For at least three hundred years capitalism has been the dominant economic system of western nations. What made capitalism so successful was it’s ability to harness surplus quantities of cheap hydrocarbon energy sources in order to perform the “work” of economic activity. This is work in the fundamental “physics” sense of the word, where energy is defined as the capacity to do work, and work itself is defined as a force moving something a distance. Ultimately, economic activity requires that a force move something a distance, requiring energy to be consumed. As long as there is an ever increasing availability of these concentrated energy sources to perform the work of REAL economic activity, the capitalist system hums along beautifully, ignoring the collateral ecological damage for now. Also, REAL, rather than illusory economic growth, an imperative of this system, can continue unabated. And ideally, we get the desired 3% to 4% real growth rates, coupled with full employment, low inflation rates, balanced budgets, modest prime lending rates, manageable inequality, an educated workforce, households with manageable debt, and global peace.

Command economic systems like those found in communist countries have never been as successful as the market based system of capitalism. Even with the availability of surplus energy, command economic systems with centralized power controlling economic activity, are too inflexible, and far less responsive to change because of their centralized nature. Without free markets and the Law of Supply and Demand, economic growth is slow.

As long as surplus energy is available to stoke the engines of growth, capitalism is a far superior economic system than any centralized socialist system. But what happens when energy constraints are introduced? As stated, constant, uninterrupted, infinite economic growth is an essential imperative of capitalism. Why must growth continue? Businesses can grow or expand by increasing productivity, but to expedite growth they take out loans, thus assuming a debt to be paid back at interest. The money they receive as a loan was created out of thin air, ultimately by the Federal Reserve, and with interest attached. Only the PRINCIPAL of the loan was created out of thin air. To pay back the principal PLUS interest requires NEW loans to be made to further increase the money supply. Without real economic growth occurring commensurate with the expanding money supply, unacceptable price inflation will occur, as too many dollars chase too few goods and services. And as long as debt levels don’t become so high that servicing the debt becomes an issue, then this debt based money system can continue.

Why is it then that I contend that a new economic system is essential? Fundamentally, it is because REAL economic growth is coming to an end; essentially a permanent end, never to resume in any meaningful time frame. The best central governments are capable of doing to preserve the illusion of growth is to pursue a strategy of staggering levels of deficits spending, coupled with historically low interest rates, and multiple rounds of quantitative easings. Monetary interventions have failed to engender robust economic growth, the kind of growth we became accustomed to during the post-war years of 1945-1980. Our modern strategy has been akin to keeping a Stage Four cancer victim mainlined with high doses of opioids; he feels better, and may think he’s getting well, but his case is terminal.

Why is it that the aforementioned “real” growth is coming to an end? Simply because the availability of profitably to produce, highly concentrated, portable, liquid forms of hydrocarbon energy are disappearing. That of course means oil; conventional oil with it’s broad suite of hydrocarbon compounds that can be refined into everything from asphalt to fuel oil, to diesel, to jet fuel, and to the varying grades of gasoline. The mythology of “Saudi America” due to the advent of fracking technology to access “tight oil”; oil trapped in source rock rather than reservoir rock, is just that, a mythology. Yes, fracking and horizontal drilling technologies to access previously inaccessible sources of oil have postponed the day of reckoning by a decade or so, but this drilling frenzy has failed to ever produce profits, having an industry wide accumulated negative free cash flow of over $200 billion. This source of oil also doesn’t have the versatility of conventional oil, and can’t be used to produce diesel, jet fuel, fuel oil, or the higher grades of gasoline without first being mixed with conventional oil before refining.

What else might suggest that growth capitalism is in trouble? For starters, income and wealth inequality that are higher now than at any time since the Gilded Age. Also, for the first time in American history, a generation of thirty-five year old’s (the Millennials), have less accumulated wealth than their parents did at the same age. What else? The hollowing out of not only manufacturing, but all mid-level occupations, due to outsourcing and automation; the rise of credit card debt and all other aspect of personal debt, in a desperate attempt to preserve the illusion of being middle class; the staggering burden of student loan debt for the young; the costs of renting rising at a far faster rate than incomes; the rise of homelessness; the opioid epidemic; the rise in bankruptcies and foreclosures; the rise of the “gig” economy; the pension crisis; the loss of reliable benefit packages; the trend away from defined benefit retirement packages; the decreasing ability of Social Security alone to provide a living income, and the return of the elderly to the workforce. This is NOT an all inclusive list.

