Part I – Capitalism - From Incredible Success to Deterioration and Dysfunction
The future is in disorder. A door like this has cracked open five or six times since we got up on our hind legs. It is the best possible time to be alive, when almost everything you thought you knew is wrong. — Tom Stoppard[i]
There may not even be words to adequately describe the improvement in human well-being over the 300 years since the beginning of the Industrial Revolution.
One way to look at human history is that prosperity and economic growth are not normal, or at least have not been normal during essentially all of humans’ existence. There has been meaningful economic growth only in 300 of the 300,000 years or so that modern humans have existed or the 10,000 years since humans began to become civilized.
Humanity’s recent success in improving its own condition is nothing short of astonishing.
In the seventeenth century, philosopher Thomas Hobbes famously noted, “Life in an unregulated state of nature is solitary, poor, nasty, brutish, and short.”[ii] Life expectancy at birth in the Roman Empire and through the Middle Ages was 20-30 years, and world life expectancy averaged around 35 years until the 1800s.[iii] This is a bit misleading, because of the large number of children who died at birth or in infancy, and the number of mothers who died in childbirth. Once a Roman attained the age of 5, s/he could expect to live to around 45 and occasionally into his or her 60s.
Until recently, there was no concept of disease other than an ill wind or the wrath of the gods. And no way to cure diseases. The germ theory of disease began its slow acceptance in the 1700s. Penicillin, essentially the first antibiotic, was not discovered until 1928, and anesthesia was not widely effective until the late 1800s. The slightest cut or abscess could be fatal, as could diseases, such as diphtheria, mumps and polio, which are dismissed out of hand today. As an example, U.S. President Calvin Coolidge’s son died in 1924 from an infected blister, which he got while playing tennis. It has been estimated that until around the year 1900, doctors did more harm than good.[iv]
Essentially everyone lived on farms, usually doing subsistence farming, producing food for their families and for paying taxes. There was little room for error, and changes in weather, insects or plant diseases could have life-or-death consequences. Famines were common.
Homo sapiens have struggled, battling nature, disease, and each other. Then the Enlightenment and the Industrial Revolution occurred, and (Western) humanity became the apparent master of all things.
Fast forward to the early 21st century. In the Developed World, life expectancies at birth are in the upper 70s (and the worldwide average is in the lower 60s). Most killer diseases have been conquered and there are medical treatments and medicines for ailments ranging from a toothache to menopause. Open-heart surgeries are commonplace. Even the poor have access to resources that kings and emperors could only have dreamed of: drinkable running water, indoor plumbing, salt, refrigeration, central heating and air conditioning. Even the poor command 200-300 horses of power when they drive their cars, far beyond the envy of the richest on Earth before the Industrial Revolution. And even the poor are generally literate, able to participate in the literature, science, and wisdom of the human legacy, when, 1,000 years ago, only an estimated 5% of Europeans could read and write.[v]
Figure 1 - World gross domestic product per capita in thousands of 1990 PPP U.S. dollars[vi]
And it is not just the Developed World that has prospered. With the exception of Sub-Saharan Africa, which is now beginning to grow economically, essentially all humanity has shared in this progress, although the Developed World has shared disproportionately. Figure 1 shows the exponential curve, beginning during the Industrial Revolution, which reflects the average economic output per person from 0-2000 CE. It is more than a little amazing that while population has been increasing exponentially, so has economic activity per capita. Global economic output per person has increased more than 12-fold on average since the beginning of the Industrial Revolution through the use of energy to multiply and augment human efforts.
Figure 2 – World population living in extreme poverty, 1820 - 2015[vii]
As developing countries adopt variations of market economies and capitalism, enabling investments in education, social safety nets and infrastructure, extreme poverty has fallen to 9.6% of the world population in 2015, according to the World Bank - down from 37.1% in 1990,[viii] and essentially the whole of humanity in 1820.
