[Quinny]

I've posted this topic to get an understanding of a socialist's perspectives on the relationship between peak oil and the crisis of capitalism. It's particularly aimed at those marxiists on the left who believe that capitalism still has significant time left to run. Without mentioning names AD would seem to fit that bill

It seems to me that we are reaching a point where resource constraints are such that the continual growth needed to sustain the system is impossible and that the system is close to collapse. I admit to being surprised at the resilience that the system hs shown so far, but still believe we are getting close to systemic collapse.

I respect the views of those who say that they believe there is still lots of profits to wring out of far eastern workers, but find it difficult to square this with the effects of resource depletion on 'real' wealth creation. IMHO the gulf that has opened between real wealth and 'money' is so vast solely because of the ingenuity of the bankers to come up with schemes that give the illusion of growth. The creation of wealth in the 'real' economy is a actually flat and growth in GDP (meaningless anyway) is eaten up by commodity inflation and the 'tax' of higher energy costs.

What analysis makes some believe that there is still significant time left to run for capitalism?

[AgentR11]

The reason this can go on for a very long time:

The Capitalist governments/structures control the following:

1.) The numerical value of the amount of currency in circulation.
2.) The formula that computes inflation.
3.) The mechanism that sets the interest rates.

Growth, for the purposes of a capitalistic system, can be sustained through directly increasing #1, and understating #2. As long as all the players have no choice but to participate, this works. So what happens if they stop wanting to participate? You tweak #3 such that sitting on deposits costs you about 3%-5% / yr in purchasing power.

So... what are they doing right now?
1.) QE1 / QE2 increased this, QE3+ is being simultaneously denied and contemplated.
2.) Inflation calcs exclude the very products that have suffered significant increase in $/unit cost.
3.) Interest rates are as near to zero as you can imagine, and some banks are charging large depositors a fee to hold their money.

In other words, we're at full throttle in sustaining capitalism without real growth, and intend to do so for a very long time. Our GDP is showing weak but positive as a result. Weak but positive on the balance sheet is more than sufficient to kick the can down the road.

[Sixstrings]

In other words, we're at full throttle in sustaining capitalism without real growth, and intend to do so for a very long time. Our GDP is showing weak but positive as a result. Weak but positive on the balance sheet is more than sufficient to kick the can down the road.

I'll play devil's advocate.

Has growth really stopped? In just the last ten years, LOTS of growth in China. New infrastructure and industry and whole cities that weren't there before -- that's growth isn't it? Australia certainly has more mines than it did ten years ago, and more on the way.

Canadian tar sands, ugly but it's new growth.. they can't wait until the ice cap melts, they're ready to dive into the Arctic to exploit that too.

If you look at pics of earth from space, at night, actually most of the planet is still empty. Russia is a vast country with room to grow, resources to exploit. Africa is essentially undeveloped.

I think the bigger question is.. at what point should we stop, willingly. We're going to wind up wrecking the environment all over the globe, once lost these species and ecosystems will not return.

[dolanbaker]

Has growth really stopped?

I suppose it depends on your viewpoint,
from the west - the answer is most likely - yes
from the BRICs - no

but Globaly has it stopped growing? I'm not sure! It depends on whether the growth in the BRICs is greater than the decline in the West.
Assuming oil is the prime driver, then the answer is probably "global decline" or at best stagnation.

[americandream]

I can understand your predicament Quinny. It's a difficult one seeing as we appear to be on the brink of quite revolutionary change. However, we have only to turn to that other precedent to capitalism, feudalism (which still lingers in significant swathes across the world) to really get a feel for just how difficult it is to predict the timing. Feudalism still persists in large areas and has not quite reached its zenith as was the case in Europe, which suggests a rationale for why these areas are increasingly being annexed (sometimes by rendering them into supplicants as in Saudi, sometimes by force (Libya and Iraq for example.)

Thus we draw some general guidelines from observing the interactions between these two systems (and of course, state capitalist opportunists such China) to obtain some broad and reasonably consistent understanding.

