The Four Challenges to Capitalism

As I have entered the discussion on postcapitalism in our community group on Facebook, personal emails, and on, several people have asked, “What about the other challenges to capitalism?” It has been my contention that digitalization and automation are the primary drivers toward postcapitalism, and the most likely to succeed, but people are asking: What about climate change? What about peak oil and resource depletion? What about Marx and the revolt of the Proletariat—are we finally seeing that? Let’s look at each and see what differentiates them. Doing so will help me explain why the digital-automation revolution is the most likely to actually unseat capitalism as the defining system of western culture.

Marx and the Socialists

The Marxist critique of capitalism is both insightful and poignant, and it drew from a time when real working class revolts were occurring in different parts of Europe. Based on the labor theory of value, Marxist theories would have been friendly to many of the religious, pre-capitalist criticisms of exploitation. That exploitation, together with other struggles faced by the working class, has proven to be the source of enormous discontent at various points in history, and it has given rise to populism, nationalism, revolution, and other expressions of discontent.

If the goal is to overthrow industrial capitalism, however, Marxism has a serious, innate flaw—it requires capitalism to make sense. In practice, Marxist government may very well force the nationalization of industry, but even if successful, the capitalist paradigm stands. The only difference is that government owns the means of production instead of capitalists. (By the way, the same problem occurs for those who want nonprofits and NGOs to take over the economy—even if they do, the capitalist paradigm reigns supreme.) All the same principles of capitalism persist—everything is still organized in terms of a hierarchy of offices, coercion is required to get people to work, the economy runs on extraction, and scarcity still drives market prices, although they may largely be black market prices.

Finally, if Marxism were to play a decisive role in changing history, it would have already done so. The Communist Manifesto was published almost 170 year ago. Empirically speaking, Marxism has lost. Capitalism is driving the global economy, and Marxism is, at best, a footnote on the global stage. It will, I am sure, continue to provide a standpoint for criticism of the global, neoliberal hegemony, but it is doubtful it will ever become a platform for major change. Even if it were to inexplicably win, the industrial capitalist model and all its principles would persist. For people looking for change, this seems unlikely to satisfy.

Climate Change

In her book This Changes Everything: Capitalism vs. the Climate, Naomi Klein makes the case for climate change being a driving force in ending capitalism. If our climate really is changing the way 97 percent of global scientists say it is, then the neoliberal capitalist system is not and cannot be sustainable. Everyone and everything that invested in creating that system is at serious risk, and it becomes obvious that the system must be rooted out in order to save life on this planet.

Unfortunately, it appears we are not going to address climate change. In America, we just suffered through a long and difficult election campaign which, to the surprise of nearly everyone, elected Donald Trump to the White House and preserved a conservative majority in Congress. During the three debates in the general election, climate change was not even a topic of discussion, yet Trump’s policies are set to remove nearly all regulations aimed at climate change. He even wants to tear up the Paris agreement.

Climate change will, in fact, force a dramatic, probably catastrophic change in the system, unless something else changes it first. This reality is what scares conservatives and the climate deniers. As Klein points out, if they were to admit climate change is real, they must also admit that the capitalist system cannot solve it. Free markets will not work, and the idea of carbon markets is an ineffective hoax—a distraction from all that is really going on. Climate change is the ultimate challenge requiring government intervention, and such intervention is decidedly anti-capitalist in their view.

Climate change could, in fact, result in dramatic changes in capitalism, but it is definitely not the preferred method. The catastrophic events that will come from it—colossal storms, sea level rise, climatic wastelands that are too hot to inhabit, and runaway warming caused by greenhouse gasses in the atmosphere—are best to avoid. Humanity, were it to repudiate capitalism and do what it must do collectively, could stop this eventuality. Unfortunately, the capitalist elite are so far opposed to any such interventions, and are likely to stay that way. There is nothing intrinsic to the system as we know it that will get capitalists to change course. The only option, if we are planning on climate change, is a catastrophic collapse.

Peak Oil and Resource Depletion

A third argument has been that peak oil and the total depletion of the fossil fuel resource will cause a calamitous collapse in the industrial system, and in the worst case, force us all into a survivalist mode of being. There is no doubt that a sudden halt to the flow of oil, gas, and coal to global factories would be catastrophic. Just think of a world in which, all of a sudden, we could not drive, we could not work, we could not heat homes, we could not distribute goods, especially food and water. The panic and the level of death and destruction would be unimaginable. But I don’t believe it will go that way, and for several reasons.

Let me begin, however, by acknowledging that resource depletion is real. The mining, the oil drilling and pumping, the fracking, and the tar sands in Canada are all indicative of the increasing difficulty and expense of extracting the resources. Peak oil is a theory outlining how and why peak oil will play out—massive drops in production, followed by currency chaos in the global markets, and an eventual collapse in industrialization. Depletion played a large part in the run up of oil prices to an inflation adjusted average of $140 per barrel in 2008, right before the financial crisis. That run up, however, made very expensive forms of production financially viable, and hence, investments in fracking and the tar sands were initiated. The resulting new supply drove prices back down.

