Free Market Capitalism is Immoral

An Essay on the Immorality of Capitalism, Given that the Economy is a Thermodynamic System

So here we are:

Just a few years into the Information Age and barely two centuries after the Industrial Revolution, the Western world is experiencing the excruciating convulsions of withdrawal. Looking to the future while reflecting on the past, can science explain our present pain?

And if so, what are the moral implications?

Before proceeding, note that these two questions examine two sides of a coin.

The first side—scientific explanation—deals with objective facts of existence, to the extent that they can be discerned. It serves to provide insight into causality, and thus into what is predictable (or knowable) about nature. While science acknowledges that not all facts can be discerned with certainty, some, like the pull of gravity, are indisputable.

The other side of the coin—morality—deals with subjective responses to existence. It serves to provide for the common good. As individual subjects engaged in the ongoing creation of reality, we each behave morally or immorally to the extent that we positively or negatively affect the wellbeing of other subjects, and to the extent that this matters.

The objective lessons that we learn through science can be combined with our subjective sense of morality to inform the choices we make—choices that contribute to development of a socio-economic system of interdependencies that one way or another constrain our activity.

We have discovered many facts of existence since the beginning of the Industrial Revolution. For example, we have learned that no engine can ever work with 100% efficiency. We have also learned that all life on earth, including human life, is composed of cells derived by cell division from a common ancestor that lived over 4 billion years ago. We are kin to all creatures.

At the same time, our subjective sense of morality has not changed, and spans all cultures. Unlike objective reality, it is quite simple, and can be distilled down to a single criterion: The Golden Rule. Do unto others as you would have them do unto you. By this rule it is immoral to (knowingly) do things that increase the suffering of others, because none of us would have others do things that increase our own suffering.

So again, we may ask: what has science taught us about our present predicament? And given the Golden Rule, what are the moral implications of those lessons?

Jumping to the punch line—

From a scientific perspective, the economy is a thermodynamic system. As such, it is governed by the laws of thermodynamics. Our present predicament is a consequence of free market capitalism, an economic system motivated by acquisitive activities of some individuals that, by virtue of the laws of thermodynamics, predictably (and hence knowingly) increase the suffering of others. Since this violates the Golden Rule, we must conclude that free market capitalism is immoral.

I will now unpack and defend each of these statements in turn.

Thermodynamics literally means the movement of heat. The science of thermodynamics began with the Industrial Revolution, as engineers sought to maximize the work efficiency of the steam engine. Sadi Carnot (1796-1832), “the Father of Thermodynamics”, showed that some of the energy that is used to create the steam that forces the motion of the pistons is always lost as heat that cannot be recovered in a useful form. In other words, whenever potential energy (for example, that stored in coal) is converted to a functional form of kinetic energy (for example, the directed movement of a steam engine) some of the potential is irrecoverably lost as heat that is incapable of fulfilling the same function. We now know that this is due to friction, which always of necessity occurs when material bodies interact. This fact of existence eventually became known as the Second Law of Thermodynamics. It is the reason that it is not possible to engineer a “perpetual motion machine”.

The fact that the Industrial Revolution led to the discovery of the Second Law was not a coincidence, and is quite pertinent to what follows. For, the Industrial Revolution was an economic revolution, whereby the power of energy locked away in fossil fuels was transformed into the power of machine-driven commerce. Fuel-burning engines greatly increased the power of anyone clever enough to construct and use them, and thence the amount of wealth that could be amassed by leveraging that power to create things of value. To whom that wealth goes depends of course on the laws of the land, and is hence determined by history and politics (not to mention sociology, culture, psychology, biology, and geography).

The Industrial Revolution did not create the laws of thermodynamics; it only motivated their discovery, owing to the increased interest of scientifically-minded engineers in pushing the limits of their newfound power. Like gravity, the laws of thermodynamics are merely facts of existence, which presumably originated at the beginning of time. In addition to the so-called Second Law, described above, there is the First Law: energy cannot be created or destroyed, only transformed from one form to another. In other words, the First Law says that nothing comes from nothing, while the Second Law says that nothing comes for free. Any transformation of energy incurs an irrecoverable cost. The technical term for that cost is entropy: the amount of energy that is lost forever whenever something is made to happen—energy that can never again be used for the same purpose.

