Corporate Capitalism from a Systems Perspective
by Jim Brown
“We really do not know how this system works . . . The old models just are not working.”
— former Federal Reserve Chairman Alan Greenspan addressing the Fed’s policymaking committee
Prologue: Boy Has Somber Insight
Sometime around the age of eleven or twelve I learned something very important, although I did not realize just how important until much later. My parents had taken me to a carnival and turned me loose to wander. Drawn like a magnet to the side shows, I studied the lurid illustrations and listened to the barkers’ come-on spiels promise the most amazing, miraculous spectacles for those who paid their money and slipped through the canvas tent flaps into the mysterious darkness inside.
An air of furtive excitement, of immanent, wondrous and somehow illicit discovery seemed to pulse along the marquee, and my heartbeat quickened with it. Should I spend my meager funds on rides, or on a ticket to see the Dog-faced Boy? Or the World’s Strongest Man? Or the Half-Woman/Half-something else?
I don’t remember what the other half of that last one was supposed to be, but the crude painting of the scantily-clad upper half of a woman tipped the scale. I parted with my money, entered the dusty, dimly lit tent, and joined a line of guys—mostly young—filing past a small enclosure. Within it reclined a woman—not young—wearing the top half of a swim suit and a costume from the hips down that was supposed to resemble half of a something-or-other.
All the excitement I had felt curdled instantly into a complex jumble of unpleasant feelings and a tacit knowledge that went something like this: the carnies had dangled a laughably unbelievable fantasy, counting on impulses I did not understand but apparently shared with many others, and had conned us into paying money to find out what chumps we were. Furthermore, I understood something about commercial interactions that I had noticed repeatedly without giving much thought to: an object or event offered for sale or trade often hooks a fantasy that seldom gets fulfilled. It would be a long time before I could articulate this understanding, but it was born in that moment.
Finally, I knew somehow that people who get duped like this tend to accept it as common practice. I saw it as the other suckers and I straggled out of the tent, facial expressions unreadable, and dispersed. Not one of us rushed back to the ticket line to demand our money back and warn others about the scam.
Living in a Freak Show
The epiphany described above happened many years ago, and I haven’t thought much about it until recently. As I prepared to write this essay, the memory of that experience bubbled into awareness. I quickly saw its relevance to what I wish to convey here: the economic system known as capitalism that now dominates humanity and wreaks grievous harm on the natural world has all the elements of a carnival side show—a freak show that touts something un-natural, exacts payment to experience it, and counts on nobody minding enough to blow the whistle.
Strong words, I know, and tightly packed. Please stay tuned while I unpack them. The next few pages lay a foundation of knowledge about systems in general, so that the reader may understand precisely how the prevailing economic system violates principles governing all systems.
System; Economic; Capitalism.
Let’s start with system, a term commonly used but seldom fully understood. We know we live in a solar system, homes have heating systems, cars have electrical systems, bodies have digestive systems. What constitutes a system?
Think of a set of elements that all connect together, each one affecting all the others. They all function together as a whole, and that whole accomplishes something—keeps a home at a comfortable temperature, generates and distributes electrical current to the parts of a car that need it, extracts energy and building material from food and excretes waste, those sorts of accomplishments.
Now, get this . . . each element in a given system is itself a system (like the alternator in a car’s electrical system or the spleen in a body’s digestive system), and each system is itself an element in a more comprehensive system (the entire car, for instance, or the entire body). In writings about living systems, you will find the term “nested hierarchy” referring to this perspective (i.e., systems nested within higher systems almost never-endingly). Arthur Koestler coined the word “holon” to mean both whole and part. “Nested hierarchy” then becomes “holarchy.”
Living and Non-Living
If you are with me so far you probably noticed I threw you a curve in the middle of that last paragraph—the term “living systems.” The term implies, correctly, that some systems are alive and some are not. You would probably like to know how living systems (synonymous with natural systems) differ from non-living or artificial systems. I deliberately used examples of each above—bodies and cars—and we come now to the distinction as systems theory formulates it. It needs articulating if we hope to understand economic systems and why the capitalist system is like a freak show.
