An SF writer’s diagnosis and cure for capitalism

In the opening of Kim Stanley Robinson’s new SF novel, New York 2140, two unemployed financial software engineers known as Mutt and Jeff—unemployed because they refuse to design a possibly illegal program for high-speed trading—contemplate a flooded lower Manhattan from atop the former Metropolitan Life building.

One of them says he has figured out what’s wrong with capitalism.

The basic problem with capitalism, he says, is that the forces of the market forces producers to sell products below cost.

How can you sell below cost and survive?  By offloading your costs onto someone else—onto customers, onto neighbors, onto taxpayers, onto the wider community and onto future generations.

This enables an individual enterprise to survive (sometimes), but, in the long run, leads human society into bankruptcy.

In the novel, global warming has taken place, sea levels have risen and lower Manhattan is under water.  Skyscrapers such as the Met Life building are still survive amid a kind of new Venice.  Uptown Manhattan is 50 feet higher in elevation, and is dry.  In the middle is a tidal zone, where the poor and homeless congregate.

Some environmental problems have been solved, or at least are being coped with.  Gasoline, jet fuel and other fossil fuels no longer exist.  Air travel is by dirigible, ocean travel is by sailing ship and land vehicles are electric.   But the financial structure and distribution of income are more or less like they are now.

New skyscrapers—”superscrapers”—in uptown are owned by the world’s wealthy elite, as investments or as one of multiple homes, and are often vacant.

A hurricane late in the novel leaves many homeless.  They try to storm the vacant uptown towers, and are turned back by private security forces, who outgun the New York Police Department.

Rather than attempt a violent revolutionary overthrow, the common people attempt a political and economic jujitsu.

They join in a nationwide debt strike.  On a given day, they stop paying their mortgages, student loans and credit card balances.  The financial system is go highly leveraged with debt upon debt that it comes crashing down, just as in 2008.   So the financiers go to Washington for another bailout, just as they did then.

But this time, the President and Federal Reserve Chairman, who are in on the plan, act differently.  They tell the banks and investment companies that they would be bailed out only on one condition—that the government be given stock of equal value to the bailout, as was done in the bailout of General Motors.   Those who refuse this deal are allowed to fail.

Now the federal government has the authority to force the banks to act as public utilities.  And the huge profits that once flowed to the financial elite now flow to Washington, which makes it possible to adequately fund public education, infrastructure improvement, scientific research and all the other things the country needs.

And so the American people live happily—not ever after and not completely, but for a while.

∞∞∞

This is a novel, so I shouldn’t criticize it as specifically as I would a political manifesto or a political party platform.  I think Robinson is on the right track, but I have a few reservations.

I don’t think it is always the case that corporations create negative value.  Economists have a word, “externalities,” for all the costs they put off onto others, but it is not necessarily the case that the externalities exceed the value of what they create.

It is true, though, that the great increase in productivity and wealth since the start of the Industrial Revolution is based on exploitation of fossil fuels at an ever-increasing rate, and that this cannot go on forever.

It is possible that the technological progress made possible by the Industrial Revolution will enable humanity to bootstrap ourselves into new renewable and sustainable technologies that will allow us to stay at the level we’re at.

But it also is possible that the whole system could come crashing down, and the Industrial and Scientific revolutions could turn out to be brief episodes in human history.   It is perverse to depend on ever-increasing spending as a source of prosperity, and on military spending as a means of stimulating the economy.

Michael Hudson and other heterodox economists have pointed out that world debt—government debt, corporate debt, individual debt—is more than can ever be repaid, and, therefore, it won’t be repaid.

Someday there will have to be a debt Jubilee, as in the novel; the question is whether this will come before or after another Great Depression.

I don’t think that nationalizing banks would solve the federal government’s financial problems.  The big profits of financial corporations such as Goldman Sachs come from anti-social activities, which a responsible government would not allow.

But I do think that banks—especially banks with government-insured deposits—should be regulated public utilities.   I also think there is a role for publicly-owned banks.

And I recommend this thoughtful and thought-provoking novel.

LINK

New York 2140: a novelist’s version of a drowned city that still never sleeps by Robert Kopp for The Conversation.  A review by a climate scientists.

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