The leading indicator for me thus is global capitalism's resourcing profile buttressed up against these developments and what that tells me about the likelihood of its surplus profile (not forgetting input from labour surpluses in China and it's own capitalisation picture as number one FDI destination.)

All of this is of course being accompanied by unprecedented volatility in the West, the end of investment and the rise of speculation and ofcourse, mercantilist backlashes in America, much of which is being formented by, ironically, global capitalists....and the mercantilist agenda which looks suspiciously like the whittling down of the state. Whittling away of the state!!! Now where did I read that. On cue, I give you...one Karl Marx. The above looks suspiciously like the playing out of globalism...cycles and all

When is this likely to reach some maturation? I don't know but I hazard guesses. I'ld be expecting to see real signs of decoupling in, at the earliest, 3 decades. By then, all outstanding feudal territory will have been mapped and mined, all surplus in China, India, Latin America and Africa will have been exhausted, at current rates of growth, so will consumer potential in those regions. Capital will have strip mined and exhausted this planet of all potential, workers will have been fully optimalised as cheap labour and consumers and the basis for an organic rise of the sorts of consciousness that trigger systemic changes will have emerged.

Edit: My apologies. "state capitalist China" should read "state mercantilist China". It's these inconsistencies that cause confusion when readers read these analyses and I apologise. I strive to avoid them but sometimes fail.

[americandream]

In other words, we're at full throttle in sustaining capitalism without real growth, and intend to do so for a very long time. Our GDP is showing weak but positive as a result. Weak but positive on the balance sheet is more than sufficient to kick the can down the road.

I'll play devil's advocate.

Has growth really stopped? In just the last ten years, LOTS of growth in China. New infrastructure and industry and whole cities that weren't there before -- that's growth isn't it? Australia certainly has more mines than it did ten years ago, and more on the way.

Canadian tar sands, ugly but it's new growth.. they can't wait until the ice cap melts, they're ready to dive into the Arctic to exploit that too.

If you look at pics of earth from space, at night, actually most of the planet is still empty. Russia is a vast country with room to grow, resources to exploit. Africa is essentially undeveloped.

I think the bigger question is.. at what point should we stop, willingly. We're going to wind up wrecking the environment all over the globe, once lost these species and ecosystems will not return.

Bingo!!

[AgentR11]

If there is real growth.. why is the interest rate on deposits zero or negative?

Surely those deposits could chase some of that growth instead of bombarding every credit worthy, middle class family with desperate flyers from *big* banks, begging us to refinance and borrow more money at embarrassingly low interest rates.

I think we're further along the globalism path than americandream might suspect; real growth has gone to zero, and what is happening now is what remaining improvements to profits that can be achieved, are being achieved by drastically reducing the expense of wages and benefits. Technology and its pervasiveness are now allowing keyman employees to work, or at least be aware of work 24/7; with engineers and typists and bookkeepers and phone support people doing his bidding all around the globe at $10/day. So what does a corporation need? It needs its board and management structure, it needs some department heads and closely guarded product people; and the rest is produced by a thousand robots in China, or a thousand nameless Indian laborers in an un-airconditioned aluminum sided shack that no American, Englishman, or European will ever see.

There is no growth, there is only the squeeze.
Only question for folks: Squeezer or Squeezie.

[Sixstrings]

If there is real growth.. why is the interest rate on deposits zero or negative?

Just FYI, not every country is running super low rates.. Australia is at 4.75%.. interesting, Russia and India seems high at 8%. China is at 6.25%.

Interest rates are just a monetary policy tool. Raise rates to drain liquidity, lower rates to pump liquidity.

