In previous posts, I’ve offered a rather bleak prognosis for capitalism.

I’ve proposed a definition of capitalism that seems to cover the many kinds of capitalism we’ve experienced in the last five centuries. I’ve observed that the central flaw in all these forms of capitalism is the expectation of sustained exponential economic growth. I’ve noted that this expectation is based on the false premise that wealth is created rather than being moved and transformed, and that capitalism has been devouring the natural economy — the ecosystem that supports our very existence — in order to create our human economic wealth. I’ve pointed out the obvious fact that this isn’t sustainable — certainly not on Earth, nor in a non-material “information economy,” nor even if we develop starships and ravage the whole galaxy. I’ve suggested that capitalism is probably pretty close to its end, with the caution that it has been on its deathbed before, then gotten back up; it may well do so again, perhaps multiple times, before it goes down for good.

I’d like to explore a bit what might come after capitalism.

Note the following, in bold red letters:

We are now entering the time-honored tradition of purest speculation. 

While I speak of “likelihoods,” it’s my opinion. I have no idea what will actually happen. I’d love to hear other people’s thoughtful alternatives.

The Likely Scenario

The most likely way this all plays out is an extended repeat of the boom and bust cycles we’ve seen throughout our written history. Think of Babylon, Greece, or Rome. Think of the Mayans, or the Anasazi. Think of Easter Island.

Our future most likely holds the collapse of our global capitalist civilization into a world-wide dark age, followed by the rise of subsequent civilizations that make ours look — to the people of that future time — grand, in its way, but also primitive and violent. Just as we now view ancient Rome, or Greece, or Assyria.

Civilizations have a life-cycle. While every such rise and fall has unique elements, there is a common structure to most: a rhyme-scheme, if you will, for those of you familiar with the statement that history never repeats, but it always rhymes.

One of the common rhymes in the fall of societies and civilizations is the appearance of a huge and growing gap in status and wealth between the upper and lower classes.

One way of looking at this, to follow with the language I’ve been developing in this series of essays, is that the society’s economic system, whatever it is, switches from an aerobic form to an anaerobic form — in the former, it really is creating human wealth for that society by taking it from somewhere else (Nature or other societies), while in the latter, it is simply going through the motions of wealth creation while, in fact, it is the rich stealing from others within the same society. This impoverishes the very people who provide the machinery for enriching the wealthy, and the society then becomes so weak that it either falls apart, or becomes prey to some other society.

Regardless of the mechanism, however, a large and growing wealth-gap between the rich and the poor is a strong indication that a society has peaked, and is ripe for decline.

This boom-and-bust cycle doesn’t require capitalism by any means, else we wouldn’t see it throughout history. However, capitalism feeds the cycle with enthusiastic abandon by attempting to expand the wealth of the owners at an exponential rate, leaving the other classes to suffocate as the economy turns anaerobic.

John Michael Greer takes this approach of boom-and-bust, and talks about our civilization being the first and most wasteful (and destructive) of a long sequence of rising and falling “technic societies,” which is an interesting, and actually rather hopeful way to look at this cycle.

It’s impossible to predict what greatness or depravity future high societies will embody, or what they will look like, after the intervening dark age. Will they build floating cities made of aerogels? Will they live in huge networks of self-sufficient rural villages linked by a solar-powered Internet? Will they form martial empires, or peaceful enclaves of philosophy, art, and music?

No one knows. It’s rich ground for speculative fiction.

The End of the World

A few people have preached that the end of our current global capitalist economy is the End of Humanity.

This is based mostly on the belief that Our Way of Life is also the Only Way of Life Worth Living — which is both childish and absurd.

But there is the idea of “technological overshoot.” This means that we do so much damage to the Earth’s ecosystem using technology to sustain our unsustainable way of life, that when our society falls and we lose our technological edge, people can’t find their way back to a simpler lifestyle. Soil is too damaged to farm, and fertilizer is no longer available; water is polluted at the source, and there is no technology to clean it; unprocessed air is unbreathable. In the extreme case, we trigger a cascade of extinctions that wipe out humans and other species, right down to the bugs, and evolution has to start over; or, if you’re of a religious bent, God has to dip his hands into the clay again.

This has certainly happened in isolated cultures. Easter Island is a classic example, and it isn’t the only example.

