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The Root of the Social-Ecological Crisis

A stark choice faces humanity: save the planet and ditch capitalism, or save capitalism and ditch the planet.

—FAWZI IBRAHIM¹

WE MAINTAIN THAT CAPITALISM, of necessity, operates to create our global social-ecological crisis. But before we go into a more detailed explanation of why this is so, let us first briefly examine some of the other explanations for today’s crisis that are commonly put forward—overpopulation, innate human greed and destructiveness, a flawed growth paradigm, and bad policy choices.

One of the most common arguments for the crisis is the “population problem”: there are just too many people in the world, using too many of the Earth’s resources. This is the chief cause of pollution, hunger, resource depletion, and poverty. It is true that the human population has increased greatly over the last few hundred years and that higher populations tend to create more stress in particular locations. Some countries do not have enough agricultural land to feed their people. Many of these countries—for example, Saudi Arabia, the Netherlands, Singapore, and Great Britain—simply purchase food from abroad. Saudi Arabia, the United Arab Emirates, China, and several European countries have even leased or bought outright land in parts of Africa or Ukraine, with its deep and rich but underutilized soil, in order to grow food for their home markets.

Not all countries can afford to purchase additional food when there are widespread crop failures or short supplies and the price of food jumps on the world market. In 2008, such price spikes led to food riots in twenty-eight countries. Yet at the same time, there were sufficient global food stocks.² As one example of what was available during that year when so much suffering occurred, about 30 percent of the enormous U.S. corn crop was converted to ethanol to feed cars instead of people.

It’s not overpopulation that’s the problem; it’s unequal distribution of wealth and resources. Quite simply, people are hungry or starving because they are poor and unable to exert effective demand in the market, which requires money. The wealthiest 10 percent of the global population uses about 60 percent of Earth’s resources and is responsible for about the same portion of global pollutants released into the biosphere. The so-called population problem is in reality a wildly skewed social system, with gigantic waste built into the economy and overconsumption by wealthy people.³ In the United States, working people are constantly blamed for consuming too much, but in fact 38 percent of all consumption in 2012 was by the richest 5 percent.⁴

Ecological havoc is often attributed to human nature: our greedy and destructive instincts cause us try to dominate nature, regardless of the consequences. Although there are certainly examples of past civilizations that have caused lasting local or regional ecological harm, others have tread lightly, surviving and flourishing in ways that allowed land and water to regenerate by developing relatively low-impact agricultural systems. In many cases the practices of humans have resulted in a more biologically diverse local ecosystem than would have been the case otherwise. As historian Neil Roberts observes:

It is easy to fall into the trap of describing human impact on the natural world solely in terms of ‘degradation’ and ‘impoverishment,’ especially when considering issues such as soil erosion or deforestation. In fact, agriculture—at least in its pre-modern form—has generally been an agent of ecological diversification. It caused the relative homogeneity of primeval forest ecosystems to be replaced by a mosaic of … ecosystems, created and maintained by human action, and their fates came to be intimately associated with particular modes of agricultural production.⁵

Ecological damage done by ancient peoples occurred because of class dynamics, low levels of technology, and lack of knowledge of long-term impacts, not because of any ingrained tendency to destroy. Once such damage occurred, many ancient agricultural societies adapted to the changes they had caused or moved elsewhere. In the Mediterranean region they modified their landscapes, building terraces to reduce runoff and erosion; or they raised perennial crops more adapted to hilly land, such as olive trees and vineyards. Wheat, which requires annual soil plowing, was then grown on the more level fields or purchased by selling olive products and wine. Human societies have generally been able to adapt and modify practices as mistakes were made or in the face of environmental change over which they had no control, such as multi-year or multi-decade droughts.⁶

Some people feel that too much growth is the cause of the ecological crisis. We need to move to a zero growth economy, they say, and the way to do that is by changing our “growth paradigm.” Instead of focusing on the gross domestic product (GDP)—which is the measure of all goods and services produced annually in a country—economists and the media should focus on a gross national happiness index, which would measure people’s quality of life. Others have likened the perpetual growth of capitalist economies to a societal addiction, requiring therapies to help cure the addiction.⁷ But growth paradigms or addictions do not create the system—they are products of the system. Simply altering what is measured, how something is described, or undergoing societal therapy will not change the trajectory of an economy.

Other explanations for the ecological crisis tend to be variations of the “growth problem”: for example, there are people, sometimes referred to as “neoprimitivists,” who believe that industrial society itself is the problem and therefore we should return to a simpler lifestyle, hunting and gathering, presumably with many fewer people. Then there are the “green capitalism” advocates who maintain that people aren’t buying the right things—everything would be fine if we all just bought “green” stuff. Some explanations get a little closer to the heart of the matter, pointing to the need for more regulation so that businesses would not be allowed to pollute at will.

