CAPITALISM is the economic system that has dominated global politics for over 200 years and solidified after World War 2, it is often pushed as the reason why human society has advanced. However, its guiding principle of endless growth has been a major reason why, once you delve within the surface of its history, Capitalism is a highly restrictive and destructive economic system.

If we use the laws of thermodynamics, we can analyse how the fundamentals are detrimental to humans and the planet in the long-term and that we need to move away from these ideals.

The Principle of Endless Growth

The first element to understand is that capitalism operates under the principle of endless growth. This is highly problematic, as the laws of thermodynamics state that an energy system naturally tends toward entropy or disorder unless new energy is constantly introduced. If you look at a closed system, such as a planet with finite resources, this law implies that the relentless consumption of resources will lead to irreversible degradation.

The drive for profit and growth costs natural and human (labour) resources. By exhausting them, the capitalist class that drives the system is setting the stage for a major collapse as it runs up against a hard environment and human limits. As Georgescu-Roegen (1971) notes, "the economic process irreversibly degrades natural resources and generates waste in a way that is analogous to the degradation of energy in thermodynamic processes."

Thriving on Transformation

Another major element is that capitalism thrives on the transformation of raw materials into commodities, however, the first law of thermodynamics states that energy can only be transformed not created or destroyed. The process of transformation within capitalism requires constant energy input but as resources are depleted and the energy required to extract, produce and consume becomes increasingly costly and harder to find, the system has two choices, become more efficient (which has limits) or fail.

The cutting from the bottom we often see by corporations and capitalists to find their increase in profits each year shows us that unless they manipulate the system, we are getting very close to these hard limits stated previously. Putting the theory of perpetual growth at odds with reality, as each cycle of production and consumption results in a loss of usable energy, which will contribute to the system’s eventual breakdown.

Kümmel (2011) reinforces this, stating, "Economic growth is bound by the laws of physics, particularly the laws of thermodynamics, which dictate that without continual inputs of energy, economic processes will deteriorate."

When you have an economic system that demands constant expansion within a closed environment, it is inherently unsustainable and applying thermodynamic principles underlines that without an infinite supply of energy or resources, the system will begin to stall, degrade and eventually collapse.

The Energy Return on Investment (EROI), which is the diminishing returns on energy investment, illustrates that harder-to-reach energy sources such as deepwater oil or tar sands, become increasingly expensive and less efficient to exploit, this quickens the decline of the economic viability of capitalism. Odum (1994) emphasized this in his ecological studies, asserting that "systems that consume more energy than they generate inevitably collapse."

Learning from History

Throughout history civilisations have failed to adapt to their resource limit such as the Roman Empire and Hittite Empire, both collapsed because their growth outpaced the energy available to sustain them. In the context of capitalism, collapse becomes inevitable once the cost of maintaining it outweighs the benefits.

Tainter (1988) explains this historical pattern: "societies collapse when they reach a point where the costs of complexity outweigh the energy and resources available to support them." This mirrors the way energy imbalances in physical systems lead to breakdown, reinforcing that thermodynamics can predict the endgame of unrestrained capitalism.

Hall (2012) adds another layer of insight into this collapse, noting that “as the EROI of energy resources decreases, so too does the potential for economic growth, leading to stagnation and decline”.

The energy and resources required by capitalism to maintain itself become increasingly scarce due to the drive for infinite growth. This will cause capitalism to self-destruct, much like a physical system depleting its usable energy. Therefore, the collapse of capitalism is not just a political or social phenomenon but a scientific inevitability driven by the fundamental laws of nature.

References

Georgescu-Roegen, N. (1971) “The Entropy Law and the Economic Process”. Cambridge, MA: Harvard University Press.

Hall, C.A.S. and Klitgaard, K.A. (2012) “Energy and the Wealth of Nations: Understanding the Biophysical Economy”. New York: Springer.

Kümmel, R. (2011) “The Second Law of Economics: Energy, Entropy, and the Origins of Wealth”. New York: Springer.

Odum, H.T. (1994) “Ecological and General Systems: An Introduction to Systems Ecology”. Boulder, CO: University Press of Colorado.

Tainter, J. (1988) “The Collapse of Complex Societies”. Cambridge: Cambridge University Press.