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Is it just me or is the obvious biggest problem in capitalism that you always need to have growth? It looks to me that in a naive approach I would like to build

• wu-ikkyu 9y ago
  Growth for the sake of growth is cancer
• mbloom1915 9y ago
  good point, utilities essentially get gov't approval to spend money and receive a return on that investment of 5-10% (depending on performance)...its a consistently profitable yet low-growth model and perhaps nothing wrong with it if not for them being investor-owned.
• ErikVandeWater 9y ago
  Capitalism does not require fractional reserve banking. Fractional reserve banking is what causes the need for exponential growth, in general.
  • tw1010 9y ago
    How does the fact that banks hold a fraction of their assets in a central bank put pressure on companies to grow exponentially? I'm curious, I don't understand the connection.
    • deleted 9y ago
      [deleted]
    • thaumasiotes 9y ago
      > How does the fact that banks hold a fraction of their assets in a central bank put pressure on companies to grow exponentially? That is not what I would understand by the term "fractional reserve banking". Rather, fractional reserve banking refers to a system where banks do not hold enough liquid assets to cover their obligations. Central banks are completely irrelevant to the concept. The location of a bank's assets are also completely irrelevant to the concept.
  • lamename 9y ago
    Could you expand on this for someone with very limited economic intuition? (me)
    • dredmorbius 9y ago
      Don't bother. It's a canard. A very popular one, but a canard all the same.
  • yuhong 9y ago
    Fractional reserve banking is one part of it, but the really horrible things occurred when we left the gold standard so almost unlimited debt can be created. People started investing in stocks instead of bonds, which is probably part of why Glass-Steagall was repealed.
  • PatchMonkey 9y ago
    Yes. But unfortunately? Without safety measures like the Fed enabling such, economies have a history of imploding every fifteen years or so on the basis of insufficient currency circulation. Oh wait, that's where we are today... Carry on! Commodity-backed currencies also have a problem - they implement their own fractional reserves as economies do grow. When they shrink? End-users learn to trade in the notes for the commodities, shrinking the pool of currency in circulation.
  • erikb 9y ago
    With higher fractions of reserve the bank is also a more stable institution. So it may be just a symptom, not the source.
• malchow 9y ago
  "in capitalism that you always need to have growth" More like: "people want growth" so "there is growth" so "capitalism is the only economic system not at odds with reality."
  • bbctol 9y ago
    There's a difference between what people want and the whole of "reality"; in a real universe, growth will never be limitless, no matter how much people want it to be.
• mixmastamyk 9y ago
  Lots of folks invest in dividends, it’s a viable model.
  • mac01021 9y ago
    Most of those people are still relying on the stock market to sustain exponential growth. If my investment strategy is based purely on dividends, then it's true I do not require share prices to grow. But if I am going to grow my portfolio be reinvesting my dividends, then I need more shares that I don't already own to be created so that I can buy them, which means the total market cap of companies will have to have increased. And, after I've grown my portfolio, I'll be looking to reinvest a correspondingly larger quantity of dividends, so that market cap will need to have grow by a correspondingly greater amount. If you want compounding returns, whatever form those returns take, you need sustained exponential growth in the economy.
  • erikpukinskis 9y ago
    Even less growthy than that... lots of people buy bonds, right?
• jcfrei 9y ago
  "Capitalism" is such a general term I find it hard to know what exactly you mean. A liberal or free markets based economy doesn't need growth at all. The problem is that a lot of companies and a lot of state-run institutions (pension funds, etc.) have had the default assumption that the economy will always be growing (mostly due to population increase). But that trend is now reversing in a lot of countries, where populations have started to shrink and societies as a whole (not just the economy) will need some time to adjust to this.
  • staplers 9y ago
    This is exactly why the de-facto monetary policy of 2% inflation needs to be rethought.
    • AnimalMuppet 9y ago
      I'm not sure that the 2% inflation is related at all to population changes. It's a change in the value of money, not in the total supply of money.
      • randomdata 9y ago
        But at the same time value is the intersection of supply and demand. All else equal, an increase in the supply of money does decrease the value of money. Granted, all else is rarely equal.
    • jcfrei 9y ago
      I don't know all the economic reasons for a 2% inflation rate. But one of them is to disincentivize the hoarding of currencies and making investments in assets like bonds, treasuries or equities more appealing. So you probably want some amount of inflation to always remain.
  • erikpukinskis 9y ago
    Capital + ism - the idea that capital should govern the flow of all resources.
• deleted 9y ago
  [deleted]
• scld 9y ago
  You also "need" to have growth because the population grows. Simply, if GDP or energy use is flat, that implies lower GDP or energy consumption per capita. The latter may be explained by efficiency, but the former would imply reduced standard of living.
• rukittenme 9y ago
  > Is it just me or is the obvious biggest problem in capitalism that you always need to have growth? Need and want are different things. > I don't need investments that constantly grow in profits. Until your rent increases or inflation makes your money less valuable or you have a child or you incur some unexpected expense. Most people don't like living paycheck to paycheck because its stressful. Large businesses are no different. But just because they don't like something doesn't mean a capitalist economy is going to bend over and hand them something. Unlike a planned economy where two year plans forced wasteful industries to continue wastefulness.
