has resulted in the bidding up of the value of star players and teams – to the point where only very few TV channels can afford to bid for their services. The inevitable end-result has been that some clubs and many individual supporters have been priced out of the market and hence are unable to watch their own teams – with which they often have long-standing traditional links (involving entire local communities) – playing.

At the same time, global competition among clubs for the most talented and marketable players has produced a skewing of rewards accruing to certain players – some of whom now earn more than $12 million a year – such as to cause obscene imbalances in valuations and distorted behaviour such as that referred to above. As suggested above also, related pressures to achieve high performance in this sector have led to abuse of aspiring players in football and other sports.

  1. Environmental damage / wasteful over-production.

There is a particular need to curb profits and growth in certain sectors (such as, notably, household energy supply) to meet the requirement for reduced carbon output – and thus limit global overheating. This has come to be seen as ever more damaging as global production gets closer to the limits of what is seen to be environmentally sustainable. At the same time, however, it is necessary to maintain the minimum level of output of goods and services consistent with human survival and long-term prosperity. On the other hand the natural tendency, under capitalism, to encourage maximisation of consumption will need to be curbed, especially as the world’s population is set to continue rising, albeit not quite as fast as in the 20th century.

  1. Drugs criminalisation.

Of all the unnecessary and harmful activities encouraged by modern capitalism by far the most lucrative and economically significant is certainly the criminalised trade in narcotic drugs (cannabis, heroin, cocaine etc.) as well as opioid prescription drugs, which are highly addictive. It is also by far the most damaging to the economy and society, given the huge costs imposed in terms of law enforcement and correctional action entailed.

As noted in an earlier post (The “War on Drugs” – the ultimate monument to capitalist corruption, 11 October 2019), there are powerful vested interests anxious to sustain this lethal business (including perhaps some at the very heart of government) – even in the face of overwhelming evidence that the most benign way of dealing with it would be via decriminalisation and licensing – coupled with treatment for addiction – as has been done in the case of alcohol and other addictive substances. As it is, the continuing illegal status – and hence freedom from taxation – of the production and supply of such drugs makes it a highly attractive activity to organised crime and difficult for addicts to get treatment. At the same time it tends seriously to distort prison systems, as illustrated in the recent BBC Television drama series “Time”.

The obvious remedy for this situation would be to implement decriminalisation and licensing of such drugs across the board. To date, however, the only country where this has occurred is Portugal, although it has been enacted in respect of cannabis in a number of US states, including California – a trend that seems bound to gather momentum (especially since Portugal has gone from having the worst to the best record in Europe for drug abuse) despite inevitable attempts to slow it down.

  1. Dangers to public health. This stems naturally from the tendency to see health care (or the lack of it) as a profit-making opportunity, particularly in the United States, rather than a primary necessity for human welfare. Symptoms of this perverse attitude can be seen not only in over-charging for routine healthcare procedures but even in the performing of unnecessary operations. Likewise it is reflected in the failure to report the negative impact of products such as cigarettes even when this is well known to those in the producer industries concerned. This obviously explains the systematic suppression by the tobacco industry from the 1950s of clear evidence of the dangers of smoking, while the same applies to the impact of fossil fuels on aerial pollution and global warming. At the same time the ability of pharmaceutical companies to impose patent restrictions on the use of new drugs they have developed – even where this been heavily supported with public money – adds needless billions to the cost of treating life-threatening conditions.
  1. Growing inequality. This results from the continuing process of asset accumulation and holding in relatively few hands that inevitably occurs under the capitalist model, especially if profits are lightly taxed. It also stems from the compulsion, under capitalism, to promote individual selfishness – encapsulated in the phrase “greed is good” proclaimed in the movie Wall Street (1987). This in itself is sufficient grounds for rejecting capitalism, since prioritising maximum equality should now be central – and always should have been. The malign impact of inequality on society as a whole was well spelt out by Pickett and Wilkinson in the best-selling The Spirit Level (2009), the irrefutable conclusions of which were studiously if predictably ignored by the Western establishment.
  1. Chronic and increasing underdevelopment of most of the world.

In parallel with rising inequality in the developed world there has been a chronic failure to address effectively the much greater inequality and grinding poverty affecting the less developed countries (LDCs), which account for the vast majority of the world’s population. This despite the efforts of the international development agencies – led by the World Bank and International Monetary Fund – and the expenditure of trillions of dollars in “development aid” since 1945. While it has been claimed that these efforts have led to at least a billion people in the LDCs being “lifted out of poverty”, the growing symptoms of unrest around the world suggest a rather different story. In particular, the millions of migrants from countries affected by both civil disorder and long-term economic failure who are annually seeking to enter developed countries in search of a better existence – putting increasing strain on the host countries – is a measure of the inadequacy of efforts to stem the growth of global poverty.

This disastrous record makes clear that the neo-liberal model is no better suited to meeting the needs of the developing countries than those of most of the rest of the world. In its place it will rather be necessary to devise (non-market-based) structures which assure a more equal share of global income and resources for the “South”. This is all the more urgent given that the climate crisis now precludes any recourse to rapid global growth to help close the gap.

A more benign alternative

The above list of negative impacts of contemporary capitalism is not intended to be exhaustive. It is probably sufficient, however, to demonstrate why it is an economic model that has not only outlived whatever usefulness it may once have had but to have become a disastrous burden on global society. In place of this existing purely market-based model designed to promote corporate profit maximisation it therefore behoves us to try and determine a more benign purpose of economic activity and organisation based on quite different principles.

These principles should certainly comprise the following:-

  1. Eschew or minimise growth of output;
  2. Encourage cooperation rather than competition;
  3. Maximise equality both within and between nations.

These may be seen as mutually reinforcing objectives, tending to promote stability – both economic and social – rather than the conflict and disruption resulting from the competitive market-based model. The desirability of pursuing this approach is all the greater given that a) the scope for further growth is in any case limited by the dwindling potential for further demand expansion, and b) the highly restricted physical capacity for increased output in view of the ever more pressing need to limit, or even reduce, production so as to counter the threat of global warming and other environmental dangers. Equally it must seem increasingly untenable that, in an era when the future of human civilisation looks precarious as never before, the “great powers” of the world should engage in a struggle for supremacy which is all too likely to lead to destructive conflict.

While the above principles may appear fanciful or utopian as the supposed basis for the future development of global society, there are two ways in particular in which communities and their leaders may be propelled in the direction of more rational behaviour along such lines:-

  1. Restriction of the right to limited liability. As made clear in our post Dethroning the profit motive (16 November 2015) the most obvious way of curbing unnecessary or wasteful investment is to restrict the automatic right to limited liability to those companies which grant the state effective right of veto over their investment decisions. Such a provision would have made it much harder to justify projects such as the disastrous HS2 railway in Britain – set to cost over £100 billion if completed – and many other white elephant infrastructure projects.
  2. Recognition of the growing global surplus of labour in light of changing technology and the limited future scope for growth. This is leading to increasing world-wide interest in the idea of Universal Basic Income (UBI), which if accepted would amount to conceding the right of all individuals to an unconditional income at a minimum survivable level irrespective of their employment status in a global economy where the opportunities for full-time employment will be rapidly vanishing. It would also tend to promote a less unequal distribution of income.

As always, the existence of powerful vested interests stands in the way of implementing such vital reforms. Nevertheless the hope must be that the global community and its leaders can be frightened or inspired by the possibilities and alternative prospects before us to embark on a radically new path

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