That capitalism has a limited lease on life for biophysical reasons is a reasonable conclusion to draw given that it depends on the steady increase of available resources. Ignorance of the biophysical realm in economic thought constitutes a fatal conceptual blind spot in the field of economics and in the assumptions of capitalists. There is no widely understood and accepted theoretical model describing the link between economic activity and biophysical processes that is taught in university economics departments outside the University of Vermont and some select few small sub-departments around the world. But this has not always been the case, although it has been the case for quite some time. In the early days, the linkage between the natural world and economic value was more obvious and more felt through day to day experience. Over the course of capital-industrial growth, as the efficiency benefits of job specialization were fully exploited, economic inquiry became divorced from natural scientific and philosophical consideration sometime in the late 1800's.
The greatest figure in the early formation of capitalism is undoubtedly Adam Smith whose tome "The Wealth of Nations" articulated the link between the largesse of the Motherland to the value of manufactures and markets operated by the citizenry. Smith didn't invent capitalism any more than he did the manufacturing processes he described in his book. What he did was observe what was happening in the economy and thereby hit on some brilliant observations. One of those was the value of efficiency in manufacturing. Another was the value of the market as a price discovery mechanism. Together they form two primary tenets of a capitalist system.
But it was not yet capitalism. What "The Wealth of Nations" did was produce the argumentative feed stock for the advent of capitalism, which required a change in the laws regarding principles of ownership, deal-making, etc. in order for it to become systemic. So what Smith did was produce an extremely long work advocating economic liberalism. Which is to say, he applied liberal thinking to the arena of economic activity already happening in the cultural milieu.
In Smith's day, land was the origin of wealth. Rich people owned land, poor people did not. It was not possible to be rich without owning land. In Smith's day people worked as cartwrights, wainwrights, wheelwrights, cobblers, millers, weavers, blacksmiths, and so on and on. But mostly people farmed, and mostly it was somebody else's land that was farmed. Land also provided lumber, stone, minerals, and grazing for animals. Most people walked in 18th century England. Many fewer of them rode on a horse or in a horse drawn cart. Boats were powered by the wind or by rowers who were powered by potatoes and mutton. Sounds like a boring world to live in by the standards of today, but that was the way of life as told by the novelists at the time.
And truly it was a hard life according to us, with most of their everyday lives spent expending quite a bit of bodily energy doing the things necessary to keep living. Now we expend energy lifting beer cans and potato chips to our mouths. Or we go to the gym to burn off the extra. But the connection to the land as the ultimate store of value was understood by the people who owned it or worked it. It was obvious to them because there was no other conclusion to draw. We moderns don't think that way because it isn't true anymore. It's possible to be wealthy without owning land. What's also possible is for most people to live in a comfort and ease that is rivaled only by what the rich experienced in 18th century England. How is this possible?
A capitalist credits capitalism for this turn of events. The great good fortune of the modern world was made possible by the tornado of technological innovation that was ignited by the capitalist spirit. And there is plenty of evidence for that claim, it's just not the whole story.
Adam Smith had a colleague at Glasgow University whose name was James Watt, inventor of the Watt steam engine. The Watt steam engine was a breakthrough design of previous steam engines and ultimately enabled the production of things on an industrial scale. It was only then that the process of capital formation could begin. This is the case because the amount of concentrated energy in the coal could allow for a very long period of innovation on that basic design. The efficiency gains of the steam engine would grow exponentially for many decades after Watt's first design. Before long, the steam engine was able to replace all of the jobs mentioned above and many others besides. The steam engine was not possible with any other fuel source found in England, hence, capitalism likely would not have come into being.
The same isn't necessarily true of economic liberalism. Markets are "the thing" with economic liberalism and markets are certainly a longstanding feature of human society. What markets, or the Market, can achieve is certainly worth pondering as they are great information generators and so can be analyzed and interpreted rationally. But this is rather vague and is something people have always done in some form at least since the Neolithic Era. In terms of the liberal aspect of Smith's idea, the notion of the market as a manifestation of the free individual could be trumped by the scarcity market, at least for a while. But there is an ebb and flow of relative freedom throughout history and geography. The durability of the free market as a cultural meme will be faced with many challenges in the form of economic crises but the idea of freedom in business affairs could certainly re-emerge over time.
The question, in terms of the entire economic liberal project of the past several centuries is: How much of it was due to the burning of a mound of coal for the purpose of pushing steam through a cylinder?
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