The American environmental writer Edward Abbey delivered a stark critique of the capitalist system, expressing his frustration with human and corporate greed. “Growth for the sake of growth is the ideology of a cancer cell.”
Hyperbolic, though it may be, it does hit the nail on the head when opposing the destructive nature of profit-maximising endeavours.
The hunger for capital growth, in many regards, has fuelled innovation, provided jobs and security for working-class families, and generally improved the lives of many people lucky enough to reap the benefits of operating in an underexploited society, with strong institutions and labour protections. But we need to ask: has the thirst for profit-maximisation been a global net good?
In extreme cases, both in modern and historical times, the relentless pursuit of improved profit margins has, in certain situations, contributed to the exploitation and subsequent suffering of human beings worldwide, the likes of which we will explore in this investigation. Some may reiterate that such incidents are rare. Even if rare, the moral cost of such outcomes cannot be dismissed as collateral.
This blog’s hypothesis is as follows. When firms treat growth in shareholder value as their primary objective, corporations prioritise scale, cost minimisation, and profit maximisation over long-term sustainability. In competitive environments with weak constraints, this creates incentives for labour exploitation and environmental externalisation.
To be clear, I do not believe growth is inherently bad or misguided, but when there is no governance determining the means of growth, it can frequently be.
The incentive Machine
Let’s have a quick rundown of corporate finance and what I like to call the incentive machine. Investors like to make money, so they invest in companies they think can make them it. Typically, investors choose companies with good earnings, or good earnings growth, and healthy profit margins, and with a higher demand for this company’s stock, the price increases. This makes the current shareholders happy, as it increases their net worth. Shareholders incentivise the executives of these corporations with monetary compensation to have good financial metrics in this regard. These executives also like to make money, and so will try to ensure their company has good growth prospects and low costs so they can get their bonuses.
This is obviously a very basic explanation of the overall incentive machine. Many other factors, of course, go into stock pricing, managerial incentives, and shareholder demands, but it does paint a rational and necessary picture to understand how corporations (and sometimes countries) can take advantage of rampant denaturisation and human exploitation.
Let’s look at some disastrous effects of this.
The Congo
In the late 19th and early 20th century, the Congo Free State, personally controlled by King Leopold II of Belgium, became a rubber extraction machine.
Villages were assigned rubber quotas. If the quota was not met, punishment followed. Hostages were taken. Whippings were administered. Hands were cut off as proof that bullets had not been “wasted.” Entire communities were destroyed.
Population estimates vary, but historians commonly cite figures indicating the Congo’s population fell by millions during Leopold’s rule. Some estimates place the death toll between 5 and 10 million people, though the exact number remains debated due to limited census data at the time. (See Adam Hochschild; Nunn, 2008; Acemoglu, Johnson & Robinson, 2001 for institutional impacts.)
Pause on that. Not thousands. Millions.
Now imagine the daily reality of a man assigned a rubber quota. He leaves before sunrise. He travels deep into forest territory. He extracts latex by hand. He returns with less than required. His wife is held hostage. His child is threatened.
The cost of missing the target is not a missed bonus. It is mutilation.
The economic logic? Global rubber demand was surging due to industrialisation, bicycle and automobile tyres.
So, revenue targets were fixed, and cheap labour in foreign countries was coerced to increase profits.
The system worked in the narrow sense that bubble output rose. It failed in every sense that matters beyond a balance sheet.
Fast Fashion: Cheap clothes, expensive consequences
According to the United Nations Environment Programme and the Ellen MacArthur Foundation, the fashion industry produces an estimated 92 million tonnes of textile waste each year and contributes between 2–8% of global carbon emissions. It consumes vast quantities of water, up to 7,500 litres for a single pair of jeans, according to widely cited industry estimates.
But environmental impact is only part of the story. Low retail prices are made possible through global supply chains operating in regions where labour protections can be inconsistent, wages suppressed, and enforcement weak.
Consumers see a £6 shirt. In truth, it is only possible due to compressed wages, factory safety compromises, environmental discharge, and mountains of textile waste
The shirt is cheap. The system is not. It is affordable because someone else absorbed the true cost.
An alternative: Mondragon
Alternatives to this oppressive system do exist. Mondragon, the Spanish federation of worker cooperatives, demonstrates that large-scale enterprise does not have to operate exclusively under shareholder primacy.
Some of it’s key structural features include:
- worker ownership
- democratic governance
- wage ratio norms limiting internal inequality
- profit reinvestment and shared surplus
This changes incentives fundamentally.
When workers are owners:
- labour is not merely a cost centre
- extreme pay gaps are constrained
- cost externalisation harms the very people who vote on strategy
Mondragon is not perfect. It competes in global markets. It faces pressures. It has made compromises. But it proves something important: exploitation is not inevitable in a capitalistic system.
References
Abbey, E. (1977). The Journey Home: Some Words in Defence of the American West. New York: Dutton.
Acemoglu, D., Johnson, S. and Robinson, J.A. (2001) ‘The Colonial Origins of Comparative Development: An Empirical Investigation’, American Economic Review, 91(5), pp. 1369–1401.
Bebchuk, L.A. and Hirst, S. (2019) ‘Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy’, Columbia Law Review, 119(8), pp. 2029–2145.
Ellen MacArthur Foundation (2017) A New Textiles Economy: Redesigning Fashion’s Future. Available at: https://ellenmacarthurfoundation.org
Friedman, M. (1970) ‘The Social Responsibility of Business is to Increase its Profits’, The New York Times Magazine, 13 September.
Guardian (2021) ‘Revealed: 6,500 migrant workers have died in Qatar since World Cup awarded’. The Guardian, 23 February.
Hochschild, A. (1998) King Leopold’s Ghost: A Story of Greed, Terror and Heroism in Colonial Africa. Boston: Houghton Mifflin.
Hawley, J.P. and Williams, A.T. (2000) The Rise of Fiduciary Capitalism: How Institutional Investors Can Make Corporate America More Democratic. Philadelphia: University of Pennsylvania Press.
International Labour Organization (2023) Progress Report on the Technical Cooperation Programme between the Government of Qatar and the ILO. Geneva: ILO.
Jensen, M.C. and Meckling, W.H. (1976) ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure’, Journal of Financial Economics, 3(4), pp. 305–360.
Lazonick, W. (2014) ‘Profits Without Prosperity’, Harvard Business Review, September.
Nunn, N. (2008) ‘The Long-Term Effects of Africa’s Slave Trades’, Quarterly Journal of Economics, 123(1), pp. 139–176.
Stiglitz, J.E., Sen, A. and Fitoussi, J.-P. (2009) Report by the Commission on the Measurement of Economic Performance and Social Progress. Paris.
United Nations Environment Programme (2023) ‘Putting the brakes on fast fashion’. Available at: https://www.unep.org
