Gfrktyl

Not all parts of the economy consume finite resources equally. In fact, only a minor portion of it is related to the manufacturing of goods. Most of the economy is services by now and, even more related to your question, most of the growth is growth in services.

Manufacturing is on the decline while capitalism thrives.

Source

Growth is growth in services.

Source

In fact, there is plenty potential for services to grow even more. For example, if you live in a western country and you get older, you wish there were more service workers tending to elder people available.

And services are very friendly on the environment. Just an example: Being an Instagram influencer is a very eco-friendly job consuming comparably only few of the finite resources.

Also, some resources are renewable: food, energy, recycled materials (to some extent), wood, .... With regard to manufacturing and production there certainly is a desire to use existing resources as efficiently as possible with this kind of optimization still ongoing.

Yes, saving the planet mostly probably will mean not using more (rather less) of the resources, but that won't be the downfall of capitalism at all. If I would be worried about capitalism, I would worry about ongoing trends in artificial intelligence and automation.

Why would capitalism have an answer?

Your question presumes that economic systems should be fully planned out into perpetuity, but that's just a false premise. You might as well ask what democracy's answer to peak oil is, or what individualism's answer to FTL travel would be.

All capitalism means is that people are able to earn money off of things that they own (private ownership of capital goods). It's not like it's something that a cabal of people got together, mapped out, and implemented from the top down. It's emergent behavior that was later described as capitalism.

I would like to (sort-of) challenge one of the premises of the question, namely that resources are finite, and I have a strong and weak version of the challenge.

The Weak Version

I mean, sure, there's only so much matter in the planet, and only so much of it is useful for our current purposes. Whether you think the end is in decades, centuries, or millenia, anyone who can count more than the sum of their fingers and toes can look ahead to the end of the tunnel. But human ingenuity is also a resource, and human creativity is unbounded.

Think about it. Finance? Law? Software? These things are huge sectors of modern economies and they barely consume any physical resources at all. Trilarion's upvoted answer focuses a lot on the service sector, another great example. How much of our resources today exist in the form of intellectual property?

Edit

I'm leaving the following paragraph in but see gerrit's comments below for a more sobering take. I'm not sure it reverses my conclusions but it does arguably weaken my case.

Not sure how the theory plays out, but in practice we've already begun to pivot in this direction more and more. N.B. that's exactly what capitalism says should happen: as physical resources become scarcer their value increases and we either have to live with shortages... or pivot to something cheaper.

The Strong Version

Which coexists with the version above: we'll never run out of resources before something else happens.

That something else might be the extinction of the human race, space travel/colonization, digitization of consciousness, whatever. Why aren't we doing more in those spheres now (at least the more positive ones)? Because it isn't economically viable. But again, as physical resources become scarcer their value will increase, until it becomes more viable to strip mine asteroids than continue to deplete the Earth.

There are some holes in the strong version: if agents are allowed to proceed to maximize their utility without regard to negative externalities generated (e.g. a factory can pollute with no consequence) then the incentives are warped. If the ecosystem that sustains life here is wrecked by e.g. AGW then game over. You can probably think of others, but the point is that continuing current trends forward unboundedly is likely selling humankind short.

The claim that constant economic growth within a planet of finite resources is impossible is false. Natural resources can be physically finite while being economically infinite. That is, regardless of the physical amount of any given resource exists in the world, it is possible to have the entire supply necessary to meet human demand.

In "capitalist" societies, this is accomplished through the use of the price system. When a resource is scarce, it becomes more expensive, so people demanding it use less, and people supplying it try to provide more. When a resource is plentiful, it becomes less expensive, which will drive up demand and make it possible for suppliers to profit from the larger volume despite the lower price.

There are limitations to the price system; it only works for things that can be owned in a free market economy. It is difficult to own the air or wildlife, which is why these things tend to be overused and used poorly. It also only works if the prices are the result of market supply and demand; if price controls are imposed, then the system breaks because the information about scarcity conveyed through prices is no longer available, so people tend to overconsume whatever the thing is.

As an example of this in action, there was a famous wager about the price of metals over a ten year period in the 1980's between economist Julian Simon and biologist Paul Ehrlich. Simon wagered the price of 5 metals would go down in the ten year period, Ehrlich wagered the price of metals would go up because they would be depleted. Simon won the bet when all five metals of Ehrlich's choosing decreased in price after the 10 year period.

