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How the Rational Irrationality of Capitalism Is Destroying the World

2016 May 1
by Ian Welsh

Capitalism leads to actions only a self-destructive wastrel would want, but does so by pure rationality.

Think of rationality as being of two types: Means-ends and internal-coherence.

Means-ends rationality says: “I want to get to Point A. How do I do that?” Or, “I want to grow a garden so I can eat food. What are the steps involved?”

Internal-coherence is related to a system. Perhaps I want to go to Heaven, and am a Catholic. I examine the Catholic system and decide that works of charity, baptism, and regular confession are the most important things to do.

If you are not a Christian, then these activities appear quite insane–as might the idea of “going to Heaven.”

“What’s ‘heaven,'” you might ask.

On the other hand, while one might quibble about someone’s garden (“Why not just buy the food” or, “You aren’t using enough fertilizer”), we all know that food is needed and that it makes sense to get food.

Meanwhile, the Christians have realized that eternal damnation, meaning eternal (what happens to those without Christ) is the worst thing that can ever happen. They have also discovered that burning someone alive will make sure that person doesn’t suffer eternal torment. So they start burning people alive, because no matter how much that hurts, it’s better than eternal torture.

This is entirely rational within a certain Christian world-view. Anything you do to stop someone from going to Hell is justified, because nothing that you can do to anyone is worse than what they will endure in Hell. War, conquest, forcible conversion—nothing is worse than eternal torture.

This is rational within certain Christian systems. To anyone outside the Christian system, it is insane.

Conquering people to impose democracy follows the essential same logic. It is only internally coherent and logical. Rational.

Let us examine the logic of capitalism.

In a market, if two people or groups agree to a trade, then that trade benefits both groups. If it did not benefit both groups, the agreement would not be made. If someone wants to buy something, (presumably) it has utility for them. Perhaps I like greasy hamburgers and sugary pop. Those things may make me sick, but I know that I get the most utility out of them, and it is not up to anyone else to say that their ill effect on my health outweighs the greasy deliciousness of the burger or the sugar high from the pop. An exchange, mutually agreed upon, is always more beneficial to the parties involved than no exchange; otherwise it would not happen.

Profit is how the capitalist system determines who is doing the most good. If people are willing to pay you more for you for goods than the your cost of production, then they place a value what you are doing. The more they are willing to pay, the more your work (or goods) is valued. The more profit you make, the more you should be doing whatever you are doing, because profit based on voluntary exchanges indicates the mutual benefit of  both parties involved. As long as you can make a profit, it indicates that scarce resources are being used well.

The product may be hamburgers. It may be firearms. In the purest form, it does not matter. Drugs, sex–anything to which both parties voluntarily agree.

So, if I’m involved in a voluntary exchange, and I’m making a profit, I should continue to do what I’m doing, and the more profit I make the more I should do of it. More profit gives me more control of resources, so I am able to do more, and I do.

This is the basic capitalist feedback system (in theory). Do more of whatever is profitable and consensual, and this will perpetuate itself automatically because those who make the most profit are doing the things people value the most compared to the cost of producing those things.

So why have we produced to so much carbon that we’re going to kill a billion people or more?

Because capitalist rationality is internal-coherence. It does not question ends. By definition, anything which makes profits and is consensual is good. (I’m leaving out questions of perfect consensuality, like power and so on, deliberately.)

Take planned obsolescence. Goods are designed so they will wear out and break down; they make them hard to repair when they do break, so people will buy new ones.

This was a big fight in the late 19th and early 20th century, by the way.  Engineers wanted to design goods which would last as long as possible, but managers didn’t: If you can sell a person whatever you make only once in their life, or twice, you make a lot less money than if it breaks down and has to be replaced every few years.

This means, of course, that you have to mine a lot more material. People have to work a lot more to make goods which would not be needed if they were designed to last as long as possible. This generate more carbon and other pollutants.

