Guy Standing’s The Corruption of Capitalism (Biteback Publishing 2017) is a powerful attack on rentier capitalism and, very explicitly, a call to revolt. It is very informative and the detailed factual descriptions that Standing puts before his readers are intended to make them angry. He succeeded with me and probably will with most readers. Standing is at his best describing the features of crony capitalism that are totally different from the neo-liberal story of free markets that justifies it. His charge is that neo-liberal economic policies are based on lies which he lists in order to describe what really happens.
Rentier Capitalism and Neo-liberalism
What Guy Standing describes across several chapters is a relationship between governments in the thrall of neo-liberalist ideology whose politicians have essentially developed a crony and client relationship to the big corporations and care little for the expendable mass of ordinary people. He describes a parasitical overgrowth as rentiers derive income from ownership, possession or control of assets that are scarce or artificially made scarce. This includes those things commonly associated with the word “rent” – land, property and mineral exploitation. However Standing also has chapters on “intellectual property” (patents, copyrights, brands and trademarks); on income from state subsidies to companies and rich individuals based on crony relationships and spurious arguments; on interest derived from “odious debts” to a financial sector where those deemed too big to fail get bailed out while an increasing proportion of the population like students and the poor are enmeshed and trapped in debt to fund their studies or to survive to the end of the week with pay day loans at astronomic interest rates.
Of particular importance to his argument, and his view of the likely economy of the future, is that a major part of the workforce have a substantial part of their already low incomes creamed off by organisations acting as brokers and intermediaries for a variety of short term and insecure kinds of work and service roles. To a large extent these are now connected into a new kind of economy where commissions come through digital platforms – taxi driving, cleaning, handiwork or delivery.
The name given for this is “Platform capitalism”.
Taken together the rentier parasitism has generated a flood of wealth and income for people and companies who do little or nothing at all to earn their riches – while at the same time upending and rendering insecure the economic conditions for millions of people who are pushed into the ranks of what Standing calls a new class – the “precariat”. The regime of the intermediaries, the “platform capitalism”, earns high fees for the connection between buyers and sellers of services and skills – whereas for sellers themselves there is vulnerability, often unfair and insecure terms and crushing competition. To complete the picture the precariat is kept in its place and trapped in financial circumstances they cannot easily escape by the welfare arrangements of the state. For example Standing compares the tax credit arrangements in the UK to the Speenhamland welfare system of 18th century England. At that time the wages of the poor had been driven down by a surplus of labour looking for employment as a result of the enclosures and were topped up to a bare minimum.
The Bigger Context – Ecological Overshoot
It is difficult to disagree with any of this story. The problem for me lies in the description, or lack of it, about the bigger context – the fact that the global economy is crashing against the carrying capacity of the planetary ecological system.
I hasten to write here that Standing does address several aspects of the degradation of the “spatial and natural commons” in his call for revolt. What he calls a “plunder of the commons” is integral to his analysis of the enrichment of the elite. He writes, for example, about a theft of collective resources that takes away from ordinary people a host of use values crucial to “social income” – for example parks and street trees which are important to mental health and the quality of life. But for me there is a much bigger environmental threat whose seriousness is not adequately covered in this book.
Standing’s analysis here is framed in terms of the so called Hartwick’s rule. This requires that “rents due to scarcity (initially applied to extraction of exhaustable resources) are invested to benefit future generations as much as the present”. (p172). It is a view in which the people of the future are inadequately protected because not enough of the rental incomes have been reinvested.
He has a point here but…were it possible to ask a medieval peasant how to protect land commons against over use the answer would not be by investment but by leaving the land fallow, to recover through the planetary life force, through a natural process of regeneration. The sustainability of the commons, their ability to keep on giving, was maintained, paradoxically, by restraints on use and then letting nature take its course to regenerate itself. The land, like the bodies of people and animals, had to be allowed to rest. Sometimes the key thing to do – is not to invest in things but just to leave them be. Take a third of the year in holidays. If you work people, animals and land too hard they get sick and eventually die.
There is a paradox of capitalist growth; it created scarcity where once there had been sufficiency in the context of a subsistence economy. In the Charter of the Forest of 1217 Henry III promised “for all time” that commoners could have access for pannage, for herbiage, for piscary and the like – but commoners understood that for the commons to keep giving, including for future generations, there had to be restraints to protect its ecological integrity.
