We have an urgent responsibility. Our existing economic system is incapable of addressing the social and ecological crises we face in the 21st century. When we look around we see an extraordinary paradox. On the one hand, we have access to remarkable new technologies and a collective capacity to produce more food, more stuff than we need or that the planet can afford. Yet at the same time, millions of people suffer in conditions of severe deprivation.
What explains this paradox? Capitalism. By capitalism we do not mean markets, trade and entrepreneurship, which have been around for thousands of years before the rise of capitalism. By capitalism we mean something very odd and very specific: an economic system that boils down to a dictatorship run by the tiny minority who control capital – the big banks, the major corporations and the 1% who own the majority of investible assets. Even if we live in a democracy and have a choice in our political system, our choices never seem to change the economic system. Capitalists are the ones who determine what to produce, how to use our labour and who gets to benefit. The rest of us – the people who are actually doing the production – do not get a say.
And for capital, the purpose of production is not primarily to meet human needs or to achieve social progress, much less to deliver on any ecological goals. The purpose is to maximise and accumulate profit. That is the overriding objective. This is the capitalist law of value. And to maximise profits, capital requires perpetual growth – ever increasing aggregate production, regardless of whether it is necessary or harmful.
So we end up with irrational forms of production as a result: we get massive production of things such as SUVs, mansions and fast fashion, because these things are highly profitable to capital, but chronic underproduction of obviously necessary things like affordable housing and public transit, because these are much less profitable to capital, or not profitable at all.
Similarly with energy. Renewables are already much cheaper than fossil fuels. Alas, fossil fuels are up to three times as profitable. Thus capital forces governments to link electricity prices to the price of the most expensive liquified natural gas, not of cheap solar energy. Similarly, building and maintaining motorways is many times more lucrative for private contractors, car manufacturers and oil companies than a modern network of superfast, safe public railways. So capitalists continue to push our governments to subsidise fossil fuels and road building, even while the world burns.
Since Donald Trump’s election, many major investment firms enthusiastically abandoned their climate commitments, which had, in favour of the common good, restrained their profitability. This should be a clarifying moment for all of us: capitalism cares about our species’ prospects as much as a wolf cares about a lamb’s.
So here we are: trapped in capitalism’s set of priorities, which are inimical to humanity’s. Human ingenuity has bequeathed us splendid technologies and capacities. But, like a cruel divinity, capital not only prevents us from using them for our collective good, but in fact coerces us to deploy them towards our collective doom.
The system also locks us into never-ending cycles of imperialist violence. Capital accumulation in advanced economies relies on massive inputs of cheap labour and nature from the global south. To maintain this arrangement, capital uses every tool at its disposal – debt, sanctions, coups and even outright military invasion to keep southern economies subordinate.
The solution is staring us in the face. We urgently need to overcome the capitalist law of value and democratise our economy, so that we can organise production around urgent social and ecological priorities. After all, we are the producers of the goods, the services, the technologies. It is our labour and our planet’s resources that are at stake. And so we must claim the right to decide what is produced, how, and for what purpose.
How can this be done? There are three necessary conditions for the transformation of our economy from a dead-end dictatorship into a functioning and ecologically sound democratic one.
The first condition is a new financial architecture that penalises destructive private “investments” and enables public finance for public purposes. At the heart of this architecture we need a new public investment bank that, in association with the central banks, converts available liquidity into the type of investments consistent with common, sustainable prosperity.
The second condition is the extensive use of deliberative democracy to decide sectoral, regional and national goals (eg regarding the growth or even winding down of different outputs) towards which the new public finance tools will be aimed.
And the third condition is a Great Corporate Reform Act for the purpose of democratising corporations, favouring and promoting the formation of companies run along the lines of one employee, one share, one vote.
We live in a shadow of the world we could create. A world in which we shall be able to avert an almost certain ecological collapse, rather than waiting around for capitalism to push us beyond the point of no return. A world where the abolition of economic insecurity, precarity, poverty, unemployment and indignity is possible, while we lead meaningful lives within planetary boundaries. This is not a distant dream. It is a tangible prospect.
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Jason Hickel is professor at the Autonomous University of Barcelona and a visiting senior fellow at LSE. Yanis Varoufakis is the leader of MeRA25, a former finance minister and author of Technofeudalism: What Killed Capitalism.