I concluded yesterday’s post by observing that Everything Must Change suggests that theocapitalism is an errant form of some more legitimate type of capitalism. Yet McLaren’s critique suggests to me that capitalism, “theo” or otherwise, is objectionable. Here’s why.
Capitalism
“Capital” is at the heart of capitalism. The word “capital” comes from the Latin caput meaning “head.” Head could be used to symbolize the whole entity, as in “a head of cattle.”
Think about a cow for a moment. A cow has two important economic properties. One property is production. If the cow is maintained, the cow will provide milk and fertilizer (in the form of manure) over a period of years. A cow can also give birth to other cattle.
The other property is consumption. The cow can be slaughtered and used for food. Other parts of the cow may be used for other purposes. If you use the cow for productive purposes, then you forfeit the consumptive uses. If you consume the cow, then you lose the productive uses.
Capitalism at its core is about creating a cycle that generates a growing herd of cattle, functioning at ever more productive levels. Just as the cattle rancher expands the herd through reproduction or through acquiring cattle from other ranchers, so is capitalism about expanding the productive capacity of society.
Some of the wealth generated by the “expanding herd” gets plowed back into creating more capital and part of it is used in consumption. The bigger the capital base, the more productive capacity there is available for society to use for purposes of consumption of goods and services. We no longer deal in cattle but the decision about whether to retain our income and plow it into appreciating assets (capital), or to use it for consumption is the same. Capitalism is about amassing a large stock of societal wealth that is placed in the productive service of societal wants and needs. Ideally, capital formation is a society-wide project where everyone is a steward of some amount of capital. Each owner works to expand their capital and uses some of it for their own welfare and the welfare of others. Economic growth is integral to capitalism. But let’s take closer look at economic growth.
Productivity
Productivity is key to economic growth. Productivity is the cost of production on a per capita (per head) basis. Productivity can be measured per dollar invested, per hour of labor expended, or per some other standard. To improve productivity, mangers of capital may seek less waste of raw materials in production, likely through improving technology. Another option is use of more skilled workers. Competition from other producers forces retail prices down motivating all producers to reduce production costs and increase the output per worker. If a raw material becomes too costly, producers will turn to less expensive substitutes.
Production processes may have unintended consequences like excess pollution. Increased awareness of pollution’s side effects may drive producers (either willingly or by force of law) to alter production methods or seek substitute materials. Recycling waste may become a feasible way of meeting raw material demands (as presently happens with about 95% of retired automobiles in the US.) Eventually, the economic pressures push toward the use of renewable resources, because the extraction and processing of non-renewable resources becomes prohibitively expensive. Furthermore, growth need not mean greater consumption of raw materials. Services (ex. health care) in post-industrial economies are expanding as a proportion of the economy.
Material and Positional Goods
Also, economists differentiate between material goods and positional goods. Positional goods are goods whose value derives (mostly if not entirely) from their desirability relative to substitute goods. If I build a house on two acres of land in rural Kansas and build the same house on two acres of land in the Hollywood Hills overlooking L.A., the second house is going to cost much more. The exclusivity of the location, and the status it brings, is the determining factor. Owning a beautiful painting by a famous artist versus owning a beautiful painting by an unknown artist is going to cost more. Yet in both cases similar amounts of raw materials were used.
In reality, most goods have some mixture of material and positional qualities (like expensive cars). The positional quality of goods has little or no impact on overall quantity of raw materials used but they can contribute significantly to economic growth. A recent article in the New York Times demonstrated the people in the middle income quintile consume only 29% more than folks in the bottom quintile. People in the top quintile consume only double what folks in the bottom quintile consume. The primary difference between the top quintile and the rest is that folks in the top quintile tend to save more and to purchase more positional goods.
Most advertising does little to sell more goods. Rather it tends to attract consumers to one product versus other competing products (shifting market share). Advertising often achieves its success by emphasizing positional qualities. Increased consumption likely comes as a result of the decreasing cost of basic needs (like food, clothing, and shelter) thus creating more discretionary income for consumers. For many, the increased income goes into saving or the purchase of positional goods, not radical expansion of material goods.
No Growth Capitalism?
McLaren opposes significant economic growth, which he uses synonymously with resource usage and destruction. (58) The issues are significantly more complex and dynamic than this. Quoting Herman Daly, a prominent neo-Malthusian, McLaren writes:
One only need try to imagine 1.2 billion Chinese with automobiles, refrigerators, washing machines, and so on, to get a picture of the ecological consequences of generalizing advanced Northern resource consumption levels across the globe. Add to that the ecological consequences from agriculture when the Chinese begin to eat higher on the food chain – more meat, less grain. Each pound of meat requires diversion of roughly ten pounds of grain from humans to livestock, with similarly increased pressure on grasslands and the conversion of forests to pastures. (203)
Precisely so, if technological realties and social realities are frozen in time and projected endlessly into the future! But things don’t stay frozen. Deforestation caused England to innovate into coal as a power source centuries ago. Demand for economical transportation across vast expanses in America led entrepreneurs to innovate into railroad technology. The increasingly inefficient and environmentally unfriendly horse method of personal transportation was answered by entrepreneurs inventing automobiles.
Projecting transportation technology thirty years into the future from the perspective of 1900 would have been exceedingly foolish yet neo-Malthusians do this without compunction today. In an earlier post, I’ve already shown that the US accomplished a twenty fold growth in gross domestic product and a threefold growth in population with zero growth in cropland acreage. World cropland usage has increased by 14% since 1960 despite a doubling of the global population. And dozens of nations around the globe have yet to upgrade to more productive methods already known today.
Nowhere does McLaren identify what he means by capitalism or what a non-theocapitalist capitalism would look like. MacLaren writes:
Just as airplane passengers in free fall feel that they’re flying (for a while), theocapitalism can produce a prosperity high in the short-term. But eventually, the flight becomes a crash: “The market’s own mindless expansion, effective as it is in the short-term inevitably brings its own long-term problems as if further taxes the planet’s carrying capacity beyond the already bad overload coming from the population increase. It’s not a question of ideology, but of physical limits.” (McLaren quoting J.F. (David?) Rischard of the World Bank, 201-202)
Rischard’s (and I presume McLaren) has a faith commitment in neo-Malthusian assessments, complete with its parochialism of the present orientation. It is only based on this commitment that he is qualified to suggest that he is responding to facts while others deal in ideology. A wide variety of economists do not believe that a few billion more human beings living at higher levels of affluence across the earth will take us anywhere near global caring capacity. The expected population stabilization level is under ten billion by century’s end (we are at about 6.6 billion today). Carrying capacity becomes a major issue only if you accept the neo-Malthusian thesis, which much like predictions of the second coming of Christ, prove false over and over again as proponents keep finding reasons why their new predictions are now accurate.
I do not believe McLaren has a clearly thought out economic strategy but you can’t have capitalism without growth. Without growth there is no way to lift billions of people around the world out poverty. Stopping growth and redistributing wealth to the poor is like taking leaves from a healthy plant and pasting them on a sickly one. It kills the healthy plant and the sick one dies anyway. Instead we need to study the healthy plant to learn what we can do to help the sickly one become healthier. Stopping growth will devastate wealth in developed nations and do nothing to help the poor because wealth, and wealth generation, is inextricably linked within an organic web of societal relationships. If robust economic growth is a criterion for detecting theocapitalism, then capitalism is theocapitalism.
The real constraints on capitalism are not material but spiritual. There is no amount of material wealth that can replace God. To the degree capitalism is about achieving our identity through wealth it is doomed to failure. We need to live within the relational limits God has given us. The most important limit is that you shall have no other god’s before God.
