This is such an important question, and it’s vital to think and talk about the crisis in this way, with a view toward history. It’s not immediately obvious why this crisis began and why, two years later, it’s not getting better. Making sense of this is challenging. Especially since knowledge of economics has become so enclosed within academic and professional channels where it’s off-limits to the majority of the population. Even progressive intellectuals, who aim to translate and explain the crisis to regular folks, too often fall into the trap of accepting elite explanations as the starting point and then injecting their politics around the edges. This is why there is such an abundance of essays and videos analyzing “credit default swaps”, “collateralized debt obligations,” etc., as if this crisis is about nothing more than greedy speculators overstepping their bounds.
On the contrary, the End of Capitalism Theory insists there are deeper explanations for why this crisis is so severe, widespread, and long-lasting. Here’s one explanation: The devastating quaking of the financial markets, and the lingering aftershocks we’re experiencing in layoffs and cut-backs, are manifestations of much larger tectonic shifts under the surface of the economy. This turmoil originates from deep instabilities within capitalism, the global economic system that dominates our planet. The dramatic crisis we are experiencing now is resulting from a massive underground collision between capitalism’s relentless need for growth on one side, and the world’s limited capacity to sustain that growth on the other.
These limits to growth, like the continental plates, are enormous, permanent qualities of the Earth – they cannot be ignored or simply moved out of the way. The limits to growth are both ecological, such as shortages of resources, and social, such as growing movements for change around the globe. As capitalism rams into these limiting forces, numerous crises (economic, energy, climate, food, water, political, etc.) erupt, and terrible destruction sweeps through society. This collision between capitalism and its limits will continue until capitalism itself collapses and is replaced by other ways of living.
The End of Capitalism Theory argues that capitalism will not be able to overcome these limits to growth, and therefore it is only a matter of time before we are living in a non-capitalist world. A paradigm shift towards a new society is underway. There’s a chance this new future could be even worse, but I hold tremendous hope in the capacity of human beings to invent a better life for themselves when given the chance. Part of my hope springs from the understanding that capitalism has caused terrible havoc all over the world through the violence it perpetrates against humanity and Mother Earth. The end of capitalism need not be a disaster. It can be a triumph. Or, perhaps, a sigh of relief.
Defining the Crisis
Rather than spend our time learning the language of Wall St. and trying to understand the economic crisis from the perspective of the bankers and capitalists, I think we can get much further if we take our own point of reference and then investigate below the surface to try to find the true origins of the crisis. This is what I call a common sense radical approach. Start from where we are, who we are, and what we know, because you don’t need to be an academic to understand the economy – you just need common sense. Then try to get to the root of the issue (radical coming from the Latin word for “root”). What is really going on under the surface? What is the core of the problem? If we can’t come up with a common sense radical explanation of the crisis, we’ll always be stuck within someone else’s dogma. This could be Wall St. dogma, Marxist dogma, Christian dogma, etc. So what is this crisis really about?
I assert that the current crisis is dramatically and profoundly different from any crisis previously faced by the global capitalist system. I see one basic reason for this: the system can no longer grow. Without growth, capitalism cannot function. Like a shark that must keep moving in order to breathe, a capitalist economy must keep growing in order to survive. Without the possibility, or probability, that investors will make a profit on their investments, they will not invest. No one invests if they expect to lose money or keep the same amount. If investors cease to invest, businesses cannot expand, jobs are lost, consumer spending declines, and loans stop coming, creating a cycle of bust. Crashing markets will continue to freefall until the government steps in with bailouts to artificially boost investment. But bailouts are only a temporary solution. If the markets cannot be “corrected” and get back on a growth trajectory, game over.
Financial analyst Nomi Prins has tallied the various loans, guarantees and giveaways that make up the Wall St. bailout to a total of
$17 Trillion [PDF], a sum larger than the annual GDP of the United States. This is a staggeringly expensive life support system for the “too big to fail” banks. How much longer can the federal government essentially print dollars to keep the stock market afloat? The End of Capitalism Theory says, “not long.” In the long arch of history, we are at the tail end of the capitalist period. Whatever follows it, for better or worse, will need to be adapted to a smaller economy.
Capitalism and Enclosure
To understand the end of capitalism, we need to know where the system started. For 500 years, capitalism has spread like a cancer across the planet. It first spawned in Western Europe on the backs of the peasants and small farmers who were displaced by the “enclosures.” The enclosures were the forced privatization of land, literally the enclosing or fencing off of land that was previously shared or held in common. The state acted as enforcer of this process, violently expelling poor communities from their homes and the “commons,” or traditionally public land. The land was taken away from the small farmers so it could be exploited for large-scale agriculture and animal herding.
