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Tuesday, September 15, 2009

Sustainable Capitalism: A Matter of Common Sense

Is Capitalism Sustainable?[1]

John Ikerd

Professor Emeritus of Agricultural Economics

University of Missouri Columbia

College of Agriculture, Food and Natural Resources

I realize most readers of this magazine are operators of small farms. But, some questions are simply too important to leave the economists and politicians. If our capitalistic economy is not sustainable, neither are our farms or ultimately our society or humanity. Some questions are so important that no one can afford to remain uninformed, uncommitted, and uninvolved.

Is capitalism sustainable? Not the type of capitalism that dominates American and most global economies today. This is not a matter of personal opinion, but a direct consequence of the most fundamental laws of science. Sustainability ultimately depends upon energy because anything that is useful in sustaining life on earth ultimately relies on energy. All material things that are of any use to humans – food, clothes, houses, automobiles, – require energy to make and energy to use. All useful human activities – working, thinking – require human energy. Physical scientists lump all such useful activities together and call them “work.” All work requires energy.

In performing work, energy is always changed in form. In fact, the natural tendency of energy to change from more concentrated to less concentrated forms gives energy its ability to perform work. All material things, such as food, gasoline, plastic, and steel, are just highly concentrated forms of energy. Matter can be converted into energy, as in eating food or burning gasoline, and the form of energy can be changed, as in using heat to make electricity and electricity to produce light. However, even though work invariably changes matter to energy or changes the form of energy, no energy is lost. This is the first law of thermodynamics, the law of energy conservation, as in Einstein’s famous E=MC2.

At first, it might seem that energy could simply be recycled and reused forever, as if sustainability would be inevitable. However, once energy is used to perform work, before it can be used again, it must be reconcentrated, reorganized, and restored. Unfortunately, it takes energy to reconcentrate, reorganize, and restore energy. And, the energy used to reconcentrate and restore energy is simply no longer available to do anything else. It has lost its usefulness. This is the law of entropy, the second law of thermodynamics; the tendency of all closed systems to tend toward the ultimate degradation of matter and energy; toward inert uniformity; an absence of structure, pattern, organization, or differentiation. The barren surfaces of the Moon or Mars are examples of systems near entropy.

Since loss of useful energy to entropy is inevitable, it might seem that sustainability is impossible. Even if waste and pollution could be completely avoided in the processes of using and reusing energy, the tendency toward entropy would continue. In fact, life on earth would not be sustainable without the daily inflow of new solar energy. Sustainability ultimately depends upon the use of solar energy to offset the unavoidable effects of entropy.

Capitalism is a very efficient system of energy extraction, but it provides no incentive to reconcentrate and restore energy to offset entropy. Capitalists have no economic incentive to invest in energy renewal for the benefit of those of future generations. Capitalists reduce waste and pollution or reuse resources only when it is profitable to do so, meaning only when it is in their individual self-interest to do so. Capitalists have incentives to use renewable energy to support current consumption, but not to re-storing energy for future generations. Capitalism inevitably tends toward physical entropy.

The law of entropy applies to social energy and well as physical energy. All forms of human energy – labor, management, innovation, creativity – are products of social relationships. Humans cannot be born, reach maturity, and become useful without the help of other people who care about them personally. People must be educated, trained, civilized, and socialized before they can become productive members of complex societies. All organizations – including business organizations, governments, and economies – depend on the ability of people to work together for a common purpose, which in turn depend upon the sociability and civility of human societies. Human productivity is a direct result of healthy personal relationships, within families, friendships, communities, and societies.

Capitalism inevitably dissipates, disperses, and disorganizes social energy because it weakens personal relationships. Maximum economic efficiency requires that people relate to each other impartially, which means impersonally. People must compete rather than cooperate, if market economies are to function efficiently. When people spend more time and energy working – being economically productive – they have less time and energy to spend on personal relationships within families and communities. When people buy things based solely on price rather than buy from people they know and trust, personal relationships within communities suffer from neglect. Capitalism devalues personal relationships and disconnects people and thus dissipates, disperses, and disorganizes social energy.

