Walter Branson [From Readers, January/February] disputes my claim that capitalism requires growth for stability. He argues that "a properly structured industry [that] allows participants to earn a sufficient margin on sales to pay labor costs, replace worn equipment, and pay a return to investors in the form of dividends ... can exist in this way indefinitely, providing jobs but not growth." He is right about a particular industry, but fails to appreciate the significance of those "returns to investors." To be sure, if investors simply spend those returns on consumption goods, the economy can, in theory, be stable without growth. But inequality under capitalism is such that those seemingly harmless "returns on investment" vastly exceed what wealthy investors can consume. (Consider: A modest 5 percent return on a billionaire's assets gives him $50 million/year with which to play. Consider also: in the United States today the upper 1 percent own nearly 40 percent of all the country's wealth, most of which is expected to generate for its owners a healthy rate of return.)
A capitalist does not generally consume all his profits; he invests the greater portion--in order to make money with his money. This means he must find an outlet for these investment funds, something to invest in over and above those stable industries that continue to pay him dividends year after year. If he--and his fellow investors--cannot fund new investment opportunities, if their savings are not reinvested, then--as Keynes has shown us--the economy slumps.
I disagree with Branson that "the most fundamental change needed is population stabilization." Population growth is not a problem for advanced economies--where population growth, when it exists at all, is largely due to immigration--nor is it a problem in poor countries that provide education, job opportunities, and social services to women, e.g., Cuba or the very poor Indian state of Kerala. He is certainly right that global population growth must be stabilized, but population growth is the effect of global poverty--another problem that I (and Amartya Sen) think insoluble unless we move "beyond the capitalist market economy."
Hunter Lewis points to a number of real problems with worker-owned enterprises. Fortunately, these problems have solutions. He notes that a worker in such an enterprise who puts in 30 years building up the enterprise will feel justly aggrieved in turning over his share of the enterprise to a...