• empiricus 9y ago
  How do you like zero sum games?
  • dredmorbius 9y ago
    How do you like negative-sum games? https://en.wikipedia.org/wiki/Second_law_of_thermodynamics https://en.wikipedia.org/wiki/Second_law_of_thermodynamics (And yes, the system you're in, writ large, is sufficiently closed for this to hold true.)
• ThomPete 9y ago
  Don't you need to beat inflation?
  • thfuran 9y ago
    You can do that by raising your prices with inflation.
    • ThomPete 9y ago
      Which is growth no?
• Dylan16807 9y ago
  > Is it just me or is the obvious biggest problem in capitalism that you always need to have growth? I'm not sure what you're talking about. In capitalism investors want profits. In this specific industry, for ultra-specific reasons, profits need growth. This isn't the case 99% of the time. But even if investors go away, the companies will run fine without them. They'll just have low stock prices. There's no need for growth anywhere in this equation.
• eric_b 9y ago
  You're conflating Wall Street and public companies with capitalism. Thousands of small businesses provide excellent livelihoods for their owners with predictable stable income as you suggest. Until the media started harping about VC and the "tech boom" in 2001, most businesses were started with the specific goal you mention. Stable profits in boring domains isn't sexy though, which is why you don't hear that narrative very often.
  • adventured 9y ago
    > Until the media started harping about VC and the "tech boom" in 2001, most businesses were started with the specific goal you mention. Approximately 98%-99% of all businesses started in the US every year, still fall under that banner. Half a million new businesses are started each year, 1%-2% of those are traditional venture capital backed (averaging the per year figures since ~2006).
  • erikb 9y ago
    Interesting point of view. I've never thought about it this way, that you would count the normal middle class companies as a legit element of capitalism as well and not just people who try to survive in a ridiculous system. Also great account name I have to say. That shows class and style.
• rsynnott 9y ago
  You need general economic growth, in general. You don't need growth in _all_ things; periodically, industries decline or become entirely obsolete. Capitalism survived, say, the decline in the demand for horses.
• minikites 9y ago
  There has been some work in this area: https://www.motherjones.com/politics/2010/07/peter-victor-deficit-growth/ https://www.motherjones.com/politics/2010/07/peter-victor-de... “We’ve had 125,000 generations of humans, but it’s only been the last eight that have had growth,” Victor told me. “So what’s considered normal? I think we live in very abnormal times. And the signs are showing up everywhere that the burden we’re placing on the natural environment can’t be borne.” See also, the physical limits to growth: https://dothemath.ucsd.edu/2012/04/economist-meets-physicist/ https://dothemath.ucsd.edu/2012/04/economist-meets-physicist...
  • Chathamization 9y ago
    The Do the Math blog is interesting because his core assumption is that growth in energy consumption must keep up with economic growth, and therefore economic growth will run into the physical limits of energy consumption. As the Vox article shows, this is an erroneous assumption (you even see a bit of leveling off in the graph he posts). I don't know what it is, but there seems to be a whole genre of physicists jumping into a field their unfamiliar with and trying to crunch numbers to prove the experts wrong without ever bothering to learn the fundamentals of the new field.
• kvartz 9y ago
  I would say growth is going to happen no matter what system you pick, it's in our nature. Capitalism only helps us to determine value
• gascan 9y ago
  Growth doesn't seem to be a prerequisite for capitalism. Rather, it's a shortcut, a cheat, that hides or forestalls your sins and indiscretions. Picture a MLM or Ponzi scheme- as long as growth is maintained, the problems can be swept under the rug, and you don't have to go to the trouble of running a sound business. (I'm not calling capitalism a Ponzi scheme, it's just a good illustration)
  • dredmorbius 9y ago
    John Kenneth Galbraith introduces the idea of the "bezzle" in The Great Crash: 1929. That's the apparent increase in monetary wealth created by ... "creative accounting" and/or other means.
• gascan 9y ago
  It occurs to me that growth has one unmitigated good- attaining critical "threshold" economies of scale. Semiconductor technology would still be exotic, expensive, and immature if not for massive economies of scale. It is only through wide application & corresponding broad demand that modern semiconductors are possible.
• spodek 9y ago
  People believe you need growth, but you don't and there are major problems with it. I just read and recommend The Growth Delusion https://www.amazon.com/Growth-Delusion-Poverty-Well-Being-Nations/dp/0525572503 https://www.amazon.com/Growth-Delusion-Poverty-Well-Being-Na..., which talked about problems with growth and alternatives to its most common measure, GDP.
  • erikb 9y ago
    since it's paid content. Does the book also talk about why people believe in it? Because that it's an illusion is not something I would need to be convinced about. I have more problems following the imperative that there always needs to be an unsustainable amount of growth and why people happily sacrifice stable huge profits just to fake a little more growth.
• douglaswlance 9y ago
  Life either grows or dies. There is no static state.
• stevehawk 9y ago
  It's not "capitalism".. it's publicly traded companies. That's the root of the issue. Stockholders demand their stock increase in value, otherwise there was no point in buying stock.
