Is ‘sustainable capitalism’ an oxymoron?

Much as I want to believe in one of the new, sustainable versions of capitalism that are being widely discussed at the moment, I’m not sure the concept is feasible.

Business is dependent upon capital for its survival. Capital derives from the financial system. Our financial system is debt based. Debt with interest. So any business, or any national economy, must grow in order to pay the interest. It must run to stand still in other words. It has to grow to be bigger in order to pay back the money it borrowed, because the value of that debt is itself growing, and so to reduce the size of the debt, the borrowing organisation has to grow faster than the value of the debt.This is surely the first systemic flaw. And Governments need businesses to grow in order to generate higher taxes with which to pay their own growing debt. So the idea of economic growth is built into the system and cannot be avoided.

A second systemic flaw might be that any business’ raison d’etre is to generate wealth for its shareholders and directors. Regardless of how it prioritises its environmental responsibilities, or its social ones, it will only be paying attention to them in order to fulfil its first objective, which is the generation of surplus profit, and I doubt its possible to change the system such as to stop individuals wanting too much. So the business will always seek to maximise this surplus profit. This is a strong incentive to minimise employee wages as far as possible, and also to externalise costs wherever possible. This too cannot be avoided as long as businesses seek to maximise profit.

A third systemic flaw might be that within the marketplace, any commercial organisation, being driven as it is to grow, will seek to take over smaller businesses until the market in any sector is controlled by a very few, very large businesses. These become unwieldy and difficult to control. They become unresponsive to local needs because policy is driven from a far away central point. A kind of commercial version of a centralised Soviet state. A few large organisations reduces choice in the marketplace, so consumers can no longer exercise influence over product designs by choosing competitive products. And the large organisations themselves become so fabulously wealthy that they start to exert political influence within national governments, despite their never having been elected to any such position of power, and their underlying focus on generating shareholder value means their influence is used to the advantage of their own vested financial interests. Again, I don’t see how this is avoidable.

A fourth flaw is the obvious one from the perspective of sustainability. For a business to grow, it has to sell more. To do this, more of its products need to be consumed. Increased consumption means increased resource use whilst sustainability requires reduced resource use. So everything that is required of business and which drives it, and which is its essence, is completely the opposite of what can be sustainable.

Surely, a sustainable, capitalist market economy must therefore be an oxymoron.

The whole global paradigm that is the modern economic and business infrastructure seems to have the appearance of a slow motion train crash… too big and with too much momentum for us to be able to stop it, even as we anticipate the impending explosion.

I’d love to be proved wrong.


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