Citizen Action Monitor

“Capitalism” — an elusive concept that appears in numerous varieties, says Tim Jackson

Whatever its definition, the question remains: Are any of these varieties of capitalism possible without growth?

No 2076 Posted by fw, October 16, 2017

To access all other synopses from Prosperity without Growth, click on the Tab titled “Prosperity without Growth” — Links to All Posts in the top left margin. 

In Section 1, a very short introduction to Chapter 6, “The ‘Iron Cage’ of Consumerism,” ecological economist Tim Jackson sets out to explore two entwined features of our modern economic life: profit motive and consumer demand.  Through a ceaseless process of innovation and rapid obsolescence, the profit motive spurs the release of newer, better, cheaper products and services. Simultaneously, expanding consumer demand is a function of slick, aggressive, in-your-face marketing. “These two factors,” says Jackson, “combine to drive ‘the engine of growth’ on which modern economies depend and lock us in to an ‘iron cage’ of consumerism.”

To figure out how we might escape from capitalism’s “twin dynamic” of profit motive and consumer demand, today’s synopsis, Section 2, Chapter 6, Jackson begins his endeavour to “unravel some of the workings of modern capitalism” with a semantic analysis of the “varieties of capitalism”.

Tim Jackson is a British ecological economist and professor of sustainable development at the University of Surrey.

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Varieties of capitalism, a synopsis, from Chapter 6, “The ‘Iron Cage’ of Consumerism” of Tim Jackson’s book, Prosperity without Growth, Routledge, 2nd edition, 2016-17

“Capitalism is an elusive concept,” asserts Jackson. “It isn’t a simple, homogeneous entity. And it certainly thrives or survives in numerous varieties.”  

Most commonly, capitalism is defined in terms of “private ownership of the means of production.” The “profit motive” is also stressed as an important defining element.

In practical, general terms, this definition of capitalism means that private persons invest their money (‘capital’) in enterprises, supply chains, and distribution networks (all of which are also ‘capital’) to produce goods and services for consumers. Making a profit on their investment is what motivates the owners of productive facilities.

The term ‘capital’ can be a source of confusion in the minds of the general public. In economics, it refers to: money; monetary assets, aka financial capital – i.e., any liquid medium or mechanism that represents wealth; and physical assets such as buildings and equipment.

Capitalism can be defined in terms of “a process of accumulation of capital.” ‘Accumulation of capital’ implies economic growth. Therefore, to propose “prosperity without growth” as Jackson does, would, by this definition, mean “doing without capitalism.”

But, Jackson notes, if capitalism were defined in terms of “the ownership of productive facilities” then all else depends on how the owners of this capital act: for instance, must there be an inevitable, necessary connection between ownership of productive facilities and facility expansion driving economic growth?

“[What’s] immediately clear from empirical experience is that the forms of ownership of capital can vary enormously from context to context.”

Oligarchic capitalism is one such form of ownership of capital, in which the means of production are owned by a few powerful firms or individual capitalists.

In stakeholder capitalism, ownership extends across society: “In most advanced economies we are all to some extent capitalists” either directly by purchasing shares, or indirectly if your pension invests in publicly owned enterprises.

In state capitalism, companies are owned by the government but run to make a profit. A recent good example of state capitalism occurred during the 2008 financial crisis when national governments took stakes in failed financial institutions.

The organizational forms of capitalism also vary. According to political economists Peter Hall and David Soskice, there are two types of capitalist economies: ‘liberal market economies’ and ‘coordinated market economies.’ Broadly speaking, the former (in Canada, US. UK) are competitive, the latter (in Japan, Germany, Sweden) are collaborative.

“In reality,” says Jackson, “almost every economy in the world is to some extent a ‘mixed economy’”, meaning, private and state ownership (or state guidance) of the economy co-exist. Moreover, despite claims to the contrary, very few market economies are entirely ‘free’ or ‘open’. “Some are captured by monopoly interests. Others rely more on state regulation.

Given the ever-present danger that greedy capitalists will be tempted to both deceive and oppress the public, the greater the need for state regulation and, where necessary, intervention. As Jackson puts it:

“It’s continually surprising to find economists who still espouse a vision of capitalism that combines a high degree of market liberalism with an unhealthy dose of oligarchic ‘big-firm’ behaviour thrown in and argue vociferously against any role for the state. The rationale for this vision is often that it offers the best possibilities for unbounded long-term expansion. And recommendations abound as to how best to nurture and protect this rare and beautiful creature, so that we can get as much growth from it as possible.”

We have arrived at the end of Section 2, “The varieties of capitalism”. The question remains: Are any of these forms of capitalism possible without growth?

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