But these explanations for the environmental and social problems we face focus on symptoms while ignoring the root cause of the global crisis—the capitalist system. More insidiously, each of these explanations—overpopulation, individual overconsumption, human nature, growth paradigms, value judgments—have something in common: everyone is to blame for the problem. Or, in the words of Pogo the possum (in a poster designed to mark the first Earth Day in 1970), “We have met the enemy and he is us.”⁸ But if “we” are the problem, this absolves the elite and the economic system from which they benefit.

WHAT IS CAPITALISM?

In its simplest terms, capitalism is a social and economic system based on private ownership of the means of production (the factories, equipment, land, etc.) for the purpose of making commodities (goods and services) in order to sell them at a profit. Most people have no way to make a living on their own and must work for those who own the land, factories, and other businesses. Business profits derive from the unequal relationship between labor and the owners of capital, with workers paid less than the value they add during the production of commodities. One way that business owners continually try to increase their profits is through greater control and exploitation of their workforce.

Markets, though not a defining feature of the system as some think, are needed in order for sales to occur and profit to be obtained.

A commodity can be as simple as an apple or as complex as a car or a computer made from minerals mined from all over the world. And types of services vary widely: haircuts, hotel accommodations, equipment repair, or heart surgery. The goods and services produced by businesses embody human labor power and natural resources. And though commodities may have a genuine use, their real value in this economic system is that they can be sold for profit—for more than the cost of making them.

Position of Labor

Because workers depend upon capitalists for their livelihoods, they are subservient to the owning and managerial classes. One way that business owners continually try to increase their profits is through greater control and exploitation of their workforce. They can do so because of the unequal power relationship between labor and the owners of capital. Individually, workers are not normally able to negotiate their wages, benefits, and working conditions. They gain power relative to capitalists by coming together to form unions, so they can use their collective strength, including the ability to stop work by striking. This is what makes unions so important to workers in capitalist economies. That is why capitalists oppose unions and try to stop their formation, while fostering anti-union sentiment in the general population through their indirect control of the media and politicians.

Whenever their power is weakened, workers are commonly forced to work harder (“do more with less”), any benefits they obtained through previous labor struggles such as paid pensions and healthcare coverage are reduced, eliminated, or have to be exchanged for employer promises not to downsize or move production elsewhere. Their miserly pay increases are not commensurate with increased productivity or increased cost of living.

Conversely, when workers have organized strong unions and incorporate elements of social justice into their demands (such as equal pay for women and defense of immigrants), the pendulum of social power swings toward them. This back and forth battle between how the extra value generated by workers is divided, what proportion goes to the capitalists and what goes to the workers or into government social programs, is a constant struggle between opposing interests. It is this sometimes hidden, sometimes open “class war” that explains why there is always going to be social conflict within capitalism.

The decline in the organizing power and conditions of workers over the last few decades and the resulting difficulties are discussed later in the chapter.

Perpetual Growth

Growth is at the core of the capitalist system. This quest for profits is what keeps the system going, it’s the moving and motivating force for investment that propels growth. Karl Marx captured this in a simple formula, M–C–M′, where M is the money, or capital, used to purchase raw materials, machinery, and labor to produce a commodity, C, which is then sold for a price, M′, that includes the costs of production and the profit. Profits are then reinvested in the production of more commodities to be sold for more profit, setting up an endless cycle: M′–C–M″ becomes M″–C–M‴ and so on, ad infinitum.

There is also no such thing as too much profit—more is always striven for. The purpose of production is not to provide people with goods and services; the purpose is to make money. Companies compete with each other for market share in order to maximize profits. If a company fails to expand, its profits suffer and it will eventually be taken over or go bankrupt. There is no such thing as steady-state capitalism: it’s either grow or die for individual businesses.

As much as the system tries to propel growth, capitalist economies aren’t always growing. Boom-and-bust business cycles are a feature of all capitalist economies.⁹ When the market becomes saturated and growth falters or a financial crisis occurs, expansion turns into recession, leading to layoffs, cuts to social programs, hunger, and increased poverty. Governments try to get the economy moving again by lowering interest rates, or spending more money, or creating jobs programs or paying out unemployment benefits. Spending money becomes a public duty to resurrect growth.

