Another fatal flaw of Capitalism: Myopia

It seems that something’s gotten into me recently and I keep writing about Capitalism-related subjects. I don’t know if this is triggered by the ongoing world-crisis or my late frictions with Libertarians but I guess it’s one of those things that needs to run its course.

There’s one thing that Capitalism does very well and that is to exploit resources and when those are running low, find something to replace them due to supply and demand. Thus when there is a demand for energy, capitalism will open opportunities for people to provide that energy.

There is however a fatal flaw in the procedure. The flaw is not fatal for Capitalism but unfortunately for the whole world.

You see, Capitalists are extremely short sighted by necessity. If a Capitalist does not seek to maximize profits, they will not have enough money for reinvestment and thus their competitors will overcome them. It’s a dog-eat-dog situation where you can be zero from hero in a short amount of time.

Capitalist Apologists will explain then that this is ultimately good for the consumer as this constant competition drives costs down and we all gain. But what they do not mention, is that this need to outdo your competitors by reducing costs does ultimately more harm than good.

Because one needs the maximum amount of short term profit, the consideration is always on using the technology and knowledge already available in order to cut down costs. Research & Development is not only expensive but also a risky endeavour which is why it is undertaken only when current costs are rising too high in the previous business model.

This is all well and good theoreticaly, but practically it is slow enough to create very real problems for everyone. Take for example oil. Until now, it has been the most valuable resource on Earth and it’s abundancy meant that there was enough supply to make it the number one choice for the Energy Capitalist. However Oil creates quite a few problems, the main ones of which are that it destroys the environment through global warming and that it funds and supports fanatics (religious or not).

In the long term, for the benefit of the whole humanity, it is far more beneficial to move away towards energy independence and clean energy sources. On the contrary, staying on oil means that the problems we have already increase at an exponential rate.
Because however the Capitalist is absolutely blind to the long term future –by necessity ((meaning that those who are not, are outpaced by those who are and drop out of the race))- they will keep using oil until other factors make it impossible to continue doing so. Only then will the capitalist seek to develop clean energy sources.

But by then, it will be too late. What use will clean energy be when the whole planet is in the process of meltdown with billions of people dying? Capitalism cannot foresee this. it can only see the short term profit.

And that’s not all. Not only is the Capitalist unaware of the damage he is doing for the long term, but he will seek to silence and muddle the waters to his benefit for as long as possible for his continued existence depends on him doing so. There is a very specific reason why Capitalists are the biggest deniers of Global Warming.

And this applies mostly to unregulated capitalism, completely free from Government intervention or assistance. The only reason companies are doing R&D now, which is a totally long-term strategy, is because they know the Government will protect them with artificial scarcity laws (AKA: intellectual Property). The Government has enough disconnection from profits to be able to see the coming events and attempt to steer the rudder away from turbulent waters. This is the reason R&D is very often subsidized in order to promote it or environmental (and not only) policies are made mandatory.

I am no fan of the State control, but I recognise that an unregulated Capitalism is a recipe for disaster. It will stimulate tremendous “economic” ((where “economic” means that the rich will get richer and they will pass that as a benefit for everyone)) and productive growth until, like a bacterium which found ample room to grow and expand, it will end up killing its host and thus itself and all it has achieved.

If we had an environment with unlimited resources, Capitalism would have been a passable choice. If we had achieved unlimited energy production or space exploration enough to allow us to mine other planets, then this might have been possible (and even then regulation for not destroying the Earth ecosystem would still be necessary). But we are limited and are very close, or have even passed our limits.

We recognise this, because we can see further than next quarter’s profits but they cannot. To give you another metaphor:

If Humanity is a train and we let Capitalism steer the wheel, all they will be able to see is the straight tracks in the next ten meters ahead and keep accelerating. They will fail to see the sharp turn 1 kilometer away, until it’s too late to slow down anymore. It will not be any consolation to anyone that we managed to break the speed of sound as we go over the cliff. We still won’t be able to fly…