These enclosures had the effect (intended or not) of creating two new classes of people: 1. a small opportunist class of private landowners and businessmen who evolved into today’s capitalists, and 2. a large landless class of workers who were forced to toil for a wage in the new urban factories, because they had nowhere else to go.
At the very same moment, the European states carried out the enslavement of millions of Africans and the genocide of the indigenous nations of North and South America. Suddenly two “new” continents could be exploited, with slave labor, bringing tremendous wealth to the rising capitalist elites in Europe. This brutal violence against people of color was instrumental in the spread of capitalism across the planet. It was accompanied by a terrifying assault on women in the form of the witch hunts, which saw hundreds of thousands of women tortured and burned alive, according to Silvia Federici’s provocative and necessary book
Caliban and the Witch: Women, The Body, and Primitive Accumulation.The book documents how the Church and state used the witch hunts to persecute sexually rebellious women, such as those having sex out of wedlock, committing adultery, abortion or infanticide. They also targeted women who held respected professions in peasant communities, such as that of midwife, healer, or fortune teller. Federici sees this as a broad attack on women that created a new kind of patriarchal order. She explains that by the time the witch hunts came to an end in the 17th century, women in capitalist society had largely become enclosed within the prescribed roles of mother pumping out new workers, or unpaid houseworker. These are exactly the female roles that the new system of capitalism required of women, argues Federici, because women’s unpaid reproductive labor boosted capitalist profits just like the unpaid labor of the African slaves. Keeping women confined as housewives and mothers meant their labor was never valued, although this labor is necessary for the entire society to exist.
Women have pushed back against this paradigm and made dramatic gains in the past 50 years, especially in the Global North. But in the Global South the position of women has largely deteriorated as capitalism has penetrated.
A disturbing but necessary example is the
Congo, where hundreds of thousands of women have been raped and mutilated in the past decade. This mass rape is a weapon in the ongoing war between various guerrilla and state factions over minerals like coltan. Coltan is used in many of our electronic devices such as laptops and cell phones, making it highly valuable. The factions that export these minerals to the global market make a lot of money, which they can use to purchase weapons. Attacking women’s bodies has been one way to assert control over territory, as the shame of rape too often leads to the ostracizing of the women, thus breaking apart peasant communities. Once the village is displaced, their land becomes available for mining.
This appalling violence in the Congo is more than a throwback to the enclosures which first launched capitalism, for as Silvia Federici says, systemic violence “has accompanied every phase of capitalist globalization, including the present one, demonstrating that the continuous expulsion of farmers from the land, war and plunder on a world scale, and the degradation of women are necessary conditions for the existence of capitalism in all times” (pg. 13).
In other words, enclosure has been an ever-present feature of capitalism because the system cannot reproduce itself without constantly putting up walls to control and limit human possibility, as well as controlling the planet itself. To be blunt, people usually only submit to capitalism when they no longer have any option.
Federici’s work challenges many myths about capitalism, such as the conservative assertion that capitalism works best without state interference, as well as the vulgar Marxist assumption that capitalism was a progressive advance over pre-capitalist forms of life, on some linear march of history. On the contrary, Federici uses the example of the witch hunts to demonstrate that capitalism has always relied on state violence in order to attack not only women’s position in society, but all communal or non-capitalist forms of life. Although she makes it clear that not all pre-capitalist forms of life were idyllic or free of oppression, the ultimate lesson she draws is that capitalism is an enemy of life itself, and that its spread has been a dramatic setback for all of us, including the planet.
Limits to Growth
2010 is a very different moment than 1492, or 1929 for that matter. In earlier times, there remained entire continents, entire populations of people, and vast reserves of natural resources remaining to be exploited for the capitalist regime of profit. Now that globalization has worked its wonders and you can order the same McDonald’s hamburger virtually anywhere in the world, what growth markets remain untapped? The answer is, in my view, remarkably few. The limits to growth are being reached. The system needs growth now. It can’t find it. And the machine is straining to keep running on the promise that profit will come tomorrow. So it turns to speculative bubbles like the dot-coms and the housing market to create imaginary growth and keep the party going, even for a little while. But it’s only a temporary strategy. Each time the bubble bursts, the hangover is worse. Reality is beginning to set in. Steady, long-term growth is elusive because capitalism is overstepping its limits. If you want a simple explanation for the collapse of the financial markets, it’s that.
Let’s explore this concept of the limits to growth. It can be divided into two categories: ecological limits and social limits.