Remember that systems, in the more-or-less technical sense used here, always accomplish something. Now, as far as we know, nothing in the universe gets done without some form of energy being involved. That means systems need energy to do what they do. Where does this energy come from? Here’s where we get to the difference.
A living system proactively takes in sources of energy from other systems around it (the biosphere) in a chain tracing all the way back to the sun. It processes those sources of energy (you know, food), deriving a form of energy it can use to do its thing, then releases what it does not use back to the biosphere to be used as food for some other system. All along the way—input, throughput, and output—the living system functions autonomously, meaning it sustains itself. All its subsidiary and overarching systems do the same thing; “itself” does not mean “in isolation.”
A non-living system, on the other hand, must have energy provided to it in order to function. It cannot proactively obtain energy for itself. It produces waste that seldom serves as fuel for other non-living systems, but instead increases disorder in its environment. I am trying to convey here that non-living systems do not sustain themselves. They are—or behave like—machines, and machines quickly cease functioning unless they are maintained from the outside.
Let’s look more closely at how a living system sustains itself. That process turns out to have two distinct and vital facets: self-regulation and self-organization. The discussion about the freakish aspects of capitalism that comes later hinges on at least a rudimentary grasp of both of these facets.
A living system such as a human body regulates its own internal environment within a shifting external environment. Your body keeps its temperature within a livable range, for example, by moving warm blood to the surface when excess heat needs to be radiated to the environment, or re-directing blood to the core when it’s cold outside and body heat needs to be conserved. How does your body know when to do which? Through its sensory networks, of course, which give feedback—information about how environmental conditions are affecting the body and how well the body is adjusting to them. Without this information, the body would have no basis on which to coordinate its myriad subsystems so that it and all its constituent holons survive.
If I were to diagram this information-response process, you would see that it occurs in loops: a change in one holon causes a change in another, and that change in turn causes more change in the original holon. Visualizing it like that might help clarify the discussion that follows. Systems thinkers make extensive use of loop diagrams in applying information-response dynamics to real world situations.
The kind of feedback that enables living systems to self-regulate is called deviation-reducing, or simply negative, feedback. It helps the system reduce the deviation between the conditions favoring survival and the conditions actually prevailing within the environment. Keep this crucial aspect of living systems in mind when we get into discussing capitalism below. We will examine how capitalism (more specifically, corporate capitalism) tries to evade negative feedback.
The deviation-reducing feedback described above serves the status quo, which enables survival of a system as long as environmental conditions remain within a certain range. If those conditions change too drastically, though, the system must either perish or find a new level of adaptation. Living systems must change, grow, develop at such times, and they have the ability to do that—to re-create themselves in response to shifting environments.
Returning to the example of body temperature relative to environmental conditions, let’s imagine a primitive human who has lived comfortably naked in a temperate climate. Imagine the climate suddenly becoming so much colder that the person’s body can no longer stay warm enough through internal processes. This person and his or her companions, who are all facing the same crisis, discover quickly that huddling together keeps them warmer. But they cannot remain huddled and still do what they need to do, such as obtain food. They have observed that other mammals are covered with fur and live in dens. They emulate this, and by doing so manage to survive. They have adapted by learning effective ways to change their behavior, leaving behind the old status quo and re-organizing around a new one. Deviation-reducing feedback will resume, but at a higher level (behavioral/cultural) that incorporates the previous level (physiological).
Let’s look at another illustration of self-organization that might seem more relevant for some readers. Imagine a girl growing up in a family that conditions her to keep her eyes lowered and speak in a small voice. She learns to feel normal and accepted only by behaving meekly. When she grows up and leaves home, she marries into a family in which her meekness invites scorn and verbal abuse, and the more abuse she gets the meeker she acts, which only brings more abuse. One day she loses all self-control and bellows, “Stop it! You’re all driving me crazy! Just back off!” Astonished, her in-laws do back off. From then on she holds her head up ands speaks assertively, which gains the respect of her in-laws and eventually feels normal to her.