Fossil fuels have enabled environmental goodness. “As Alex Epstein points out in an unfashionable book, The Moral Case for Fossil Fuels, the use of coal halted and then reversed the deforestation of Europe and North America. The turn to oil halted the slaughter of the world’s whales and seals for their blubber. Fertilizer manufactured with natural gas halved the amount of land needed to produce a given amount of food, thus feeding a growing population while sparing land for wild nature.”[ix]
The improvement in wealth, quality of life, and life expectancy of humans over the past 300 years has been nothing short of spectacular – there are no superlatives sufficient to describe it.
There is a fear, however, articulated well in The Limits to Growth and its 30-year update, that we are using up the Earth’s resources and polluting the environment at the same time – including through man-made climate change. The fear is that, by capitalism’s enabling humans to take growth beyond the limits of the Earth’s ability to support it, we are leading to inevitable catastrophe, measured in terms of human suffering and environmental damage.
Four Things Have Been Critical to This Incredible Prosperity
The critical factors that have led to our incredible wealth, prosperity and longevity are
· the Enlightenment, which freed up our ability to read, innovate and think, leading to an explosion of knowledge, expressed in all aspects of life, particularly including technology, science and medicine; it introduced the concept of human progress, perhaps leading to perfection;
· the availability of natural resources to be deployed and re-formed according to our desires and needs;
· an economy based on some form of capitalism and some variation of free markets to productively discover prices and deploy savings; and
· inexpensive, plentiful energy to provide the means for enablement, transformation, communication and distribution.
The loss of any of these factors would lead to, at a minimum, significantly reduced levels of prosperity.
The Enlightenment is over and perhaps can be taken for granted, although significant portions of the population of Western countries are now calling its premises into question. In this book, I will take it for granted, remembering, however, how much human knowledge was lost in the Dark Ages and in the Greek Dark Ages before that. However, we seem to have entered a so-called “romantic” period in which emotions trump facts to an unusual degree, and knowledge may become endangered. Emotions have always trumped facts, but during romantic periods, which occur periodically throughout Western history, emotions become the legitimate measure of all things. Factual-based knowledge often suffers during such periods when literature, history and facts run counter to the dominant emotions, leading to their censure and, potentially, to their destruction.
Natural resources have been depleted to such an extent that we have reached the point that we are losing access to many critical natural resources.
Capitalism and free markets are under fire from several directions. Capitalism is now being gamed by its participants and is being inevitably influenced by the changing culture that it was a critical factor in enabling.
Ironically, capitalism’s success has contributed to the rise of the Information Age in which the requirements for both capital and labor have been dramatically reduced. This, in turn, reduces the effectiveness of capitalism, while leading to social unrest.
Capitalism is inevitably being taken to its illogical extreme, and is now contributing to a lack of sustainability.
The discussion, below, on Energy Returned on Energy Invested concludes that we are reaching the limits of our ability to generate sufficient energy of a sufficient quality to sustain a complex civilization.
Of the four critical factors to our prosperity, all four, are arguably beginning to decline.
[i] Stoppard, Tom, Arcadia, a play.
[ii] Hobbes, Thomas, Leviathan, 1651
[iii] “Life Expectancy,” Wikipedia, https://en.wikipedia.org/wiki/Life_expectancy
[iv] Lavin, James, “Before 20th Century, doctors did more harm than good,” March 11, 2009, http://www.jameslavin.com/articles/2009/11/11/before-20th-century-doctors-did-more-harm-than-good/
[vi] Lomborg, Bjørn, The Skeptical Environmentalist, Cambridge University Press, 2001
[viii] “Poverty,” World Bank Group, https://www.worldbank.org/en/topic/poverty/overview
[ix] Ridley, Matt, “Fossil Fuels will Save the World (Really),” The Wall Street Journal, December 5, 2018, https://www.wsj.com/articles/fossil-fuels-will-save-the-world-really-1426282420