Pops wrote:Capitalism doesn't obviously equal growth.
Definition of CAPITALISM from Wiki:
Capitalism is an economic system that is based on private ownership of the means of production and the creation of goods or services for profit.
That's about it. You need the rule of law of course, some kind of medium of exchange and access to labor and material but not growth.
It requires growth because of the last word in the definition: profit. More on that below.
Of course investors want More, just like we all do, that's a desire, not a requirement. Consolidation is the solution to shrinking investor value.
It's not just "consolidation" but moving to a competitor who will offer a higher return. Of course, it's not a requirement to increase profits and make things look good to investors. You can always choose to be beaten by your competitor.
You are inserting "More" in there for some reason but you aren't saying why except that more is fun. Chevy is selling fewer cars than in past but they are still profitable, they are still a capitalist company. Either a company innovates to stay profitable or it is overtaken by the competition, but there is no requirement that it grow, just that it be profitable.
Likely, such companies are profiting because they are dealing with niche markets where people are willing to buy expensive vehicles, but again the ability to buy expensive vehicles means the businesses that these customers are in have to sell more goods and services. Another way to profit without selling more is to engage in financial speculation, which is what various U.S. companies had been doing the past few decades. On paper, they show that they are profitable but their earnings come from investments.
In order to stay profitable through innovation, one innovates to cut costs, increase productivity, or both. The first leads to more profits without selling more, but those profits have to go somewhere. If they are invested in other companies, then those companies have to sell more in order to produce greater returns on investment. If they are re-invested in the business, then more will have to be produced, which is the second result of innovation.
In short, the end result is always increased productivity, which boils down to more sales in return for more profits. That is essentially what "profit" involves in the definition that you gave.
The example of the choice between the Prius and the F-150 was supposed to show how innovation (small efficient vehicle) would outcompete old technology (large inefficient vehicle) in a world with higer energy cost. At some pint the newest innovation may be ox carts but as long as the ox cart maker can leverage his capital in the form of factory and enough liquidity to obtain labor and material to build a profitable cart he is still a capitalist is he not?
I don't think moving from a Prius or an F-150 to an ox cart is an example of innovation. Also, the profit from the latter will be much lower than from the former.
Of course, one can argue that he can make more profits by selling many more ox carts than from selling a few Prius or F-150 units, but that also proves my point: in order to maintain or increase profits, one has to sell more. In this case, ox carts.
You're making a circular argument and it's about inflation not capitalism, two different things.
Again, there is no requirement that incomes grow in order to support capitalism
It's not a circular argument but the very nature of capitalism: the capital obtained is actually the profit made from sales. In order to make use of that profit, one invests it in another business (which means that business has to profit in order to provide returns on one's investment) or puts it back in one's business, which eventually means increased production. My point has nothing to do with inflation.
Also, income has to grow to support capitalism for very obvious reasons. Businesses maintain prices of goods and services sold by cutting down on costs, increasing productivity, or both (another option is to invest in another business). In all cases, workers' wages have to be minimal while production is maintained. But given competition, production has to be increased. With that, more goods have to be sold.
The catch is that more goods can be sold only if workers' wages go up. This is what is never thought about: the same workers who produce goods are also essentially the ones who will buy them. This is, in fact, the problem that led to the housing crisis in the U.S.: banks thought that no matter what happened, they would win if borrowers defaulted because they could still sell the foreclosed properties at higher prices. What they didn't realize is that the same borrowers who defaulted also belonged to the same group of people who were supposed to buy the foreclosed properties at higher prices!
This is, in fact, the means by which the U.S. solved the problem of workers' strikes during the 1970s: allow for easy credit, so that people could buy goods and services that they would not have been able to afford due to lower wages. Banks will offer easy credit eventually as they have to keep lending in order to keep earning. And as more money is created, the same workers can move to service industries and make more money while manufacturing is outsourced to poor countries whose citizens want the same middle class lifestyle.
Thus, what I am giving is not a circular argument but what very much describes the global capitalist system since the end of WW2.
Of course they would rather have tall grass and high tides forever but that is the whole point! In a de-industrializing world there will not be "More" markets, niches and products, there will be Less. I was casting the entire economy as acting like a mature market in which share is zero sum - actually a declining sum. Competition will be in consolidation, efficiency, price.
That is essentially my point: a capitalist system requires ever-increasing costs, production, money supply, profits, etc. An example is the move from an F-150 to a Prius, supposedly a means to lower resource use but actually doesn't.
The move from a Prius to an ox cart, though, is definitely not part of capitalism, unless one imagines selling many ox carts to make the same profits as one did when selling Prius cars.
Thus, in such a world, there will be very little profit, and in one with decreasing resources, very likely almost none. Such a world cannot be seen as capitalist or even one with the same or increasing profits.
LOL, you are just describing a growth economy. None of which explains why a capitalist economy must grow.
A capitalist system requires growth for the reasons I describe above. That is why for the past five decades or so we've seen increasing production and consumption of goods coupled with increasing money supply.
That is why we are seeing fallout from an economic crisis caused by increasing debt. That is why we are seeing a growing global middle class.
That global capitalist economy cannot be sustained as increasing debt leads to one credit crunch after another. But those will look like a walk in the park compared to the effects of a resource crunch.
In case you want to know the reason why growth is involved in capitalism, view Martenson's primer on peak oil.
Of course it is nice to make more money, but it isn't a requirement of capitalism. Like I said, the guy making the Prius for personal transport will make more profit than the guy making the pick up in an expensive energy world, and the guy making ox carts will make more profit than the guy making the Prius when the Prius is outdated – that would be the definition of deindustrialisation, right?
Money is actually a critical component of capitalism, as seen in the hundreds of years of its use to lead to the current global capitalist system.
Finally, I don't think someone who makes ox carts makes more profits than one who makes Prius cars or pick-ups. Perhaps what you mean is that the latter two will earn nothing given de-industrialization while the first will still earn. But that still goes against your previous claim that one can make the same profits, right?