The profit motive even applies to essential goods and services such as food, clothing, and healthcare that are clearly in the public’s interest. In a June 2014 Wall Street Journal article, Mike Peterson, CEO of Valeant Pharmaceuticals, explains that “R&D on average is no longer productive. I think most people accept that. So it is begging for a new model, and that is hopefully what we have come up with.” Instead of trying to discover and bring new drugs to market, Valeant has increased profits by purchasing other companies, lowering production costs, and raising drug prices. It relocated its headquarters to Canada and made other changes purely to obtain tax advantages. Peterson goes on: “We were able to get a corporate tax structure which took our effective tax rate from 36 percent over all to what was actually 3.1 percent, which we hope to continue to work on and move lower.”¹⁰

Another tactic that drug companies use is to combine two inexpensive drugs and market the combination as something special at a huge markup. A box of nine tablets of the drug Treximent, brainchild of the Pernix Therapeutics, costs $728 while its two ingredients cost $19.¹¹ Other pharmaceutical companies, including Valeant, have also adopted the practice of charging outrageous prices for combinations of inexpensive drugs.

Individual companies and the system as a whole work to maintain growth, through investment in new production, city and state tax breaks for companies, promoting favorable regulations, opposing regulations deemed unfavorable, and working for international agreements that maximize flexibility to move capital and goods across borders.

The Market Needs and Creates Consumers

One of capitalism’s central problems is how to sell the avalanche of goods that are continuously churned out by ever more productive factories and workers. This creates the need for never-ending, ever-increasing consumption. So, how does such a system of commodity production, always making new items and more of the old ones, sell all its products at a high enough price to make profits?

It does so by finding and developing new markets in other countries or among new groups of people by inducing in them a “need” for these commodities. Advertising and other types of marketing play an essential role in capitalism, not just to sell a particular product but to convert people to consumption as a way of life, a path to personal happiness, a means of overcoming feelings of emptiness, loneliness, and dissatisfaction that are generated by a system that stresses individualism, competition, and consumerism. An essential purpose of advertising is to make people feel inadequate in their bodies and lifestyles. The “consumer age” didn’t happen by accident; it arose as a systemic necessity, carefully cultivated as an ideology supportive of business interests.

As far back as 1955, Victor Lebow proposed the following solution to the problem of overproduction: “Our enormously productive economy demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfactions, our ego satisfactions, in consumption.”¹² But what happens if consumption isn’t great enough? “We’ve got to motivate people to want things so they’ll work for these things,” says marketing guru Philip Kotler. “If there’s no more things they want, they won’t work as hard: they’ll want 35-hour weeks, 30-hour weeks and so on. Yes, marketing does drive us to new wants.”¹³ To stimulate new wants, 30,000 to 40,000 new products are coming onto the U.S. marketplace every year.¹⁴

The increasing concentration of companies in most sectors of the economy increases the need for advertising. According to Robert McChesney, “Modern persuasion advertising blossomed as a function of less competitive markets where a handful of firms dominate output or sales. Advertising emerges front and center as a major way to increase or protect market share without engaging in destructive profit-damaging price competition.”¹⁵ The more similar the product, the more firms must spend on advertising to shape their brand image to emphasize differences, which are based on what the packaging looks like, which demographic it will appeal to, and the feelings and emotions it will generate in the consumer’s life. Of course, the more advertising there is, the more corporations have to advertise to make a potential consumer pay attention to their product.

The Internet has created a new phenomenon: it is now possible for telecommunications companies who provide access and other services to gather personal information from their subscribers and sell it to advertisers. The data they collect provides unique portraits of users’ online habits. The person’s taste, perceived needs, and desires are manipulated to sell more products, faster and more effectively. This amounts to the commodification of a person’s identity.

But where do the people who can afford it put all the stuff they buy? Living in larger houses with three-car garages helps, but it is the storage industry that has really benefitted from overconsumption. The Wall Street Journal describes one such company, Public Storage, as “the self-storage giant that on the surface appears boring but in reality has created a fantastic business housing all of the junk that Americans refuse to part with.”¹⁶

Just as Lebow suggested, people are encouraged to value relationships with things over their interactions with other people. Those things, the commodities that workers produce, dominate people’s reality. Navigating this reality becomes the purpose of life. The more things workers produce, the more ensnared and subservient they become to commodities. Marx characterized the phenomenon as “commodity fetishism,” finding an analogy in “the mist-enveloped regions of the religious world. In that world the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men’s hands.”¹⁷

The deepest issue is not that humans have an obsession with buying commodities, or even that we worship them. It is that we view commodities as if they are living and independent entities that form relationships with each other and with people.

Full Employment Is a Fantasy

“There is no provision that all those able and willing to work will always have a job,” observed Albert Einstein. “An ‘army of unemployed’ almost always exists. The worker is constantly in fear of losing his job.”¹⁸ Full employment rarely occurs in capitalist economies. After all, labor is just another commodity. When it’s in short supply, workers are able to demand better wages and working conditions, and that’s not good for business. The system functions best when there is a pool of workers who are normally excluded from full participation in the system—women, immigrants, and people of color—a reserve army of labor that can be called in when companies need more workers. Having a group of potential workers that can be mobilized if needed keeps a downward pressure on wages of the employed. Effective labor organizing is also undermined by the existence of a group of people always available to fill slots of employed workers.¹⁹

Workers and unions generally support economic growth because of the promise of the availability of jobs. A continuous supply of new jobs is needed to absorb labor displaced by automation (including robots and the algorithms that operate computers and robots), downsizing, and offshoring. The Great Recession officially ended in 2009, but since then layoffs and discharges from private-sector jobs in the United States have amounted to around 20 million workers per year.²⁰ While most workers quickly find new jobs when the economy is healthy, a slowdown in growth makes it harder to replace those jobs that are lost through the normal functioning of the economic system.