How does this fable illustrate positive, or deviation-amplifying, feedback as a factor in self-organization? Remember how, when she got verbal abuse from her in-laws, the woman acted more and more the way she had been trained to by her original family, which stimulated more and more abuse, and so on in what we commonly call a “vicious cycle.” Well, systems thinkers call this a positive feedback loop. Schematically, it works like this: an activity in holon A elicits a response from holon B, which then elicits an increase in holon A’s activity, which increases holon B’s response . . . and so on.
Do you see how this scheme would amplify deviations from an optimum state of being—in this case, the woman’s level of emotional comfort? The positive feedback loop was interrupted only when the woman blew her top and self-organized at a higher level. It’s a good thing she did or she really would have gone crazy—disintegrated psychologically. Because throughout the natural world, positive feedback loops must culminate either in a breakthrough to a higher level of system organization–and resumption of self-regulation at that new level—or in system disintegration. The feedback gets going when change in a system’s environment requires change in the system, and it can lead to evolutionary development. But if allowed to go on too long, such a loop can lead to the system’s destruction. We will have occasion to recall this in the next section.
There you have the basic nature of systems, and the qualities (self-regulation and self-organization) that distinguish living from non-living systems, as simply as I can state them. With this background, we are ready to look in general at economic systems, and at corporate capitalism—the industrial growth economy—as a particular subset of those.
Economic Systems; Capitalism
We shouldn’t have difficulty agreeing that the set and subset italicized in the heading above share the characteristics of systems. Think of an economic system as the totality of production, distribution and trade or purchase of all the stuff that people need (or believe they need) to live. Think of all that goes into that totality—all the activity, equipment, communications, transportation, storage, display, marketing, and the complex movement of money throughout the whole system that connects it all together. It meets the qualifications of systemhood in that it comprises a holarchy in which a change in any holon affects all the other holons (through feedback loops). It accomplishes something: matter and energy go into it (input), they get processed and used (throughput), and conditions in the environment change as a result (output and waste).
Does it match the characteristics of a living system? Ideally, yes. Self-regulation occurs when the economy attends to ongoing information about the environment from which come the matter and energy that fuel it, and into which it moves its waste, and adjusts its throughput to keep that environment, and therefore the economy itself, viable. Self-organization happens in the event that the environment shifts beyond the economy’s current capability to adjust and, following some inevitable turbulence, the system re-organizes at a more complex level to accommodate the environmental shift. An example of such a shift is the impending depletion of cheap petroleum. An example of self-organization in response to it would be developing and deploying alternative energy sources.
Now we can inquire whether the economic system called capitalism fits the profile of a living system. Let me remind you that I used the term corporate capitalism earlier in the essay, since what I am about to show you refers to capitalism as manifested particularly in the functioning of large corporations. Immense multi-national corporations constitute the pre-eminent business form throughout the world, and thus drive the world’s economy. Capitalism and corporatism are inseparable on a global level, which is what I had in mind earlier when I described it as dominating humanity.
To review quickly, living systems have the capacity to regulate their functioning autonomously, through a process called deviation-reducing feedback. This process relies on a flow into the system of accurate information about the environment, so that the system can make internal adjustments to match fluctuations in the environment.
Now, check out what one prominent spokesman for a wing of corporate capitalism known waggishly as Cornucopianism has to say:
People since antiquity have worried about running out of natural resources . . . Yet, amazingly, all the historical evidence shows that raw materials—all of them—have become less scarce rather than more. It is beyond any doubt that natural resource scarcity—as measured by the economically meaningful indicator of cost or price—has been decreasing rather than increasing in the long run for all raw materials . . .The trend toward greater availability includes the most counterintuitive case of all—oil.
Professor Julian Simon wrote this in a 1996 book he edited, The State of Humanity (I added the italics in the quotation). We will now examine the basis for his mind-boggling claim that raw materials—the input of corporate capitalism—have become “less scarce” rather than more scarce. In doing so we will quickly discover how and why the industrial growth economy has split off from the world of material reality and natural systems and become a freak show.