Worldwide Central Bank Rates

0.25 % (- 0.75) USA | Funds Rate (Dec 16 2008) Central Bank
1.50 % (+ 0.25) Eurozone | Main Refin. Rate (Jul 07 2011) Historical Rates
0.00 % (- 0.10) Japan | Call Rate (Oct 05 2010) Central Bank


OECD & G20 Countries:

4.75 % (+ 0.25) Australia | Cash Rate (Nov 02 2010) Historical Rates

9.00 % (- 0.25)

Argentina (Oct 21 2009) Central Bank

12.50 % (+ 0.25)

Brazil | Selic Rate (Jul 20 2011) Central Bank

1.00 % (+ 0.25)

Canada | Overnight Rate (Sep 08 2010) Historical Rates

5.25 % (+ 0.25)

Chile | Monetary Policy Rate (Jun 14 2011) Central Bank
6.56 % (+ 0.25) China | Lending Rate (Jul 06 2011) Central Bank
0.75 % (- 0.25) Czech Republic | Repo Rate (May 06 2010) Central Bank
1.55 % (+ 0,25) Denmark | Lending Rate (Jul 07 2011) Central Bank
6.00 % (+ 0,25) Hungary | Base Rate (Jan 24 2011) Central Bank

4.50 % (+ 0.25)

Iceland | Lending Rate (Aug 18 2011) Central Bank
3.25 % (+ 0.25) Israel | Benchmark Rate (May 23 2011) Central Bank
8.00 % (+ 0.50) India | Repo Rate (Jul 26 2011) Central Bank
6.75 % (+ 0.25) Indonesia | Benchmark Rate (Feb 04 2011) Central Bank

4.50 % (- 0.25)

Mexico | Benchmark Rate (Jul 17 2009) Central Bank
2.50 % (- 0.50) New Zealand | Cash Rate (Mar 10 2011) Central Bank

2.25 % (+ 0.25)

Norway | Key Policy Rate (May 12 2011) Central Bank

4.50 % (+ 0.25)

Poland | Reference Rate (Jun 08 2011) Central Bank
8.25 % (+ 0.25) Russia | Refinancing Rate (Apr 29 2011) Central Bank
2.00 % (- 0.50) Saudi Arabia (Jan 19 2009) Central Bank
3.25 % (+ 0.25) South Korea | Base Rate (Jun 10 2011) Central Bank

5.50 % (- 0.50)

South Africa | Repurchase Rate (Nov 18 2010) Central Bank
2.00 % (+ 0.25) Sweden | Repo Rate (Jul 05 2011) Central Bank

0-0.25 % (- 0,50)

Switzerland | SNB-Target Range (Aug 03 2011) Central Bank
5.75 % (- 0.50) Turkey | Repo Rate (Aug 04 2011) Central Bank
0.50 % (- 0.50) United Kingdom | Bank Rate (Mar 05 2009)
http://www.cbrates.com/

[americandream]

If there is real growth.. why is the interest rate on deposits zero or negative?

Surely those deposits could chase some of that growth instead of bombarding every credit worthy, middle class family with desperate flyers from *big* banks, begging us to refinance and borrow more money at embarrassingly low interest rates.

I think we're further along the globalism path than americandream might suspect; real growth has gone to zero, and what is happening now is what remaining improvements to profits that can be achieved, are being achieved by drastically reducing the expense of wages and benefits. Technology and its pervasiveness are now allowing keyman employees to work, or at least be aware of work 24/7; with engineers and typists and bookkeepers and phone support people doing his bidding all around the globe at $10/day. So what does a corporation need? It needs its board and management structure, it needs some department heads and closely guarded product people; and the rest is produced by a thousand robots in China, or a thousand nameless Indian laborers in an un-airconditioned aluminum sided shack that no American, Englishman, or European will ever see.

There is no growth, there is only the squeeze.
Only question for folks: Squeezer or Squeezie.

The real interest rate for global capital is China's GDP. Of course, this is not to suggest that capital is not transacted in (labour maximised, neo-mercantilist) America (where credit rates I agree, are nominal (due to an increasingly bankrupted exchequer it has to be said))

However, America's underlying rate which interests global capital is its optimal rate of consumerism, which in turn is the basis for China's GDP, and thus the nominal cost of credit makes absolute sense as it is essentially a giveaway.