Theoretically, a national government could function as the employer of last resort, providing jobs to those unable to find work.²¹ But this would go against the interests of capital in having easy-to-hire workers when needed. And it would mean raising taxes to pay for these government jobs, which is also against the interests of corporations as well as the “1 percent” of individual capitalists and other wealthy persons.

Growth of Monopoly Power

The trend within capitalism toward the centralization and concentration of capital into larger and larger units has reached a point where a few giant transnational corporations dominate most sectors of the economy. A handful of corporations—Monsanto, Dow-DuPont, Syngenta, BASF, and Bayer (which is trying to purchase Monsanto for $66 billion)—control over 75 percent of the global commercial seed markets.²² In 2007, in approximately 40 percent of industries, the four largest companies sold more than half of the goods. The four largest supermarket companies in the United States went from garnering 18 percent of sales in 1992 to 32 percent in 2007. This goes on for industry after industry and sector after sector. By 2014 the revenue of the 200 largest nonfinancial corporations in the United States was over one-third of the total revenue of all such corporations.²³

In a 2015 article for the New York Review of Books titled “Challenging the Oligarchy,” economist Paul Krugman wrote:

It’s obvious to the naked eye that our economy consists much more of monopolies and oligopolists than it does of the atomistic, price-taking competitors economists often envision…. There’s also statistical evidence for a rising role of monopoly power. Recent work by Jason Furman, chairman of the Council of Economic Advisers, and Peter Orszag, former head of the Office of Management and Budget, shows a rising number of firms earning “super-normal” returns—that is, they have persistently high profit rates that don’t seem to be diminished by competition.²⁴

Monopolies and oligopolies don’t compete by cutting prices; they compete primarily through advertising, continually bringing out new versions of a product, and other aspects of the sales effort. Less competition means profits above those normally expected, derived from dominating the particular market. “Today’s markets are characterized by the persistence of high monopoly profits,” says Joseph Stiglitz, former chief economist for the World Bank.²⁵ “The real key to capitalist success,” says Stiglitz, “is to make sure there won’t ever be competition—or at least there won’t be competition for a long enough time that one can make a monopoly killing in the meanwhile.”²⁶

Democracy Not Essential

The United States is a plutocracy; the wealthy elite—or ruling class—controls the government and its regulatory system. “Of the 1%, by the 1%, for the 1%,” is the way Stiglitz puts it.²⁷ Capitalism does not require democracy in order to exist. It has functioned quite happily under dictatorships around the globe: under Franco in Spain, under Pinochet in Chile, and under the military juntas of Brazil and Argentina. Capitalism has thrived in contemporary Saudi Arabia, China, and so on. What capitalism requires is a state that sets rules, facilitates business success, and acts to protect and expand national business interests when domestic corporations operate in foreign countries.

In 2014, political scientists Martin Gilens of Princeton and Benjamin Page of Northwestern University conducted a study confirming that the economic elite, composed of superrich individuals and organizations representing business interests, “have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.”²⁸

In other words, the United States is governed by a plutocracy instead of the democracy that many still believe exists. With Donald Trump as President and Congress and the majority of state governments under Republican Party control, the elite—especially the fossil fuel and financial industries—are becoming even more powerful.

The Rise and Growth of Capitalism

How did capitalism get started in the first place? What were the original sources of capital? How were free workers forced to sell their labor power to the capitalists? And why were colonialism and slavery such an integral part of capitalism’s development?

Capitalism requires pools of capital and labor as well as access to natural resources. When all are available, capitalists organize labor and obtain machinery, land, and other resources and put it all in motion to produce commodities. The accumulation of capital that began the process by providing large amounts of money that could be invested was based on theft: stolen labor, stolen people, and stolen natural resources. The colonial powers stole precious metals primarily from the Americas and brought them to Europe. Land was appropriated and indigenous peoples were compelled into forced labor. Millions of men and women were seized as slaves from Africa, decimating that continent while providing labor in its cheapest form to develop the resources of the New World as well as a source of wealth for traders and slave owners. In all of this, the nation-state was the organizing instrument that promoted, planned, and carried out the thefts or gave permission and made the resources available to do so.