Capitalism is all about profit. And everybody is interested in highest possible return on investment (true for every capitalist starting with unskilled worker and on J.Bezos ending), so maximizing profit is the best strategy for achieving that goal.

Obviously, it can be done in multiple ways, of which reducing the costs is always first and foremost. That includes reducing labor force of an enterprise, which is but one and least efficient, albeit most vilified method.

Most often though capitalism employs new technologies, new materials and new ideas to increase productivity and/or reduce costs. And it can be seen across world and time, that production of anything becomes more efficient, streamlined, less wasteful etc.

There is no reason to assume that the need for natural resources will be constantly increasing ad infinitum without allowing for the possibility of either substitution (humans may develop a technology of converting old plastic bags into new synthetic material stronger than steel, for example) or there will be new sources of resources (i.e. asteroid mining).

In the meantime capitalism's answer is improvement. Not sure how old are you, but I remember when instead of a smartphone one required a huge desktop computer, printer and phone for effective office work. Think on how much technological progress reduced the need for resources going from fifty kilos of various materials to less than 200 grams (which is 250 TIMES) without reduction in productivity (in fact, it increased it dramatically).

Is it really hard to apply same logic to almost EVERYTHING (to various extent, of course)?

I think you might have gotten the wrong impression from the answer you linked to. When technology, production of capital equipment, or education make workers more productive, it frees up human resources that can be used elsewhere. If those people were not able to find work and were simply "automated out of a job" then that would be bad. Fortunately, this person can then take on a new job. This is where the growth happens.

Imagine a world with just a finite supply of farmland which is all used by people engaging in subsistence farming. All the resources of the world go into farming and people eat all the products of that farming. Suddenly one of the farmers develops a new plow that lets 5 farmers do the work of 6 farmers. Now 1 in 6 farmers no longer have to farm. These farmers can now become entertainers who put on plays and tell stories instead of farming. All the resources of the world are still being used, but now people get this new thing that makes them happy, entertainment. This is economic growth. It didn't require any more resources from the world, it just required increased technology that freed up labor for new things.

This is a clear weakness of "pure" capitalism

Pure, unhindered capitalism, does deplete resources. Moreover, it creates huge monopolies and cartels, that become so powerful that they start to resemble governments. Suddenly, a single company starts to control so much land, so many people, and so many resources that they almost look like a nation.

Most proponents of capitalism, therefore, agree that some regulation is needed, as "pure" capitalism may not even be possible.

Growth can be in services

Right now, manufacturing is huge in Asia, and services are growing in the West. As resources get increasingly scarce, we do not need to manufacture so much stuff. Growth can be in the services sector, and those services do not need to rely as heavily on stuff that they do today.

Technology makes us less dependent on old commodities

I am the author of the answer quoted in OP. I would like to expand the portion quoted a bit, as it is relevant for this answer:

Technology and knowledge are always advancing. This allows us to
constantly improve our efficiency and reduce the manpower needed to
achieve the same things. For example, it takes much less manpower to
manufacture a jacket today than it did in 1850. This effect is
constantly happening. And that reduced need for manpower would leave a
lot of people unemployed. Therefore, we have three options:

1. A constant increase in unemployment. (Generally feared and loathed.)


2. Less time at work per person. (Sometimes impractical. Wastes educational resources as people would still have to study and train
   just as much only to produce less. Might reduce people's earnings,
   etc.)


3. Constant economic growth to create new jobs and counteract the reduced need for manpower caused by technological advancement.

The third option is generally preferred by policymakers, academics,
the public, etc. for the reasons described above, as well as other
reasons.

I showed him this simplified version of his explanation, and he said
it was correct.

Also, there's hardly any limit to how far this can go. We now have
machines doing an immense amount of work that used to be done by
humans.

Note that the reason for the effect is the increase in technology. As our technology gets more advanced, this advancement may (if we play our cards right), make us less dependant on any given commodity. Some examples:

• Wood may be replaced by synthetic materials.


• Synthetic materials may be recycled.


• Oil may be replaced by renewable energy sources, batteries (technology improves all the time), hydrogen fuel cells, fusion reactors (hey, maybe one day). Plastic can be created without oil.
  