However, some tinkering will be called for in America to remedy the labour/services drag on surplus whilst ensuring its consumer rating at the top remains. It is after all, the cultural locomotive of the world. Whither goes America in the malls, so does the world. Interesting times.

[Pops]

Let me talk this out and you guys tell me where I'm wrong.

Capitalism itself doesn't require growth, it only requires private ownership of the means of production (or ownership of some resource) and that the product be sold or rented for a profit, preferably in a free market.

Capital accumulation however does require growth and at some level of reinvestment of profits, capitalism produces growth - profit from profit.


I own some land and a cow, that's the capital, I grow some cow and have some left over, that's the profit, hopefully there is a market for cow and the markets demand for cow sets the value.

I guess it would still be capitalism if the government (or a monopoly corporation) set the cow price, or controlled the cow selling place or even owned the cow selling place as a for profit enterprise but as long as I get to profit from my capital, that's capitalism.

Right?


The "growth" thing is only required for accumulation of capital. But if I make just enough cow to keep me full and have some to trade to my neighbor for toothpicks and occupy my time eating and picking my teeth instead of making babies I'll keel over from a MI at 60 and our 1.8 kids can then sit on the same porch and pick their teeth for their 3 score. No growth required.

Capital accumulation can happen without growth but it requires taking the capital of others unfairly, unfairly is a subjective word but hitting someone over the head and taking their wallet is certainly unfair and so is, say, payday loans whose effective APR can be in the thousands of percent, or manipulating a market so that demand appears to be higher than it actually is.

No growth is no problem as long as you don't have in mind cornering the market in capital or making a profit without making anything as in interest or gambling in whatever form.

As it turns out capitalism is alive and well. So well in fact that while we've been bickering about and gay marriage and welfare queens and who has a valid birth certificate, the capitalists have acquired just about everything that can turn a profit except the government - and they are doing a good job keeping us talking so they can privatizing that.

AD always talks about capital going into paper gambles and that's fine since oil fueled growth will make those all smoke. But I do worry about privatization of government assets right about now.

Really the only problem with capitalism is the moral one: how much profit is fair to make from labor, what is the limit to fair dealings with laborers, how much cost should society bear to enable capital's profit, how much restriction should there be on capital accumulation, if any. I also worry about capital being scared right now and buying real assets like farmland and water rights.


I like capitalism, unlimited capital accumulation not so much.

[Outcast_Searcher]

Really the only problem with capitalism is the moral one: how much profit is fair to make from labor, what is the limit to fair dealings with laborers, how much cost should society bear to enable capital's profit, how much restriction should there be on capital accumulation, if any. I also worry about capital being scared right now and buying real assets like farmland and water rights.

I like capitalism, unlimited capital accumulation not so much.

A good and thoughtful post Pops, that I think gets to the heart of the issue -- moral questions about limits and ethics in capitalism.

Unfortunately, with modern politics, the rhetoric (and history thereof) from BOTH the left and the right on the subject makes having a reasonable (adult) conversation about this all too rare -- and rare as hens' teeth on TV (where the masses turn for "information").

From what I can see in well over 90% of the cases, NO ONE wants THEIR ox to be gored, and NO ONE wants to give up their favorite things, be they low taxes, high services, both, or any combination there-of.

With that as a background -- reasoned, logical debate with honest LONG TERM "reasonable" goals in mind seem improbable.

I, sadly, don't have any good answers. I believe in compromise, but THAT seems to be a lost concept these days. Even if I did, only those folks with "oxen goals" similar to mine would agree anyway...

Cheers

[AgentR11]

I think your example falls more into the mercantilism aspect that americandream is talking about. Make something, sell something, profit is different between sale price and cost of good sold. Capitalism would be the investor who uses his cash, leveraged, to participate in the production of an assortment of calves owned by different people, whether by direct means, or by means of the mortgages and business loans used to finance those operations. The investor doesn't really "do" anything, aside from deciding whether an operation is likely to be profitable or not in the future. A wrong answer in that decision results in the investor losing money as loans fail to pay; a right decision yields him a profit based only upon that which he had at risk.

