Why is it said that "capitalism needs to expand in order to survive"?

[Corbeau]

Basically, like the title says. I have heard many times that capitalism needs to expand - spatially, geographically, technologically, whateverally - or it collapses on itself. However, I don't see why it must be so. What is the exact mechanism that leads to this?

Or I got something wrong?

[Rooster]

Capital requires it to make more capital. And to do that it has to invest more and create more. Hence, it has to expand. This is how growth rates are usually measure. David Harvey writes about this quite a bit. I can't remember the title right now but it might be The Enigma of Capital.

[Yefim Zverev]

I want a concrete and clear answer to this too. None given so far.

[Aurora]

The reason technology becomes more advanced in capitalism is because companies are constantly in competition with each other for market share, by developing the means of production with capital companies are able to produce more products for less labour allowing them to sell their products for less, the ratio of capital to labour increases, this gives them an edge in the market against other companies, but ultimately decreases the percent profit per each product.

The reason capital spreads geographically is the search for profit by conquering new markets, this is the reason the discovery of America was a massive boost to capital it opened up a massive new market without any feudal restrictions on the expansion of capital allowing it to flourish. Today the world has been conquered by capitalism and there is nowhere left to expand to so the search for profit becomes about more thoroughly exploiting the existing markets.

[EvoMorales]

Suppose a capitalist is content with their business and forgoes reinvestment (aside from replacing the constant and variable capital consumed), making x profit a year. Unless our capitalist suddenly becomes a miser, that money must go somewhere - this in itself creates expansion.

Of course, the capitalist cannot be content with their business because of competition. I believe it was Schumpter who high-jacked Marx's term and called this "creative destruction". Via competition with other capitalists the organic composition of capital is always changing. Continuous investment in R&D, branding and so on so as to ensure their future. This means new technologies, research, divisions of labour and so on.

Capitalism is a constant expansion creating new goods and services because it must in order to ensure surplus value.

[Brosa Luxemburg]

Capitalism works and succeeds through growth because growth creates new opportunities to invest and profit. Therefore, capitalism will always seek out new markets to exploit in order to rake in a bigger profit margin. When a capitalist uses all the resources available in one marketplace or society, in order to stay competitive on the market with other capitalists it will seek out new markets. This is a very simplified version though. To get a more informative view I would seek out articles and books on the relationship between capitalism and imperialism.

[Revolutionair]

Anti-Capitalist is close.

I'm not sure whether I can supply a good answer, but I'll try.

Long term marginal costs equals long term price in competitive markets.
That means that the profit of the capitalist slowly fades away, in Marxist theory, this is called the falling rate of profit.

A capitalist always needs to invest more to remain competitive. If other capitalists invest in new machines resulting in lower production costs, then you MUST too, or your long term marginal costs will be above the long term price.

This means that capital always needs to be invested AND be profitable so it can be reinvested. If you lose money and you cannot invest in machines as much as other capitalists, you will run out of business.

Please not that this also causes overproduction. If capitalists are investing so much in machines that they are producing so much that it cannot be sold in the market, then a crisis will emerge. Capitalism will try to 'destroy' its own capital (the other option is the conquering of a new market so you can dump your products there).

I hope this makes sense. I'm sure better economists than me will come here and produce a better answer. Also if you don't understand one part, feel free to ask.


edit:
Why does 'long term marginal costs = long term price' hold?
You have to understand that individual capitalists look at the world from a micro-economic perspective. If you can lower your price by 10 cents, and in turn all of the market goes for your products then it's worth it. This will cause other capitalists to lower their prices as well. However, the price can never fall below the long term marginal costs or people will just stop producing it.

[Thetwoterrors]

Rooster right fully brought up David Harvey. David Harvey writes that a key component of the capitalist system is the immediate reinvestment of much of the surplus of capitalist societies into investments and future growth opportunity. Thus a large portion of the surplus of today is put away to generate the surplus of tomorrow, and that surplus will be used to generate the next one ad infinitum. A key-point he makes is that 3% investment today is necessary to achieve the 3% growth of a "healthy" economy. He writes that in 2030 when the economy is predicted to be twice the size it is today, capitalists will have to come up with a way to invest 3 trillion dollars in future growth oppurtunities:ohmy: obviously a tall order.

