« | Home | »

The Interdependence of Phantom Financial Wealth, Phantom Carrying Capacity and Phantom Democratic Power

By Karl North | May 13, 2013

Capitalism is a total social system in which most land and other capital assets can be privately owned. Over time this allows profit, wealth and power to concentrate in the hands of a minority. As a result, that minority makes or indirectly controls all the major decisions that shape US society and the rules that govern the way it works. In the latest stage of evolution of the capitalist system, its rules have gradually driven it to create a fantasy world that is tripartite:

Phantom financial wealth. Cheap oil is necessary for real wealth creation because it pays for the interest rates that private capital requires for investment to take place under the rules of capitalism. As oil has become more expensive it has destroyed the process of capital creation. Hence the capital is no longer there either to maintain the physical structures of industrial society or to finance the massive cost of conversion to a society whose physical structures are geared to lower energy consumption. Moreover, because the current structures cannot be maintained without cheap oil, they are gradually falling apart and the economy of real wealth production is at a standstill.

However, the rules allow virtually unlimited creation of money and credit to maintain for a time the profits of the financial class. As in the rest of the capitalist economy, survival in the financial economy requires competition to attain monopoly control. In the present zero-growth economy, unrestrained competition in the financial class now drives money and credit creation mainly for speculative purposes, and the resultant financial wealth greatly exceeds the production of real wealth and is thus phantom wealth.


Phantom Carrying Capacity. The rules of capitalist society allow and in fact drive resource use beyond the carrying capacity of ecosystems. Ecosystem scientists call this overshoot, a process which, continued long enough, leads to collapse. Access to a limited source of fossil energy has allowed capitalism to create a temporary phantom carrying capacity far above real carrying capacity, one that creates the illusion that the last 200 years of excess economic development will persist. In the current overshoot of earth’s carrying capacity, as unrestrained resource use continues to deplete or otherwise damage the resource base, it gradually becomes clear that the system is cannibalizing itself simply to prolong the present level of consumption for a short time.

Phantom Democratic Power. Economic behavior according to the rules of capitalism allows and in fact insures rising inequality. Real democratic power is impossible in societies where most of the wealth is in few hands. So to keep order, governing systems are created that project the appearance of democracy without the reality: phantom democracy.

The Interdependence. Economic activity at phantom carrying capacity depletes resources at a rate that causes rising resource costs and decreasing profit margins in the production of real wealth. The investor class therefore turns increasingly to the production of credit as a source of profits. Credit unsupported by the production of real wealth is stealing from the future: it is phantom wealth. It also creates inflation, which is stealing from the purchasing power of income in the present. Protected from the masses by the illusion of democracy, government facilitates the unlimited production of credit and the continued overshoot of real carrying capacity. This causes inflation and permanently rising costs of raw materials. To divert public attention from the resultant declining living standard of the laboring classes, government dispenses rigged statistics and fake news of continued growth to project the illusion of economic health. The whole interdependent phantom stage of the capitalist system has an extremely limited life before it collapses into chaos.

Topics: Political and Economic Organization, Social Futures, Peak Oil, Relocalization | 2 Comments »

2 Responses to “The Interdependence of Phantom Financial Wealth, Phantom Carrying Capacity and Phantom Democratic Power”

  1. umbrarchist Says:
    May 15th, 2013 at 9:01 am

    Talk about Capitalism reminds me of the Flip Wilson routine about the Devil. Capitalism mad me do it!

    Capitalism is an abstraction. Capitalism does not cause the economics profession to ignore the Demand Side Depreciation of things like automobiles and fail to report it. Is Capitalism a valid excuse for the “experts” to LIE?

    Every economics book since the Moon landing should have discussed planned obsolescence as a factor in the economy regardless of whether or not the economist approved of it. Therefore economics has become the Delusional Science.

    Economics cannot escape the Laws of Physics even though physics does not give a damn about economics or human beings.

  2. Karl North Says:
    May 15th, 2013 at 10:36 am

    Umbrarchist, Thanks for your comment. Of course you are right that modes of social organization like capitalism never completely excuse individual behavior. I did not mean to imply that they did. However, as regards their impact on the decisions and choices in our lives, capitalist structures can be just as compelling as more physical structures like the ground beneath our feet. To deny that by calling them an abstraction is to misunderstand that all reliable knowledge, indeed all language, is composed of abstractions that are essential to their usefulness. Social forces are real and need to be called by their names. To deny that is to fall back into the belief that individuals are completely responsible for their destiny, and everyone is getting only what they deserve. That is a false conception of social reality that excuses the class warfare of the rich and powerful against everyone else.

    Your example of economists is interesting. I agree that economics cannot escape the laws of physics. It is a flagrant intellectual crime that mainstream economists in capitalist cultures defy those laws and still call their ideology a science. I am painfully aware that economists as a class are relatively well-paid and therefore have less excuse than others for not exposing properly as fairy tales the official stories that serve the privileged classes. But we should not ignore the fact that the social forces that marginalize those who speak truth to power are very real.

Comments