The Problems of Capitalism

I’ve spent a lot of time learning about capitalism in hopes of finding out how we can get to Better Capitalism.

I’ll be honest, there are no silver bullets, no clear cut answers, but the thing that I’ve realised is how critical having a clear idea of what the bigger picture is.

Otherwise we begin pushing back against smaller local issues and don’t realise how they fit into the bigger change that we want.


The world today

  • The world is the best it has ever been.
  • Billions of people have been lifted out of poverty.
  • Capitalism has been a major factor in achieving that.
  • Capitalism has gone through several major transformations.
  • The latest being neoliberalism; a focus on free markets to increase efficiency and profits.

Three big challenges

I know you’re not going to slog through this 2000+ reading list on capitalism and that’s ok. What is really important however is that you understand that there are three big issues which are putting pressure on capitalism, and hence our lives.

When elections come up and you start thinking about the issues that affect your life, try to think how they fit into the bigger picture.

These are the three meta-issues:

  • Climate = carbon emissions + renewable
  • Financial = debt + fiat money + financialisation
  • Demographics = ageing population + migration

1. Climate

In the current system of capitalism there are few rules are in place to force sustainability into the market. This means we have treated nature as an infinite supply of resources (which it is not).

What was needed was reducing our carbon emissions significantly enough to prevent more heat from being trapped in the ozone.

Scientists predict that when the planet warms by 2℃ there will be irreversible changes in the global weather systems. These are likely to result in extreme weather increasing drought and flooding, mostly affecting the poorest nations in the world but placing strain on international economics.

This is a big deal, things are likely to get worse and we have little chance of making the 2℃ target. 🤷‍♂️ This is really fucked, but true.

Renewable energy has advanced a lot in recent years, however there are things that block it from replacing fossil fuels.

  • Renewable energy is less efficient than coal and oil from a capitalist perspective.
  • This means less short-term profits.
  • The big energy companies have no real economic incentive to switch, since there is lots of fossil fuels and they make lots of money (profit motive).
  • Further international trade deals which aim to enforce “free market” thinking, make it difficult for local governments to create effective green policies.

This is a problem for capitalism, because despite it not affecting short term profit making, it will eventually cause a long-term market crisis (failure) where natural disasters and global tensions make it difficult for people to consume.

2. Financial

With the move towards neoliberal ideas, the financial system has significantly increased its reliance on debt. While succeeding at providing short-term liquidity in markets, it has some problems.

Financialisation was the increase in the market towards using people as financial products (credit cards, home loans, pay-day loans).

  • When not regulated, this hides risk behind complex financial products (2008 crash).
  • Since banks have the ability to create money supply, this enables risky lending practice for short-term profits.

3. Demographics

As birthrates worldwide slowdown, all countries are going to have to face the reality of eventually reaching zero population growth and ageing populations.

  • This makes growing the economy harder (population growth ≈ GDP growth)
  • But remember, economic growth needs to outpace debt, which becomes harder as GDP slows and government expenses from ageing populations rise.
  • This puts governments under strain to provide services while servicing growing debt burdens.

Climate change and increased globalisation are increasing migration of poor populations to “wealthier” countries.

  • This creates more political tension.
  • Nationalist ideals resurface as countries struggle with the effects of larger immigrant populations.
  • Migrant workers increase the supply of low-paid work increasing inequality

sebastiankade

Sebastian Kade, Founder of Sumry and Author of Living Happiness, is a software designer and full-stack engineer. He writes thought-provoking articles every now and then on sebastiankade.com

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