Its gambling... but with better odds than Vegas.

[americandream]

Let me talk this out and you guys tell me where I'm wrong.

Capitalism itself doesn't require growth, it only requires private ownership of the means of production (or ownership of some resource) and that the product be sold or rented for a profit, preferably in a free market.

Capitalism is the accumulation of surplus. Where it departs from say selling cows (feudal and pre) and selling widgets (mercantilism) is that it not only does the two former, it also adds another layer to transactional exchange, for example, derivatives which draw value from these underlying layers. So for example, not only do I sell the cow, I now sell equities futures and options premised on the underlying value of that cow/cow business. I may then trade in derivatives of those derivatives and on and on as must this system deepen in the constant quest for accumulation over anjd above that currently available in circulation as the pool of capitalist input expands with the encroaching inclusion of the "barbarians" (third world, underdeveloped, developing etc, etc )as they are termed by capitalists who set the benchmark for what constitutes civilisation. Those most effective at managing capitalism are, curiously enough, economic as well as social liberals, which I count you as one of Pops. Fine people, don't get me wrong, social liberals especially, who invariably seek to apply capitalism with a human edge. Conservatives who are essentially mercantilists are utterly hopeless as managers and are plain silly, and only useful to the extent that they help capitalists wean the economic liberals off Keynesianism, which is a form of paternal mercantilism and equally silly.

Edit: The above is not a definition of capitalism but highlights the additional layers of exchange within the capitalist cycle. A key feature of capitalism is the emergence of an urbanised labour force with nothing else but their labour to sell (as opposed to say pre-feudal primitive socialism and the period on the cusp of comprehensive European feudalism (time of the land enclosures and not dissimilar to the emerging fundamentalist Arab Imperial system where a small elite have essentially enclosed the wealth of the Islamic world) where there was some rudimentary form of common ownership as well as enclaves of free lands and craftsmen.

[Cid_Yama]

This continuous growth meme has just been a myth to placate the masses and explain how they too will benefit from Capitalism. (In the very long run.)

It's never been true. It's always been best pirate wins.

He who can buy his way best, gets his way to the detriment of all others.

So it really does come down to best criminal enterprise, that owns the pols and judges, so they never have to worry.

It's never been about competition in a free marketplace, it's always been about eliminating the competition through rigged markets, regulations, permits and so forth.

Surely, no matter what they say, everyone knows this to be the case.

They always pretend that Elliot Ness and the inept and thouroughly bought police forces of the 1930's rounded up and eliminated all the organized crime.

Does anybody really believe the whole Untouchables myth?

They just stopped killing each other openly and put on business suits.

So there IS no crisis in Capitalism. It may retrench regionally, and the guns may come back out, but it's still best crime boss wins.

[americandream]

@ Cid.

Under all my academic analysis, that alas is the harsh truth.

[Cid_Yama]

I'm just sick and tired of this whole free market jive, where they imply that free means fair, until you push them.

Then they say, "whoever said the world was fair." Well, actually they did in their descriptions of the economics of Capitalism.

There is nothing free or fair about it. Capitalism is extortion, and protection, and blackmail, and rigged gaming tables.

[AgentR11]

There is nothing free or fair about it. Capitalism is extortion, and protection, and blackmail, and rigged gaming tables.

And yet, most here manage to have enough to eat and are able to avoid getting rained on, no? I know its a depressing way of thinking about it, but it isn't so horrible either.

As to fairness, nobody ever told me that "fair" was something to expect. In fact, human existence is about as unfair as it gets. Not only do we as individuals come with a vast and diverse array of abilities and weaknesses; but they are amplified by the extent and strength of the families that birthed us and raised us. Is it fair that some could not fail regardless of the degree of their incompetence? Is it fair that some can succeed with only the most intensely diligent performance coupled with a bit of luck?