While global overshoot is possible, I personally think it unlikely. I believe our global civilization is a whole lot more fragile than people think. I believe we’ll blink before all of Nature does: our civilization will collapse, and stop destroying the environment, which will slowly recover. Our descendants may spend millennia herding goats in a steamy, rainforested Antarctica, but there will be descendants.

My biggest objection to this story, however, is that it’s not very interesting to talk about. Humans pollute their environment and go extinct. Meh. End of stories and storytelling alike. We can argue about whether Mother Nature’s “human experiment” was a tragedy or a farce, though we have to adopt a transcendent viewpoint to make the argument on either side. What else is there to say?

The more interesting question is whether there is a way to climb down from the capitalist money-tree before the branches break off and tumble us into either a dark age, or extinction.

Steady-State Capitalism

Exponential growth isn’t part of the definition of capitalism. Perhaps we could have a capitalism that supports a more modest kind of growth.

The basic problem with any sub-exponential growth in a capitalist system is a scaling problem. Perhaps I can explain it this way.

If I want to invest $100, I’m expecting some return on that investment. If I want to invest $1000, I’m expecting roughly ten times the return. It doesn’t matter whether I invest the $1000 in a single enterprise, or try to spread it out over ten $100 enterprises, or whether I’m representing ten different investors, each of whom wants a return on his $100.

Returns are expected to be proportional to the total investment. As I’ve explained at length elsewhere, proportional returns are one way of defining exponential growth. Proportional growth and exponential growth are two different names for exactly the same thing.

So if you don’t have exponential growth, then returns can’t be proportional to the investment.

My son was arguing for linear growth the other night, but once he grasped this scaling issue, he saw the problem. Linear growth means that the economy grows by a fixed amount each year: it generates (say) a total of $100 in new human wealth every year. So if you are the only person to invest $100 in the economy, you get a return of $100. If you are the only person to invest $1000 in the economy, you still only get a return of $100. If ten people each invest $100 in the economy, and they have to share the $100 return, then each of them gets a return of $10. If a thousand people each invest $100, each of them gets a return of ten cents.

With linear economic growth, all of the investors (and investments) are competing for the same fixed amount of wealth generated by the economy. Over time, as the investors’ fortunes grow (albeit slowly), they will want to invest more of their money, but they are still all competing for that $100 in actual growth. Investing more reduces their proportional return.

There’s no real point to investing $100 in such an economy, because the best you can hope for is your $100 back. It might make sense to invest $90, to get that $100. But if that makes sense, then lots of people will want to invest $90, which means the $100 gets split by lots of people, meaning the return is now far less than $90. The only way this could possibly be worthwhile as a financial investment, is if the number of investors is strictly limited.

The same is true of any sub-exponential economic growth. One of the examples I’ve used before is the science fiction concept of an expanding galactic empire that collects resources from entire planets and distributes the wealth instantly through teleporting star gates. The fastest this empire could grow, economically, is quadratically — that is, as the square of time, representing the surface of a sphere expanding at the speed of light (since new resources are only available at the frontier). This is faster than linear growth, but it’s still sub-exponential. Investors are still going to see diminishing returns over time, unless the number of investors, and the amount they can each invest, is strictly limited.

So we might as well jump right in and ask how capitalism would fare in a steady-state, zero-growth economy with zero returns on investment — in the long run, this is what any sub-exponential growth looks like.

Can capitalism survive in a zero-growth setting?

The Owners in Steady-State Capitalism

We have to be careful with this idea of “steady-state.” Nothing lasts forever. And just about anything, no matter how nutty or out-of-balance, can last a few years. So let’s set an arbitrary bound of 1000 years. Anything that could last 1000 years, clearly doesn’t have a systemic problem built into it, as capitalism does, though it still might fail for other reasons.

Thus, we’re imagining a kind of steady-state capitalism that’s going strong 1000 years from now, with no economic growth, no expectation of growth, and good prospects for running another 1000 years.

I’ve proposed that the only real innovation that capitalism introduced to the Medieval European idea of hereditary feudal landholdings, was the idea that entitlements could be bought and sold.

I believe the late Medieval period actually came to this point, even within the aristocracy: in the late 1300’s, impoverished knights were quietly selling off their holdings and their titles, which they could no longer afford to support. In the novel The Count of Monte Cristo, written a few centuries later, we see a long section of gossip about whether Comte Edmond Dantès’ title was inherited or bought. This still persists in the concept of “old money” versus “new money.”