As Marx wrote there is a tendency for the rate of profit to fall in capitalist endeavors, so capitalists jostle around the geographically looking for the next great profit extraction. You can compare this tendency to say oil extraction, there is a great boom in easy and profitable oil often followed by a rapid decline or alternatively a slow leveling off. So capitalists have to move about the planet geographically finding new markets or 'fields' as you will. And just like the oil industry, new technology and new economic conditions may allow the previously tapped market to be expropriated greatly.

There are some steady-state and 'natural capitalists' who are searching for a green and no-growth way to perpetuate capitalism, but I don't believe this can work. Over the five hundred years of capitalism's existence it has been characterized by rapid growth, so that's the historical precedent of capitalism. Plus the legal structure of corporate capitalism requires that companies try to provide the highest levels of short-term growth possible for shareholders. Natural capitalist theory is mostly intellectually bankrupt imo, it proposes re-localizing the global economy and a sort of return to the age of mom and pop style green small businesses. But even the times they look back to where characterized by genocide, slavery, environmental destruction and exponential growth. Relocalizing capitalism will not make it kinder and gentler.

All i have on this question is the marxist position and the historical precedent. I can't tell you why capitalism could NEVER exist without growth, all i can tell you is that it never has.

[Psy]

Without expansion you have the problem that workers and the bourgeoisie can't consume everything produced, the bourgeoisie's profits comes having value unconsumed by the production process after each production cycle.

Expansion takes the surplus value of industrial capitalists and uses them to create even more means of production thus solving the problem of under-consumption by creating a over-production problem, where the ever greater productive forces devalues commodity prices thus drives down the rate of profit.

This is the contraction of capitalism, capitalism is damned if it doesn't expand and damned if it does.

[Corbeau]

Huh, thanks for all the answers... Now that it's explained the answer seems trivial and I'm embarrassed that I wasn't able to get to it myself...

[Rooster]

qOP2V_np2c0?

[Lynx]

What roles do bubbles play? Are they now necessary to keep capitalism going?

p.s. if the steady state folks want to call it capitalism, fine by me.

[Workers-Control-Over-Prod]

O.K. Capitalism is the system whose sole purpose it is to multiply capital. When there is no more new things to invest into, when there is no increasing amount of live labor, capital cannot multiply itself. How does this process work you might ask? When the owner of a factory moves his factory from America to China, he does this to increase his capital, i.e. he lowers his "costs" by paying lower wages. So, it is the objective interest of capital to constantly want to expand and find more live labor to increase in its production process to exploit, more resources to invest into taking out of the ground. IF though, the capitalist uses more machines, his "Rate of Profit Falls" as machines cannot be exploited. So when the production process becomes unattractive in comparison to other sectors, the capitalists invest their money into that other sector (service sectors, baking, advertisement, speculation etc.). So, when the there is not enough investment into the real economy production process, and especially into the means of production sector, you have governments forced to create "bubbles" to make sure investment into the real economy becomes attractive (mostly done by securing contracts for loans). The thing is, we are now at a stage in capitalism where the "Rate of Profit" has fallen under the financial interest rate. That means concretely, the capitalist market banking system cannot provide loans as everyone invests into banking. Mercedes VW, BMW Porsche all make about 95% of their profits from banking and not the production process. So, we a re looking at a future of State Monopolist Capitalism in the interest of Capital or Socialism.

[Stadtsmasher]

Being a capitalist is a bit like being an alcoholic. "One more" is never enough.

[Revolutionair]

What roles do bubbles play? Are they now necessary to keep capitalism going?

p.s. if the steady state folks want to call it capitalism, fine by me.

As I already showed, capital always needs to expand. But what if there is nowhere to expand? What if there are no opportunities for profitable investment?

At that point, speculation will occur, since the capitalists have no choice but to invest. A bubble is a rise in the price of something, purely because there is an increased demand. 'necessary' is a complicated term in economics. In reality, bubbles and their bursting will continue to exist as long as capitalism is the dominant mode of production.

So yes, bubbles seem necessary from the capitalist's point of view, although he doesn't see them as bubbles, merely as investment opportunities.