Capital, Energy and Capitalism

By Shahab Sabahi, Energy and Environment for Development – Policy Research Group

The emergence of capitalism in human history was a natural event and, just like other large scale natural events, it had positive and negative side-effect. How did this evolutionary process set in? How did the discovery of fossil energy amplify this process? What might put the growth of the process in standstill or derail the process’s prevailing trajectory?
Modern society no longer needs human slaves or a social organization based on distinct classes. Investments in useful energy instead of human and land investments has been the key to modern capitalist society. Substituting capital for human activity makes it possible to maintain a certain pattern of growth in modern society, in which only a tiny fraction of human activity is invested in those specialized compartments generating surplus. In modern society, physical capital that powered by fossil energy have taken the place of humans in preindustrial society. Fossil energy provides an extraordinary power level controlled by humans that has dramatically reduced overhead costs of generation.  By continuously accumulating capital, developed societies managed to lift the constraints that previously prevented the decoupling of economic growth from investments of human-energy-centered supply activities.

The continuous increase in capitalization to ease the biophysical limitation never arrived to crash against the existence of an external constraint. By adoption of fossil energy used by the growing capital supported the strategy of continuously lifting internal constraints on the energy input supply [M. Giampietro and K. Mayumi]. The abundant availability and accessibility of fossil energy removed the historical external constraints that is, the impossibility of expanding capital, that used to be colonized land, as much as necessary and permitted humans to control quantities of energy unthinkable in preindustrial times. The move from land-tied energy inputs to fossil energy opened up the era of exploitation of concentrated flows of energy carriers. But, what would be the next possible stage, when there would be no possibility of taking advantage of accumulated capital. History tells, an analogous, all empires initially organized effective and powerful army but reached at a point either internal capability diminished to a point that no longer could handle the empire power level or no more small realms left to conquer. Internal capability of system or external constraints brings the system to a point that no incentive exists for building up or expanding capital. The bottleneck faced to get a larger capability is to guarantee achieving a larger power level. The larger power level leads to the more capital accumulation, and it implies the more quality concentrated energy source should be used.

It was the extraordinary strength of concentrated energy in the form of fossil energy that makes it possible to successfully implement the ideological imperatives of maximization of profit and perpetual growth. The acceptance of this ideology translated into a powerful and simple strategy “survival of the fittest” [A. Lotka].  

Societies that were faster in accumulating capital and securing the flow of energy have won the battle for control over more energy. In fact they could generate more useful work, and approach to higher power level. As a consequence, they were able to use more resources than others. There is nothing fundamentally wrong with this strategy. As a matter of fact it represents exactly the series of event expected in the evolution of living systems.

 Perhaps in future, the story of mutual success for accumulating capital and fossil energy-oriented growth would reach to its end. Though now, voices for the risk of climate change and exploitation of natural resources are widely ignored, a bitter competition on securing the supply of fossil energy is ongoing and it will strain supply-demand balance of these crucial treasures for capitalism. The competition will pose an external constraint for fossil fuel supply (scarcity goes higher), and it will get more hostile when adding the fact that nations are confined in their own ability of diplomacy to get cheap energy.