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We keep hearing a lot about economic growth in the media and this answer shows us why it is so important:

Therefore, we have three options:

  • A constant increase in unemployment. (Generally feared and loathed.)
  • Less time at work per person. (Sometimes impractical. Wastes educational resources as people would still have to study and train just as much only to produce less. Might reduce people's earnings, etc.)
  • Constant economic growth to create new jobs and counteract the reduced need for manpower caused by technological advancement.

The third option is generally preferred by policymakers, academics, the public, etc. for the reasons described above, as well as other reasons.

However, perpetual constant economic growth within a planet having finite resources is not possible (it is not sustainable):

Capitalism requires a constantly expanding production and consumption of goods, which can only be achieved through the increased exploitation of the planet’s natural resources at an unsustainable rate. Because of this reality, sustainable development cannot be achieved without a dramatic reduction in the levels of production and consumption, which directly contradicts the growth logic that drives capitalism.

So, I am wondering if and how capitalism can deal with this? What if we reach the limits of the environment and economic growth is no longer possible?

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    Comments are not for extended discussion; this conversation has been moved to chat. – yannis Jan 17 at 13:45
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    Further comments deleted. If you want to discuss how much more economic growth is possible or not please use the chatroom provided by yannis. – Philipp Jan 20 at 11:19
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    Are you talking about economic growth (more wealth per person) or population growth (more people in total)? There's no real limit to the first, while the second is obviously limited (though depending on how advanced future technology you're thinking about, we might be ~1-12 orders of magnitude away from that limit). Consider the difference between having 10 times more cars to having a new car ten times as often. The first case needs more raw resources, the second doesn't (ignoring waste) - but they both correspond to the same economic growth. – Luaan Jan 21 at 10:08
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    There are two questions here. One is about finite resource consumption; the other is about the obsolescence (or not) of human labour. They are not directly related. What are you asking about? – henning Jan 21 at 15:40
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    What is capitalism's answer to constant economic growth hitting the limit of the planet's finite resources? SpaceX. – ValarDohaeris Jan 21 at 17:02

26 Answers 26

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Why would capitalism have an answer?

Your question presumes that economic systems should be fully planned out into perpetuity, but that's just a false premise. You might as well ask what democracy's answer to peak oil is, or what individualism's answer to FTL travel would be.

All capitalism means is that people are able to earn money off of things that they own (private ownership of capital goods). It's not like it's something that a cabal of people got together, mapped out, and implemented from the top down. It's emergent behavior that was later described as capitalism.

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    "All capitalism means is that people are able to earn money off of things that they own" Finance makes money of things they do not own (other people's money). Similarly, a Marxist would tell you that capitalists make money by extracting value from workers. I repeat it again. This is a terrible answer. The OP is evidently interested in the ideas apologists of capitalism have come up with to tackle the issue. A trivial rephrasing of the question would make this answer redundant. – luchonacho Jan 21 at 12:17
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    @luchonacho No it's actually a perfect answer that covers multiple angles. As an opponent, this very nicely represents the cynical "we don't care" attitude of "all-round"-capitalists that consider making money and consuming the main purpose of economic life. But it also can be seen as a very realistic answer, it truly isn't a thing of concern for capitalism as a concept. As much as it's not part of the concept of a hammer where and how to use it and where you forbid people to use it or require them to wear protective gloves when using it. – Frank Hopkins Jan 21 at 15:18
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    @luchonacho you're wrong about finance - unless you think that debt isn't something you can own? In which case...can I borrow some money? – David Rice Jan 22 at 14:42
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    @Darkwing Capitalism isn't a moral framework, it doesn't purport to answer moral questions. There are good questions to ask, like "is capitalism the right choice", but "what it capitalism's answer" is a meaningless question. – David Rice Jan 22 at 16:46
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    @hyde You might as well ask "What is evolution's answer to long droughts?". Evolution isn't teleological, it doesn't have answers to anything other than "how does speciation occur?". Capitalism isn't teleological, it doesn't have any answers other than "who controls the means of production?". It doesn't have a goal, it doesn't try to end poverty or increase inequality or do anything other than describe who is controlling the capital goods (private individuals). – David Rice Jan 22 at 22:12
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Not all parts of the economy consume finite resources equally. In fact, only a minor portion of it is related to the manufacturing of goods in the industrialized countries. Most of the economy there is services by now and, even more related to your question, most of the growth is growth in services.

Manufacturing is on the decline while capitalism thrives. (US)

enter image description here Source

Growth is growth in services. (UK)

enter image description here Source

In fact, there is plenty potential for services to grow even more. For example, if you live in a western country and you get older, you wish there were more service workers tending to elder people available.

However, this does not mean that globally the use of resources is stagnating. Many products consumed in the US are made in China and even working in services consumes resources. Resource usage is still very much increasing.

enter image description hereSource

or

enter image description hereSource

Services can be very eco-friendly jobs with a relatively small resource usage per job. Let's think for example doubling the number of teachers in schools which would could likely be done with little additional resource usage.

The shift to these jobs could happen quite automatically in capitalism. If resources become scarce they also become very expensive.

Also, some resources are renewable: food, energy, recycled materials (to some extent), wood, .... With regard to manufacturing and production there certainly is a desire to use existing resources as efficiently as possible with this kind of optimization still ongoing.

Saving the planet mostly probably will mean not using more (rather less) of the resources. This means that on average jobs have to be much, much more resource efficient and that global manufacturing may decline, which would mean that for example people might use things for a longer time or live on smaller space. However, it's much to early to deduce the downfall of capitalism because of that. If I would be worried about capitalism, I would worry about ongoing trends in artificial intelligence and automation.

Summary: Capitalism will use all available resources before anything changes. Only if resources become scarce, they will also become expensive. The world economy will then shift to labor that uses low amount of resources. These jobs will mainly be in services and within services only those who use low amounts of resources.

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    Comments are not for extended discussion; this conversation has been moved to chat. – Philipp Jan 17 at 22:50
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    This answer is good. The question assumes economic growth consumes resources. I would argue economic growth is turning resources into useful things (e.g. turning phone components into a cell phone, using a person with free time into a service). Aside from non-renewable energy sources (for which alternative sources exist), the assumption of resource consumption is faulty. – Underminer Jan 18 at 16:47
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    @Jontia That's all about the cost. When raw resources become scarcer, those landfills disappear over time (this has already happened many times in the past - e.g. platinum, gold, aluminum, ...). Sorting waste is expensive, and reclaiming the useful materials is also expensive. Don't expect the renewal efforts to really get started until the cost of the raw material approaches the cost of renewal. Everything is renewable in principle if you don't care about the cost; whether renewable is also economical is another matter entirely, and depends on alternatives. We still have many of those. – Luaan Jan 21 at 9:34
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    @henning Driving your SUV is cheap because there are huge subsidies on oil (among other things). But yes, externalities that aren't accounted for can make a significant part of the total costs, and can distort the image quite a bit. But the reason we don't account for those is that they're really hard to even estimate, much less correctly measure. What's the real cost of leaking a kg of carbon dioxide? How does it change with total release (it certainly isn't anywhere near linear!)? Are those Malaysian workers free or forced labour (if free, their life is well improved by the job)? – Luaan Jan 21 at 16:05
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    @Luaan exactly, they should have better choices. The alternative shouldn't be between suffering and starving just so that my iPhone is cheap. – henning Jan 21 at 21:34
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The claim that constant economic growth within a planet of finite resources is impossible is false. Natural resources can be physically finite while being economically infinite. That is, regardless of the physical amount of any given resource exists in the world, it is possible to have the entire supply necessary to meet human demand.

In "capitalist" societies, this is accomplished through the use of the price system. When a resource is scarce, it becomes more expensive, so people demanding it use less, and people supplying it try to provide more. When a resource is plentiful, it becomes less expensive, which will drive up demand and make it possible for suppliers to profit from the larger volume despite the lower price.

There are limitations to the price system; it only works for things that can be owned in a free market economy. It is difficult to own the air or wildlife, which is why these things tend to be overused and used poorly. It also only works if the prices are the result of market supply and demand; if price controls are imposed, then the system breaks because the information about scarcity conveyed through prices is no longer available, so people tend to overconsume whatever the thing is.

As an example of this in action, there was a famous wager about the price of metals over a ten year period in the 1980's between economist Julian Simon and biologist Paul Ehrlich. Simon wagered the price of 5 metals would go down in the ten year period, Ehrlich wagered the price of metals would go up because they would be depleted. Simon won the bet when all five metals of Ehrlich's choosing decreased in price after the 10 year period.

  • Comments are not for extended discussion; this conversation has been moved to chat. – Sam I am Jan 23 at 6:15
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    In "capitalist" societies, this is accomplished through the use of the price system - more correctly, in free market economies. This answer would become close to perfect if you also pointed out how free market economies create growth by using innovation to use resources more efficiently - making less go further increases wealth. – Grimm The Opiner Jan 24 at 8:14
  • The market also fails on Giffen goods like bread or low-income housing, which is why there are agricultural subsidies and social housing subsidies in most developed countries. – Alexander Jan 24 at 14:49
  • @Grimm The Opiner that's a very valid point. I didn't go that specific because I was trying to illustrate the general principle (which some readers apparently consider to be "magic"). I also put "capitalism" in quotes because "capitalism" isn't actually a real "-ism" in the sense that the asker's cited blog post implies. – Joe Jan 25 at 15:09
  • @Alexander Giffen goods are a concept with very little empirical evidence because the conditions for them are very specific and hard to observe in practice. A lot of apparent Giffen goods have normal demand behavior when investigated closely. I don't think they're why we have subsidies for food and housing; we have subsidies for food and housing because people's moral intuition tells them that it would be wrong if poor people couldn't afford these things, we should give them money for those things, and we don't necessarily care about what that does to demand & supply (even though we should). – Joe Jan 25 at 15:22
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I would like to (sort-of) challenge one of the premises of the question, namely that resources are finite, and I have a strong and weak version of the challenge.

The Weak Version

I mean, sure, there's only so much matter in the planet, and only so much of it is useful for our current purposes. Whether you think the end is in decades, centuries, or millenia, anyone who can count more than the sum of their fingers and toes can look ahead to the end of the tunnel. But human ingenuity is also a resource, and human creativity is unbounded.

Think about it. Finance? Law? Software? These things are huge sectors of modern economies and they consume far fewer resources than hard industry. Trilarion's upvoted answer focuses a lot on the service sector, another great example. How much of our resources today exist in the form of intellectual property?

Edit

I'm leaving the following paragraph in but see gerrit's comments below for a more sobering take. I'm not sure it reverses my conclusions but it does arguably weaken my case.

Not sure how the theory plays out, but in practice we've already begun to pivot in this direction more and more. N.B. that's exactly what capitalism says should happen: as physical resources become scarcer their value increases and we either have to live with shortages... or pivot to something cheaper.

The Strong Version

Which coexists with the version above: we'll never run out of resources before something else happens.

That something else might be the extinction of the human race, space travel/colonization, digitization of consciousness, whatever. Why aren't we doing more in those spheres now (at least the more positive ones)? Because it isn't economically viable. But again, as physical resources become scarcer their value will increase, until it becomes more viable to strip mine asteroids than continue to deplete the Earth.

There are some holes in the strong version: if agents are allowed to proceed to maximize their utility without regard to negative externalities generated (e.g. a factory can pollute with no consequence) then the incentives are warped. If the ecosystem that sustains life here is wrecked by e.g. AGW then game over. You can probably think of others, but the point is that continuing current trends forward unboundedly is likely selling humankind short.

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    The problem as always is not how much there is, but who gets it. In a capitalistic society it goes to the highest bidder. – Mazura Jan 16 at 14:49
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    I think this is the only reply that answers OP's question so far, but I have issue with "barely consume any physical resources." Any data-related business consumes resources, in matters of degree, that aren't immediately visible. e.g. facebook's latest 10-Q lists over $11 billion in network equipment, and almost $6 billion in contracts to build new data centers (which cost energy to run). Smaller businesses can exchange this cost to cloud providers (paying $ for the physical resources). – BurnsBA Jan 16 at 15:00
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    @user28434 some of that is true (particularly for law) a lot of that is just that coordination costs are unavoidable in a complex economy. How much of that is necessary vs. incidental complexity is an interesting question in its own right, but out of scope here. – Jared Smith Jan 16 at 15:06
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    Side note to my previous comment. Data centers cost a lot of energy to run (US data centers used ~1.5% to ~2% of US electricity between 10 and 5 years ago ). However, there are strong efficiency incentives, so this number hasn't changed too much in the past few years, seeing downward pressure. But it's reasonable to argue this will continue to increase like in OP's question, but then the question becomes can we continue to increase energy usage indefinitely, which is a different kind of question ... – BurnsBA Jan 16 at 15:06
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    I'm not sure how the theory plays out, but in practice we've already begun to pivot in this direction more and more, citation needed please. There is no evidence for a decoupling between GDP and energy consumption, rather the contrary. See Garrett (2012): No way out? The double-bind in seeking global prosperity alongside mitigated climate change – gerrit Jan 16 at 16:05
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I think you might have gotten the wrong impression from the answer you linked to. When technology, production of capital equipment, or education make workers more productive, it frees up human resources that can be used elsewhere. If those people were not able to find work and were simply "automated out of a job" then that would be bad. Fortunately, this person can then take on a new job. This is where the growth happens.

Imagine a world with just a finite supply of farmland which is all used by people engaging in subsistence farming. All the resources of the world go into farming and people eat all the products of that farming. Suddenly one of the farmers develops a new plow that lets 5 farmers do the work of 6 farmers. Now 1 in 6 farmers no longer have to farm. These farmers can now become entertainers who put on plays and tell stories instead of farming. All the resources of the world are still being used, but now people get this new thing that makes them happy, entertainment. This is economic growth. It didn't require any more resources from the world, it just required increased technology that freed up labor for new things.

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    But this itself is a fallacy. You've taken away 1 farmer's livelihood - but he doesn't necessarily have other skills he can fall back on. And if he doesn't, all he can do is work as a menial servant for one of the other 5, where before he at least was happy in charge of his own fate. As automation escalates, the skill level needed to contribute escalates too. People do not have equal abilities, and those who lack the "right" abilities are left behind. So people who might have previously had a prestigious job as a skilled welder are today serving coffee in Starbucks at minimum wage. – Graham Jan 16 at 15:57
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    @Graham When the washing machine was invented and spared people (mostly women) from the tedious and confining job of washing clothes, were these workers "economic roadkill?" What about carriage drivers and horses? Suppose robots become sufficiently good at mining underground. Are the displaced human miners with their negative health issues and high-risk jobs somehow "economic roadkill?" If you focus only on the new costs of changes without considering the benefits, certainly everything other than pure stasis will seem awful. – Andrew Jan 16 at 17:29
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    This is actually the right answer, and it is clever in not assuming or depending upon a particular economic system. It is equally true under a command economy as it is under a laissez-faire market economy. – Andrew Jan 16 at 17:37
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    @graham Most of your thoughts are true. Moving people out of now automated factories and into jobs at Starbucks is economic growth. Free markets make saving labor profitable and free that labor up to do other things. When no other opportunities or only far worse opportunities exist problems start to arise. But the question was about natural resources needed for growth, not the distribution of the gains of capitalism. – lazarusL Jan 16 at 17:38
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    "The benefits are seen by the children of the 5 farmers who automate, not by the 1 farmer who's displaced" They're also seen by everyone who can buy cheaper food; even the 1 farmer. – Robert Grant Jan 20 at 21:10
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This article, entitled "Is sustainable capitalism possible?", provides a neat analysis of arguments by defensors of "green capitalism" . The paragraphs below summarise the points:

Hawken and the Lovins’ agree with Kovel that the current model of capitalism is problematic. “Capitalism, as practiced, is a financially profitable, non-sustainable aberration in human development.” But they do not see the problem as residing in capitalism itself. They distinguish among four kinds of capital, all necessary for production: human capital, financial capital, manufactured capital and natural capital. The problem with the current form of capitalism, they argue, is its radical mispricing of these factors. Current market prices woefully undervalue—and often do not value at all—the fourth factor: the natural resources and ecological systems “that make life possible and worth living on this planet."

In terms of solutions to this mis-pricing:

Hawken and the Lovins’ argue that these remedies—properly applied—can work. The first step, they say, is to eliminate the perverse incentives now in place. They document the massive subsidies that governments currently provide for ecologically destructive behavior, e.g. highway construction and repair, which encourages suburban sprawl and the shift away from more efficient modes of transportation, agricultural subsidies that encourage soil degradation and wasteful use of water, as well as subsidies to mining, oil, fishing and forest industries.

Second step: impose resource and pollution taxes so as to reflect the true costs of “natural capital.” Sweeten the pie by phasing out all taxes on labor (which increase unemployment), and income taxes as well. The point is to level the playing field so that more sustainable energy technologies and more energy efficient processes can compete fairly with the destructive practices of “industrial capitalism". We might even want to go further, and subsidize—at least initially—the technologies that reduce the negative environmental impact of our production and consumption choices.

Of course, critiques of this approach abound. The paper discusses some. See also linked wikipedia article, for a summary, and this article for a comparison of green capitalism and green socialism.

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    Note that, if capitalism is defined as free market capitalism, the Hawkins/Lovins solution is to do away with capitalism. The replacement, probably what you refer to as green socialism, explicitly attempts to control and, if necessary, eliminate those actors which do not share the values and judgements of the government, which implicitly includes Hawkins/Lovins or those who reliably share their values. Note that all of the "Second Step" involves direct and possibly Draconian political intervention in the economic process, and hence is not remotely free market capitalism. – WhatRoughBeast Jan 16 at 17:18
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    @WhatRoughBeast "if capitalism is defined as free market capitalism". Indeed, but that is not how capitalism is defined. Otherwise, no country has ever ever been under a capitalist mode of production, a clear (and unhelpful) nonsense. – luchonacho Jan 16 at 17:31
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    I agree that we should reduce subsidies in harmful industries like the oil industry, implement Pigouvian taxes on things that destroy the environment, and subsidize technologies that can be environment-saving. I think it's debatable whether the latter methods I listed are really Capitalist methods. Although, they are just as Capitalist as any existing taxes and subsidies. – John Jan 16 at 21:01
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    This is, while not being an appreciated or accepted answer, a good synopsis of the issue, namely capitalismn being a means to an end and how the rules governing society would have to change to be able to incorporate a capitalistic market into a sustainable environment – antipattern Jan 17 at 0:30
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Capitalism is all about profit. And everybody is interested in highest possible return on investment (true for every capitalist starting with unskilled worker and on J.Bezos ending), so maximizing profit is the best strategy for achieving that goal.

Obviously, it can be done in multiple ways, of which reducing the costs is always first and foremost. That includes reducing labor force of an enterprise, which is but one and least efficient, albeit most vilified method.

Most often though capitalism employs new technologies, new materials and new ideas to increase productivity and/or reduce costs. And it can be seen across world and time, that production of anything becomes more efficient, streamlined, less wasteful etc.

There is no reason to assume that the need for natural resources will be constantly increasing ad infinitum without allowing for the possibility of either substitution (humans may develop a technology of converting old plastic bags into new synthetic material stronger than steel, for example) or there will be new sources of resources (i.e. asteroid mining).

In the meantime capitalism's answer is improvement. Not sure how old are you, but I remember when instead of a smartphone one required a huge desktop computer, printer and phone for effective office work. Think on how much technological progress reduced the need for resources going from fifty kilos of various materials to less than 200 grams (which is 250 TIMES) without reduction in productivity (in fact, it increased it dramatically).

Is it really hard to apply same logic to almost EVERYTHING (to various extent, of course)?

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    Yes, it's impossible to apply that to everything because it's not logical. Your phone is not going to be scaled down another 250x. You can't eat 250x less (or get 250x improvement efficiency in making that food). Your car isn't going to weigh 4kg anytime soon. And so on... There are real physical limits on anything tangible. – awjlogan Jan 16 at 13:09
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    There is more to capitalism than maximizing profit. A competent business position would be to ensure sustainability of the business, such that continuous profit is assured over the life span of the company. e.g. don't clear cut every tree as a lumbermill. – Drunk Cynic Jan 16 at 13:14
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    @awjlogan - I see your point. Will amend accordingly. However, you're missing the point on some things, too. Yes, some areas can't be improved 250x (and I'm not attached to that number), but they don't have to. Food we grow in excessive excess, and already cheaply. Maybe it's time to improve refrigeration again? so that we can store food indefinitely? Obviously physics limits us severely, but then again - car has utility, but not much versatility, for example. That's why you can still replace yours every year, but model from 2000 is still perfectly adequate, unlike your smartphone. – user10424 Jan 16 at 13:45
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    @AcePL The problem is you picked an example which is semiconductor based, and as such was a very immature technology and hence had massive room for improvement. Refridgeration is very mature. You could invest a huge sum of money to get a % or two gain in efficiency, but again there's a fundamental limit on the efficiency of the heat cycle. That is the question that is being asked - you can asymptotically approach this limit (growth), but your gains become less and less and more expensive as you get closer. – awjlogan Jan 16 at 14:06
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    @DrunkCynic Except that some management bonuses are so short term that they are rewarded for profits in the next two years, never mind that the company is run into the ground five years later. But that is not an inherent feature of capitalism. – gerrit Jan 16 at 16:08
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tl;dr: Material resources do not disappear, they just become harder to reuse. This is solvable with energy of which there is an effectively infinite resource.


This is less about "capitalism's answer" because capitalism has zero answers to anything; it is just a self-organizing economy based on the acceptance of private property and otherwise free individuals.1 As it turns out, the majority of people, at least with the prevailing memes, seem to want ever more stuff and power if not for themselves then for their children, which drives economic growth.

Instead, my answer shows a technical aspect which I believe will sustain a growing economy far into a future which is so unknown that the question becomes meaningless.2


Physical resources come in two flavors: Those which can become depleted (e.g. ores, fossil fuels) and those which can become unusuable, e.g. by contamination or climate change (air, soil, water).

Both phenomenons have a common underlying mechanism: They are two flavors of the inadvertant distribution of substances in the environment. Earth is an almost closed system when material is concerned:

Nothing really disappears — it is just dispersed.

The passage of material through the economy is conceptually a concentration of distributed resources (like ores or atmospheric CO2) into products (like cars and agricultural products) during production; and then the reversal by spreading them out again during and after consumption (car wrecks rusting away, feces washed into the oceans and CO2 exhaled into the air).

The same is true for substances which contaminate the environment like chemicals used in manufacturing or toxic materials in products like batteries or plastics.

The first step, concentration, needs energy. The more distributed the raw material is, the more energy is needed to concentrate it (example: Uranium ores vs. crude oil). Distribution is a form of increasing entropy; concentration is a form of lowering entropy. Increasing entropy is easy because energy flows from high-entropy to low-entropy places, passing through any process you put in the middle (e.g. a human, a car engine). This energy flow can be used to locally decrease the entropy. We humans are examples of low-entropy islands. As soon as we stop breathing or eating we die and entropy takes its course.

All manufacturing decrases entropy locally by concentrating and organizing distributed and un-organized substances (ores to cars). To do that the industry establishes an energy flow; some of the low entropy in oil or, recently, solar rays is "diverted" into islands of low-entropy products. Not surprisingly the highest-concentrated raw materials are the most sought-after ones.

The same principle used in production — separate usable raw materials from unusable substances — can be used to de-contaminate resources like air, water and soil. It's just that the process needs to reverse a lot of entropy gain because contaminants are often widely and evenly distributed, and hence needs a lot of energy.

But this retrieval of distributed raw materials and contaminants is entirely doable; it is just a question of available energy.

Here comes the good news. While planet earth is a closed system for material, it is eminently open for energy, which flows through the planet at a staggering rate. Low-entropy solar radiation (see this question) is absorbed, passes through the system earth and is radiated away as high-entropy infrared radiation. This abundant flow of energy can be diverted by the economy and put to good use. Enough of it is available to satisfy any global demand in the foreseeable future. Solar cells will continue to drop in price (they are just semiconductors, after all) and will switch to more abundant and less toxic compounds. They'll produce enough energy to clean up after themselves and then after the economy proper. Together with technological and social innovation (car sharing, public transportation, less meat consumption etc.) the global economy can be sustained at high levels of material throughput, which will be a near-complete cycle.


1 Of course this kind of capitalism does not exist (and has never existed) anywhere; it is always embedded in a political framework which is precisely tasked with giving those answers which transcend the economic realm as well as controlling, directing and dampening the effects of the economic realm on individuals and the collective. But discussing the political answers to an economic drive for constant growth would be a different thread altogether.

2 Think Kardashev Scale and Dyson Spheres.

  • Thank you for writing a detailed answer addressing that energy is not a material resource, so I don't have to reply to all the comments rooted in that lunacy. – Ben Voigt Jan 19 at 19:13
  • @BenVoigt And that changes all; material resources do not vanish, they just get harder to re-use which is solvable with energy. (Now that you made me say that I'll have to change my tldr. "Look what you made me do ;-)." ) – Peter A. Schneider Jan 19 at 21:53
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    Yes, a sustainable world is possible. You're correct that solar energy would play a big role in it, and that we should modify our transport, housing and eating habits. But please note that car sharing and decreased meat consumption are really bad for the GDP. ;) Finally, while 173PW of solar irradiance is a huge amount of power coming on Earth, it cannot be considered infinite. – Eric Duminil Jan 22 at 8:34
  • @EricDuminil You are right about sharing being bad for the GDP. It will have to continue to grow in the service sector ;-). Wrt inifinite solar: I said "effectively". It'll be a while before we use a significant fraction of what hits earth, and beyond that there is plenty of solar for a Kardashev Type II civilization. – Peter A. Schneider Jan 22 at 10:06
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Economics is simply the use and management of time and energy. That is all humans actually "have". Whether a label of capitalism or communism or any other ism is attached to use of time and energy or not.

What is capitalism's answer to constant economic growth hitting the limit of the planet's finite resources?

There is no central capitalism committee.

There are different answers for different individuals and institutions.

Some exploit resources until there are none remaining. Whether capitalism or communism is the system used to exploit resource until there are no more is irrelevant.

Before proceeding it is important to note the fact that humans have in fact impacted fish, wildlife and water resources due to their activities.

Unsustainability is not a mythology.

Natural resources do decline based on human activities and can be depleted to the point of no return without human recognition of those facts and the altering of human behaviour and conduct as relates to their usage of the natural resource.

Depletion of natural resources is not exclusive to capitalist systems.

Two examples:

Under a communist system

Restoring life to the Aral Sea's dead zone Source: BBC

The Aral Sea started to shrink in the 1960s when the Soviets diverted water from the two main rivers that flowed into the Aral Sea to feed vast new cotton fields.

As cotton production boomed, the Kremlin refused to acknowledge the problem. Locals had to put labelled sticks in the ground to prove the shoreline was disappearing.

As the volume of water decreased, the concentration of salt increased, poisoning everything in the sea.

"Fish stocks went down and in the end all we caught were dead fish. Now young people have to leave for other countries in search of jobs".

The Aral Sea has shrunk to 10% of its former size - an area of water as big as Ireland has been lost. But it's not just a way of life that has been affected.

Under a capitalist system

Chinook Salmon Source: United States Environmental Protection Agency

Chinook salmon populations are down 60% since the Pacific Salmon Commission began tracking salmon data in 1984.

First foods ceremonies are one way Coast Salish communities celebrate respect for the earth. In spring, families celebrate the first Chinook salmon caught with First Salmon ceremonies called Thehitem ("looking after the fish.") At the end of the ceremonies the bones of the salmon are returned to the river with a prayer giving thanks to the Creator, Chíchelh Siyá:m, and the salmon people. This is to show that the salmon were well-treated and welcome the following year.

Salmon are an iconic species of the Salish Sea. They play a critical role in supporting and maintaining ecological health, and in the social fabric of First Nations and tribal culture.

Strong commercial and recreational salmon fisheries also make salmon an important economic engine for the region.

Chinook (Onchorhychus tshawytscha) are the largest salmon, and are commonly known as "Kings" or "Tyee" (which means "chief" in Chinook jargon).

What's happening?

Just over 485,000 Chinook salmon were reported to be in the Salish Sea in 2010 (source: Pacific Salmon Commission - see chart below). This is a 60% reduction in Chinook abundance since the Commission began tracking salmon data in 1984.

However, there's been a 29% reduction in the number of harvested salmon and a 30% increase in the number of spawning salmon since 1999 when Puget Sound Chinook were listed as a threatened species under the U.S. Endangered Species Act.

Why is it important?

Salmon provide food for a variety of wildlife, from bald eagles to killer whales to grizzly bears. Because salmon die after spawning, their carcasses also provide abundant food and nutrients to plants and animals, including tiny aquatic insects and other invertebrates that in turn provide food for other animals.

During their life cycle, salmon transfer energy and nutrients between the Pacific Ocean and freshwater and land habitats. Since Chinook are the largest salmonid, they contribute the largest amount of biomass (organic matter) per fish to the ecosystem. In fact, in areas that have experienced dramatic declines in salmon, there is a measurable deficit of nutrients to help support the ecosystem.

Why is it happening?

The steep decline in Chinook salmon is associated with three main factors: - Habitat change. - Harvest rates. - Hatchery influence.

Five things you can do to help

  1. Keep streams shaded. Trees and native vegetation along shorelines keep the water cool for fish and help stabilize the banks from erosion. Help protect these types of areas in your community and watch for stream restoration projects and opportunities.
  2. Keep litter and trash out of streams. Trash can pile up on logs, sticks and other debris and block water flow. Summer is the best time for in-stream cleanup to reduce impacts to key salmon life-cycle stages which typically occur in spring and fall.
  3. Help protect natural shorelines, wetlands and floodplains in your community. These habitats are extremely valuable to both salmon and people.
  4. Look for sustainably-harvested salmon at your local supermarket or favorite restaurant.
  5. Get to know your local watershed group and volunteer to get involved.

Additional factors increasingly recognized as contributing to declining salmon populations include climate change, ocean conditions, and marine mammal interactions.

Some alter their approach to generating profit based on a wide range of reasons.

Individually, once aware of unsustainable trends, the person can alter their own behaviour to as not to be a contributing factor to unsustainable practices.

Conversely, if an individually has reached the conclusion that there is no such thing as unsustainable trends, they can, too, invest in scarcity, or the current or projected trends for profit.

Would be cautious in attributing unsustainable practices solely to capitalism. China is not, generally, considered a capitalist nation. However, the Chinese people and the Chinese Government are not fools.

China is a major purchaser of U.S. debt instruments. China is involved in major construction projects in Africa and Asia. Neither of those facts are particularly motivated by capitalism alone, the motivations are strategic as well. If profit can be made within the scope of long-term strategic goals and activities, China and the Chinese people will not forgo said profit.


So, I am wondering if how capitalism can deal with this? What if we reach the limits of the environment and economic growth is no longer possible?

"Who ordered chicken? Chicken is what poor people eat"

The above is an actual quote by a primary guest on a luxury yacht when the chef served them and their guests chicken for a scheduled meal.

This lead to this user fact checking that statement.

It turns out that 52 billion chickens are slaughtered for food each year Every year, around 52 billion chickens are slaughtered globally for meat a figure that will double if consumption in India and China catches up with the west.In 2016, worldwide, chicken production topped 66 billion birds. Humans are slaughtering, processing, and consuming about 2,100 chickens per second

We’re producing a lot of chicken meat: about 110 million tonnes per year. And we’re producing more and more. In 1966, global production was 10 million tonnes. In just twelve years, by 1978, we’d managed to double production. Fourteen years after that, 1992, we managed to double it again, to 40 million tonnes. We doubled it again to 80 million tonnes by 2008. And we’re on track for another doubling—a projected 160 million tonnes per year before 2040. By mid-century, production should exceed 200 million tonnes — 20 times the levels in the mid-’60s.

The U.N. has urged people to transition to a meat and dairy-free diet, given the projected requirement to feed 9 billion people in 2050, see 2050: A third more mouths to feed.

UN urges global move to meat and dairy-free diet

Agriculture, particularly meat and dairy products, accounts for 70% of global freshwater consumption, 38% of the total land use and 19% of the world’s greenhouse gas emissions, says the report, which has been launched to coincide with UN World Environment day on Saturday.

Last year the UN’s Food and Agriculture Organisation said that food production would have to increase globally by 70% by 2050 to feed the world’s surging population. The panel says that efficiency gains in agriculture will be overwhelmed by the expected population growth.

The poultry industry is incredibly efficient, able to produce a "50-day chicken", with efficiency expected to increase World poultry production expected to more than double by 2050

Wilkinson said that Cobb has projected that by 2050 a 2 kilogram (4.4 pound) broiler would be marketed at 19 days post-hatch with a feed conversion ratio below 1.0. In 2050, a laying hen may produce 550 eggs by 100 weeks of age and have a feed conversion ration approaching 1.0.

The poultry industry has doubled production every 12 years since the 1970's. The poultry industry projects that poultry production will double again by 2050, which is a key year for for a vast range of economic and social forecasts.

Flocking to digital: The future of poultry technology

It is estimated that the world poultry production will increase 120 percent from 2010 to 2050

However, even given the efficiency of the poultry industry, there are still concerns that economic growth relevant to poultry production is unsustainable. The reasons cited are the several, including the necessity to produce grain to feed 50-day chickens, fresh water and land.

Global poultry production: current state and future outlook and challenges

However, poultry represent a threat to human health, especially as a vector of infectious diseases and because of its role in antimicrobial resistance. Furthermore, poultry has a significant impact on the environment and is a large consumer of natural resources. While the sector is usually seen as efficient in converting natural resources into edible products, it uses large amounts of land, water and nutrients for the production of feed materials and contributes to climate change, mainly through feed production, and air and water pollution.

The growth of the poultry industry could also be viewed as a prudent investment in a growth industry

Have not yet been able to determine if only "Chicken is what poor people eat" to the exclusion of non-"poor" people (There Are 36 Million Millionaires in the World and They Own Nearly Half the Planet's Wealth) where non-"poor" would be tentatively defined as total wealth of at least $1 million U.S. dollars. We can clearly define who the "poor" are

Global Wealth Report 2017 Source: Credit Suisse Research Institute

Introduction

In general terms, throughout the twelve months to mid-2017, we observed a significant increase in wealth across the globe, driven not only by equity markets, but also by significant increasess in financial wealth. In total, golabl wealth has grown by USD 16.7 trillion to USD 280 trillion, which corresponds to a rise of 6.4%. We further saw an increase of 2.3 million US-dollar-millionaires, almost half of whom reside in the United States.

The global wealth pyramid

The large base of low wealth holders supports higher tiers occupied by progressively fewer adults. We estimate that 3.5 billion individuals – 70% of all adults in the world – have wealth below USD 10,000 in 2017. A further 1.1 billion adults (21% of the global total) fall in the USD 10,000–100,000 range. While average wealth is modest in the base and middle tiers of the pyramid, the total wealth of these segments amounts to USD 40 trillion, underlining the economic importance of this often overlooked group. The base of the pyramid The layers of the wealth pyramid are quite distinctive. The base tier has the most even distribution across regions and countries (Figure 2), but also the widest spread of personal circumstances. In developed Figure 3 Number of dollar millionaires (% of world total) by country, 2017 Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2017 Figure 2 Regional membership of global wealth strata Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2017 countries, about 30% of adults fall within this category, and for the majority of these individuals, membership is either transient – due to business losses or unemployment, for example – or a lifecycle phase associated with youth or old age. In contrast, more than 90% of the adult population in India and Africa falls within this range. In some low-income countries in Africa, the percentage of the population in this wealth group is close to 100%. For many residents of low-income countries, life membership of the base tier is the norm rather than the exception.

Though there is a report that millionaires prefer Ford vehicles, though not whether rich people do not eat chicken

Conclusion

The data is available. In 2019 an individual cannot blame either capitalism or communism nor any other ism for their decisions. Natural resources will last until they are gone. Simple choices, such as actually looking into your food chain, that is the food that you actually consume, is what you can do. If you find that you are contributing to the depletion of natural resources where individuals or institutions have publicly advised the entire world that such practices are unsustainable, it is your responsibility to change your own behaviour to decrease your own impact on decline and depletion of natural resources.

Conversely, if an individual reaches the conclusion that natural resources are infinite, or that they simply do not care about or doubt reports stating certain human behaviour and activities are "unsustainable", they can invest in industries where growth is projected, ignoring reports which state that the industry practices are unsustainable. Scarcity generally increases the value of a commodity or product. There is profit to be made, right now, be damned with "unsustainability".

Humans possess free will. Humans are responsible for their own actions, not systems; especially where humans are aware of, or should be aware of the impact of their activities.

Whether the individual decides to pursue profit or is concerned about the sustainability of profit making, or both, is an individual choice.

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    The conclusion is stated as a fact, but is it? We have huge educational and judicial systems to make humans not to commit murder, not to steal, not to destroy property, etc. Why do we still need them, if everyone is so autonomous and conscious? Aren't we only a minor upgrade of herds of apes? And why don't we apply these proven social mechanisms now? – kubanczyk Jan 21 at 8:52
  • Lots of interesting thoughts and sources, here. Thanks! – Eric Duminil Jan 22 at 8:38
  • @kubanczyk That is not necessarily true re the purpose of educational or judicial systems How Boarding Schools Tried to ‘Kill the Indian’ Through Assimilation; Washington Post Column Highlights Evidence of Racial Bias in the Criminal Justice System "Aren't we only a minor upgrade of herds of apes?" Not sure who you are referring to as "we". No. What is the origin and basis of that idea? – guest271314 Jan 22 at 8:58
  • "The U.N. has urged people to transition to a meat and dairy-free diet", actually the UN report says no such thing. The report urges "a substantial worldwide diet change, away from animal products", but it does not in any way suggest total elimination of all domesticated production animals, nor end of controlled hunting. – hyde Jan 22 at 20:01
  • @hyde "From such detailed studies it becomes apparent that ... the consumption of meat and dairy products (within food consumption) ... cause a disproportionately large share of environmental impacts (Tukker and Jansen 2006).", "Animal products, both meat and dairy, in general require more resources and cause higher emissions than plant-based alternatives." If your issue is with the article "UN urges global move to meat and dairy-free diet" send The Guardian feedback. The answer does not state "elimination of all domesticated production animals, nor end of controlled hunting". – guest271314 Jan 22 at 23:33
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This is a clear weakness of "pure" capitalism

Pure, unhindered capitalism, does deplete resources. Moreover, it creates huge monopolies and cartels, that become so powerful that they start to resemble governments. Suddenly, a single company starts to control so much land, so many people, and so many resources that they almost look like a nation.

Most proponents of capitalism, therefore, agree that some regulation is needed, as "pure" capitalism may not even be possible.

Growth can be in services

Right now, manufacturing is huge in Asia, and services are growing in the West. As resources get increasingly scarce, we do not need to manufacture so much stuff. Growth can be in the services sector, and those services do not need to rely as heavily on stuff that they do today.

Technology makes us less dependent on old commodities

I am the author of the answer quoted in OP. I would like to expand the portion quoted a bit, as it is relevant for this answer:

Technology and knowledge are always advancing. This allows us to constantly improve our efficiency and reduce the manpower needed to achieve the same things. For example, it takes much less manpower to manufacture a jacket today than it did in 1850. This effect is constantly happening. And that reduced need for manpower would leave a lot of people unemployed. Therefore, we have three options:

  1. A constant increase in unemployment. (Generally feared and loathed.)
  2. Less time at work per person. (Sometimes impractical. Wastes educational resources as people would still have to study and train just as much only to produce less. Might reduce people's earnings, etc.)
  3. Constant economic growth to create new jobs and counteract the reduced need for manpower caused by technological advancement.

The third option is generally preferred by policymakers, academics, the public, etc. for the reasons described above, as well as other reasons.

I showed him this simplified version of his explanation, and he said it was correct.

Also, there's hardly any limit to how far this can go. We now have machines doing an immense amount of work that used to be done by humans.

Note that the reason for the effect is the increase in technology. As our technology gets more advanced, this advancement may (if we play our cards right), make us less dependant on any given commodity. Some examples:

  • Wood may be replaced by synthetic materials.
  • Synthetic materials may be recycled.
  • Oil may be replaced by renewable energy sources, batteries (technology improves all the time), hydrogen fuel cells, fusion reactors (hey, maybe one day). Plastic can be created without oil.
  • Technology may constantly improve our ability to recycle
  • We may run out of some commodities, but then new technologies may arrive that mean we no longer need those commodities, or we are able to produce them synthetically.

Regulated capitalism

Does the free market make this happen? I will argue in this answer that, to some extent, yes, it, does. However, I will also argue that moderate government regulation is typically needed to prevent environmental devastation and unfair depletion of key resources. Is such regulation capitalism? I believe so. The vast majority of capitalist thinkers have supported some degree of regulation.

For example, a massive river does not belong to any one entity, so if the government uses regulation to prevent companies from spilling toxic chemicals into it or extracting too much water from it, I would argue that this is not opposed to the fundamentals of capitalism.

There is always some government intervention in capitalism.

Usually that means that while the free market is the backbone of economic policy, the government has some ability to regulate the private sector in order to avoid such issues as described in OP. For example, if companies in search of profits are destroying vast areas of forest, which is detrimental to society at large for a number of reasons, then ideally the government should introduce a system (using either permits or taxes to limit said activity to a sustainable level). Most would agree that this is still capitalism, albeit with some modification.

Only as good as its implementation

Whether this actually happens in practice would depend on the quality of the government in said area, its level of corruption, its competence, democratic dynamics, willingness of the populace to demand certain actions from the government, etc. Success varies based on those factors.

So, let us say that everything worked perfectly and industries stopped destroying forests to the unsustainable degree they did before. Does this mean economic growth can no longer happen? Not necessarily. Perhaps one of the things society extracted from the forest was timber, which was used to build houses, furniture, boats, etc. Industries can replace that with renewable materials such as recycled synthetic materials, wood grown on plantations (to a sustainable extent), etc. Sure, this may be more costly (isolatedly) than just straight-up cutting down forests, but there can still be economic growth. Again, this assumes that the government is competent and does a proper job at regulation, that corruption does not get in the way, etc.

Also, the free market is not only contributing to the depletion of resources here. It can also contribute to investment in new technologies. If regulation as described above is applied, the free market can also help towards intelligent use of resources. For example, let us say that the oil on Earth is near depletion and will soon be completely empty. (I am not sure how far we are from that right now, it is only an example) Businesses that are heavily invested in oil for their operations will decrease constantly in value in pace with declining oil reserves. Investors will realize that companies that depend on oil are thus worth less, and try to move their funds elsewhere. They may not do that for any environmental reasons or anything like that, but rather from a recognition that there may not be sufficient oil left, as a calculated, reasonable move. If a resource does not exist at all, it can not be used. Competent investors will therefore invest their funds elsewhere, in companies that have based themselves on technologies, infrastructure and commodities that are not about to run out anytime soon. In this regard, capitalism naturally moves towards sustainable development, in some ways. Obviously, one still needs government regulation to prevent environmental devastation.

Some olive trees only produce optimal yields up to 80 years after planting, yet investors still invest in them. For the long wait-time, they will demand a return down the line that compensates for the 80 years waited. That, however, will simply increase the cost of olives. As long as investors believe people will still buy olives 80 years from now, the trees will still be planted. If an investor wants a profit after 20 years instead of 80, that investor can simply sell the trees (or the stock in the olive company) after 20 years, which has still increased in value since the olives are now closer than they were at planting time.

What I have described in this post is basically what governments around the world have been trying to do for years, with various degrees of earnestness, sincerity and success. Personally, I have to say that some of the shortcomings are very disappointing. What is capitalism's answer to that? I would say, skillful regulation, as described in this post. Some people may say such regulation is the very opposite of capitalism. In a way, that is true. However, all capitalism I have seen practiced and described does involve some (to a greater or lesser degree) such regulation. Therefore, I would say that some regulation is a part of modern capitalism, and it is therefore the answer here.

Ideally, the government can use the market as a tool for its regulation, by using economic policy to encourage certain activity while discouraging other.

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    This is just incoherent -- efficient allocation of resources is the point of having a capitalist price system, and indeed of any economic system. Extracting any benefit at all from a resource probably requires "depleting" it, and the negative consequence of such a depletion is exactly that it is no longer available for other consumption, and this is precisely what is internalised in the cost. – test monkey banana Jan 18 at 17:29
  • @AbhimanyuPallaviSudhir Some resources are renewable and can therefore be used without depleting them. – Revetahw Jan 18 at 17:31
  • Which is why I said "probably" -- it's not relevant whether or not there exist renewable resources, the point is that any positive effect of this renewability is still internalised in the price. Renewable resources also have scarcity, the resources used to harness them may not be renewable, etc., and there is no reason these other forms of scarcity shouldn't be considered in pricing. – test monkey banana Jan 18 at 17:36
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    @AbhimanyuPallaviSudhir what's your point? – Revetahw Jan 18 at 17:40
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    That saying the "depletion of resources" is a "weakness of pure capitalism" is worse than wrong. Now could you explain your point in the weird interjection about renewable resources? – test monkey banana Jan 18 at 18:26
6

The point of a free market, which is how pricing is determined under capitalism, is that it reacts efficiently to supply and demand. If something drops in supply it will be harder to get ahold of, and vice versa. Accordingly, when an issue is greatly threatening, such as the issue of feeding an explosively growing population in the mid-20th century, capital will be allocated towards the problem relatively proportional to its severity until a solution is found - in this case the Green Revolution.

This is not to say that business and private allocation of capital is the solution to everything in this regard - when the costs are so widely spread that no one person or group is incentivized to fix it (the Tragedy of the Commons) it may become necessary for a larger regulatory body to be established. This is not, in a sense, a purely capitalist response, but it is a real-world response by self-proclaimed capitalist countries (Montreal Protocol).

So to answer your question, capitalism's answer to constant economic growth and finite resources is that we'll cross that bridge when we get there. When the oil wells begin to run dry, renewables will become more economic as fuel becomes more expensive. When the ratio of space needed for production to protein provided of beef no longer feeds a population properly, another source such as bugs will become more prevalent. Climate change is an example of a more intractable problem that will require more forethought, but there is growing concern worldwide on the topic and as the costs become better defined, it can be assumed that more initiatives will be taken on the topic.

Of course, freedom of information is essential to a free market, so this breaks down some when companies withhold information for selfish reasons (e.g. tobacco industry manipulation of research and to take it to a state level the US, Russia, Saudi block of the COP24 climate report) but historically the truth has prevailed. In such cases it is our duty as citizens to press for transparency and accountability.

Our current practices are not sustainable, so we'll just have to change our practices as they become untenable on an individual basis.

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    A free market does not require capitalism. You can have a perfectly free market even if all the means of production are publicly owned, by cooperatives competing on the quality of their services no matter who owns the computers or offices. – gerrit Jan 16 at 16:12
  • @gerrit I tried to stick to real-world examples and solutions. There's plenty of theoretical solutions. – Gramatik Jan 16 at 18:20
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    Except that your answer opens with a sentence on theory. – gerrit Jan 16 at 19:39
  • This is the best (actually correct) answer in a sea of surprisingly bad answers. Simple supply/demand economics dictates that when supply becomes more limited, prices rise, and thus less of it gets used. See supply shock for more information. – T.E.D. Jan 17 at 23:11
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    In an Econ 101 world, this is correct. But the real world is not Econ 101 (as much as Mankiw and co. would like you to believe). In fact, the world suffers from intertemporal irreducible uncertainty, which means we can simply not predict (sometimes not even imagine) the consequences of our actions. The pricing mechanism cannot solve this uncertainty. We have used too much oil and we are seeing the consequences of it now. This means the price of oil was too cheap in the past. The market could/would not see this. Also, oil corps buy patents and put them to sleep. Power matters. Econ 101 is false – luchonacho Jan 22 at 14:12
3

Capitalism is not a way of natural resources handling so much as a way of human resources handling. We motivate people by paying them instead of forcing them under some threat of violence or imprisonment or the glory of God or the common good or return to glorified past or towards an Utopian future or some holy ruler or priest council.

The handling of the natural resources is orthogonal to whether the system is capitalist or communist or religious fundamentalist or absolute monarchy or whatever it could be.

All these have different ways of handling and motivating people, not of handling natural resources.

  • When the means of production are privately owned and owners have a lot of freedom to use their property as they want, democracy has far less leverage than if the means of production are democratically controlled. I don't think it's orthogonal. – gerrit Jan 19 at 10:36
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    "Democracy" is nowhere in this question nor in my answer. What do you mean? – mathreadler Jan 19 at 11:04
  • It's not orthogonal. The people in a country can democratically decide on what to do with collectively owned means of production, but the market decides what happens with privately owned means of production, unless democracy sets rules and conditions, which limits the free market. Capitalism is, in a narrow sense, to gain income from capital. If I get paid to work I get income from labour, which is not specific to capitalism. If a country (democratically or not) is to have control over natural resources, those must either be collectively owned, or one must limit the free market. – gerrit Jan 19 at 11:46
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    It's true that it doesn't matter whether or not such rules are set democratically, but in capitalism without boundaries on the free market, one cannot set such rules at all, therefore it cannot be democratic. – gerrit Jan 19 at 11:50
  • Exactly. Great explanation why it is in fact orthogonal. The degree of ehm what you call "democracy" is the perpendicular dimension independent of capitalism or not. – mathreadler Jan 19 at 20:40
3

So, I am wondering if how capitalism can deal with this?

The way it deals with everything, by definition: as supply decreases, prices increase, until they are out of the price range of consumers, so demand decreases as well. Meanwhile, if the item was essential, the purely economic pressure to discover or develop alternatives increases until those take over the job (simply because they become economically feasible).

Note that this is a neutral process; i.e., this is just the way stuff works, not necessarily a catastrophe for everybody involved, and tells you nothing about the speed of change.

What if we reach the limits of the environment and economic growth is no longer possible?

It depends on who you're talking to. On the one end of the scale, you have politicians who insist that everything is just fine (insert a "Jedi hand gesture" here). On the other end, you have someone like Michael Rupport, whose movie "Collapse" you can watch on YouTube, and who is very certain that the world as we know it will meet a swift and ugly end, and soon.

But one thing is certain: nobody knows for sure. E.g., Ruppert's pamphlet is hinging on a catastrophic Peak Oil event, where everything breaks down suddenly, and a systematic failure of the whole society/economy is inevitable. But he cannot know for sure. It is one scenario amongst many.

It depends on your own opinions and character whether you want to use outliers ("everything is fine and will be forever" or "the end is near"), or if you want to accept that we just cannot see the future. It depends not only on how fast the ressource in question disappears, but also on scientific advances; on social changes in behaviour (i.e., the movements emphasizing local sourcing of food, energy, and so on); on the foresight and conservativeness of countries (i.e., whether they make the basic services like water supply dependant on certain technologies, or stick with old technologies); and certainly a lot on randomness (e.g., which kind of political power is at the helm at some deciding moment in time).

For me, personally, it is clear that at some point in the future, oil (for example) will be a premium product; not usable for transportation, and also used only for the most essential products. This is clearly, mathematically, inevitable, until or unless we find a way to synthesize oil on an industrial scale (but let's just ignore that at the moment, as we're more concerned about economics in this question). But what this means for us is absolutely not clear. I can absolutely imagine scenarios where this is a long, slow process, giving us enough time to react. Maybe even slow enough that it spans generations, so nobody ever has a really hard "life-changing event". But I understand and accept the other opinions, for sure...

  • I mostly agree with you, but it's worth pointing out that oil certainly can be synthesized. Obviously that's only economical if the cost of crude is quite high (say, you've picked a fight with most of the rest of the world and failed to capture the Caucasus oil fields). It's an open question whether decarbonization or well exhaustion will happen faster. – Jon of All Trades Jan 22 at 16:16
  • @JonofAllTrades, thanks; I have added a side note about this to the answer. – AnoE Jan 22 at 17:05
2

Competition between individuals lies at the core of capitalism. One businessman invents a better product and a second businessman runs out of business. As resources run out you will see similar competition intensify between different nations. Which inevitably leads to war, the ultimate method of settling a dispute.

If we reach a point where the planet's most critical resources are running out with no feasible technological solution in sight, things will end up in armed conflict over the limited assets. There are already numerous conflicts around the world over who gets to control a given oil field or mineral supply, such as the dispute between Sudan and South Sudan over Abyei. We can expect more such conflicts in the future, as we're approaching peak oil and running out of precious materials like helium.

If there's only enough goods to supply a billion people on this Earth, either 6.53 billion will have to leave for another planet or the strongest billion people will subjugate the rest. We of course hope that this will never happen (see the other answers for a more optimistic prediction), but war is inevitable if the optimistic predictions fail to come true.

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    Desire for resources and especially war as answer to the scarcity is in no way shape or form unique to, or endemic to, capitalism. Less so than other systems, if you review human history; actually. So "war" is an objectively wrong answer to "what is capitalism's answer" question. – user4012 Jan 17 at 13:46
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    @user4012 plenty of wars over resources have been started by capitalistic societies. See all the wars started by the US for examples. – JonathanReez Jan 17 at 15:38
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    I would like a complete list of resources that US owns as a result of a war it started to get that resource. – user4012 Jan 17 at 16:13
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    Opium wars were not over resources. They were over control of who gets to sell things (e.g. over political power - which is the root cause of any war regardless of the system involved). – user4012 Jan 17 at 18:04
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    Texas is most certainly NOT a valid example. The Republic of Texas declared independence from the Republic of Mexico on March 2, 1836.. Note that at the time US opposed inclusion of Texas into US. – user4012 Jan 17 at 18:05
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I question the premise: the linked article does not appear to support its assertion that capitalism “requires” constant growth. (And even if it did, the private sector's craving for something to happen does not, on its own, mean it will happen.) Why couldn't commerce sustain itself in a steady state?

I have seen somewhere an argument that the problem is fractional reserve banking. In simple terms (because I'm not sure I understand it myself), money is created by lending, and repayment of these loans with interest requires even more money to come from somewhere, presumably more lending. This cycle is inflationary if the economy does not grow in proportion to the money supply. To postpone a hyperinflation crisis, the political system manipulates the economy to grow, grow, grow.

2

Global capitalism suffers from serious coordination problems. The capitalist class competes among themselves, not the least because nations compete among themselves. Their greed blinds them. They cannot think in the very long term. The rest of society is also competing among themselves, and are too many (and some might say too ignorant) to coordinate themselves. So a rational response is not possible.

Catastrophe has been a common answer for society and nature to force us to change. For instance, when inequality gets too high, wars and revolt happen. So, when we have messed up the environment so much, nature will react, like it's doing it right now with climate change, forcing death, malnutrition, wars and so the population falls again.

Malthus suggested this long ago. More recently Walter Scheidel suggested this in his book The Great Leveler. So it's not good news, unfortunately.

2

For one thing, look at people's spending and consumption patterns. we are spending more and more money on things that do not necessarily have a big physical footprint: software, movies, music, telecommunication services and health. Food too, but expensive food is pretty much the same as cheap food in terms of environmental impact (plant vs animal calories aside).

You'll also see, that lost in the political tug of war about taking global warming seriously and things like ongoing coal subsidies, a lot of large corporations are in fact advocating carbon pricing. Because, precisely, a lot of companies realize that their continued economic well-being depends on managing the transition to a more careful management of at least CO2 impacts.

In short, as far as discretionary spending goes, a lot of where people choose to spend money on isn't necessarily a heavy hit on the environment. And capitalism is all about listening to where people want to spend money on.

One glaring exception is transportation, and especially air travel. But fixing that could be achieved by carbon pricing, rather than throwing out capitalism.

Not to mention that alternative economic models (for non-subsistence level systems), such as Communism, have generally not been very kind on the environment either. Neither have systems where resources at risk aren't clearly either owned by someone, or managed by some government/institution. For example you can look at international overfishing: its main problem isn't capitalism, it's that there are "free calories" out there for the taking and no one is pricing or controlling stock degradation.

If we value the environment, we need to price it accordingly and capitalism has built-in mechanisms to react to those signals. That requires political will and it's unlikely to happen soon, but that's more a problem with the political system (including corporate lobbying) than using a free market per se. And, yes, it is also a problem because voters don't care enough (yet) to vote for environmental policies that will cost them economically.

Carbon pricing would drive some companies out of business, sure (and that's a good thing in the long run). But other companies would get created to deliver new goods and services that have less environmental impact. Or to deliver mitigation services.

Ask yourself this: if US coal miners were employed, not by US corporations, but by some form of state-owned company, like in the USSR, do you think that winding down the coal industry would be easy if those miners had any political agency in how to lead their lives?

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Capitalism's answer is a global crisis, which weakens world economic powers and redistributes resource consumption. Such a crisis may be either peaceful (like the Great Depression in the US) or non-peaceful (like WWI, for example - when growing economic powers - the German bloc - tried to overpower existing economic powers - the Western world mainly).

So, in fact, there is no such problem in capitalism - its decision is stored inside.

About "growth in services economics, which is unlimited". Let's consider, why it is naive.

The process itself is described very well in @Trilarion's answer. The answer describes so-called "post-industrial" economics.

What's wrong with it?

At first, should notice, that graphics (services percent) are true, but for very special countries from western world, which have such huge services sector (US and UK are most known). You may look at the second graph. We now, that main part of UK GDP is formed by banking sector and services. From the first view, it sounds good - it is a pure service sector, we are just servicing our and foreign banks money, giving credits, so on.

But - of course, there is a 'but' - the financial sector cannot live in a vacuum. When it grows too much over REAL sector, we obtain a financial bubble. It may be a big amount of credits, an exchange bubble, or something else, but what we have? We have an economic sector which growth, in fact, is a fake.

A bright example: Brexit. You may, again, look at the second graph from @Trilarion's answer. The UK have a huge financial sector (result of M. Thatcher politics of 'de-industrializing'). What Brexit means? It means (and Deutsche Bank already have done it), that EU banks will stop to use UK bank services, because of UK is exiting, and retrieve their finances from UK back to homeland. How do you think, this will affect UK bank sector (and, as it is huge, huge part of economics)? It will collapse. You may say - but what's the difference between EU and UK, if both have a financial sector and banks? Yes, both have, but EU do have a big REAL sector (which can be an investment target to the banks, and supports it) and UK does not.

To conclude. That theory - about constant growth, provided with services constant growth - is applicable in a one-hegemony-world, which is globalised. While hegemonic growth its services, which is consumed by others, others, in return, provide something REAL. A bright example is the 'late-Washington' world - before Russian comeback to global powers. But now, as the world becomes multi-polar again, this is not more than a pure theory.

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    Comments are not for extended discussion; this conversation has been moved to chat. – Philipp Jan 17 at 23:00
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Mahatma Gandhi once said "The world has enough for everyone's need, but not enough for everyone's greed.".

I think that statement sums up how the ideology of capitalism needs to be ethically framed in order to save the biosphere and stop theft of resources from future generations. "Enough" has to be defined, a "greed exit strategy", so to speak, that would strike the right balance between acceptable Return On Investment (ROI) and the needs of society, the biosphere, and future generations. Right now there is no definition of "enough" other than infinite greed.

Also, in order for capitalism to work ethically, property rights and how they are defined must be worked out. If you think about it, there is really no such thing as property "rights". There are property "claims" which society would honor or dishonor based upon the merits of the claim.

Private "ownership" of property is very well documented. Whereas the common property that naturally belongs to everybody is seldom documented as proportioned to each citizen's account. Just as not having a birth certificate does not mean someone does not exist, similarly, just because a citizen's equity share in the commons is not documented does not mean the citizen does not have claim to said portion of the commons.

Capitalism, as far as I know, does not mention how property claims are vetted and distributed justly through society. It focuses on the free market mechanism where supply and demand determine price and true competition prevents monopolies. If the free market mechanism is fully allowed to work, and property claims were equitably distributed in the society, a wealth gap should not be able to develop. In capitalism, there is no "too big to fail" or governments (that belong to everyone) enforcing dubious property claims of a few.

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    Gandhi is loved enough to invoke him but not enough to get his name right – Anton Sherwood Jan 19 at 1:46
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  1. Finite doesn't mean constant. There may be limited resources, but that doesn't mean we cannot find or produce more resources. It also doesn't mean that we can't find better ways of allocating resources, or of extracting the greatest productive value from these resources. An improvement in these is what leads to economic growth.

  2. The fact that resources are scarce is the whole point of capitalism, and really of economics -- more precisely, the question that any economic system answers is "given that resources are finite, how do we allocate them most efficiently with the goal of creating greatest productive economic value?"

  3. Economic growth is a specific economic phenomenon -- it would certainly be possible to have a universe in which there was no economic growth possible, but this is not our universe (see point 1), and this has nothing to do with capitalism. Indeed, even in such a universe, capitalism would be the optimal manner of allocating resources -- for example, if you had a universe in which water kept disappearing and there was no way to synthesise it or find an alternative to it, humans would be doomed to extinction in that universe but the capitalist price system would still maximise human welfare during our brief existence.

I find it funny that two of the most common arguments against capitalism are that it will fail because "the planet's resources are finite" and that it can't handle the coming "post-scarcity economy". These arguments are contradictory, and both false anyway, there is nothing inherent about the utilitarian economic argument in favour of capitalism that requires scarcity or infinite resources.

I think too many people conflate "capitalism" with terms like "economic growth" and "industrialism". Capitalism is just an idealisation of a system where property rights are well-defined and economic agents pursue their self-interest. And it doesn't make sense (from a utilitarian perspective) to criticise economic growth either -- economic growth (with externalities, inherent costs etc. accounted for) is just the ultimate measure of increases in well-being, it's what an economic system should be chosen to maximise. You could try and make the case that capitalism leads to unsustainable economic growth, but you'd still probably be wrong.

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    Yes, finite means constant. I think the the question is not about temporary scarcity that goes away once a new source is found; it's about resources of which a limited amount exists in the world and that can't be reproduced. – henning Jan 16 at 16:27
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    @henning Finite doesn't mean constant -- those are just definitionally different things. The resources we have access to are a very small fraction of the resources present in the universe, and because the latter is finite doesn't mean the former is constant. – test monkey banana Jan 16 at 16:38
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    It's going to be difficult to tap the universe for anything but solar radiation. I don't see clean air, water, coltan, or uranium on the Moon. – henning Jan 16 at 16:47
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    The point is that you can (in principle) synthesise them, or recycle them from used resources or whatever, so there isn't a fixed amount of resources you keep "draining". In any case, this is irrelevant to the question of the impact an economic system has in such a scenario. – test monkey banana Jan 16 at 18:53
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In Austria the answer to that is private ownership and regulation. Almost all of the forests in Austria are in private ownership. The owner is responsible for keeping the forest in order and making sure it is in a good condition. The philosophy behind it is, that people would look out better for what is their own in comparison to if it was community owned. And the community is more likely to impose regulation on the privately owned forests, than it would be, if the forests were in communal hands. This creates sort of an equilibrium of forces, which conserves the forests. If both the ownership and the regulation would be in state hands it would be easy to reduce the forests for short term political gains. On the other hand if the private owners were allowed to do what they want, they would also reduce the forests for short term gain.

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No natural law says that we are stuck on Earth indefinitely. Of all economic systems, Capitalism has shown the most potential for growth, invention, and new things. It therefore has the best chance to establish human presence elsewhere.

  • So when we've broken earth, we'll just invent faster-than-light travel (no natrual law against that!) and find another inhabitable planet were everybody moves. Thank god, no need to worry then! – henning Jan 22 at 7:20
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Assuming the premise, that resources were limited, the capitalist method would be to attempt to get whatever profits there were to be had in distributing whatever goods those limited resources provided. Really, the world has always had limited resources, over time the limits of which fluctuate, it's just that humanity has usually tended to operate well within those limits.

Several answers here already argue that free markets might still be for the best and keep civilization humming optimally along whatever the case, but it's also possible that for certain scarcities capitalism might be a poor fit, and at worst a fatal one.

For the fatal scenario, there would need to be a cascade of necessary great auks, a bird that became extinct due to the increasingly high market value of its feathers which were used to fill pillows. Here a free market destroyed a commodity, the price of which went up in a nasty feedback loop:

  1. Kill auk, sell soft feathers.
  2. Fewer auks, price goes up.
  3. Any auks left? If so, go to step #1.

Of course auk feathers were luxuries, so people could live without them, but if similar feedback loops wind up up destroying necessities, we might behold a different sort of feedback loop:

  1. Necessary commodity insufficient to maintain current populace.
  2. Populace becomes fewer.
  3. Enough of commodity yet? If not, go to step #1.
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    This answer is wrong - great auk feathers were easily replaced by other ornaments. Which is an essential point here - if they were indeed a critical resource, the end game would have reached an equilibrum where a buiseness aimed at raising auks would become profitable (same way farm fishing became profitable once ocean fish stocks started to deplete). Which, by the way, is different from socialism, where no conservation whatsoever was taking place, comparative to capitalist countries. – user4012 Jan 17 at 13:50
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    @user4012, SFAIK Auk feathers were never used as ornaments, their short little feathers were just used for down -- but as you probably meant, auks weren't the only source of down, and down isn't the only pillow filling. Re "if they were indeed a critical resource, the end game...": that's optimistically presuming markets can always distinguish between necessities and luxuries prior to game time. It hasn't always worked out that way. – agc Jan 17 at 17:51
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    The question isn't whether markets work out 100% of time. It's whether they work out better and more often than other systems. For every one famine under market system (and in all honesty I don't know enough about Irish famine to know if it was indeed market-driven and not politics driven), I can point to dozens of the ones that happened under and often due to non-market systems. – user4012 Jan 17 at 17:58
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    @user4012, This Q. is not a systems comparison, and with respect to humanity's survival success 100% of the time is the most practical goal. To avoid irrelevant boosterism, for the sake of argument let's suppose capitalism is indisputably the best system known. Unless we go so far as to say it's the best system conceivable or possible, (so that it's impossible to improve), then it's not vain to ask if this best system is up to spec (100% survival) in 2019? If not, then contemplating its defects the better to meet that spec may be useful and necessary. – agc Jan 17 at 18:22
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    in that frame, it's also reasonably close to 100%, given that on one scale is a minor set of failures that are mostly localized (again, let's count Irish famine as one), on the other end is ending poverty and hunger in something like 1B people after 1960; most of it related to uptake of capitalism in Asia; and capitalism-driven Green Revolution (Bourlag was important but he was extremely unlikely to have been a product of non-capitalist system) – user4012 Jan 17 at 20:33
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Capitalism’s answer to go by what we know how wealth is being distributed rather than by their propaganda which hides how wealth is being distributed, is that most of the growth in wealth is being captured by a small segment of the population.

So long as that segment stays small, you can have so called perpetual growth; when that segment actually becomes almost the whole population such a growth strategy is simply not sustainable and a switch to a sustainable economy will have to be forced.

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This is not an important question. It is a theoretical question about something that cannot happen.

First, it is unlikely that all the resources of the planet could be used because as the available resources of the planet are exhausted the scarcity will cause massive reductions in the number of resource consumers. So large is the planet and so few would be the number of resource users that the resource users would perish before they located all the resources.

Second, even if it could happen by the time it does happen, there wold surely be no identifiable economic system other than rampant chaos and nobody would be thinking about economic systems.

Third, the question is not a matter of a particular economic system since the economic system neither creates nor responds to such a scenario.

-1

Barbara Branden (at the time a member of Ayn Rand's inner circle) was asked what would be done for the poor in a free society (one devoid of the compulsion that characterizes every departure from capitalism).

Her answer:

If you want to help them, you will not be stopped.

Capitalism's answer to the problem of unlimited growth in the face of limited resources is essentially the same: If you are trying to solve the problem, you will not be stopped (not by capitalists, anyway), but if your solution requires fraud or coercion, you will not be allowed to use those methods.

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    ... unless you take away our means of coercion and exploitation. – henning Jan 22 at 7:38
  • Will the down-voters please provide a reason? – EvilSnack Mar 2 at 14:24

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