At a minimum, this resource depletion seems likely to produce swings in the market, but it is harder to imagine a sudden collapse of all oil, gas, and coal production at the same time. The theoretical shock to society does not result from going off fossil fuels, but rather from losing access to them suddenly and unexpectedly, all at the same time. Given the multiple companies working in multiple locations to extract multiple energy sources all around the globe, the suddenness seems unlikely, even though the depletion is undeniable.

Finally, any change to society driven by depletion is unlikely because although capitalism demands extraction and exploitation of the resources, depletion offers nothing in the form of alternative principles. As a result, even though it may create a devastating catastrophe, that catastrophe in and of itself does nothing to establish the principles and the thought environment for a new, noncapitalist view of the world. In fact, the most likely response would be to look for something else to extract and burn, rather than for a new way to live.

Digitalization and Automation

The fourth challenge to capitalism is digitalization and automation. We are already well along the road to digitalizing products, automating work, and investing heavily in robotic production. Here’s what I mean:

  • Digital products include ebooks, music, education, videos, and other content, as well as the digital component of new products—like in cars, clocks, and refrigerators. Both the number of digitalized products and the component percentage of value that digitalized products include are increasing.
  • Automation includes the use of driverless cars and trucks, artificial intelligence (AI) for appointment setting in a sales process, AI for writing analyst reports on individual stocks, and setting up automated business processes, such as paying bills.
  • Robotic production includes not only robotic production lines that many manufacturers are using today, but also 3D printing at all levels and scales.

These three categories of the digital revolution are just the beginning, and there is much more to come.

Capitalism cannot stop this onslaught of digitalized automation—it is creating it. Its intrinsic logic of cost reduction, productivity improvement, and profit enhancement requires the development and adoption of these technologies because it is the only way companies will be able to compete. If you are a factory owner paying workers $15 an hour and the guy next door is paying $0, who do you think will compete effectively?

The problem in all three cases is that the eventual adoption of these technologies will erode the underlying value bases on the microscale and the macroscale, but capitalists and business leaders will only manage to the microscale.

Automation and robotic production, for example, completely eliminate the value and cost of labor. Human beings no longer have to compete with cheap labor overseas; they have to compete with free labor in the factory next door. For millions of people whose primary value in the capitalist world is their labor, they will lose not only their jobs, but any opportunity to get a job in the first place.

Digitalization has a different effect. When products become wholly digital, as with ebooks or music, they have infinite supply and zero marginal cost of production. As a result, markets cannot price them because the ratio between supply and demand makes no sense. When prices cannot be set, markets break down, and there is no capitalistic value to producing products in the first place.

When both of these forces become dominant, we will have no jobs for income, a lot of people with no money, a bunch of products that are free, and no reason to invest in creating them. What will money even mean? Capitalism as we know it will cease to function.

What differentiates this force from the previous three is that it provides a new paradigm that serves as a metaphor for a new society. Networks replace capitalism’s innate hierarchy; collaborative production, such as Wikipedia and Linux, replaces the coercive need to work; conversion replaces extraction; and abundance replaces scarcity. These new principles offer the opportunity to organize society and undo the enormous negative consequences of capitalism, including those that will result from each of the other three forces—Marxism, climate change, and resource depletion.

The Race

Given these four forces working against capitalism, the question is: Which one destroys capitalism first? I see these options:

  • The Marxist-socialist challenge seems unlikely, for if it were to produce a meaningful challenge, it would have done so long ago.
  • The climate change and resource depletion challenges could occur first, particularly if they result in sudden changes. In that scenario, we can expect catastrophic changes as were outlined above.
  • Digitalization and automation could occur before resource depletion and climate change do. If it does, and if it triggers the change toward a postcapitalist world, we may avoid the worst effects of both climate change and resource depletion. We might also establish principles for a new, postcapitalist world of the future.

The most likely scenario is that digitalization, climate change, and resource depletion continue to develop in parallel and potentially transform capitalism. If digitalization initiates and develops a postcapitalist world before the catastrophes, we may be able to head them off. If not, one of the other two will bring down the capitalist world in a catastrophic meltdown, and there is no telling how things go after that.

Posted in Capitalism, Futures, Postcapitalism and tagged , , , , , , , , .

Anthony Signorelli is the author of Speculations on Postcapitalism, and other books. They are available as Ebooks on Amazon:

The Postcapitalist Manifesto
Speculations on Postcapitalism Ebook
How to Find Your Purpose, Passion, and Bliss: A Mythological Guide for Young Men