Capitalistic economies use people to do work, while doing nothing to restore the “social capital” needed to sustain positive personal relationships. There is no economic incentive for capitalists to invest in families, communities, or society for the benefit of future generations. Capitalists build relationships or contribute to social causes only when such contributions are expected to contribute to their profits or growth. Capitalists do not waste energy by investing in social capital. Capitalism inevitably tends toward social entropy.

Economies are simply the means by which people facilitate their relationships with other people and with their natural environment in complex societies. Economies actually produce nothing; they simply transform physical and social energy into raw materials and human labor, which can be exchanged in impersonal marketplaces. All economic capital is extracted from either natural or social capital. Once all natural and social capital has been extracted, there will be no source of economic capital. Without capital, an economy loses its ability to produce; it tends toward economic entropy. Today’s capitalistic economies quite simply are not sustainable.

A sustainable economy must be based on a fundamentally different paradigm, specifically, on the paradigm of living systems. Living things by nature are self-making, self-renewing, reproductive, and regenerative. Living plants have the natural capacity to capture, organize, and store solar energy, both to support other living organisms and to offset the energy that is inevitably lost to entropy. Living things also have a natural propensity to reproduce their species. Humans, for example, devote large amounts of time and energy to raising families, with very little economic incentive to do so. Obviously, an individual life is not sustainable because every living thing eventually dies. But, communities and societies of living individuals clearly have the capacity and natural propensity to be productive, while devoting a significant part of their life’s energy to conceiving and nurturing the next generation.

Relationships within healthy living systems must be mutually beneficial, and thus must be selective in nature. All living organisms are made up of cells and each living cell is surrounded by a selective or semi-permeable membrane. These semi-permeable boundaries keep some things in but let other things out and keep some things out but let other things in. Living organisms likewise are defined by boundaries – skin, bark, scales, – that selectively allow different elements – air, water, food, waste, – to enter and to leave the body of the organism. If these boundaries were either completely permeable or impermeable, the organism would be incapable of life, and thus incapable of producing or reproducing.

The same principle holds for all living systems: ecosystems, families, communities, economies, cultures. The relationships among elements of healthy natural ecosystems are by nature mutually beneficial. However, relationships among humans and between humans and nature are matters of choice, and thus must be consciously and purposefully selective. People must be willing and able to choose to maintain positive relationships with other people and to choose to take care of the earth, not only to benefit themselves, but also to benefit those of future generations.

Capitalism provides no economic incentives to sustain life on earth, but humans have the innate capacity and natural tendency to do so. Throughout human history, people have chosen families, communities, and societies over isolation, even when it was not in their short run, individual self-interests to do so. Throughout human history, people have shown a sense of respect and reverence toward the earth, and have attempted to care for the earth, even when here was no incentive to do so. It’s only within the past few decades that humans in large numbers have abandoned their basic nature as living, caring beings in pursuit of their narrow, individual self-interests. Not until the last few decades, were the social and ethical constraints removed, turning capitalism into an unsustainable system of extraction and exploitation.

To restore sustainability, people must make conscious, purposeful decisions to rely on renewable energy, not just for consumption, but also to rebuild stocks of natural capital for the benefit of future generations. To restore sustainability to capitalism, people must make conscious, purposeful choices to rebuild positive, mutually beneficial relationships with other people, not just for economic gains, but also to restore depleted stocks of social capital. No other economic system even approaches the efficiency of capitalism in utilizing economic capital to meet individual material human needs and wants. But, natural and social capital must be continually renewed and replenished to sustain economic capital. The sustainability of capitalism is simply too important to be left to the politicians and economists.

Is capitalism sustainable? This question ultimately must be addressed by all people, including those who operate small farms. You don’t have to be “rocket scientist” to understand energy and entropy. All people have the ability and responsibility to understand the importance of this question, to commit, and to become involved.

(Reference: Sustainable Capitalism: A Matter of Common Sense; www.kpbooks.com)

[1] Sustaining People through Agriculture series,” Small Farm Today Magazine, Missouri Farm Publications, Clark, MO. November-December 2006.

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