Despite the list above, there is something else that is far, far more menacing as a profound and undeniable indicator that growth capitalism is dying: the emergence of what is being called Catabolic Capitalism. The author of the concept of catabolic capitalism is Craig Collins, Ph.D, of California State University East Bay. Doctor Collins fully elaborates his theory of catabolic capitalism in the essay titled: “Catabolism: Capitalism’s Frightening Future“, published by http://counterpunch.org. Please read this most inspiring and enlightening essay. The gist of the essay is that growth is not the primary driving force behind capitalism-profit is. Dr. Collins further states that as globalization runs down, a grim catabolic future is eager to replace it; that it’s a system characterized by hostile takeovers, mergers and leveraged buyouts, predatory firms devouring their competition; that in a growth-less economy, catabolic capitalism is the most profitable, short-term alternative, making it the path of least resistance after growth capitalism has expended itself. He acknowledges though, that without growth, catabolic capitalism is not sustainable; just a self-cannibalizing end-game that devours the society that had previously sustained it.

So if catabolic capitalism is the natural outgrowth of what formerly was growth capitalism, then what replaces the wreckage of spent catabolic capitalism? This is the most important question to answer in my essay. Self-organizing, naturally emergent systems WILL replace catabolic capitalism. Resources, however depleted, will have to be marshalled to sustain human life. How then, will all this unfold in the aftermath of the demise of catabolic capitalism?

I believe that post catabolic capitalism, there will be two emergent and competing systems for organizing human activity to meet our daily needs; one is neo-feudalism, and the other is worker cooperatives. These systems can be fashioned to operate in urban, suburban, and rural environments, and will take on varying attributes depending upon local needs. Five years ago I wrote a short story titled “The Ninety-four Forties“, which can be found on this blog under “Pages” that examines in fictional form a confrontation between these economic modalities. I am not the first, or the most vocal to propose this dichotomy. Richard Wolff, Professor of Economics Emeritus, from the University of Massachusetts, Amherst, has shouted for years from the rooftops about the advantages of worker co-ops. Please check out one of multiple YouTube videos where he discusses worker cooperatives as the most equitable, beneficent system for arranging worker activity in a post-growth world. In a worker cooperative, the workers in the enterprise collectively function as their own board of directors, thereby not needing any separate group of people functioning in this role. This arrangement is what Dr. Wolff calls a Workers Self-Directed Enterprise (WSDE); radically different from the hierarchical capitalist model. Capitalist enterprises and WSDE’s are just different ways of organizing production.

A great advantage of the worker cooperative is that you are extending democracy into the workplace. The workers hire management, not the other way around. Management is evaluated by the workers, again, not the other way around. Managerial compensation is also determined by the workers. In the most successful worker cooperative in the world, the Mandragon Cooperative Corporation in the Basque region of northern Spain, the CEO can only make 8.5 times the pay of the lowest paid worker. Typical capitalist enterprises by contrast, in addition to their hierarchical nature, are autocratic, dictatorial worker regimes, where the CEO makes hundreds of times the income of the average worker. Also, since no parasitic stockholders exist in worker co-ops, who must be rewarded with satisfactory quarterly dividend checks, the exigency of profit is reduced, if not removed entirely. So, is it possible that worker cooperatives are a model for arranging human activity that can be successful in a contracting rather than expanding economy? Can they be part of the “managed contraction” to the smaller “steady state economy”, often discussed by Richard Heinberg of the Post-Carbon Institute? Can encouraging the establishment of worker cooperatives stave off competition in the form of neo-feudal empires with their quasi-slave labor? I don’t believe anyone wants to see a revival of sharecropping.

Governments are pathetic when it comes to accomplishing anything, or making anything happen. But appropriate government intervention can “encourage” certain developments. Government action can encourage the establishment of worker cooperatives by using incentives; with making “space” in the corporate world so cooperatives can compete on an equal footing with conventional public and private corporations. Properly designed government intervention can DISCOURAGE the establishment of post-growth neo-feudal empires.

Whether we like it or not, growth capitalism, based as it is on ever increasing supplies of surplus energy, is ending. It’s replacement, catabolic capitalism, temporarily fills the void, but is ultimately an unsustainable model since cannibalizing an economy leads to it’s destruction. Either worker cooperatives arrangements or neo-fuedal arrangements are the likely models for organizing and conducting human activity that will step into the vacuum created by the demise of catabolic capitalism. We can remain passive and permit the carnage that accompanies economic collapse, or we can actively intervene to promote a better way forward.