An economy is a system of interactions in which goods and services are exchanged between individuals and organizations. Since those individuals and organizations exist entirely by virtue of energy use, and since the creation and exchange of goods and services also uses energy, an economy is a thermodynamic system. Hence, it is bound by the laws of thermodynamics. It does not create energy, it simply transforms it. And some of the energy that is transformed becomes entropy that is “dissipated”, lost forever.

For a system that is striving to persist this is not a problem as long as there is enough energy coming into the system to replace that which is dissipated. Terrestrial ecosystems are complex living economies that grow and are sustained by energy from the sun, which more than compensates for what they dissipate away.

However, the Second Law is consequential beyond the simple fact that no machine can ever work with 100% efficiency. As a consequence of friction things wear out over time. As a consequence of combustion (or other forms of energy release such as nuclear fission) fuel is converted into material waste that is less useful but which is nevertheless consequential. For example, CO₂, a major byproduct of carbon fuels, is a greenhouse gas. And many byproducts of energy use are toxic.

In biology the major consequence of the Second Law is that organisms get old and decrepit and eventually die, owing to accumulating wear and tear and metabolic toxins. But in the economics of ecology most everything gets recycled, so there is very little waste other than the heat that must (according to the Second Law) be dissipated.

Obviously that is not true for human economies that developed after the Industrial Revolution. For one thing they do not run on a limitless source of free energy, but rather on highly concentrated energy stored in deposits within the earth. Those deposits are being withdrawn far more quickly than they can ever be replaced. And while much of the potential energy stored in them is converted to the kinetic energy of commerce, much of it is dissipated, not only as heat, but also as unusable (and often toxic) chemical waste. All the while the machine infrastructure undergoes continuous frictional degradation, requiring repair and replacement fueled by the same high grade energy deposits. We are burning it as fast as we possibly can, and as a direct result the human population has exploded, leaving in its wake a considerable accumulation of toxic waste. Why is that? Why don’t we exert more self control? Why have we gotten ourselves into the fix we are in?

“Capitalism” refers to an economic system wherein individuals accumulate wealth (capital) by selling things of value for a profit, which presupposes that individual ‘ownership’ is a good thing, and a right that deserves legal protection. It is essentially motivated by the self-interest of individuals, which stimulates competition. But it can and does (under some circumstances) benefit societies, because the wealth accumulated by individuals can be shared through trade, thus providing for the common good. The Scottish philosopher Adam Smith (1723-1790) articulated the theory of capitalism in his magnum opus An Inquiry into the Nature and Causes of the Wealth of Nations. It was Smith’s second major work, the first being, appropriately (and ironically) enough given the present discussion, The Theory of Moral Sentiments.

Smith was a product of the European Enlightenment that gave birth to the Industrial Revolution, and his thinking was very much in line with that late historical development. A key to Smith’s definition of capitalism is a division of labor, wherein individuals specialize, like parts of a machine, at carrying out certain jobs according to their unique talents. Specialization—devoting most of one’s time to a specific task—allows one to create something that is more refined, and hence of greater value, than is possible if one’s time is spent doing many different things. An economic system composed of specialists with different but complementary talents can be much more efficient and effective at completing a specific project than one that is composed of generalists that all do similar things—and hence more competitive in the marketplace. And so the specific project of creating and accumulating wealth—a form of power—is greatly facilitated by a division of labor.

Note however that the more specialized one becomes, the less aware one need be. This is true not only for humans, but for all animals. Focusing on a specific task both promotes and is facilitated by ignorance of what is happening outside of one’s limited sphere of influence. So capitalism fosters ignorance of what is happening in the world at large.

The division of labor also fosters the stratification of society into economic classes. In a mature capitalistic system those who own and thus control the capital are usually not those who do the work to create it. The latter—the laborers—generally do not have time or energy, much less the necessary capital, to successfully compete in speculative investment, because they must spend so much time working just to make ends meet. This is because in capitalism value derives entirely from the marketplace, which ascribes no value to labor.