In every way this is bad: People have less free time, there is more pollution, and we use up more scarce resources. No one sane would create such a system from first principles.

But it makes sense within the Capitalist system. The exchanges are all voluntary, it leads to maximum profit, and profit indicates scarce resources are being turned into utility in the best way possible.

It is rational to destroy the planet’s life-bearing ability by over-using resources and spewing more pollution into it than necessary. It is rational to do more work than is necessary to produce the goods people need (or even want) so you can sell again and again, rather than just selling once.

This is internal-coherence rational, not means-ends rational. I don’t know about you, but I’d prefer to work less and have everything (or most everything) I need and want, while polluting less and using less resources. I will posit that the vast majority of human beings on Earth would agree.

Internal-coherence rationality is so close to always bad that you might as well just say that it is. Yes, one always has to ask, “Why do we want X?” when dealing with means-end rationality, but means-ends rationality has a tendency to cut out the shit. When we examine it carefully, most of us want enough stuff for the least possible work and want to be healthy, which means we don’t want a lot of pollution.

Capitalism is not means-end rational. The argument was made for a long time, “but it works.” By which it was meant, “it produces a lot of goods and money.” But it produced too many goods we didn’t need and money is only a means, for most people, to get the goods they need.

We will have to find a better way. The easy sneer that “Communism failed” is irrelevant. Capitalism is failing as well, and its failure will lead to a billion deaths or more because of climate change and other foreseeable failures (like over-use of resources.) We knew these were problems, but driven by the internal-coherence rationality of Capitalism, we kept doing what we knew would have unacceptable consequences.

When finding that better way, we must start by asking what the economy is supposed to do. I will suggest it doesn’t exist to make a profit, it exists to make sure people get what they need (and as much as possible what they want) in a fashion that is sustainable, doesn’t make us sick or unhappy, and doesn’t threaten the conditions necessary for sustaining life on Earth.

It is “rational” to destroy the Earth for profit. But only if you’re so wrapped in the logic of Capitalism that you’re no longer rational.

Or particularly sane.

(This is the 4th in a series on Capitalism.  Read “The Death of Capitalism”, “What Capitalism Is”, and “Did the Industrial Revolution Require Land Clearances, Slavery, Genocide, and Empire?”)


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14 Responses
  1. Dan Lynch permalink
    May 1, 2016

    I agree with everything Ian said, though the wording is not particularly strong.
    .
    The thing that strikes me about our capitalist society is “I consume, therefore I am.” We observe this every day, and we are all guilty of it. We identify with the things we purchase or possess. We feel good if we possess lots of cool things, or we feel inadequate if we possess less than our neighbors.
    .
    I enjoy consumer goods as much as the next person, but if your life revolves around acquiring more and better consumer goods, that’s messed up.
    .
    Natives of the Pacific Northwest — who were among the more affluent natives because they had access to so many resources — had a tradition called the potlatch. The goal was to see who could give away the most stuff. Social status was measured not by who accumulated the most stuff, but who gave the most stuff away. That makes more sense to me than our capitalist system.

  2. May 1, 2016

    Conquering people to impose Democracy follows the essential same logic. It is internally coherent and logical. Rational.

    Not that anyone ever really does that, but it is not coherent and not rational. It requires the government of the conquered nation to be the slave of two masters, which it cannot.

  3. S Brennan permalink
    May 1, 2016

    I am not convinced that capitalism and free markets are interchangeable terms.

    Unrestrained by anti-trust laws, capitalist have systematically tried to put the “buyer” in the position of buying modern necessities* from either a single source, or a collaborating consortium. Even when it’s consumer “stuff” that one buys today most of it is offered for sale by a tiny cabal of corporate “buyers” who “chose” for you. In this respect, what we call “capitalism” has achieved what communism sought, except the that purveyors are even farther removed from the power of the citizenry.