Medieval European feudalism, unlike our modern society, believed in steady state. God appointed the clergy, the clergy ratified the rulers, the rulers assigned the land to lords, the serfs were bound to the land and worked it for themselves and everyone else, and all the other professions, from hooper to whore to moneylender, worked within this static system. World without end, Amen.

So some kind of feudal capitalism, consisting of semi-hereditary fortunes with ownership trades among the owners, is not at all unthinkable. The House Atreides and House Harkonnen in the Frank Herbert novel, Dune, both come to mind for me. In fact, we already see modern corporatism headed in precisely this direction: Coke and Pepsi are, essentially, feudal estates, and their controlling shareholders, board members, and executives are the aristocratic court. The corporation holds market share rather than land, and the aristocracy holds controlling stock rather than titles.

Open acknowledgement that economic growth has ceased will, however, cause a few not-so-minor shifts in the economy.

Our current model of Federal Reserve and fractional-reserve banking will have to be replaced or radically revised. Fractional reserve banking is an odd beast, only a little over a century old: it loans money into existence, and demands repayment with interest, meaning that every dollar you have in your wallet is a promissory note that obligates you (or your descendants) to pay back more than a dollar. This is one of the root causes of both inflation, and the endless need for exponential economic growth. Such a money system simply can’t survive in a zero-growth economy, because there is no place for the interest to come from.

We’ll also lose the idea of the interest-bearing US Treasury Bond, which is the bank-note the Federal Reserve issues: the US economy won’t be growing, so again, there’s no place for the interest to come from. That, in turn, will force governments back into balanced budgets based on taxation, or (bad idea) borrowing money directly from the rich for really big endeavors, like putting on a war. I’m thinking now of the amusing and recurring situation between the Medici and the Popes in the 1400’s, where the Pope requests a loan, both parties proclaim eternal admiration, gratitude, and friendship, the Pope glibly refuses to repay the loan, the lender lays siege to the Papal vineyards, the Pope excommunicates everyone involved, renegade priests defy the Pope and offer Mass anyway, and — in the end — the Pope coughs up the money with proclamations of kissy-kissy-friends-forever-again.

Municipal bonds will go the same route. These are currently a relatively painless alternative to voting for a municipal tax to support some community enterprise, like a water plant or a school. In a zero-growth economy, no one is going to buy bonds as an investment.

Commodity markets might persist, because they serve as a seasonal hedge for both buyers and sellers of commodities. But they’ll change a lot, because non-renewable resources won’t generally be commodities. Things like wheat, bananas, and pork-bellies will remain: things like oil and coal will not. There’s more room for speculation as to how precious and useful metals will shake out, and whether speculative buying on margin will still work. What seems certain, however, is that speculating in the commodity markets will be even more risky than it is now.

Stock markets will vanish. Stock won’t vanish — it is the new aristocratic title — but corporate stock will be more like real estate: not the mortgage papers, but the actual properties. Like land holdings in feudal Europe, they’ll be valuable for the rents (dividends) they return, and the power they offer. Properties that are easy to acquire will be generally worthless. Valuable properties will not change hands often, and the trades will be personal, and limited. That trade will doubtless support brokers — but I can’t see it supporting an open marketplace.

Overall, “investments” of any sort won’t yield wealth. Investment will still happen, but it will cease to be about making money, and more about getting things done: more like Kickstarter campaigns.

In particular, corporations and the wealthy holders of controlling shares will use investments, not for wealth-generation, but for ego-feeding, political power, and even general social benefit. I’m thinking now of the funeral tombs of Egypt, the sculptures of Greece, the Medieval cathedrals, the artwork of the Renaissance, or the Italian and German patronage of music during the classical period.

The only way to gain more wealth in a steady state system is to acquire it from someone else.

That means there will be war. I’ll return to this in a moment.

Commoners in Steady-State Capitalism

Let’s look briefly at the situation of the commoner, the serf, in our steady-state feudal corporate capitalism.

The first issue is population.

People breed like bunnies: that is, exponentially, at least until they eat all the lettuce and starve, or become numerous enough to attract wolves. Modern people have considered this an intractable problem that leads to inevitable doom, but there’s an odd thing: human societies have, in fact, been able to control their populations. One of the most astonishing to me is the little island of Tikopia, in the middle of the Pacific Ocean, which can support no more than about a thousand people. They’ve apparently been there for at least a thousand years. So they clearly figured it out — they’ve proven it’s possible (as have other cultures) to put limits on population growth.