While plunder in the colonies and slavery provided capital and labor for further investment, capitalism as it developed its modern form needed laborers in the “home” country to work in the factories. These workers were obtained through the enclosure process. The enclosures of land in Britain occurred over centuries, but accelerated as the British Parliament passed a series of Enclosure Acts, culminating in the nineteenth century. These laws incorporated the portion of land and water that had once been free to all—the commons—into the vast privately owned agricultural estates. With nowhere to pasture their animals or grow their crops, the peasants were forced off the land and, in order to live, were compelled to sell their labor to the nascent industrial market. In the New World, millions of native peoples were being driven from their homes, enslaved, slaughtered outright, or decimated by smallpox and other diseases for which they had no immunity. European settlers—mostly peasants forced off their land in the home country but not needed in the developing industries—seized their territories and privatized what had been communal resources of water and land.

The massive trade in human beings and later the colonial takeovers changed the economic and social trajectory of whole continents. Slaves were sources of labor and wealth—commodities to be bought and sold, rented out and used as collateral for loans. The labor of enslaved Africans made it possible to develop the sugar and cotton plantations that were so central to capitalist expansion in the Americas. Slavery was also central to providing Britain with massive amounts of raw material for the first mass-produced commodity, cotton textiles.

Because of the significance of cotton and its critical role in the rise of the Industrial Revolution, and the role enslaved labor played in producing cotton and sugar, the importance of slavery to the economic development of the U.S. and Britain cannot be overemphasized. As historian Walter Johnson has written,

In the years before the Civil War, there was no capitalism without slavery. The two were, in many ways, one and the same…. It is not simply that the labor of enslaved people underwrote 19th-century capitalism. Enslaved people were the capital: four million people worth at least $3 billion in 1860, which was more than all the capital invested in railroads and factories in the United States combined. Seen in this light, the conventional distinction between slavery and capitalism fades into meaninglessness….²⁹

By the time of the Civil War, cotton production was 30 percent of the U.S. economy. Cotton became so integral to the economy of the South and the world economy that it was known as “King Cotton,” and during the relatively short period from the 1830s to the U.S. Civil War, “Indian land, African-American labor, Atlantic finance and British industry [were] synthesized into racial domination, profit and economic development on a national and a global scale.”³⁰

The invention of the cotton gin to clean raw cotton at the end of the eighteenth century allowed for a huge increase in worker productivity and cost savings in this aspect of the industry. However, as historian Sven Beckert makes clear in Empire of Cotton, what really made the difference was not better technology but the social relations unique to capitalism. The explosive growth of the cotton textile industry, Beckert writes,

did not at first derive from technical advances, nor from organizational advantages, but instead from a far simpler source: the ability and willingness to project capital and power across vast oceans…. The muscle of armed trade enabled the creation of a complex, Eurocentric maritime trade web; the forging of a military-fiscal state allowed for the projection of power into far-flung corners of the world; the invention of financial instruments … allowed for the transfer of capital and goods … the expropriation of land and deportation of Africans created flourishing plantations.³¹

The European countries seized colonies in Asia, Africa, and Latin America. Atrocities were routinely committed by the colonial powers, particularly when people refused to submit. For example, in the German colony in what is today Namibia, tens of thousands of people from the Herero and Nama tribes were slaughtered in what the German government now admits was genocide. Esther Muinjangue, a Herero activist and social worker at the University of Namibia described the enormity of what happened during colonial rule: “We are talking now about the lives that were lost, the land that was taken, the cattle that was killed, the rape, the lost dignity, the culture that was destroyed. We cannot even speak our language.”³²

Former World Bank economist Branko Milanovic described capitalism as:

brought to the many at the “point of a gun,” and many were “globalized” literally kicking and screaming, from Commodore Perry’s ultimatum which opened Japan, to British and French gunboat diplomacy in Tunisia, Egypt and Zanzibar, to the Opium Wars and gunboats that patrolled Chinese internal waterways. Worst of all, for many millions who were sold in slavery, or who toiled 16 h a day on plantations from Malaya to Brazil that too was globalization. Globalization was not merely accompanied by the worst excesses of colonialism; colonialism was not an accident. On the contrary, globalization was colonialism because it is through being colonies that most of the non-European countries were brought to the global world.³³

This was the greatest land grab in history. By the beginning of the First World War in 1914, “the colonial powers, their colonies, and their former colonies extended over approximately 85 percent of the earth’s surface.”³⁴ Most of the countries in the Americas became independent from the European powers during the eighteenth and nineteenth centuries. However, it was only after the Second World War that long-standing independence struggles were successful among the colonies of Africa and Asia in the face of the brutalities committed by the colonial powers.