With growing demands on the land it was, however, increasingly difficult to protect its ecological integrity. Rich and powerful people and a growing mercantile economy had other uses for the land and they were well connected in the state. The pressure to enclosure did not happen for some time after the adoption of the Charter because 100 years of the Black Death took place with massive population loss. This slowed the corrosive effect of growth on the ecological system of that time. However, as the population recovered so too did trade. There was a demand for wool and sheep; a demand for food, not just for local villagers, but for growing urban centres. There was a demand too for wood to build a navy and a mercantile fleet – as well as to keep the people in the towns warm. The land was deforested – not just in the sense of ceasing to be common land but also ceasing to be wooded lands.
Growth and Enclosure
Growth undermined the commons, commoning and commoners. The rights of commoners “for all time” and the ambitions of merchant adventurers and the gentry could not all be accomodated and those who won out were the ones who were well connected with the central power and who were serving its global ambitions. By 1800 the growth that undermined the commons had already gone a long way. E A Wrigley, a professor of economic history at Cambridge University, calculated that to meet the British economy’s energy needs with woodfuel at the beginning of the nineteenth centry would have required a forest the size of Britain to be harvested each year.
This was the time Harwick was formulating his ideas and growth was about to accelerate powerfully with the invention and deployment of the steam engine. No longer was growth solely achieved through colonial expansion and slave labour – it could also expand through machines powered by “energy slaves”- a metaphor first suggested by Buckminster Fuller.
A human being of average fitness can sit on a bicycle rigged to function as a generator and peddle 3kWh in a day – enough to keep a 40watt light bulb glowing through 24 hours. A machine powered by fossil fuels – ‘energy slaves’ in Buckminster Fuller’s metaphor – could do much better. Coming right up to the present day the average North American has a lifestyle that requires the consumption of 24 barrels of oil a year. That is equivalent to 204 energy slaves because a barrel of oil contains the energy equivalent of 8.6 years of human labour. An average Western European lifestyle requires 110 energy slaves.
The growth, powered by fossil fuels, entailed a voracious demand for energy minerals and other natural materials which have encroached on global commons the world over. Given the incredible inequality of the world economy described by Guy Standing the majority of this has and is being consumed by a small majority of the world’s population – the beneficiaries, as Guy would call them, of rentier capitalism. Of this more later.
When the water companies do not maintain their network of sewers and pipes their systems on which we all depend will degrade. If depletable fossil fuels and minerals are used without the development of substitute renewable resources to replace them then a crisis will eventually take place at the time that they are exhausted – when inadequate substitute arrangements have been developed to replace the dwindling energy supply of the fuels that have been burned. In the 1990s there was a debate among economists about what was called “strong” and “weak” versions of sustainability connected to the Hartwick principle. In the strong version non renewable natural resources should be exploited no faster than the rate of creation of renewable substitutes. The revenue from exhaustible resources is supposed to be divided into two parts, one of which can be consumed provided that the other part is invested in new sustainable sources of energy that will completely substitute for the depleted resources.
It’s a nice idea but what would this involve? When one gives the answer one has to doubt whether it is really feasible. At current rates the global economy consumes slightly over a cubic mile of oil a year and the energetic equivalent of another 1.4 cubic miles of oil is consumed as coal and natural gas. So this is the rate at which we should be replacing fossil fuels with renewable energy capacity. But what would this involve? Here are calculations of a number of options to replace just one cubic mile of oil consumed per year. (The nuclear option is also included to show the scale issues).
4 x Three Gorges Dams,developed each year for 50 years, or
52 nuclear power plants, developed each year for 50 years, or
32,850 wind turbines, developed each year for 50 years, or
91,250,000 rooftop solar photovoltaic panels developed each year for 50 years
Each of these “options” would itself involve considerable environmental damage and depletion of other materials.
Using this data and 2008 market prices where a cubic mile of oil cost $3 trillion US dollars the developmment cost of all of the substitutes was greater than the market value of the oil. So the idea that one can set aside some of the revenue from oil to invest in replacement is a fantasy.
Making this task even more important, a key problem with a depleting resource is that you have to invest increasing amounts to continue to get out an amount equivalent to what you got before because the easy and cheap to extract resources have been exhausted. Evenually, the investment costs to replace the resources that have been used up becomes too expensive.
A crisis of this sort is almost upon us in the global energy system right now. There is a great deal of talk about developing renewables like wind and solar but they constitute not much more than 1 or 2% of global energy sources while fossil fuel resources are all but exhausted.
Of course fossil fuels are available in the ground in great quantities but the cheap and easy to extract reserves are gone. Getting out what is left is much more expensive and, as a result, a major part of the global fossil fuel sector is in financial crisis. They cannot charge higher and higher energy prices as that will drain the other parts of the economy of the purchasing power to buy everything else as well as to service debts.