Having a stable population, however, means cultural, legal, religious, and economic commitment to keeping the population stable. There cannot be an economic advantage to having too many children; if there is, there will need to be extremely strong legal, cultural, or religious taboos to counterbalance the economic incentive. That would require a very different culture than the one we currently live in, here in the US.

There also needs to be a good mechanism for dealing with “normal” bulges and troughs in population, such as our “Baby Boom” generation, or the Black Death in the fourteenth century in Europe, which so drastically disrupted the Medieval system. Zero population growth does not mean people can’t have children: it means that, on the average, two breeders must have exactly two children that live to reproduce. But things will happen, and the population will rise and fall. The system needs to withstand this.

The current economic and cultural forces that drive people from one place to another, looking for work, in the process breaking up families and communities, will vanish: with no epidemic economic reason to move and keep moving, and stronger communities that lack our modern expectation that kids will go to a distant college and then move to a distant city to get a job, more people will simply stay put. Not everyone, of course: there will always be free spirits and malcontents.

Our current process of trying to prepare for old age, illness, and such through personal “investments” will vanish, since there is no economic growth to provide these returns. It’s quite possible that the common folk won’t even have access to banks: banks may be useful only to the wealthy. However, overall inflation should be zero, so if you put a coin in a box and bury it, then dig it up fifty years later, it will still be worth what it was worth when you buried it.

Our hyper-individualistic current outlook, as US Americans, sees this as leading to people hoarding coins, other people stealing those coins, brutal police forces and/or vigilantes seeking to get their parents’ money back, and so forth. It’s a well-worn plot cycle: kindly old restaurant owner is robbed by thugs of the Evil Triad Cartel, renegade Shaolin Monk appears from nowhere and defeats the bad guys and gets the money back, then rides into the sunset. You can set the same story in the American Old West. Or Gotham City.

In practice, this is romantic nonsense. In a stable system, you can’t have the Dickensian horror of most old people dying as beggars in a dark alley, trying to keep warm, nor can you have the free-for-all of a lawless Old West with individuals stashing a few coins in a hidden box under a mesquite tree. What real people in real societies do is, in general, called a mutual aid society. US Social Security is an example, scaled up to the national level. Before there was Social Security, there were mutual aid societies, like the Odd Fellows, or the BPOE. Before that, there were trade guilds — or at the rural level, real local communities.

Beyond those basic features, I can’t see too many constraints on the common life imposed by steady-state capitalism. There’s room for all kinds and levels of social mobility based on skills and merit, room for technology (though not for wasteful extractive technology), room for all kinds of social conventions (that don’t result in population growth).

On the whole, life for most people will be good, and satisfying. If it isn’t, people will get restive, and the system will become unstable.

The Art of War

Ownership, in capitalism, is individual and sovereign, and in a world with a finite number of things to own — specifically in a zero-sum economy that is not growing and is not expected to grow — it is inherently competitive.

The traditional way of increasing ownership of this sort has always been to take it by force. If the current owner objects, you kill him. It’s called right of conquest. It’s also known as war.

The positive side of the capitalist innovation is that it gave people an alternative to war. Ownership of the critical resources could be bought and sold, rather than inherited or granted by divine right or taken by right of conquest.

The thing that free-market fundamentalists don’t seem to understand about marketplaces, is that they depend on impartial law to validate and enforce ownership claims.

It’s like the Medici and the Pope. If you lend money to the Pope, to what authority will you appeal if he simply decides to not pay you back? If you buy controlling stock from another aristocrat in a steady-state capitalist economy, what can you do if he takes your money and then refuses to turn over the executive washroom key?

If there is no such authority to appeal to, then our steady-state capitalism will turn into an unending series of wars among the owners, using commoners as soldiers. This is not a stable system.

If there is an overarching authority, with sufficient power to reign in any individual owner or small group of owners — a corporate government, if you will — then its courts, and its bureaucracy, will be more corrupt and intrigue-ridden than any imperial court the world has ever known. That opens covert routes to increasing wealth and power, and a kind of war in the shadows. The system will not long remain impartial. Again, I think the system will prove unstable.

I would be very surprised to see any form of steady-state capitalism last a thousand years. I’d love to hear others’ thoughtful explorations of how it might be made to work.

In a subsequent post, I’d like to explore some alternatives to capitalism by playing with the concept of ownership.