Imperialism as Inherent to Capitalism

In the words of Harry Magdoff, “Imperialism is not a matter of choice for a capitalist society; it is the way of life of such a society.”³⁵ Imperialism without colonies is an essential feature of twenty-first-century capitalism, in which control is maintained in other ways. The leading nation-states use political, military, and economic means to force open and expand markets for goods and services, permit investment and the repatriation of profits, set up low-cost production facilities, control resource exploitation on favorable terms, and pursue geopolitical interests—everything possible to enhance their own national profit potential and power.

After the Second World War, the United States—its huge economy unscathed while other capitalist economies were in ruins—replaced Britain as the world’s leading imperial power. Since then, the United States has overthrown democratically elected governments and intervened militarily in dozens of countries to further its own interests. (See chapter 4 for discussion of U.S. actions abroad.)

Following the attacks of September 11, 2001, there were calls for a more muscular and aggressive foreign policy, a “new imperialism.”³⁶ In a 2003 Wall Street Journal article, Alan Murray quoted two Brookings Institution authors as saying that “the real debate is not whether to have an empire, but what kind.”³⁷ As the Iraq insurgency against U.S. intervention exploded, a BBC defense correspondent referred to Rudyard Kipling’s famous poem, “The White Man’s Burden,” as an analogy for George W. Bush’s new imperialism. The poem begins with the following exhortation:

Take up the White Man’s burden, Send forth the best ye breed

Go bind your sons to exile, to serve your captives’ need;

To wait in heavy harness, On fluttered folk and wild—

Your new-caught, sullen peoples, Half-devil and half-child.

The correspondent, trying to stiffen the U.S. government’s spine, just as Kipling had tried to do with his poem, reminded Washington:

It should be remembered that more than 100 years ago, the British poet Rudyard Kipling wrote his famous poem—a warning about the responsibilities of empire that was directed not at London but at Washington and its newfound imperial responsibilities in the Philippines. It is not clear if President George W. Bush is a reader of poetry or of Kipling. But Kipling’s sentiments are as relevant today as they were when the poem was written in the aftermath of the Spanish-American War.³⁸

The United States straddles the globe with its military might. Despite the closure of hundreds of bases in Iraq and Afghanistan during Obama’s presidency, the U.S. operates “nearly 800 military bases in more than 70 countries and territories abroad—from giant ‘Little Americas’ to small radar facilities. Britain, France and Russia, by contrast, have about 30 foreign bases combined.”³⁹

New York Times columnist Thomas Freidman, a strong supporter of U.S. imperial adventures abroad, observed in the late 1990s in words that still ring true: “The hidden hand of the market will never work without a hidden fist—McDonald’s cannot flourish without McDonnell Douglas…. And the hidden fist that keeps the world safe for Silicon Valley’s technologies is called the United States Army, Air Force, Navy and Marine Corps.”⁴⁰

CAPITALISM TODAY

Capitalism has the same basic features today that it has had since it began a few centuries ago. It has expanded to nearly every corner of the globe and into every aspect of our lives. The profit motive reigns supreme as the motivating force that propels the economy. Naturally, as the system matures and nation-states rise and fall, significant changes have occurred since the 1970s.

Growth Slows

Economic growth has slowed in the wealthy capitalist nations of Europe, Japan, and the United States. For example, the U.S. annual real GDP growth rate, corrected for inflation, averaged 4.3 percent in the 1950s and ’60s, 3.2 percent in the ’70s, ’80s, and ’90s, and 1.8 percent from 2000 to the middle of 2016.

Increasing productivity and the addition of more factories, stores, and equipment during flush times has resulted in huge overcapacity of industrial capacity and retail outlets and in relation to what can be profitably marketed. In December 2016, seven and a half years after the Great Recession was declared over, only 75 percent of U.S. industry capacity was being utilized.⁴¹ And though the shopping malls serving the wealthy are still doing well today, those serving the rest of the population are struggling. Between 2010 and 2015, about two dozen “dead malls” closed in the United States; another sixty or so are on the brink of failure, and many more are in serious trouble.⁴² Global overcapacity in many economic sectors is one factor slowing economic growth.

In 2016, a trend of slow growth, what some economists call “secular stagnation,” has taken over much of the world. In Japan, Europe, and the United States, growth is occurring at rates far below what is possible. China’s growth, relatively high in comparison to other countries, has slowed considerably. Global trade hasn’t increased in close to two years, leading to an overcapacity in the shipping industry and to the 2016 bankruptcy of one of the major ocean shipping companies, the South Korean–owned Hanjin Shipping. Investment in new productive capacity has declined, threatening future growth. International corporations are sitting on trillions of dollars. Zheng Zhe, chairman of Gulifa Group, a manufacturing company in eastern China, said, “I don’t know what to invest. It worries me a lot…. A lot of industries that we used to put money in have seen tremendous drop in returns. I dare not invest anymore.”⁴³ This is precisely the problem that many corporations face, so they use a large portion to buy back their own stock, buy other companies, or pay out more dividends instead of investing in future production capabilities.

