Beyond growth or beyond capitalism?

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An ecosocialist critique of proposals for steady-state capitalism begins a debate on key issues facing the left greens today


There’s widespread agreement among left-leaning greens that this society’s drive for economic growth is a key driving force of the global environmental crisis. Many, most notably environmental economist Herman Daly, have made proposals for a “steady-state economy”that allows market forces to operate without growth. That idea is the subject of an important debate in Real World Economics Review, an online journal that often publishes valuable critiquesx of mainstream economic thought.

In issue #53, Richard Smith provides a powerful ecosocialist critique of Daly’s theories, arguing that “the idea of a steady-state capitalism is based on untenable assumptions, starting with the assumption that growth is optional rather than built into capitalism.”

He writes:

“since capitalist growth cannot be stopped, or even slowed, and since the market-driven growth is driving us toward collapse, ecological economists should abandon the fantasy of a steady-state capitalism and get on with the project figuring out what a post–capitalist economic democracy could look like.”

And he concludes: “Either we save capitalism or we save ourselves. We can’t save both.”

In a brief reply in issue #54, Herman Daly declares that he has never used the term steady-state capitalism, instead “always speaking of a steady state economy, which in my view is something different from both capitalism and socialism.” Smith, he says, opposes “my preference for the market over centralized planning as a tool for dealing with the single problem of allocative efficiency,” but doesn’t offer “anything specific or helpful about moving to a steady state economy, whether capitalist or socialist or neither.”

In issue #55, and in the journal’s blog, Smith responds that while Daly has not described his proposal  as capitalist, neither has he said what it actually is.

“If there is nothing particularly ‘socialist’ about Daly’s SSE model and he insists that the means of production must be privately owned and that markets ‘determine the allocation of resources,’ then what else can he talking about but capitalism?”

Recommended reading for anyone interested in alternatives to this ecocidal system.


  • Ciaran,

    The notion that capital markets as a zero sum game for the preservation of wealth will be an effective means of sustainable infrastructure investment is a pleasant fantasy, but highly unlikely to be true. It is true of course that even in a zero growth environment one industry can shrink and another can grow. The social cost of such movements are not zero since capital and labor cannot seamlessly be shifted between one industry and another. Such costs exist even in an environment of vigorous growth, but are held to be far outweighed be the benefits of increased overall productivity. It seems unlikely that the constant creation of new industry will be viewed as favorably as it is today in a zero growth environment.

    However, a more fundamental problem with growth of new industry at the cost of collapse of old industry is the necessity of paying a cut of the profits to the financial gate keepers who allow this transfer of resources to take place. In a zero growth environment one person’s consumption rights can increase only if some other person’s consumption rights decrease. In order for one financial investor to increase his or her consumption rights as a result of investment, then one of two things must happen: Either some other financial investor loses his or her shirt or someone who does productive labor takes a cut in wages. The investing class a whole will do everything in their power to make sure that option number two prevails. That this class has the political power to accomplish this goal should be evident from the action of the great ‘Socialist Satan’ Obama who has been giving money away to bloodsucking financial vampires in quantities so large that the human mind can scarcely comprehend their magnitude. Of course the impoverishment of the laboring classes to preserve financial wealth is justified as a temporary expedient for ‘getting the economy moving’ (i.e. growing) after which a revival increasing prosperity for all will resume its normal and eternal course of activity.

    If, in a zero growth environment, the socialization of investment risk was completely eliminated so that the law of the jungle prevailed for all classed of investors, then capital markets would probably be replaced by old fashion ownership of land and capital, and our society would head toward a stagnating oligarchy unless countervailing social forces acted to eliminate the system of hierarchy based on income.

    Any hope of a reasonably democratic society in a post growth world requires a system of community investment in which risk is socialized so that we do not have to charge interest as the price of creating and maintaining useful infrastructure.

  • It strikes me that the difference beween Daly and Smith are in the detail and the use of terminology. Does Daly agree on the need to have democratic government saying what is allowed and what is not in terms of energy generation and a host of other resource related issues? I think he does. At what point does such government intervention become socialist style planning. . . . . I guess it hangs on who owns the means of production?

    The main question is the relative position each author takes on the forms of ownership in key sectors of the economy such as energy, health care and farming? I assume that Richard Smith would go much further in passing legislation to put the means of production in key sectors into the ownership of co-operatives etc.

    It’s not clear, but it seems Daly does not see this as necessary or desirable and prefers regulated markets dominated by capitalists?

    At this point you have to ask, can capitalism be controlled in that way, given the way it concentrates power in the hands of a few?

    I don’t take the line that it can’t survive without growth, as some firms may grow at the expense of others and over time in a competing capitalist market we do see shrinking of sectors and growing of others (markets can go up as well as down). Look at Japan’s economy, for the last 20 years it has not grown or collapsed despite much press hyperbole indicating the latter. Most people lose on the horses but it does not stop the races.

    Personally, in practical terms at this point in history, I would like to see much more encouragement of the various forms of collective ownership through preferential taxation and in some cases reserving key sectors to collective means of ownership, or state owned as the fall back position.

