The whole story:
Life, Money
and Illusion
The Rise and (eventual) Fall of Capital
The world could work, long-term, for everyone and for the Earth. We have the knowledge to do this. Enough people are willing. The biggest obstacle to success is the obsolete goal of Capital expansion. Change the goal and the possibilities are promising.
Lets look at how Capital – money available for investment – has evolved from 300 years ago, when it was enormously beneficial for society, to its civilization-killing stature today.
Capital was highly regarded because it enabled mechanized industrial production, which brought large quantities of material goods into an accessible price range. This was barely possible until barter gave way to trading with money. Not only did money enable us to get what we want without having to find exact trades, it became possible to accumulate trading power – money – Capital.
Accumulated Capital enables large projects. It would be hard to build an industry if millions of tonnes of grain and eggs had to be distributed between hundreds of contractors, sub-contractors and all their employees. To build an industry, machine tools have to be conceived, designed and built. A building has to be erected or purchased. After the machines are installed, people have to be trained to use them. Even then no money would come in until the goods are made, distributed and sold. To take all these steps, before a business has income, requires Capital – money available in advance to make industrial production possible.
Three hundred years ago, having plenty of cloth, pots and pans, agricultural equipment and all the other products that industries produced in quantity, seemed very good. This good was possible because of accumulated Capital. Capital accumulation came to be seen as a primary good. Capitalism – making decisions with the aim of expanding Capital – came to be honoured as an objective of society.
Collateral Damage
While industrialization provided a vast advantage, let us acknowledge the collateral damage. As the production of goods is taken over by machines, large numbers of hand-workers lose their livelihoods. Some find work in new enterprises. Others are not so fortunate. Displacement of workers continues today as automation becomes ever more sophisticated.
If unrestrained, industries seeking continuous growth can deplete natural resources and pollute local areas and beyond. On top of the social and environmental disruptions, industrialization often increases inequality. The owners of the Capital that builds industries also receive the lion’s share of the profits, enabling their fortunes to grow. With expanding wealth comes political power and the opportunity to adjust laws to enable further capital accumulation.
One way to acquire Capital for new industries was to pay people for the use of their Capital. Charging interest (usury) was not always considered moral. It was long considered a Deadly Sin in Christendom and still is in other faiths.
(See Usury in Chaptter 8 (Life Money and Illusion 2nd Edition p144 - p151)
In its origins, interest was a portion of the natural increase of grain or live-stock produced by a farmer who had land but needed to borrow seed or animals to get started. Similarly, if a craftsperson needed to borrow money for tools or materials, a portion of their profit was expected to accompany repayment of the loan.
As long as the crops grew and the crafts sold, there was no problem. Whether the loan was just a business deal or a deadly sin depended on what happened if things did not go well for the borrower. What was considered unlawful was to lend money at an interest rate identified in advance to be paid, come what may, with no risk to the lender. “Come what may” clauses are a standard part of modern-day loans, enabling countless farms, homes and businesses to be taken over by lenders at a fraction of their value.
Over the years, Capital, and the payment of interest for its use, has grown immensely in volume, power and stature. Consider its role in the austerity measures of the early 1990s.
“Governments were reported to be spending too much and had to cut back social services, job creation, education, health care, old age pensions, the arts, amateur sport and even the military. These calls for reduced spending were echoed throughout the media, but never, in the intense process of moulding public opinion, was there any suggestion that we might reduce the deficit by cutting back on interest payments. This suggests that, of all the things we do as a society, paying interest charges is the most sacred. This is an impressive rise to prominence for a practice that was once condemned as a deadly sin.” (Life Money and Illusion 2nd Edition p249
Enough and Beyond
By the early 1900s, Capital had industrialized most productive activity in the “developed” world. We could have shared our know-how with the rest of the world and celebrated the end of human need. We could also have reduced work time, enabling everyone to spend more time with family and friends and to develop the dreams and talents for which so many wish they had time. Instead we developed what one commentator suggested was "consumptive indigestion resulting from the outright satiation of human wants." (Life Money and Illusion 2nd Edition p142)
By 1959, the “Brave New World” of media-induced desire had expanded into an all-pervasive enterprise. In an edition of The New York Journal of Retailing that year, retail analyst Victor Lebow summed up the situation eloquently:
"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 satisfaction, our ego satisfaction, in consumption .... We need things consumed, burned up, worn out, replaced and discarded at an ever increasing rate."
Expanding along this path in the decades since has depleted natural resources, filled garbage dumps and polluted air, lakes, rivers and oceans. The carbon emissions from powering it all are disrupting climate world wide. Add to this deep indebtedness and the massive growing chasm between rich and poor and it is clear that further accumulation of Capital is no longer the most beneficial objective for society.
Speculation, the New Frontier
Orbiting satellites and agents on the ground scan the Earth for any resources that can be bought and sold. Forests, fish, minerals, soil, human labour, real estate, art, national currencies, public institutions and the accumulated Capital of others are all game for exploitation. Occasionally, new products are invented and are quickly capitalized. Cultivating want and planning obsolescence cannot keep up. To continue its growth, huge amounts of Capital now depends on buying and selling things with no concern besides the profit to be made.
The amount of Capital now engaged in speculation approaches $100 for each single dollar invested in goods and services. This explains why some government expenditure seems to do more for speculators than for productive enterprises.
In 1929, over-abundant Capital, bidding assets up above their real worth, sent the entire world into depression. We saw a similar pattern in 2008. Real-estate was bid up so high that when housing prices collapsed, millions of people lost their homes and hundreds of billions of dollars had to be made available to enormous banks to prevent the collapse of the global financial system.
Stability has not returned. Between the USA, Europe, China and Japan, hundreds of billion of dollars frequently have to be pumped into the system to maintain a shaky balance. Most of that money is picked up at low interest rates and used for more speculation.
Capital still has a place, but surely it is time for another goal to be our top priority!
The Global Monopoly Game has been won. In the Board Game Monopoly, the game is not properly over until the winner has acquired all the wealth. In the Global game, we cannot play until all people are in debt and the natural world has been consumed and turned to waste. It is time to recognize the winners of the Global Game, congratulate them, pass out some prizes, pack up the game and play something else.
The World Game, as proposed by Buckminister Fuller aims for the goal outlined in the first sentence of this article. When humanity recognizes the new goal, we can get to work and bring it about.
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Three Potent Steps to a Sane Economy