• Technology may constantly improve our ability to recycle


• We may run out of some commodities, but then new technologies may arrive that mean we no longer need those commodities, or we are able to produce them synthetically.

Regulated capitalism

Does the free market make this happen? I will argue in this answer that, to some extent, yes, it, does. However, I will also argue that moderate government regulation is typically needed to prevent environmental devastation and unfair depletion of key resources. Is such regulation capitalism? I believe so. The vast majority of capitalist thinkers have supported some degree of regulation.

For example, a massive river does not belong to any one entity, so if the government uses regulation to prevent companies from spilling toxic chemicals into it or extracting too much water from it, I would argue that this is not opposed to the fundamentals of capitalism.

There is always some government intervention in capitalism.

Usually that means that while the free market is the backbone of economic policy, the government has some ability to regulate the private sector in order to avoid such issues as described in OP. For example, if companies in search of profits are destroying vast areas of forest, which is detrimental to society at large for a number of reasons, then ideally the government should introduce a system (using either permits or taxes to limit said activity to a sustainable level). Most would agree that this is still capitalism, albeit with some modification.

Only as good as its implementation

Whether this actually happens in practice would depend on the quality of the government in said area, its level of corruption, its competence, democratic dynamics, willingness of the populace to demand certain actions from the government, etc. Success varies based on those factors.

So, let us say that everything worked perfectly and industries stopped destroying forests to the unsustainable degree they did before. Does this mean economic growth can no longer happen? Not necessarily. Perhaps one of the things society extracted from the forest was timber, which was used to build houses, furniture, boats, etc. Industries can replace that with renewable materials such as recycled synthetic materials, wood grown on plantations (to a sustainable extent), etc. Sure, this may be more costly (isolatedly) than just straight-up cutting down forests, but there can still be economic growth. Again, this assumes that the government is competent and does a proper job at regulation, that corruption does not get in the way, etc.

Also, the free market is not only contributing to the depletion of resources here. It can also contribute to investment in new technologies. If regulation as described above is applied, the free market can also help towards intelligent use of resources. For example, let us say that the oil on Earth is near depletion and will soon be completely empty. (I am not sure how far we are from that right now, it is only an example) Businesses that are heavily invested in oil for their operations will decrease constantly in value in pace with declining oil reserves. Investors will realize that companies that depend on oil are thus worth less, and try to move their funds elsewhere. They may not do that for any environmental reasons or anything like that, but rather from a recognition that there may not be sufficient oil left, as a calculated, reasonable move. If a resource does not exist at all, it can not be used. Competent investors will therefore invest their funds elsewhere, in companies that have based themselves on technologies, infrastructure and commodities that are not about to run out anytime soon. In this regard, capitalism naturally moves towards sustainable development, in some ways. Obviously, one still needs government regulation to prevent environmental devastation.

Some olive trees only produce optimal yields up to 80 years after planting, yet investors still invest in them. For the long wait-time, they will demand a return down the line that compensates for the 80 years waited. That, however, will simply increase the cost of olives. As long as investors believe people will still buy olives 80 years from now, the trees will still be planted. If an investor wants a profit after 20 years instead of 80, that investor can simply sell the trees (or the stock in the olive company) after 20 years, which has still increased in value since the olives are now closer than they were at planting time.

What I have described in this post is basically what governments around the world have been trying to do for years, with various degrees of earnestness, sincerity and success. Personally, I have to say that some of the shortcomings are very disappointing. What is capitalism's answer to that? I would say, skillful regulation, as described in this post. Some people may say such regulation is the very opposite of capitalism. In a way, that is true. However, all capitalism I have seen practiced and described does involve some (to a greater or lesser degree) such regulation. Therefore, I would say that some regulation is a part of modern capitalism, and it is therefore the answer here.

Ideally, the government can use the market as a tool for its regulation, by using economic policy to encourage certain activity while discouraging other.

1. Finite doesn't mean constant. There may be limited resources, but that doesn't mean we cannot find or produce more resources. It also doesn't mean that we can't find better ways of allocating resources, or of extracting the greatest productive value from these resources. An improvement in these is what leads to economic growth.




2. The fact that resources are scarce is the whole point of capitalism, and really of economics -- more precisely, the question that any economic system answers is "given that resources are finite, how do we allocate them most efficiently with the goal of creating greatest productive economic value?"