  • Roger is right: We don’t need to have huge accumulations of pension funds (public or private) if we have a society that takes care of the needs of everyone for life out of current production.

    The need to accumulate private hoards of wealth, both big and small, and pass them on to our heirs upon death is the product of living in a society where individuals are left to fend for themselves, and compete with each other for their material needs. When everyone has what they need, there’s no reason for private accumulation of wealth, or even for private ownership of property. For this reason, many sustainable indigenous pre-capitalist societies had no concept of private ownership.

  • The claim that the current economic system can be made sustainable by financial reform alone (e.g. eliminating fractional reserve banking) is incorrect. There are two fundamental structural features of our economic system which drive growth and resource depletion. One of these features is, of course, private finance which inevitably demands interest as compensation for risk, and therefore requires continuous growth for proper functioning. Private finance must be replaced by community finance (or community infrastructure investment if you prefer) in which risk is socialized so that we do not have to demand interest as the price of creating and maintaining useful infrastructure.

    However, although such a system of interest free community finance or community infrastucture investment is a necessary condition for sustainable economic production, it is by no means a sufficient one. The second structural feature of our current economic system which drives continuous growth is the competitive accumulation of domestic consumption rights. Consider the most conservative and legitimate form of savings: consuming less than you produce today in order to consume more than you produce at some future period of your life. Two individuals plan to retire at 70 years of age. One dies of heart attack at 69 and the other lives to be 95, and yet both feel that they need huge amounts of stored consumption rights ‘just in case’. Furthermore if substantial income differentials exist then larger savings allows a more luxurious retirement. Gentlemen start you engines.

    The problem with this quest for savings is that society as whole does not save other than relatively small inventories of manufactured goods and raw materials. The only real savings is in the build up infrastuctre of society and in the resource base which supports that infrastructure. The competition to obtain lots of savings is a competition to build up infrastructre and use it to produce lots of goods and services. Society as a whole can decide that is has sufficient infrastructure. But for the individual economic actor seeking personal security and ‘independence’, anxiety about the future drives a constant desire for the further accumulation of consumption rights.

    The competitive accumulation of domestic consumption rights has to be replaced by work and income sharing. The people whose productivity drops are supported by people who are in their productive prime. This condition of mutual dependence is physical reality and until we give up our quest for a delusory economic independence we will find no solution to the ecological dilemmas which face us.

  • steady-state economics of any sort begins with stable population bases below the capacity of that region can provide – particularly the essentials of food and water.

    Steady populations will begin when governments put energy into education and access to family planning to girls worldwide.The most effective birth control ever devised is women emansipation.

    Its a pity so many socialists are so human centric and do not understand the environmental factors that underpin all life.

  • Get a grip, people!

    Interest is just another form of profit. It’s the lender’s notional share of the surplus value appropriated by the borrower in the course of employing the borrowed money as capital.

    Those who claim capitalism “can work” if only they’d stop paying interest on borrowed money might as well say we can have capitalism without profits! Capitalism doesn’t “work” unless those who invest in economic activity receive a return (i.e., profit) in the form of interest, dividends, or capital gains. As the rate of return tends to fall over time, capital must expand its size and its operations to keep its investors happy.

    Capitalism can’t survive without growth, and that’s why we have to create a new society – freed from the rule of capital – if we want to stop growth and the ecologiocal harm it causes.

  • Hi John, I will see Capitalism and the Dialectic Pluto 2009, and I acknowledge my understanding is a developing one, but if you are correct and that capitalism ‘can’ in theory overcome many of its ills, the question ‘will’ it still remains, how likely it ‘will’ of course is enormously subjective, do you feel there is much hope?
    Best wishes.

  • There is certainly something about capitalism that requires it to grow in order to avoid a systemic crisis and eventual collapse. I have shown this to be true with even the purest from of market capitalism imaginable. Even then, periodic crises will occur but capital can overcome them under a limited range of (use-value) conditions. See my Capitalism and the Dialectic Pluto 2009.

    A zero growth or negative growth capitalism is an impossibility, as my book demonstrates, but let us suppose that some misguided, neoclassically handicapped, pale green economist, such as Daly or Korten, tries to engineer this impossibility by an extraordinary level of state intervention in the market. This would totally undermine the capacity of the market to self-regulate and to allocate resources and labour-power in a capitalistically rational fashion so as to reliably reproduce material/real/substantive economic life. We would still have moved beyond capitalism even if some now state dependent, self-styled capitalists were still around because state planning would regulate the economy far more than the now atrophied market.

    So much for the oxymoron of zero growth capitalism.

    The next canard we must dispose of is the assertion that the market is democratic. Unless your view of economic democracy includes the systematic reproduction of class inequality and, thus, of inequality of opportunity, then capitalism does not deliver economic democracy. The market’s impersonal coercion, which is exercised over capitalists and workers alike, is perfectly compatible with the simultaneous reproduction of inequality.

    Again,see, my book and the work of Kozo Uno and Th T.Sekine, who, among other things, corrected, refined and completed Marx’s unfinished masterpiece, Capital.

