Appropriate Political Economy?

Economics is the creation and distribution of wealth in countries. Two hundred years ago, two contemporary political philosophers conceived of two seemingly opposing views on the economy: Thomas Malthus with his ‘Dismal Science’ and Adam Smith with his Capitalism. These two men differ in a fundamental way due to the perspective and focus they have adopted. Malthus believed that resources were limited and that to increase the population is to increase the demand for recourses and reduce the resources available for everyone else. On the other hand, Adam Smith preached the power of the ‘invisible hand’, the invisible market forces that turn the self-directed impulse for success back into the market, thus expanding the economic resources that are available for all. After making the connection between the Declaration of Independence and Smith’s Wealth of Nations, my teacher concludes that history has proved Smith’s conception (Capitalism) the more accurate model for the political economy for the world.

I beg to differ.

To begin with, I do not think the two pioneer economists in the 1700s were diametrically opposed. They had different points of emphasis, yes, (one focused on the relationship between resource/population while the other on population/productivity) but ultimately, there is no contradiction. Smith’s Capitalism model happened to be most appropriate during its historical context since productivity and the capacity to innovate were less developed at the time when resources were still abundant. However, as the human capacity to exploit is enhanced by technology and the consumption of resources is magnified into a global-scale influence, the fundamental Capitalistic idea of self-directed gain to improve overall welfare quickly becomes a race to the bottom as resources dwindle. In other words, Capitalism expedites consumption to maximize productivity but doesn’t take into consideration the finite resources (a fundamental Malthusian proposition) available on earth.

Even though the Malthusian idea is more conservative (and sustainable) in that it considers finite resources, it is poorly timed given its historical context–its inherently pessimistic view of economics would have stilted growth for many decades to come. During the time, the human capacity was way below the abundances that are available in the world and there were much uncharted land and resources open to the swift, strong and daring. The world was like a big bank account: as long as there was enough of the principle capital left, the interest that is generated (resources that is created from the sun’s energy) could be utilized at sustainable rates without ever exhausting the planet. With the Malthusian world view, expansion and growth would have been slow but sustainable; with the Capitalistic world view…well, development could tap into the selfish motives of man, trigger a storm of entrepreneurship and innovation and turn a nation into the most powerful and abundant entity in the world.

Thanks to the technological advancements sparked by the Capitalistic system, the United States eventually had the capacity to exploit resources at unforeseen levels; thanks to the internet and global trade, now the entire world has that same capacity. Before, the system was sustainable only because of an unequal distribution: we were able to live life with the consumption rate of 15 people because even more people in 3rd world countries were living below their average consumption rate. Now, the entire world is increasing in consumption rate (including the phenomenal populations in China and India), and we are slowly eating away at the principle capital of this planet, killing the hen that lays the golden eggs in order to score a spurt of quick gain. This cannot go on forever–resources can and do run out. The Capitalistic model of free competition and free consumption was helpful in raising the standard of living and quality of life that we enjoy today, but we must now adopt a hybrid, Neo-Malthusian mentality to confront the situation before us to ensure that we have a tomorrow.