    Meanwhile, what “capitalist” have done to the labor market is the EXACT OPPOSITE, there, by law, labor must purvey itself to the market as an atomized individual. For the employer, the choice is endless. Can’t stand having blacks or woman in your workforce, or those pesky domestic people who demand you follow labor laws, don’t worry, replace ’em with H1-B’s…if they make a peep…ship ’em back to wherever they came from. At the lower end, illegal labor serves the same purpose, some jerk starts organizing your meat packing plant, which is located in the middle of nowhere, no problemo, call the INS and the ingrates will be shipped out at government expense.

    Domestic labor, [who has no choice in local] must compete against ALL foreign and domestic labor, foreign labor competes at a set advantage, with lower and in many cases free education, they can easily out-compete those candidates forced to pay the most expensive university costs in the world, then too they can off-shore at even a greater discount.

    With a quisling nation-state ruling, the short term gains of training foreign countries in the industrial arts that required generations to acquire expensively through by trial & error in government financed projects is paramount…and so the jobs are offshored…at a deep discount from the true cost to the nation that paid for trained industrial workers and processes.

    *Communication, shelter, food, energy

  4. Spinoza permalink
    May 1, 2016

    For those who like punk rock and the irrationality of rationality….

    http://youtu.be/ks-5GTggTUM

    And, I do hope your great work is coming along Ian. Whoever has ears will hear, as Christ puts it.

    @dan lynch
    Yet, is consumption all that bad? As you correctly point out, consumption, like anything can become unhinged, but there are so many people who would kill for things like A/C or heat or water as well as big screen TVs and nice clothes. Sometimes when we slave away all day the only thing we wish to do is crack open a beer and sink into our sofas. Until folks are unalienated in life and at work they will continue to derive meaning and peace from the luxuries and necessities that their wage, near, or actual slavey enables them. With our system so fucked its unsurprising to find the people who make the wealth possible so complelty fucked as well. Peaceful souls are only possible with a full belly.

  5. NLK permalink
    May 1, 2016

    Ian, reason and logic are not the same things. Logic is objective. Reason, as you point out, is not objective.

  6. May 1, 2016

    There is another reason capitalism is failing. Capitalism is, by its very nature, inefficient since the makers of goods and services are not the ones who get paid. Capitalism has to pay for taxation, labor, and raw material–and do it in a way that still generates profit for both the managers and the shareholders.

    Capitalism thrived under imperialism, because exploitation of labor and raw materials allowed companies to offset the inefficiency. As imperialism was replaced by nationalism, it became more and more difficult to exploit labor and materials, so companies turned to evading taxation–but are only canabilizing the very government structures that allow capitalism to exist.

    Climate change will deliver the death blow to the system, but capitalism was no more sustainable than free trade markets. The question is what comes next? The sharing economy is a hybrid system that will not survive the end of capitalism and the global cottage industry economy cannot support the kind of taxation and oversight to sustain current levels of government, and also relies too heavily on fossil fuels. Of course, that assumes humankind survives both climate change and the collapse of climate change.

  7. May 1, 2016

    Ian,

    I believe the following refers to a “free market” rather than “capitalism.”
    “In a market, if two people or groups agree to a trade, then that trade benefits both of them. If it did not benefit both of them, it would not be made. If someone wants to buy something, it has utility for them”

    The “free market” (RIP), which is something economically akin to “equal protection and equal opportunity,” is an extinct commodity in the U.S.

    Capitalism, however, (& taken to its logical conclusion), effectively kills free markets.

    In the U.S., our so-called “capitalist” system is built on monopolies, trusts, statutory or regulatory protected markets/exclusions/restrictions/subsidies/disincentives etc.

    There is no “free market” equal opportunity. Rather, under the U.S. system, capital is doled out, protected or outright bequeathed through regulatory, fiscal and monetary policy.

  8. Ian Welsh permalink
    May 1, 2016

    Capitalist ideology uses market ideology to sell itself by saying that Capitalism = markets.

    Logic does not determine ends.