  • BirdieNZ 9y ago
    Dividends also exist as a point to buying stock.
• trixie_ 9y ago
  There are plenty of companies that don't grow and just pay dividends. Companies go out of business all the time too. Looks like capitalism isn't just about growth is it. Capitalism - An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state. Doesn't say anything about growth. You're just conflating the two.
• cryptonector 9y ago
  Yes, way back in the 1600s, Mr. Capital wrote as much. Less sarcastically and more substantively: there's no such thing as orthodox capitalism requiring growth or any such thing. Capitalism is what you get when a) you have private property, b) freedom to trade property, goods, and services (labor). Everything you associate with capitalism is either a consequence of this or of not-capitalism market distortions (which we often fail to recognize as such, and then we associate them with capitalism). Growth will stop when people stop needing, wanting, or being able to afford growth. Clearly, we're very far away from that: clearly people worldwide want the standard of living we have in the U.S., but the world is far from being there. So we have some growth left. Clearly, too, there is a limit to demand for growth, and we see this reflected in fertility rates the world over. If you're aching to put an end to growth then I counsel patience: we're on our way. Back to what is capitalism... I talked with an economist friend once who told me that "we need to develop an alternative to capitalism". My answer was: "well, given that capitalism is what you get when you let people be free to own and trade, what freedoms do you propose to deny people?!". Oddly my friend did not challenge the premise of my question (see below)... Instead he admitted that he hadn't thought of it that way. Sadly we never discussed it again. Many here at HN (and elsewhere) don't see capitalism this way. They deny the premise that capitalism is just freedom. But... where is the force being applied (by whom and to whom) to make capitalism what it is, if capitalism isn't freedom?? (I'm not referring to regulations here, or laws against crime for that matter. Socialist countries, for example, apply lots of force or threats of force to get people to do what is expected of them -- this is what I'm referring to.)
  • yaps8 9y ago
    > Capitalism is what you get when a) you have private property, b) freedom to trade property, goods, and services (labor) I disagree. We (sort-of) have your a) and b) and capitalism now but the implication part "what you get" is not obvious. Do you have sources that show a consensus on this implication ?
    • cryptonector 9y ago
      Do you have a source for a definition of capitalism? It's definitely not like Marxism -- one man's idea. Capitalism really is an evolution ("what you get when ...") of Dutch and British economics of the 17th century or thenabouts through today. The key characteristic is: private property and freedom to trade (goods, property, services).
• MarkMc 9y ago
  Does capitalism require growth? Moreover, is growth bad? Don't forget that GDP growth is not the same as growth in resource consumption. Eg. Amazon's kindle allowed far more books to be published while using far fewer natural resources.
• dredmorbius 9y ago
  The "growth imperative" is ... complicated. I wouldn't put the cause / blame / credit / fault entirely with capitalism, and I'd specifically exclude fractional-reserve lending[1]. At the same time, there is a clear tendency for a growth-at-all-costs mantra. Seems to me there are several dynamics at play. 1. Given growth, redistribution is not as urgent. 2. Redistribution is politically exceedingly unpopular ... 3. Most especially with those who have the most wealth to redistibute. As Adam Smith wrote in one of his briefest sentences ever ... 4. "Wealth, as Mr Hobbes says, is power." 5. There's a great deal else that becomes more convenient in a growing economic domain, a topic also discussed at length by Smith (Wealth of Nations, book 1, chapter 8, on wages, particularly as concerns England, the Colonies, and China). 6. Though that argument largely boils down to the fallacy of consequences: "The alternative to growth is too horrible to consider, so we won't consider it." This bodes poorly. There have been a few fairly long-term stable or negative-growth regimes. The Indus River Valley civilisation(s) seem to have been particularly equitable (archaeological evidence shows little diversity of housing stock or personal chattel property), and the Byzantine Empire effectively went through an extensive period of de-growth successfully, if not entirely happily. Growth as a present economic mantra seems all but ubiquitous. You'll find it held as sacrosanct by voices as diverse as Milton Friedman, Paul Krugman, Thomas Piketty, Lawrence Summers, and Christine Lagarde. It's the fundamental axiom of both hard-left and hard-right economic theologists (what they preach is not a science). See Mauricio Schoijet's "Limits to Growth and the Rise of Catastrophism" particularly for reflections on this: https://www.jstor.org/stable/3985399 https://www.jstor.org/stable/3985399 ________________________________ Notes: 1. Brief counterargument: Fractional reserve + fiat currency + at your option any of a) a strong bankruptcy law / process, b) a gradual devaluation of all debt, including perhaps c) a gradual devaluation of all paper currency[2], and/or d) a periodic debt jubilee (see Steve Keen) would allow for a FR banking system without the spectre of debts-in-perpetuity. 2. China instituted this, historically, by requiring regular stamping of paper money. The stamps cost money, and this effectively became a tax on cash holdings. Other mechanisms might be instituted. Remember that money is not wealth, but rather is tokens of wealth. See generally Richard von Glahn, Fountain of Fortune: Money and Monetary Policy in China 1000-1700 (1996).