09 April 2017

Post-Capitalist Market Economy (or why markets obsolete everything - even capitalism)

I recently heard Dr. Katharine Hayhoe speak about why people are climate change deniers. She said that when people don't see or don't like a solution, they'll deny the problem. An example she didn't use but that seems appropriate is that of a poor woman in a abusive relationship who brushes away claims that her man is a threat because she can't imagine raising the children on her own. Given the solution seems untenable, she doesn't admit to the problem.

What's curious about climate change deniers who inevitably are fans of gas and coal is that they seem to see an admission that carbon emissions are dangerous as an admission that capitalism is over. This, this notion that the communists would win because of some science issue seems like something that McCarthy would have warned them about had he the foresight to see how clever the foes of capitalism were.

This misses something really important about markets, though. Markets proceed through sustained drives of incremental improvement punctuated by bouts of creative destruction. Little is safe from the force of markets. Bicycles and roads get better and better every year and then ... we get cars. Gas engines get better and better every year and then ... we get electric cars. Markets are so disruptive that they're even making capitalism obsolete.

People often use the terms capitalism and markets interchangeably. I don't. To me, capitalism defined the market economy that was limited by capital. The West went through a capitalist period from about 1700 to 1900. During this period it wasn't just discovery of how to harness energy from coal and oil that helped to fuel the first real gains in productivity in thousands of years. It was a relentless automation of manual work with machines and factories. Life sped up and output increased. We went from battling starvation and having very few material goods to battling obesity and having an abundance of goods.

By that definition, capitalism is over. It became eclipsed by the information economy that simply assumed the presence of an abundance of capital. In the third, information economy, retirement plans made tens of millions of Americans new capitalists. We now have trillions of dollars in capital in search of returns and the limit is not capital but good investments in which to pour that capital. What is the source of good investments? Good entrepreneurship (and not just private sector entrepreneurship, but public sector as well). The creation of new infrastructure and businesses that generates a return to capital is the new task. Worry about financing such ventures is almost incidental.

And here is the problem with seeing the problem of climate change as meaning an end to capitalism. Capitalism is already over. Not even capitalism was safe from the creative destruction of markets, so it is hard to imagine how carbon fuels could be. Markets don't show anymore respect for carbon fuels than evolution pays respect to dinosaurs.

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