  9. Tom W Harris permalink
    May 2, 2016

    Yesterday I saw a bumper sticker that warned:

    NO FARMS
    NO FOOD

  10. EmilianoZ permalink
    May 2, 2016

    Chris Hedges wrote one of his best, most heartfelt columns on a similar subject. It is loosely shaped as a commentary on Moby Dick, which he interprets as an allegory of America’s quest for self-destruction. I cant do justice to the whole long powerful imprecation, I’ll just quote the few excerpts most relevant to our present discussion.

    Our country is given shape in the form of the ship, the Pequod, named after the Indian tribe exterminated in 1638 by the Puritans and their Native American allies. The ship’s 30-man crew—there were 30 states in the Union when Melville wrote the novel—is a mixture of races and creeds. The object of the hunt is a massive white whale, Moby Dick, which in a previous encounter maimed the ship’s captain, Ahab, by dismembering one of his legs. The self-destructive fury of the quest, much like that of the one we are on, assures the Pequod’s destruction. And those on the ship, on some level, know they are doomed—just as many of us know that a consumer culture based on corporate profit, limitless exploitation and the continued extraction of fossil fuels is doomed.

    Melville’s description of Ahab is a description of the bankers, corporate boards, politicians, television personalities and generals who through the power of propaganda fill our heads with seductive images of glory and lust for wealth and power. We are consumed with self-induced obsessions that spur us toward self-annihilation. “All my means are sane,” Ahab says, “my motive and my object mad.”

    I do not know if we can build a better society. I do not even know if we will survive as a species. But I know these corporate forces have us by the throat. And they have my children by the throat. I do not fight fascists because I will win. I fight fascists because they are fascists. And this is a fight which in the face of the overwhelming forces against us requires us to embrace this sublime madness, to find in acts of rebellion the embers of life, an intrinsic meaning that lies outside of certain success. It is to at once grasp reality and then refuse to allow this reality to paralyze us. It is, and I say this to people of all creeds or no creeds, to make an absurd leap of faith, to believe, despite all empirical evidence around us, that good always draws to it the good, that the fight for life always goes somewhere—we do not know where; the Buddhists call it karma—and in these acts we sustain our belief in a better world, even if we cannot see one emerging around us.

    http://www.truthdig.com/report/item/chris_hedges_jan_27_column_transcript_collapse_of_complex_societies_2014012

  11. S Brennan permalink
    May 2, 2016

    E…Z ;

    Nice Quote.

  12. different clue permalink
    May 3, 2016

    Mr. Hedges makes the same mistake that many Western Civilization people make. And that is confusing Western Civilization with Species Human. If every participant in Western Civilization goes extinct, that does not mean that Species Human will necessarily go extinct.

    If the last human survivors on Earth are Native Andeans and Native Tibetans, then Species Human survives. And Andeans and especially Tibetans are a little more pre-adapted to survive in a lower-oxygen atmosphere than the rest of us. They have evolved to be able to strip oxygen out of thinner lower-oxygen high-altitude air.

    So if the atmospheric oxygen levels get just a little too low for non-Andean non-Tibetans to be able to strip oxygen out of the partially de-oxygenated air of the near future, but the air at low altitudes remains just oxygenated enough for Andeans and Tibetans to be able to strip oxygen out of it; then the Andeans and Tibetans will inherit the depopulated low-altitude zones and Species Human will thereby survive.

  13. V. Arnold permalink
    May 3, 2016

    different clue
    May 3, 2016

    Humans will not go extinct because they cannot adapt; we’re likely the most adaptive species on the planet.
    The problem as I see it, will be the species we rely on for our life, our food. Those species require time, lots of time to adapt, which we do not have, IMO.
    Thanks to our toxic form of capitalism we are messing with the very genetics of our food supply and totally fail to consider the inevitable, unintended consequences, of that which we do not understand. In short; our abiding ignorance will do us in…

  14. Ian Welsh permalink
    May 4, 2016

    And aye, agreed, Capitalism kills markets.

Comments are closed.