A division of labor requires a system of trade that uses currency—a universal quantitative proxy for the actual things of value. So capitalism develops naturally, through occupational specialization, toward the use of currency as a vehicle for trade. Accumulation of wealth can then be quantified by the amount of currency one has at one’s disposal, based on the amount of capital that one owns. And the more capital one owns, the less one has to labor to survive.

The accumulation of capital is a form of growth. Growth is simply an increase in capacity, throughput, or physical size—that is, an increase in power to do more and expand one’s domain of influence. In the real world growth is limited by resource availability, a consequence of the laws of thermodynamics (“nothing comes for nothing, and nothing comes for free”). When a system grows to the limits of its resource base it must stop growing.

However, it may nevertheless continue in its attempts to grow. But such attempts meet with success only to the extent that resources tied up somewhere within the system are sacrificed (‘liquidated’), which can only lead to one thing: death of part or all of the system.

Free market capitalism is a system motivated by the accumulation of wealth. As such it exists for one reason and one only, and that is to grow. Growth is its sole project, its raison d’etre. But the laws of thermodynamics do not allow unlimited growth—as any astute observer of nature knows. When the growth of a system reaches the limits of its resource base, continued efforts to grow cause some part of, and possibly the whole, system to collapse. This is a thermodynamic fact. It is the reason why cancer kills its host.

Like cancer, free market capitalism does not recognize the limits to growth, and it does not self-regulate for the greater good. It is an engine of growth—nothing more, and nothing less. When Adam Smith articulated his theory the world afforded an abundance of natural and human resources that could be exploited and thence transformed into wealth by the capitalistic engine. Most of those resources are now gone, and what is left is barely enough to sustain the system in a state of homeostasis. The system has stopped growing because it has reached the limits of growth. But capitalists still work on the growth project, and as a necessary consequence of their work, the system has begun to collapse.

And so, to answer the questions posed above at the end of the last section: Why don’t we exert more self control? Why have we gotten ourselves into the fix we are in? The answer is that long ago, in a world that was very different from the one we live in now, human beings became enchanted with the power that free market capitalism grants under conditions that favor growth. That enchantment fostered, and was in turn reinforced by, the “nose to the grindstone” ignorance that comes with increasing occupational specialization demanded by the capitalist Economy.

Although the Laws of Thermodynamics were articulated just a few decades after Smith published Wealth of Nations, their clear implications were largely ignored. Many (perhaps most) of us have yet to come to grips with those laws, much less the limits on growth that they impose. We have thus failed to recognize that the ultimate consequence of our capitalistic enchantment is widespread suffering and death. Free-market capitalism establishes an economy that is, in essence, a cancer growing on earth.

The aptness of the cancer metaphor cannot be overstated. Unregulated growth always becomes cancerous. Unless a system regulates its growth (as all organisms do genetically) it will grow to the thermodynamic limit. At that point something has to give—and it usually starts with the weakest (i.e. poorest) parts of the system.

Ask anyone who has known the ravages of cancer: unregulated growth invariably causes suffering.

And so it is with free-market capitalism, a system based solely on acquisitive growth-promoting activities of individuals. Eventually such activities predictably, and hence knowingly, cause someone somewhere to suffer. And this violates the Golden Rule.

Free-market capitalism is therefore immoral.

I am not the first to argue that capitalism is immoral. Jesus said as much when he pointed out that it is easier for a camel to pass through the eye of a needle than it is for a rich man to enter the Kingdom of Heaven. The moral of that story is clear enough.

So, capitalism is not only immoral, it is un-Christian. Anyone who claims to be both a devout Christian and a free market capitalist is a bald-faced liar, because it is impossible to be both. So if you are a true Christian, and you come across someone making such claims (perhaps a politician asking for a donation or your vote), it behooves you to follow Jesus and say to them: “Get thee behind me Satan!” For that person is, if anything, the anti-Christ.