Rising energy prices are deflationary. We must pay more for the “energy slaves” on which our civilisation is dependent and have have less left to pay for everything else – including paying to service debts. Guy Standing describes the financial crisis of 2007-2008 as a crime scene in which Wall Street and the banks were largely responsible for the chaos. He is right to do so – but that crisis was also a result of high oil prices forcing people to choose between fuel or debt servicing.
When we are overwhelmed by the next stage in this crisis it will not only mean that we did not invest a sufficient amount and early enough in renewable energy technologies – it will also mean that large parts of the economy are no longer viable without the cheap fossil fuel energy which is no longer to be had. Perhaps the only consolation might be to reflect that if we still had these fossil fuels we could not have used them anyway as that would take us even further over catastrophic climate tipping points.
Signs that the global economy is in overshoot
These are all symptons that the global economy has grown too much – and is now out of balance with the carrying capacity of the planet. There are many implications for Guy Standing’s analysis. For example in the context of the developing energy crisis it is probably too late for some of Guy Standing’s recommendations – like the adoption of a Sovereigh Wealth Fund.
The trouble here is that in the UK and many other places the oil and gas fields are in an advanced state of depletion. Far from the remaining North Sea being a source of revenues to go into a Sovereign Wealth fund it is more likely that, as Tim Watkins explains:
“To avoid an environmental catastrophe, a large part of the North Sea infrastructure – disused wells, rigs, pipelines, etc. – will have to be safely removed in the course of the next 5-10 years. But there is a big question mark over who is supposed to pay.”
“The exact cost of cleaning up 470 platforms, 5,000 wells, 10,000km of pipelines and 40,000 concrete blocks that the oil industry has built in the North Sea cannot be known at this point – it has never been tried before. However, we can be reasonably sure that the industry (which still needs to attract investors and maintain the support of politicians) will have underestimated it. The industry’s conservative £40 billion price tag is widely expected to rise above £60 billion by the end of the process. That being so, the income from more than half of the oil that is left (around 1.5bn barrels) will be needed for decommissioning, leaving just 1.3bn barrels to cover industry costs and to reimburse investors.” 
Guy Standing’s book does not really address the problems of an economy that has passed the limits to economic growth. In the blurb to the book, the aim is described as “a new income distribution system that would achieve the extinction of the rentier while promoting sustainable growth.” Elsewhere in the book Standing approvingly quotes the OECD to the effect that “inequality is an impediment to growth” (p 312). However “sustainable growth” is an oxymoron and the serious danger is that growth will achieve the extinction, not just of rentiers, but of the rest of humanity and most of the other life on the planet.
Uneconomic growth and the danger of collapse
Further growth at this late stage in global economic evolution is pushing beyond planetary boundraries of toxicity and maximum use, as well as exhausting sources of resources. Thus further growth is bound to be uneconomic, doing more damage than good and making worse an eventual collapse.
Ecological limits can of course be overshot – for a time. Just as a family can spend more than its income by running up debts and selling its assets so (the wealthy part of) humanity has been running down the resources of planet earth for several decades. It is a process that is unsustainable and is leading to a collapse. In such a collapse a piggy bank called a sovereign wealth fund will not save us – in fact it will mostly likely get wiped out. This is best illustrated by the fate of the small Pacific nation of Nauru where phosphate was discovered in 1900. After 100 years of mining 80% of the island is uninhabiteable. In that period the islands inhabitant had a high money income and they put money aside in a sovereign wealth fund which was estimated to reach a value of $1billion. However mainly as a result of the Asian financial crisis it was almost entirely wiped out – leaving the inhabitants a devastated island and their “nest egg” gone.
So much for sovereign wealth funds….
The notion of threatening ecological collapse is not to be found in this book. Some consideration of damage to mental and community health from plundering natural commons is there but not the damage to the health of the global ecological system, nor the likely knock on economic and human consequences. Standing is not complacent about the explosive potential of inequality to undermine social sustainability but appears to have no comparable concept of how we are now way over the edge of ecological sustainability.
Using ecological footprint analysis humanity has been in ecological overshoot since the 1970s with annual demand on resources exceeding what Earth can regenerate each year. At this time humanity uses the equivalent of 1.6 Earths to provide the resources we use and absorb our waste. (The rich part of humanity mainly). This means it now takes the Earth one year and six months to regenerate what mostly rich people use in a year. We use more ecological resources and services than nature can regenerate through overfishing, overharvesting forests, and emitting more carbon dioxide into the atmosphere than forests can sequester. If there is a 1 to 1 relationship between income and the use of the earth’s resources that means that only 1/1.6 = 63% of global income is sustainable which means global income needs to fall by 37% to return to one planet living. This does not include trying, to the extent it is possible, to regrow the ecological capacity run down since 1970 – which might be thought of as ecological debt owed to future generations.
