Capitalism

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Characteristics

Inherent Growth Characteristics of Capitalism

Richard Smith:

"1. Producers are dependent upon the market: Capitalism is a mode of production in which specialized producers (corporations, companies, manufacturers, individual \producers) produce some commodity for market but do not produce their own means of subsistence. Workers own no means of production, or insufficient means to enter into production on their own, and so have no choice but to sell their labor to the capitalists. Capitalists as a class possess a monopoly ownership of most of society’s means of production but do not directly produce their own means of subsistence. So capitalists have to sell their commodities on the market to obtain money to obtain their own means of subsistence and to purchase new means of production and hire more labor, to re-enter production and carry on from year to year. So in a capitalist economy, everyone is dependent upon the market, compelled to sell in order to buy, to buy in order to sell to re-enter production and carry on.


2. Competition is the motor of economic development: When producers come to market they’re not free to sell their particular commodity at whatever price they wish because they find other producers selling the same commodity. They therefore have to “meet or beat” the competition to sell their product and stay in business. Competition thus forces producers to reinvest much of their profit back into productivity-enhancing technologies and processes (instead of spending it on conspicuous consumption or warfare without developing the forces of production as ruling classes did for example under feudalism): Producers must constantly strive to increase the efficiency of their units of production by cutting the cost of inputs, seeking cheaper sources of raw materials and labor, by bringing in more advanced labor-saving machinery and technology to boost productivity, or by increasing their scale of production to take advantage of economies of scale, and in other ways, to develop the forces of production.


3. “Grow or die” is a law of survival in the marketplace: In the capitalist mode of production, most producers (there are some exceptions, which I will note below) have no choice but to live by the capitalist maxim “grow or die.” First, as Adam Smith noted, the ever-increasing division of labor raises productivity and output, compelling producers to find more markets for this growing output. Secondly, competition compels producers to seek to expand their market share, to defend their position against competitors. Bigger is safer because, ceteris paribus, bigger producers can take advantage of economies of scale and can use their greater resources to invest in technological development, so can more effectively dominate markets. Marginal competitors tend to be crushed or bought out by larger firms (Chrysler, Volvo, etc.). Thirdly, the modern corporate form of ownership adds irresistible and unrelenting pressures to grow from owners (shareholders). Corporate CEOs do not have the freedom to choose not to grow or to subordinate profit-making to ecological concerns because they don’t own their firms even if they own substantial shares. Corporations are owned by masses of shareholders. And the shareholders are not looking for “stasis”; they are looking to maximize portfolio gains, so they drive their CEOs forward.

In short, I maintain that the growth imperative is virtually a law of nature built-into in any conceivable capitalism. Corporations have no choice but to seek to grow. It is not “subjective.” It is not just an “obsession” or a “spell.” And it cannot be exorcised. Further, I maintain that these theses are uncontroversial, even completely obvious to mainstream economists across the ideological spectrum from Milton Friedman to Paul Krugman. But Herman Daly, Tim Jackson and the rest of the pro-market anti-growth school of ecological economists must deny these elementary capitalist rules for reproduction because their project for a “steady-state” eco-capitalism rests on the assumption that capitalist economic fundamentals are not immutable, that growth is “optional,” and thus dispensable." (http://www.paecon.net/PAEReview/issue53/Smith53.pdf)


Source: Critique of Steady-State Capitalism. Richard Smith