Neoliberal Policies and Consequences

In response to the return of slow economic growth in the 1970s, capitalists launched a multifaceted effort to enhance their economic and political power, moving toward implementing laws and practices that are collectively referred to as neoliberalism and harken back to earlier periods such as the 1920s. The essential goal of this effort has been freeing capital from as many restraints as possible, resulting in a massive transfer of wealth and power from the public to the private sector. Public services and facilities have been privatized, industry deregulated, unions attacked, tax rates for corporations and the wealthy cut, and social spending slashed, in the name of flexibility and “austerity.”

Neoliberalism does not represent a break from the underlying dynamics of capitalism. It is merely an aggressive response by capitalists, reasserting their interests in the face of social programs they don’t want to pay for, loss of power to labor unions, and the crisis of low profitability. In the United States, an opening salvo in a heightened class war was the 1971 Lewis Powell memo to members of the U.S. Chamber of Commerce that only came to light after Powell’s appointment to the Supreme Court by Nixon. Powell maintained that it was no longer enough for corporations merely to secure profits: “If our system is to survive, top management must be equally concerned with protecting and preserving the system itself.” Saving the free enterprise system required “the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.”⁴⁴ The memo

inspired the establishment of the powerful Business Roundtable (which has only CEOs as members), the American Legislative Exchange Council, the Heritage Foundation, the Cato Institute, and Citizens for a Sound Economy (the forerunner of Americans for Prosperity). Within a decade the number of firms with lobbyists expanded by almost fifteen-fold. Corporate PACs quadrupled in number between 1976 and the mid-1980s.⁴⁵

The massive amounts of money in politics, the notorious “revolving door” between government and business, the cozy relationship between corporations and the government agencies that regulate them, tax cuts for the rich and big business, international “free trade” agreements such as NAFTA and the WTO that favor business interests over those of workers—all point to the enormous influence of business on government.⁴⁶

As part of the offensive against labor, unions were blamed for unemployment and economic crises because their workers were too well paid, too secure in their jobs, or had too many benefits. Attacks on wages, benefits, and labor rights were justified by the supposed need for increased “flexibility” in the marketplace. The result has been a decline in union membership in the United States from about one-third of all workers a half-century ago to about 10 percent today (with less than 7 percent in private businesses). The attack on labor went hand in hand with an ideological and political offensive to roll back the social gains of the 1960s and 1970s made by African Americans, women, environmentalists, and other social groups.

With the combined effects of technological changes, slow growth in traditional full-time employment, and greater power of business owners to determine the conditions of work, more people are working in what is called the “gig-economy.” It’s estimated that one-third of U.S. workers are employed in jobs that pay no benefits, offer no security, may have irregular hours, and have few legal protections. About 70 percent of these workers “report being stiffed at one time or another.”⁴⁷ While some consider the U.S. to be near full employment in early 2017, an estimated 20 million people have been left behind, “looking for work, out of the labor force but unhappy about it, or report working part-time when they’d prefer more hours.”⁴⁸ (The situation for workers in Europe is also difficult, with the unemployment rate about double that in the United States and half of the workers in jobs created from 2010 through 2016 on temporary contracts.⁴⁹)

When asked whether class war existed, billionaire investor Warren Buffett said: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”⁵⁰

Explosion of Debt and Speculation

One of the prominent features of contemporary capitalism has been growth of the financial portion of the economy. As it became more difficult to profit by making and selling commodities, capital began to flow to the financial system; banks and non-bank lenders, investment companies, and insurance companies. Why not just make money without actually making a commodity? As commodity production (M–C–M′) became financial wizardry (M–M′), an expansion of debt and an orgy of speculation followed. With real wages falling, much of the growth of the economy in the developed countries during the last forty years was accomplished through debt expansion, allowing people and companies to spend much more than they actually have: total debt in the United States (government, household, and business) swelled to around 150 percent of GDP in the mid-1980s and reached a peak of over 360 percent of GDP during the Great Recession (2007–2009). There has been an explosion of easy credit—for automobiles, home mortgages, college education, and credit cards that can buy anything—greatly expanding consumption and thereby stimulating the economy.⁵¹

The sheer magnitude of speculation and accumulated debt and the size of the housing bubble that occurred leading up to the Great Recession were staggering.⁵² A good portion of the financial system was converted into a giant casino where bets could be made on just about anything, such as changes in relative currency values, the price of corn, oil, or interest rates at some time in the future, or concocted financial “instruments” so complex no one really understood them. Though there has been a retreat in total debt in the United States relative to GDP (standing at about 330 percent in mid-2016), total debt of the major economies as a whole has continued to grow since 2009. According to a 2016 article in the Financial Times: “Since 2008, total public and private debt in major economies has increased by over $60tn to more than $200tn, about 300 per cent of global gross domestic product (GDP), an increase of more than 20 percentage points.”⁵³