Figures for global distribution of income are hard to come by but the share of income by the richest 10% in the USA is 50% of US GDP. It is not unreasonable to assume that there is a 20 to 80 ratio for global income. If 20% of the global population gets 80% of the income then the necessary reduction in income for one planet living could be achieved by reducing the incomes of the top 20% by a half – with most of the reduction falling on the top 1% who, in the USA, earned about 19% of all US income.
The ecological footprint of “platform capitalism”
I suppose Guy Standing might say that without the rentier constraints on the intellectual property regime technological change to respond to the limits to economic growth would be much faster and this may be true up to a point. The most prevalent idea against limits to growth ideas has always been that there will be “techno-fixes” and that human ingenuity will find a way. I should not assume what he would say but that would be a very commons way of thinking.
The trouble is that without a bio-physical analysis that explores the carbon, materials and energy intensities of the new wonder technologies we cannot properly evaluate them either – not as part of the solution but as part of the problem.
Take for example the matter of “platform capitalism” based on digital infrastructures which plays a major part of in what Standing sees as being the future. Like most other people Standing appears unaware that the digital infrastructure has a massive carbon footprint. In that sense it is not at all sustainable – and that which is not sustainable will come to an end.
Just looking at the energy consumption of their iphone, laptop or tablet, many people probably assume that their digital energy consumption is rather low. But creating an infrastructure to manufacture micro technologies and then using these manufacturing infrastructures is immensely energy intensive – and particularly carbon intensive now that processes have moved to China with its coal powered electricity system. Thus the energy (and carbon) consumption of the internet is rising rapidly in regard to the production of the infrastructures (servers, computers, routers, smart phones etc) as well as to the energy used in and through these system.
All the components are rising – just to take one example an average website with 10,000 page views per month could be responsible for emitting up to 4,700 lbs of CO2, equivalent to driving a car for over 5,000 miles.
This is important because extravagant claims are made that new technologies will save the world by saving energy and carbon yet there are good reasons to believe that the energy savings realised by digital technology will do no more than absorb and offset its own growing footprint.
In conclusion – “the purpose of a system is what it does”
In conclusion, a fundamental change in mind set is needed. Guy Standing takes us on the first part of the journey. He goes a long way but not far enough. Maybe I am being overcritical. I am not sure. To be fair he is appropriately scathing about the concepts used by economists and parasitical consultants where they define natural processes as “eco-system services” and “natural capital” so as to price them up for sale in financial markets. He can see the scope for rent seeking in this – which is the theme of his book. Making aspects of nature scarce could become a nice new earner for the financial markets. This is the strategy, not just of the British government (as described critically on pp 180 to 181) but of the United Nations Environment Programme with its “Economics of Eco-Systems and Biodiversity”. (TEEB 2013). According to money junkie economists, natural commons are “over-exploited” because they are available for free – because they do not have a price. If they had a price, if use had to be paid for, then less would be used and indeed, if the market for nature was competitive an optimal amount of nature would be used.
This conceptual garbage is promoted by the United Nations no less, as well as university professors of environmental economics the world over. But packaging nature and giving it a price will not protect it from “over use”- the chief ways to protect nature are to mobilise the opposition of local communities that sufficiently understand the natural processes and features where they live. Communities are needed that are committed to protecting the soils, the water and air around them as well as the local species of plants and animals to hand down to their children unimpaired. This requires communities alert to the dangers from money junkies who have no long run interest in people or places but only in the money they can make from them.
Since the purpose of the money junkies is not the protection of nature but to make money their “markets in nature” are bound to fail. The greatest amount of money goes to those who game the systems, who make back door deals with politicians, who co-opt the regulatory agencies and are implicated in an epidemic of fraud. This is indeed what happens over and again in the regimes “incentivised” by money – the patents, the subsidies, the tax breaks. The cybernetician the late Stafford Beer cut through the nonsense with his statement – “the purpose of a system is what it does”. This is not the same, it will be noticed, as the spurious purposes that are claimed to justify the rental claims. The real purpose is always to make more money – because while the economy is owned and controlled by money addicts for whom everything else takes second place, it cannot be otherwise. It is not to be wondered therefore that the stated policy aims supposedly incentivised by money are secondary, incidental, and rarely achieved. The systems described throughout Standing’s book succeed very well in their primary aim – rental extraction, but fail otherwise.
1. Continuity, Chance and Change E A Wrigley CUP 1988
2. Sources for this calculation are in https://en.wikipedia.org/wiki/Cubic_mile_of_oil
Featured image: oil platform. Source: https://www.freeimages.com/photo/oil-platform-1336513