Look again at the phrase in the excerpt above that I have set off in italics: scarcity—measured by the economically meaningful indicator of cost or price. By relying on the classic market formula relating supply, demand and price (the higher the demand for a commodity relative to supply, the higher the price; the higher the supply relative to demand, the lower the price), he has barely escaped blatant dishonesty. According to that formula, lower price does indicate higher supply, therefore less scarcity.
Here we come to the crux of this essay. Simon has tipped the hand of industrial growth capitalism by making a patently absurd claim based on an abstract indicator that has no validity in the real world. He has opened the door on a common practice in our economic system: using measurements that have little relationship to real world limits to guide decisions that have real world impact. Imagine a horde of Lemmings scurrying toward the suicide cliff. Within the horde may be seen some Lemmings with little notebooks and calculators, measuring the Lemming equivalent of economic well-being but paying no attention at all to the cliff up ahead. That, I believe, is roughly our situation.
The economic system that unfortunately governs the fate of most of humanity, industrial growth (corporate) capitalism—with all its political and sociological underpinnings—has substituted reliance on abstract “indices” such as “price” for accurate feedback of environmental realities that ultimately determine our well-being. Invoking the archaic market formula, without accounting for such system distortions as government subsidies and externalizing costs, is dangerously absurd. In cutting off accurate deviation-reducing feedback, one of the essential features of viable living systems, capitalism has increased its risk for demise as a system. As discussed below, the consequences of that demise could be devastating
That risk becomes even more grave when we consider corporate capitalism from the point of view of positive or deviation-amplifying feedback. A few pages ago I stated that positive feedback can kick a system into a more adaptive level of organization, but that, if not interrupted by resumption of negative feedback, it can shake the system to pieces. It appears that the industrial growth economy, corporate capitalism, is fully caught up in a runaway positive feedback loop.
Growth is the shining beacon for our economy. All indicators revolve around showing growth or the lack of it (Gross Domestic Product, GDP, is foremost among these indicators). Economists speak openly about this, proudly and with and no apparent awareness of the loop’s lethal potential. How can such ignorance persist?
Herman Daley suggested an answer to this question in a paper he delivered at a conference in 1982
Economists . . . are not without some excuses for their predicament. They do not really deny that raw materials come from the environment, or that waste returns to the environment. But economic theory developed at a time when the environment was considered an infinite source and sink because it was so large relative to the economy. Since the throughput flow went from an infinite source to an infinite sink it involved no scarcity, and could, presumably, be abstracted from for purposes of economic theory. But economic growth means that the scale of the economy gets bigger, and it is now no longer reasonable to treat it as infinitesimal relative to the ecosystem. (Italics added for emphasis)
Some excuse! To overlook the fact that a growth economy grows, and that this one has grown so huge that the ecosystem can no longer serve benignly as endless source and sink seems not just dumb, but willfully perverse.
I have found no clearer demonstration of that perversity than another statement by Julian Simon, whom I quoted earlier. This appears near the end of the article I quoted from:
We have in our hands now—actually in our libraries—the technology to feed, clothe, and supply energy to an ever-growing population for the next seven billion years. (Italics mine)
Simon obviously didn’t do the math on this flamboyant claim, but someone else did (retired physics professor Al Bartlett). Calculating population growth for seven billion years, even at a minuscule rate of growth per year, the number of people to be fed, clothed, and supplied with energy would vastly exceed the number of atoms in the universe. This is precisely the sort of obvious natural limit that Simon refused to acknowledge, and that those he spoke for still refuse to acknowledge.