Ecological limits are the restrictions placed on economic growth by the planet’s inability to sustain that growth indefinitely, either because of lack of resources or lack of capacity to withstand more ecological damage. The list of ecological limits is long and awareness of them has been growing rapidly. Some big ones include the limits of oil, natural gas, coal, uranium, phosphorus, copper, fresh water, arable soil, fish, and more broadly, climate. Perhaps the most decisive limiting factor is oil, which I’ve called the “lifeblood of industrial capitalism” because it supplies 40% of the energy for the total economy, making it the system’s primary energy source. Oil’s critical contribution includes powering
95% of transportation. Oil is the fuel that moves the people and equipment that do virtually all of the work in the capitalist economy. There is no known substance on Earth that can replace it.
Peak Oil
Since the oil price shock of 2008, “peak oil” has become something of a household word in the United States, but I’ll just give a few facts to back up the validity of the concept. First,
US oil production peaked in 1970. Oil was discovered in Pennsylvania in 1859, and the US quickly became the main exporter of petroleum in the world, like Saudi Arabia is today. After its oil supply peaked, the US became a chronic importer of oil and went into severe debt to pay for it. Today, contrary to the cries of “Drill, Baby Drill!”, there is no amount of drilling that could bring US oil production back to the level of 40 years ago. In fact, production is about half what it was then, and still declining.
A second essential fact is that
global discovery of oil peaked in 1960 and for the last 50 years less and less oil has been found across the planet. Demand keeps growing, but supply has not been, despite the efforts of every oil company to discover more “black gold.” With all the cheap, easy oil pretty much gone, they’re left to spend millions to drill in remote locations, like the Gulf of Mexico, which is now a disaster area. So we know peak oil is a real phenomenon because it happened to the US. And we know there’s not enough oil being found anywhere in the world to sustain growing demand. The only question is when the global peak will be reached.
There are a whole slew of geologists, ecologists and engineers dedicated to answering that question, and I can’t add much to their debate. But I do want to highlight
this remarkable graph created by Princeton geologist Kenneth Deffeyes, author of the books Hubbert’s Peak and Beyond Oil. He graphs global production of oil against the price of a barrel (equal to 42 gallons). We can see that as global production hits about 27 billion barrels, the price spikes into the heavens. We would expect, according to Economics 101, that as the price increases, supply would also increase. It’s in the interest of producers to pump more oil from the ground, and develop more expensive oil wells, in order to take advantage of the high prices. Instead, we can see that no matter how expensive oil has gotten, production has hit a wall. What Deffeyes argues, and I agree with his analysis, is that the peak has already been hit. No matter how wildly the price of oil fluctuates, growth in production is no longer possible.
In Beyond Oil, Deffeyes also makes the case that there is nothing that can do what cheap and plentiful oil has done for global capitalism. Solar and wind are great technologies, and they certainly have a role to play in transitioning to a democratic and sustainable future, but not being liquid fuels, they’re useless for powering the Army’s tanks and planes in Afghanistan. Even hydrogen fuel cells or electric engines would solve little, because there would still need to be a massive influx of energy to make up for the 40% provided by petroleum. And that’s without factoring in necessary growth.
Efficiency is another crucial piece to look at. Efficiency in energy can be measured in
Energy Returned on Energy Invested (ERoEI). The ERoEI of oil is something like 10-to-1, meaning for every calorie or joule of energy expended in getting oil out of the ground and making it a usable fuel, 10 times that much energy is made available by it. If the ERoEI for a particular fuel was 1-to-1, it would be useless. It would take just as much energy to extract the fuel as they could get out of it. This is the trouble with “non-conventional” fuels such as the tar sands, corn ethanol, or coal liquefaction. All are tremendously destructive to the planet, but none comes anywhere near oil in terms of efficiency, and corn ethanol may actually
waste more energy than it produces. The bottom line is that no energy source is as abundant, cheap, versatile, easy-to-transport, and efficient as oil.
Oil is also not the only energy source hitting its peak. Natural gas appears to be in the same position, and coal and uranium aren’t far behind. All are being exploited at a rate much higher than can be sustained. This is why Richard Heinberg has written a book called Peak Everything, and argues that from ecological limits alone,
growth is no longer possible. Capitalism needs abundant and growing sources of energy to move its resources, products and labor around the world, to organize them into the production process, and to power the assembly lines. We are now entering a period in which for the first time in 500 years, less energy will be available, the energy that exists will be more expensive, and therefore profits will be severely constrained. Without energy, the shark stops swimming and dies.
Did peak oil trigger the economic crisis? It’s difficult to know for sure. One thing is certain, in 2007-8 the price of oil skyrocketed to a record high of almost $150/barrel, while production stayed flat. And as former Chairman of the Federal Reserve Alan Greenspan noted in 2002, “All economic downturns in the United States since 1973… have been preceded by sharp increases in the price of oil.”
I will explore social limits, the other piece of the puzzle, when I finish responding to your great question in the next part of the interview.