But what could be fair? Communist systems devolve into the same sort of imbalance just as quickly, with connection and acquaintance networking substituting in place of family wealth or power. Anarchist systems quickly fall to the ones who can bring the most lethal force to bear at opportune moments. In short, there are no benevolently fair systems, there are only systems which favor your preferred form of power, and those which do not.

edit: stupid late night typing disease.

[americandream]

There is nothing free or fair about it. Capitalism is extortion, and protection, and blackmail, and rigged gaming tables.

And yet, most here manage to have enough to eat and are able to avoid getting rained on, no? I know its a depressing way of thinking about it, but it isn't so horrible either.

As to fairness, nobody every told me that "fair" was something to expect. In fact, human existence is about as unfair as it gets. Not only do we as individuals come with a vast and diverse array of abilities and weaknesses; but they are amplified by the extent and strength of the families that birthed us and raised us. Is it fair that some could not fail regardless of the degree of their incompetence? Is it fair that some can succeed with only the most intensely diligent performance coupled with a bit of luck?

But what could be fair? Communist systems devolve into the same sort of imbalance just as quickly, with connection and acquaintance networking substituting in place of family wealth or power. Anarchist systems quickly fall to the ones who can bring the most lethal force to bear at opportune moments. In short, there are no benevolently fair systems, there are only systems which favor your preferred form of power, and those which do not.

The first cannibal who decided to formalise rules against this opractice could well have said, I am reasonably well fed, why bother. Instead, material conditions forced his conformity to the new realities.

Analysis of systems seeks to understand these dynamics and likely tipping points to these dynamics. That is not to say that what exists is somehow flawed. It simply is. It has its inherent functions and fracture points. Hence this is an objective journey which cannot be hurried, try as we may to mould the material to our ideals. Marx's cautioned against seeking to impose communism, especially in a world still vastly rural and peasant. There has to be that critical mass for systemic shifts of the magnitude that has seen humanity advance in stages.

Discussions such as these however help us to understand what lies beneath contemporary economic realities and where they must lead. At times, those who are particularly compassionate or idealistic or driven by a strong sense of humanism may express frustration with our slow progress. Yet they are often at the forefront of our evolution as a species from brute nature to the highly civil order that sees such advances as rights for children and presumptions as to the innocence of those who face the scrutiny of society.

[Shaved Monkey]

Just saw a great documentary on planned obsolescence.
Its the engine that drives capitalist consumer society
It needs cheap energy cheap resources and cheap easy money.
So good luck to capitalism its going to need it.

"Earth provides enough to satisfy every man's need, but not every man's greed." (Mahatma Gandhi)

http://www.youtube.com/watch?v=endUcoHsCVY

[Quinny]

Thanks for all the inputs. I suppose my perspective is that Oil and cheap fossil fuels are such a limiting factor that they will continually cause sudden shock contractions which means that there will either be systemic collapse or a cycle of continual crises each one getting worse that will undermine peoples confidence in the system leading to an upsurge in organisation by labour.

The first alternative, although not necessarily Mad Max territory will be horrific and would IMO be more likely to knock us backwards towards feudalism or totalitarianism. This would potentially sustain a mercantilist/capitalist system for longer but at the cost of civilisation with the cruelist pirates at the top.

The second which seems to be the way things are playing out at the moment will lead to a general awareness that the games up and produce leaders to organise the general population. The problems for these leaders will be that they will still have the MSM and press continually counteracting their arguments, and they will also a to many a pretty distasteful agenda to put forward. 'Managing the downslope' would not be an easy campaign to win and democratic socialists would find elections an uphill struggle. Another major problem is the dislocation of producer and consumer. I used to argue that western workers were stupid because they wore there consumer hat to the polls, but to a large extent it's the only hat they've now got. How do you organise the workers into revolutionary councils when there are none? Moving forward in this scenario requires socialist leadership in movements like Transition Towns and Green political movements. The left also need to dump the idea of growth as a solution, whether as a means of gradual redistribution or in it's current role of 'deficit reducer'.

I still see nothing to convince me that PO will not be a economic catalyst accelerating the world towards a crisis of global capitalism.