It is not so difficult to understand the arguments raised by the author of the article referred to in this thread. Go back to the wiki entry shared by Pops: http://en.wikipedia.org/wiki/Capitalism
Take a look at the first sentence. Notice that it's not just private ownership of the means of production that is involved but also profit.
Next, go back to Pops' reference to maintaining expenses using profits. I forgot to mention that profits are not used to maintain expenses but revenues. That is, the profit is the difference between revenue and expense.
Now, go back to the wiki entry, and take a look at "Economic Elements." Notice that there are two components involved: capital goods and consumer goods. The former and used to make the latter. There are two other elements involved: land (or usually fixed assets, things that aren't consumed to transform capital to consumer goods, although they may depreciate) and labor. Later, you will see that the profits are used to gather more capital goods, which logically will be used to make more consumer goods. The result is that land and labor should make up a smaller component of expenses, and thus allow for more profits. Also, the need for more profits will be explained after.
Next, go to the paragraph after that. It explains how the capital goods plus labor (the labor market) are used by a "goods and services market" (capitalists owning land and the means of production) to produce consumer goods at a profit (for capitalists), with the consumer goods sold back to the labor market. That's capitalism.
What's the problem, then? It's that the price of consumer goods is higher than the labor cost. In which case, the labor market cannot obviously afford to buy the consumer goods. Why is this so? Because a profit was included in the price of consumer goods. Profit acts like interest in loans, except that the borrower must already have the principal plus interest ready in order to borrow the principal. Note that such a system requires growth, simply because of the presence of profit.
Who pays for the profit? There are many ways. One is labor: the same labor market can be made to produce more consumer goods given the same wages. That way, prices of consumer goods will drop while capitalists receive the same profits because the labor cost of each consumer goods has gone down through more production. Again, notice the requirement of growth.
Another is to increase credit. This can happen if the labor market cannot produce any more given the same labor cost. The credit can be used to increase technology or to offer money to the labor market to buy consumer goods. That's where the financial market comes in, and it's described in the same wiki entry (see subsequent paragraphs in the same entry). The same market will charge for interest for what it lends. Notice what was mentioned earlier about profits and interest. In this case, interest is the profit made by the lender, and the borrower can only pay that back if what he earns from what he borrows is greater than what he borrows. For that to happen, he has to make a profit from his capital goods. With that, go back to what was mentioned earlier about capital and consumer goods. From there, notice again how growth is a requirement in the same system.
Once the system becomes more complex, then it becomes increasing difficult to use physical assets such as precious metals as means of payment or of credit. In which case, paper money is then used, generally promissory notes where the borrower promises to pay back what was purchased at some later date. At that later date, he will certainly have to produce more to pay for that plus current expenses plus interest on the loan. Again, notice how growth is a requirement, in this case more consumer goods produced because more credit is created.
Part of that complexity involves competition. It was mentioned earlier that with better technology, one can make the same amount of consumer goods at less time, which means he may have more free time. But in competition, someone else may have another idea: the same technology will allow him to produce more consumer goods given time he currently uses. The result for the latter is lower prices, as there is more production given the same labor cost plus fixed assets. Since consumers will logically buy what is cheaper, then those who don't utilize technology properly will lose market share. Again, notice how growth is required in the system.
The same applies to non-utilized capital goods and unsold consumer goods. If they are left in inventory, the business may lose money due to holding and opportunity costs. But one goes against the other: clearly capital goods need to be utilized, but that will mean more unsold consumer goods. The same can happen in one point above, as more is produced to lower labor cost. The answer for businesses involve combinations of marketing and fulfilling demand that has not been satisfied. We can see this in examples given earlier: replacing an F-150 with a Prius, moving from a mature market to an emerging one. Again, growth is required in the system.
What about the labor market? Most want more pay as they go through years of work, probably because they want to, using a previous example, replace ox carts with F-150s. There are many ways to do that. One is to increase profit, and then use that to promote personnel and expand the business. Again, growth is required for that to happen, as higher prices may lead to lower sales; the solution is to increase production, which involves using better technology and expansion. Another is for the financial market to extend credit, which is inevitable as the financial market earn from interest earned as they extend credit, and since the principal and interest have to be paid for, then the borrow has to produce and sell more. Once more, growth is required, especially if the credit is used for expansion.
What about capitalists? The profit may be shared as retained earnings to the financial market or used to expand the goods and services market. The reasons for both are seen clearly in previous points, with the financial market requiring interest or returns on investment and expansion needed to increase production to lower the labor and fixed costs of consumer goods, increase earnings of the labor market, etc. What is clear, though, is that any profit is re-invested in another businesses or in the business itself. To ensure an increase from that investment, production has to go up. Again, growth is required.
There are more points to consider, but I'll stop here. Meanwhile, go the "Criticisms" section of the wiki entry. How are all of the points raised above connected to critical views of capitalism. First, it is inevitable that concentration of wealth will take place among the goods and services market, but they can only earn more if the labor market not only produces but consumes more. Thus, the financial market also essentially relies on the labor market to do the same so that they will receive returns on investment. Again, growth is required.
Notice, though, the interesting contradiction of exploitation and dependence: capitalists can maintain their financial power only by exploiting the masses, but that exploitation requires increasing production and consumption of consumer goods to the same masses! That is because, ultimately, much of the wealth of capitalists is found in the financial market, which can only earn as more borrow. But more will borrow only if they will produce or consume more. Again, growth is required.
Can the system go on? Yes, but only if more people are produced and more resources are found. Thus, those who are capitalists will maintain financial power, more from the labor market become part of goods and services market, and most of the labor market will join them as better technologies are employed to make consumer goods abundant at less time. The vision of capitalism, then, is some space age where consumer goods are so abundant thanks to technology that credit will no longer matter. But because it's the same credit that makes the financial market powerful, then what results is, ironically, the same utopia of egalitarianism and comfort envisioned in communism!
Thus, it will not matter what type of capitalism takes place. If there aren't enough capital goods to produce more consumer goods and thus maintain growth, then that capitalist system will fail. As the article points out, what takes place is cannibalistic capitalism, not a type of capitalism but a condition where some exploit others but with no possibility of continued profits. If any, such a condition leads to the demise of such a system.
From there, one can see very, very clearly the connections between this topic and peak oil, as peak oil represents the lack of capital goods. Given that, I don't understand how many of you have posted hundreds of thousands of messages in a peak oil site and never saw connections between the two, which might explain why you came up with the horribly absurd idea that capitalism doesn't require or involve growth!
Want more evidence? Read the other threads of the forum. Can't be bothered? That's not my problem.
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