But even the triumphant seven billion year bleat wasn’t enough for Simon. The very next paragraph ends this way:
The discovery of genetic manipulation certainly enhances our powers greatly, but even without it we could have continued our progress forever. (Italics mine)
What havoc will ensue if growth continues to foment growth in a positive feedback loop for even a few years longer—never mind 7 billion? Global climate change and sharp depletion of cheap oil—both, arguably, direct outcomes of “growthmania” (Herman Daley’s term)—are already on us. It is inevitable that the financial strain wrought by accelerating natural disasters like Hurricane Katrina, and by waging perpetual war in the Middle East, will set off a relentless cascade of economic chaos throughout the system. With the current economic meltdown in the developed nations of the world, we may well be in the first stages of that chaos–large scale, across-the-board disaster.
The system we have known and relied on will likely fall apart entirely. If that happens suddenly, we will see a world of hurt, literally. More gradual disintegration could allow for transformations in the system that would turn it around and make it viable. The first would be system death; the second would be self-organization. A third possibility would be self-correction prior to extreme crisis, but the system appears to have too much inertia—denial, massive investment in the status quo, simple ignorance, etc.—for that to happen.
I can’t predict which it will be, but based on the thoughts I have shared in this essay, one of the above outcomes is inevitable. Our current economic system cannot last. Common sense requires that we begin devising alternatives.
Epilogue: Somber Insights Keep Coming
The boy who had the unsought epiphany in the freak show still lives in the man I have become. What I experienced outside and inside the dim, dusty tent so many years ago—the barker’s come-on, the arousal of feverish excitement, the ludicrously phony display, the puzzling, unspoken assumption of the scam’s normalcy that I saw in my chump peers, and in which I colluded—set my life on a course of uncomfortable comprehension. Each element of the experience symbolized a part of the template I have seen repeatedly stamped on western culture, especially its economy. More often than I like to admit, I have pretended not to know what I know and played along, still hoping for the un-natural wonder, still susceptible to the come-on. The barker’s words have changed, but the message remains essentially the same.
Step right up, ladies and gentlemen—
on the other side of this door you will find
riches without end, gadgets guaranteed
to relieve you of all drudgery,
protection against harmful aging,
security for life, interest compounded daily.
Just kick back and let
your money work for you!
No crowding please, ladies and gentlemen—room for all.
Take what you want, all you want, plenty more
where that came from!
Laws of Nature suspended
for your convenience!
Travel anywhere, vehicles of all sizes; hit the road, Jack!
Go on in, ladies and gentlemen; all these wonders
will unfold before your eyes for the low, low cost
of your intelligence.
Ladies and gentlemen, once inside,
you may encounter occasional nay-sayers.
Pay them no mind!
Just follow the simple directions,
and stay in line please,
ladies and gentlemen,
stay in line.
* * *
The brief descriptions of systems principles in this essay were distilled from these key books on the subject: The Systems View of the World by Ervin Laszlo (George Braziller, 1972); Mutual Causality in Buddhism and General Systems Theory by Joanna Macy (SUNY, 1991); The Web of Life: A New Scientific Understanding of Living Systems by Fritjof Capra (Anchor, 1997); Beyond the Limits by Meadows, Meadows and Randers (Chelsea Green, 1992). I refrained from discussing one essential principle of living systems—emergent properties—because it did not bear directly on my main point. To get the whole story, readers whose interest in systems thinking was piqued at all by reading my essay need to look into the more detailed material contained in these books.
David Korten’s 1999 book The Post-Corporate World: Life After Capitalism also touches on systems principles, but mostly it provides a treasure house of information about the historical and cultural background of industrial growth capitalism.
In quoting Herman Daly, I chose for brevity’s sake to leave out fascinating revelations about money, how its nature has changed over time, and how its current fetishistic attributes underlie many of the ills of modern capitalism. To remedy this omission, I recommend reading his book For the Common Good (Beacon Press, 1994).
Korten and Daly (and quite a few others) offer excellent ideas about transforming the freak show economy into a system that better serves humanity and sustains itself naturally. That would be a very good thing to get started on, and soon.
The Spring Creek Project for Ideas, Nature and the Written Word provided crucial support in bringing this essay to fruition. I dedicate the essay to the memory of Franz Holb.