The importance of debt is that it allows a person or company or government to buy and do things that they would otherwise not be able to do, thereby stimulating the economic activity. But, though there is no firm boundary of how much debt there can be in an economy, the system becomes increasingly fragile as debt increases relative to the underlying economy (GDP). And personal debt can grow relative to one’s income until it reaches a level where it becomes increasingly difficult to pay the money back. That’s what happened to many households in the lead-up to the Great Recession of 2007–2009. Although the very rapid growth that occurred in China during the first fifteen years of the twenty-first century was certainly impressive, much was based on economic activity stimulated by borrowing by individuals, local and regional governments, and commercial enterprises. Many are now concerned that the debt and asset bubbles in everything from housing to stocks to raw materials (stimulated by massive amounts of debt) cannot be sustained and that difficulties lie ahead for China’s economy, with potential global repercussions.

Speculation occurs on an international scale, with literally trillions of dollars sloshing around the world, seeking higher returns first in the poorer (“developing”) countries and then in the wealthier ones, depending on relative interest rates and currency values. This is how financial instability is exported, with crises developing when vast quantities of money quickly move out of a country as investors and speculators seek safety and/or higher returns.

More Wealth, More Inequality

Neoliberal economic and political policies and the growth of the financial industry have dramatically increased inequality in many countries of the world, including the United States. In 2015, total global wealth was $250 trillion—over three times the total global GDP of $73 trillion (2014).⁵⁴ But 10 percent of the population owned 87 percent of that wealth (see Figure 2.1) and the richest 1 percent owned half. Conversely, 70 percent of the population owned less than 3 percent of global wealth.⁵⁵

Figure 2.1 Percent of total global wealth ownership by decile (10 percent portions of the population).

Source: Credit Suisse Global Wealth Databook 2015.

Income distribution, though very unequal, tends to be less so than wealth ownership. Income inequality decreased during the Great Depression, and again in the 1950s and 1960s, when many workers were members of strong unions that helped obtain significant wage increases. But that didn’t last: in the mid-2010s, the top 10 percent in the United States received about half of all income—a share last seen in the 1920s. At the same time, the top 1 percent increased their income share from around 10 percent to over 20 percent of all income.⁵⁶ During nearly four decades, through 2015, as income of the rich and its portion of total income was skyrocketing, the adjusted income of the bottom half of the U.S. population actually declined by 1 percent.⁵⁷

In the United States inequality by race is even greater, with white homeownership rates at about 72 percent whereas only 42 percent of African Americans owned their own homes. The median wealth of African American households is only about 8 percent that of white households.⁵⁸ And of course women still earn only 78 cents for every dollar earned by men in similar jobs and suffer a host of other problems in a society organized to perpetuate gender inequality.

The vast inequalities experienced by large portions of the world’s people are not a result of fate, or technological change, automation, population growth, lack of education, or any of the other random factors trotted out to explain income and wealth inequality. Economic inequality is a reflection of the inequality of power between workers and capital built into the system. In its pursuit of perpetual profits and growth, capitalism guarantees that incredible amounts of wealth flow to a small portion of the population while the poor and near-poor are deprived of the resources needed to live full lives. Capitalism has no mechanism to rationally manage the human interaction with resources or promote the general social well-being.

Some of the harmful social effects today result from capitalism’s history of slavery and colonization, land theft and marginalization of native peoples, and imperialist interventions. Decades of stagnant or falling wages, increased pressure on the job to do more with less, and more insecure, temporary, and part-time work have also taken their toll on working people in many countries.⁵⁹

Part of the explanation for the election of Donald Trump as President of the United States and the UK’s decision to “Brexit” the European Union occurring at the same historic moment is that a significant portion of the working class in these countries justifiably feels that their economic situation is stagnant or getting worse while others enrich themselves. They are aware that this system is unfair with very unbalanced wealth and power. However, not understanding the causes of their predicament, and in the face of showmanship and propaganda playing to their fears, many end up voting for people who will make the situation even more unjust.

At the same time as challenges to neoliberal orthodoxy are occurring, the declining power of the United States to control or even greatly influence events around the world introduces another level of global instability. There is significant dissatisfaction and anger in the European Union with neoliberal policies adopted by center-left governments, with questions arising about more countries withdrawing from the European Union or dropping use of the euro. Across the world people are struggling against the declining quality of life.

The primacy of private profits, a result of the basic way capitalism functions, creates social and ecological dislocation and degradation all around us. The next two chapters explore the consequences of this economic system for the environment and humanity.