Increased labor costs, driven by rising worker power and wages, create a persistent incentive for businesses to innovate. To protect profits, firms often adopt new, labor-saving technologies that substitute human workers with non-human energy, particularly from fossil fuels. This strategic shift results in production methods that are more energy-intensive and contribute to significant environmental degradation, or the 'impoverishment of nature'.

Rising Labor Costs as an Incentive for Resource-Intensive Technology

In many capitalist countries, the power and wages of workers increased over time due to several key social and political developments. These included the expansion of voting rights, the legal prohibition of slavery and child labor, and the organization of workers into trade unions and political parties. These changes collectively contributed to a significant rise in workers' living standards.

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This category explores the relationship between the rise of capitalism and the significant, sustained economic growth observed over the past few centuries, often visualized as the 'hockey stick' of history. It covers the historical context, causal links, major events, and the dual legacy of this transformation.

Capitalism and Historical Economic Growth

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

CORE Econ - The Economy 2.0: Microeconomics

The relationship between capitalism and the 'hockey stick' of history examines how certain economic systems can foster exponential growth in living standards and technology. Capitalism, characterized by key institutions like private property, markets, and firms, encourages competition, innovation, and the successful adoption of new technologies. This environment has been linked to the dramatic upward surge in wealth and technological advancement over the past few centuries. While direct causation is complex, these capitalist institutions have played a significant role in shaping the trajectory of human progress and the exponential growth depicted by the hockey stick graph.

Capitalism, Causation, and History’s Hockey Stick

The Great Depression was a severe global economic crisis during the 1930s that devastated capitalist economies across Europe and North America. In the United States, it led to massive unemployment, with about a quarter of the labor force being out of work. [11, 12, 13]

The Great Depression (1930s)

The transition from a world of economic stagnation to one of continuous technological revolution and predictably rising living standards can be largely explained by the capitalist revolution. This historical process, which began in the 18th century, involved the emergence and global spread of the economic system now known as capitalism.

The Capitalist Revolution as an Explanation for Modern Economic Growth

The economic transformation driven by 'carbon plus capitalism' has a dual legacy. On one hand, it enabled countries to escape the Malthusian trap, leading to historically unprecedented growth in per capita income, as shown by the 'hockey stick' graphs. On the other hand, it produced an equally unprecedented and dangerous side-effect: a sharp rise in the Earth's surface temperature.

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