  • I agree with mmckinl. The problem is not capitalism per se, but more specifically, financial capitalism.

    As the “means of production,” capital is necessary for almost all that we do. If a farmer buys a fruit press so he can stretch out his season and sell more than just his #1 Grade A apples, he is investing in capital that better allows him to earn a living. When an artist buys a canvas, and improves that canvas through her labour, she’s a capitalist.

    Where capitalism has gone wrong is linked to the fractional reserve banking problem that mmckinl brought up — the notion that money somehow grows, just by existing.

    All three of the biggest religions ban financial capitalism — the charging of interest for the use of money — although they all have conveniently forgotten that.

    Mike Nickerson (et. al.) argue that perhaps holding money should have a negative incentive, and that money should degrade over time. In fact, some governments tax financial capital via an annual “net worth tax.” This means that you either use it, or eventually lose it. This fits in nicely with Paul Hawkin’s notion of “natural capitalism” — all capital degrades if not maintained.

    What a different world we would live in if hoarding capital were punished, rather than rewarded!

  • The problem is not “capitalism” per se … There is nothing about capitalism that says it must grow or die …

    The problem is fractional reserve banking …which indeed must grow or die …

    With planned currency and credit derived from a true sovereign central bank, credit currency rather than debt derived currency, capitalism can work.

    Capitalism doesn’t need fractional reserve banking. The root of our grow or die problem is directly related to the workings of our current financial system.

  • Hi Paul, My feeling is that naval gazing whilst waiting for capitalism to reform itself (gradually, as you say) is a significantly greater waste of time than pushing for ecosocialism. Why not argue for the perfect society! I fear the apocalyptic clock is ticking so loud that neither a reformed and just capitalism or global ecosocialism will be in place in time. I don’t believe capitalism will ever be reformed in the way you would hope – convince me! Either way if/when the boat goes down I’m going to be fighting for what is most just and most true and that is ecosocialism.

  • may i suggest some investigation of steve keen’s work, including his unsettling model of a market system in equilibrium.

    he does agree with me the road between here and there is necessary paved with Jubilee of some degree or other. however, i think his model will fall on simple human fallibility. we simply cannot remove all the oscillations in the system, but can merely hope to reduce them to a size manageable.

  • yeah but if you cant accept that capitalism can be improved or re-aligned to a framework of values, then you are consigning us to no change. because this will happen gradually not by some grand revolution to a socialist state. I mean it will be, and is, a socialist revolution, but one of personal ideology and awareness, one which will happen more through lifestyle. The market is the only democratic tool we have left and missing that while navel gazing about the perfect global society is not actually going to achieve much at all.

  • In the last paper (link) by Smith he says “And of course, there’s just no doubt anywhere on the planet except in the Washington and Beijing, that single-payer or socialized medicine is far superior to the profit-driven capitalist medical industry we have to deal with.”

    Actually, the problem is not so much in Washington as out in the small towns and rural communities where the voters live. Out in the sticks, particularly in the “red” states, they still erroneously believe that single-payer health care is “communist” and inferior. Before democracy can work people have to be informed and be capable of independent thought/logic… Don´t see that happening any time soon either…

  • is there going to be a mass-conversion to eco-socialism? i wouldn’t exclude the possibility altogether. or have we abandoned our faith in humanity–at least as regards its capacities and potentialities?

    examine the case of greece since 2008… radical social change is surely possible (which is not to say that greece is the U.S., however).

  • I have to side with Smith on this one. M-C-M’ will always be in capitalism’s DNA. Even “green” entrepreneurs seek to end up with a bigger pile of cash at the end of the day than they started with. They have to pay all sorts of economic rents to the other actors in the economy who are also seeking M-C-M’.

    We need a system that will allow everyone to operate according to something like C-M-C, where money is not hoarded by economic actors but is used to transact between producers.

  • yes, talk of ‘socialism’ is counter productive and it is the next few steps in transition to a sustainable future we should be focusing on. My personal view is that our present ‘capitalist’ societies need only be underpinned (albeit, substantially so) by a few core values. those being the value of the biosphere, the value of the citizen and the value of democracy. If these values were cast in law, meaning no profit could be turned at the expense of any aspect of them, then we would be on the right track. This would of course Mean a resetting of current economic positions and an acceptance that growth and living standrds will slow or decline in the short term. Capitalism as we know it has been allowed to run amok unchecked by any real values beyond profit, but at the same time has improved the lives of millions. It is not the system which is flawed but those operating it, the people who flout universal human values for personal gain. It is greed which must be rooted out here and the acts which have been perpetrated and are still being perpetrated to furnish the greedy and insanely selfish with the riches they so desire must be made ‘criminal acts’ against society. The value of personal wealth has too much dominance.

  • I find this exchange exasperating. Yes, there is a difference of position that needs to be explored. But no, there is not going to be a mass conversion of people to eco-socialism. Abstract arguments like this seem to me a waste of time — unless they occur in a context of a much bigger movement.

    In the US, views like those of Daly and Smith are held by about one per cent of the population. In this situation, the skills of movement-bullding are much more important that ideological fine points.