In my previous post I quoted Professor Charles Hall’s assertion that the current economic paradigm is ill-equipped to account for and address externalities such as resource depletion and environmental degradation. Peak oil as well as climate change/global warming are just two in a long list of biophysical constraints which neoclassical Keynesian economics, i.e. mainstream economics, overlooks:

…the crisis looming before us is likely to be, if anything, more terrible than the Great Depressions of 1873-93 and 1929-39. The continuing industrialization of agriculture and urbanization of population—by 2010, it is estimated, more than half the earth’s inhabitants lived in cities—has made more and more people dependent upon the market to supply them with food and other necessities of life. The existence on or over the edge of survival experienced today by the urban masses of Cairo, Dhaka, São Paulo, and Mexico City will be echoed in the capitalistically advanced nations, as unemployment and government-dictated austerity afflict more and more people, not just in the developed world’s Rust Belts but in New York, Los Angeles, London, Madrid, and Prague.

Left to its own devices, capitalism promises economic difficulties for decades to come, with increased assaults on the earnings and working conditions of those who are still lucky enough to be wage earners around the world, waves of bankruptcies and business consolidations for capitalist firms, and increasingly serious conflicts among economic entities and even nations over just who is going to pay for all this. Which automobile companies, in which countries, will survive, while others take over their assets and markets? Which financial institutions will be crushed by uncollectible debts, and which will survive to take over larger chunks of the world market for money? What struggles will develop for control of raw materials, such as oil or water for irrigation and drinking, or agricultural land?

Gloomy though such considerations are, they leave out two paradoxically related factors that promise further dire effects for the future of capitalism: the coming decline of oil—the basis of the whole industrial system at present—as a source of energy, and the global warming caused by the consumption of fossil fuels. Even if continuing stagnation should slow greenhouse gas-caused climate change, the damage already done is extremely serious. Elizabeth Kolbert, a journalist not given to exaggeration, called her soberly informative account Field Notes From a Catastrophe. The melting of glaciers threatens not only Swiss views but the drinking supplies of whole populations in such areas as Pakistan and the Andean watersheds; droughts have ravaged Australian and Chinese agriculture for years now, while floods periodically devastate the low-lying South Asian homes of tens of millions of people. The rolling parade of disasters is, unfortunately, only getting started. It will accompany a stagnant economy and only be exacerbated by the increased greenhouse-gas emissions that a return to true prosperity would bring… – essay adapted from Paul Mattick’s book ‘Business as Usual: The Economic Crisis and the Failure of Capitalism‘

The mandatory growth requirement of mainstream economics also precludes the concept of sustainability. I have not yet read the above referenced book ‘Business as Usual: The Economic Crisis and the Failure of Capitalism’, but a prominent socialist speaking of peak oil and global warming in the same paragraph is always intriguing. However, a brief critique of the book by a reader finds that Mattick does not go nearly far enough in incorporating these two realities into his analysis of our current crisis:

All mainstream institutions have subscribed to the near religious belief of the infallibility of the capitalist economy which itself is considered a self-regulating system governed by the “invisible hand” of the free market as explained by Adam Smith in The Wealth of Nations. Market ‘value’ is produced by the optimal use of capital, labor, and production. Mainstream economics operates under the assumption of a world with freely available and unlimited resources. It divides and reduces all resources into units of monetary value, not taking into consideration the value such resources hold in maintaining the ecological balance of the planet.

Isn’t it the height of hypocrisy that those wealthy nations trumpeting the superiority of the free market are also the same countries which dominate global resources and world markets by military superiority as well as the subversive and coercive tactics of their economic hitmen?

…war is integral to imperialism. Imperialism – and especially the imperialist powerhouse, the USA – needs the threat of war to sustain itself: ideologically, militarily, geo-politically and also financially. The arms and defence industry is a major part of the US economy. In 2011, the defence budget was a staggering $698 billion, or 4.8% of the US GDP (link). Add to that the cost of increased security concerns – for example, to combat the ‘terrorist threat’ within imperialist countries – and you have a major chunk of the economy being reliant on the continued existence of enemies within and without.

It’s a form of military Keynesianism to keep a faltering economy going. The further capitalism sinks into decline, the more irrational the drive to war becomes and the more ludicrous are the reasons presented by imperialism (weapons of mass destruction, nuclear capability, etc).

…a very naive view of how the world is run [is to hold the belief that] David Cameron, Barack Obama and Benjamin Netanyahu just ‘happen’ to be spending ‘too much’ on military, which on the surface seems deeply illogical at a time of official austerity. But, of course, the opposite is true: it is their way of staying in power.

Of course, we should fight against such ridiculous spending on increasingly refined machinery to exterminate humanity. But we should be clear why. – link

Moreover, America’s military has become a self-perpetuating industrial complex for profiting from war and instability.

Another problem with the world’s dominant economic system is that GDP is a misguided and inaccurate gauge for measuring the standard of living and well-being of the general populace:

…History shows that democratic forms are no proof against a slide into repressive forms. In Germany in the 1930’s, a declining standard of living contributed to the rise of the Nazi party; Hitler was democratically elected to the office of Chancellor (and then proceeded to establish himself as Fuehrer).

As America’s perpetual-growth economy faces the reality of ecological limits, as climate change imposes costs and decreased well-being on us, as food and energy and other resource prices increase because of the inexorable logic of a declining Energy Return on Energy Invested at the physical foundation of our economy, we face the prospect of a widespread decline in our standard of living. This dynamic lies at the root of this fact: Americans coming of age today are among the first generation who can’t be confident that they will be better off than their parents. By one widely used measure of well-being (the genuine progress indicator, which deducts loss of ecosystem services and other “disamenities” from the national accounts), the American standard of living has flatlined since the 1970s, despite continued strong growth in GDP.

Thus the cautionary lessons from Egypt and Tunisia. GDP is a measure of the commotion of money in an economy, not a measure of delivered well-being. If sustained or rising well-being is what is economically and politically desirable, we should measure it directly, instead of counting on GDP to do the job. And if we accept the idea of popular sovereignty—that governments rule with “the just consent of the governed,” as Jefferson put it in our Declaration of Independence—we must recognize that as the middle class goes, so goes the legitimacy of the regime in power. No system of government—despotic or democratic—fares well when the majority of its citizens experiences a declining standard of living… – link

For those who have not read Darbikrash’s last post, A Nation of Hustlers and Swindlers, it lays bare the big con game of capitalism. Similarly, the mechanic scenes in Oliver Stone’s U-Turn represent, for me, capitalism’s exploitive process of getting something for nothing: