Technology Displaced by Financial Innovation, Peter Lang, Second Edition.
The Book Review Essay by Peter Senker summarised here is forthcoming in Prometheus in 2021/2022
This book is based on the assumption that during the twentieth century, and especially after the end of World War II, there has been a fundamental shift in the focus of Western creative energy from technological innovation to financial innovation. But continuing financial innovation has always been central to the survival and prosperity of capitalism.
The violent disruption of long-established trade routes between Europe and the East was significant in inspiring a search for a sea route to the East Indies. During the industrial revolution, industrial capitalism which started towards the end of the eighteenth century became an engine of mass production. But between various sections of the populations of each country and over time there have been very uneven patterns of distribution of the multiple resulting economic benefits and disadvantages.
Kingston writes that “capitalism made the Western world uniquely rich” , but fails to mention that most of the great riches in the Western world are, and always have been enjoyed by a relatively small proportion of its total population.
From the beginnings of industrial capitalism, owners of companies and corporations have supplied capital which they had obtained through various routes including ownership and exploitation of land or slaves, inheritance, or remuneration from their companies. But owners of large companies and corporations have never been the people mainly responsible for technological innovation as suggested by Kingston. The return on capital significantly exceeded the growth rate of the economy through much of history until the nineteenth century and it follows logically that inherited wealth grows faster than output and income. People with inherited wealth need save only a portion of their income from capital to see that capital grows more quickly than the economy as a whole. Under such conditions, it is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin, and the concentration of capital will attain extremely high levels- levels potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies (Piketty, 2014 pp. 26-27).
Piketty considers that the rate of return on capital is likely to significantly exceed the growth rate of the economy again in the twenty-first century and that now ‘the process by which wealth is accumulated contains powerful forces pushing toward … an extremely high level of inequality’.
Kingston claims that laws made by government have the power to ‘civilize’ self-interest and force it to serve the public good as well as individual objectives: the self-destruction of capitalism resulted from “allowing the capture of laws by interests”.
But capitalist interests never needed to capture laws because in effect those laws were securely in their pockets right from the beginnings of industrial capitalism, as a consequence of the extensive and generally successful propaganda many of them undertook in numerous countries to persuade governments to adopt laissez-faire policies.
Extreme poverty was indeed pervasive in the world before the industrial revolution. But Polanyi pointed out that the social conditions created by the industrial revolution and its widespread introduction of factory production involved a “veritable abyss of human degradation.” Large parts of the country “were rapidly disappearing under the slack and scrap heaps vomiting forth from the satanic mills.” Ordinary people, especially workers – many of them who had lived previously in rural environments – had been “dehumanized … crowded together in new places of desolation in slums in the industrial towns of England”. This was a catastrophe involving “an avalanche of social dislocation” (Polanyi, 2001, pp. 41-42.)
Laissez-faire was adhered to by most states in the nineteenth century, but public faith in private capitalism was deeply shaken in most countries by the economic crisis of the 1930s (Piketty, 2014, p. 136). Laissez-faire had been designed to create a self-regulating economic system motivated by individual gain. But this implied a thoroughly distorted conception of life and society, based on assumptions that markets were institutions which had arisen naturally in the course of history, and that for people to behave as traders in markets was also natural to human beings (Polanyi, 2001, pp. 276-277). Not, however, until 1944 did the first publication of The Great Transformation make it clear that the tendency to barter, upon which Adam Smith relied heavily – has never been a common tendency of human beings (Polanyi, 2001, pp. 45 and 258).
By the end of the eighteenth century, laissez-faire, promoted and supported by numerous capitalists and orthodox classical and neoclassical economists, had triumphed in Western Europe and the U.S.A. Capitalists now had political power with which to promote their wealth. By the time of the early factories, it was generally believed that “a science had been discovered which put the laws governing man’s world beyond any doubt” (Polanyi, 2001, pp. 106-107). A society which had previously been influenced by Christianity was transformed gradually into a society dominated by the new ‘secular religion’ of laissez-faire. Human solidarity was renounced in the name of the greatest happiness of the greatest number. The new religion was completely materialistic and included faith that all human problems could be solved by the provision of huge quantities of material commodities.
But even in purely material terms, modern capitalism is a notable failure, including neglect of basic infrastructural investment in poor countries – in particular investment in provision of clean water, adequate sanitation and electrical connection. It has also failed to supply healthy nutrition to numerous poor people throughout the world.
At the beginning of the twenty- first century, about 2 billion people in developing countries did not have an electricity supply or adequate sanitation, and about 1 billion lacked a safe water supply. Since then there have been no means of finding the necessary resources (Harris, 2003, p.41).
The world’s agricultural and food system dominated by capitalism has indeed increased total food production immensely to cope with very rapid growth in the total world population. The rapid growth in human populations has also been facilitated by the growth in output from the world’s agricultural and food system. But many national systems have been converted to export-oriented agriculture, at the same time as countries have been forced to open their own markets to food imports, including imports dumped on them by US and EU companies at less than the cost of production. As a result, millions of small farmers have had their livelihoods destroyed.
Many farms – especially large capitalist ones – use intensive production methods, often focusing on the use of monoculture. Increasingly they dominate agriculture world-wide. Capitalist corporations expel peasants and pastoralists from their land to secure large areas of land to produce food for export to rich countries or to produce crops to be converted into fuels. These farms require large inputs such as water, fertilizers and pesticides.The top priority of the capitalist corporations who own these farms is to derive the maximum profit from their operations. The food and drinks produced by intensive manufacturing processes are generally neither tasty, nutritious nor conducive to human health.
Capitalist farming increasingly uses monoculture, intensive methods of farming, mechanized tillage and makes increasing use of chemical inputs such as fertilizers and pesticides, which cause soil erosion and depletion of nutrients in the soil. Biodiversity is diminished by intensive, large-scale production methods which concentrate on a very restricted range of crop varieties. But food for healthy nutrition has not become available for all the world’s population. Less than 60% of the world’s population consumes an adequate amount and quality of food to maintain health. About 28% of consumers eat too little food and 15% consume too much, which can result in obesity and chronic conditions as type 2 diabetes and cardiovascular disease.
About half of global greenhouse emissions are now created by the industrial food system which includes agricultural production, land use change and deforestation, as well as processing, transport, packing and retailing. In contrast, traditional farming systems used by peasants and smallholders typically involves greater diversity of crops, year-round vegetation cover, lower levels of inputs including energy, and less unused waste. For such reasons, they can be far less damaging to the environment.
There has been rationalisation and intensification of farming in relation to food from animals as well as in arable agriculture. This has caused extensive air, water and land pollution and environmental degradation. Wet markets in which relatively rich people buy exotic killed wild animals, and the trade in those animals are only symptoms of the diseases of industrial capitalism which heats and poisons the atmosphere, land, oceans, seas and rivers, animals and plants. Highly capitalized production of food depends on practices that endanger humanity worldwide by helping to unleash new deadly pandemics. The increasingly intensive agricultural and food involves land grabs into remaining primary forest, drives deforestation and development leading to the emergence of pandemic diseases. There have been dozens of outbreaks of disease emanating from these practices.
Since the 1940s more than 300 new infectious diseases have occurred. The main causes of this have been habitat destruction -mainly deforestation and industrialised agriculture .A “livestock revolution” started in the USA. It involves billions of animals – pigs, cows and chickens being confined in colossal facilities which produce billions of animals to be slaughtered and sold to companies as meat. This revolution is now spreading worldwide. As with Covid-19, the diseases generated from animals in these facilities are liable to turn into pandemics which spread from the animals themselves to consumers, farmworkers and local environments across the world
Capitalists influence politics at all levels. They control global food chains and those for non-food agricultural products, as well as markets for inputs, especially seeds. Too many consumers are forced to rely on industrially produced ‘cheap foods’. Globalized trade is defended and enforced by many states and multilateral agencies. Threats to production from climate change are intensifying and wreaking havoc on production in many of the world’s poorest regions. In contrast, food sovereignty offers enormous possibilities, drawing on agro-ecological approaches to production, concentrating on local, national and regional markets, and emphasizing access to and control of natural resources by local populations
Kingston’s book relies throughout on fundamental misunderstandings of how the modern world economy works. Monumental expenditure on advertising and other forms of promotion, much of it inspired by huge multinational corporations, now ensures that the world economy produces enormous quantities of products bought by relatively rich consumers around the world. But basic needs of billions of poor people for essential products and services such as clean water, sanitation, electricity and nutritious food are neglected.
Capitalism is now seriously detrimental to the welfare of both the human population and of most other organisms living on planet earth. Securing excessive profits for owners of large companies and corporations remains a much higher priority for capitalists than looking after the world’s people and the environment. Caring for the billions of animals, insects, plants, fish and other aquatic animals on which human welfare and the welfare of the planet also depend still has a low priority for wealthy capitalists.
In addition, Kingston writes on climate change: “The targets for reducing emission which various countries have set for themselves have little hope of being met, since the people of the world are simply not going to turn their backs on the benefits which the industrial revolution, which was primarily about learning how to use fossil energy has brought them”.
But it is suggested here that Kingston’s conception of the nature of the climate change problem and the scope of the solutions he favours are both far too narrow.
Piketty, T. (2014), Capital in the Twenty-First Century, Harvard University Press, Cambridge MA.
Polanyi, K. (2001), The Great Transformation, Beacon Press, Boston (first published 1944).