3. Economic growth is a specific economic phenomenon -- it would certainly be possible to have a universe in which there was no economic growth possible, but this is not our universe (see point 1), and this has nothing to do with capitalism. Indeed, even in such a universe, capitalism would be the optimal manner of allocating resources -- for example, if you had a universe in which water kept disappearing and there was no way to synthesise it or find an alternative to it, humans would be doomed to extinction in that universe but the capitalist price system would still maximise human welfare during our brief existence.

I find it funny that two of the most common arguments against capitalism are that it will fail because "the planet's resources are finite" and that it can't handle the coming "post-scarcity economy". These arguments are contradictory, and both false anyway, there is nothing inherent about the utilitarian economic argument in favour of capitalism that requires scarcity or infinite resources.

I think too many people conflate "capitalism" with terms like "economic growth" and "industrialism". Capitalism is just an idealisation of a system where property rights are well-defined and economic agents pursue their self-interest. And it doesn't make sense (from a utilitarian perspective) to criticise economic growth either -- economic growth (with externalities, inherent costs etc. accounted for) is just the ultimate measure of increases in well-being, it's what an economic system should be chosen to maximise. You could try and make the case that capitalism leads to unsustainable economic growth, but you'd still probably be wrong.

This article, entitled "Is sustainable capitalism possible?", provides a neat analysis of arguments by defensors of "green capitalism" . The paragraphs below summarise the points:

Hawken and the Lovins’ agree with Kovel that the current model of
capitalism is problematic. “Capitalism, as practiced, is a financially profitable, non-sustainable aberration in human development.” But they do not see the problem as residing in capitalism itself. They distinguish among four kinds of capital, all necessary for production: human capital, financial capital, manufactured capital and natural capital. The problem with the current form of capitalism, they argue, is its radical mispricing of these factors. Current market prices woefully undervalue—and often do not value at all—the fourth factor: the natural resources and ecological systems
“that make life possible and worth living on this planet."

In terms of solutions to this mis-pricing:

Hawken and the Lovins’ argue that these remedies—properly applied—can work. The first step, they say, is to eliminate the perverse incentives now in place. They document the massive subsidies that governments currently provide for ecologically destructive behavior, e.g. highway construction and repair, which encourages suburban sprawl and the shift away from more efficient modes of transportation, agricultural subsidies that encourage soil degradation and wasteful use of water, as well as subsidies to mining, oil, fishing and forest industries.

Second step: impose resource and pollution taxes so as to reflect the true costs of “natural capital.” Sweeten the pie by phasing out all taxes on labor (which increase unemployment), and income taxes as well. The point is to level the playing field so that more sustainable energy technologies and more energy efficient processes can compete fairly with the destructive practices of “industrial capitalism". We might even want to go further, and subsidize—at least initially—the technologies that reduce the negative environmental impact of our production and consumption
choices.

Of course, critiques of this approach abound. The paper discusses some. See also linked wikipedia article, for a summary, and this article for a comparison of green capitalism and green socialism.

Capitalism's answer is a global crisis, which weakens world economic powers and redistributes resource consumption. Such a crisis may be either peaceful (like the Great Depression in the US) or non-peaceful (like WWI, for example - when growing economic powers - the German bloc - tried to overpower existing economic powers - the Western world mainly).

So, in fact, there is no such problem in capitalism - its decision is stored inside.

About "growth in services economics, which is unlimited". Let's consider, why it is naive.

The process itself is described very well in @Trilarion's answer. The answer describes so-called "post-industrial" economics.

What's wrong with it?

At first, should notice, that graphics (services percent) are true, but for very special countries from western world, which have such huge services sector (US and UK are most known). You may look at the second graph. We now, that main part of UK GDP is formed by banking sector and services. From the first view, it sounds good - it is a pure service sector, we are just servicing our and foreign banks money, giving credits, so on.

But - of course, there is a 'but' - the financial sector cannot live in a vacuum. When it grows too much over REAL sector, we obtain a financial bubble. It may be a big amount of credits, an exchange bubble, or something else, but what we have? We have an economic sector which growth, in fact, is a fake.

A bright example: Brexit. You may, again, look at the second graph from @Trilarion's answer. The UK have a huge financial sector (result of M. Thatcher politics of 'de-industrializing'). What Brexit means? It means (and Deutsche Bank already have done it), that EU banks will stop to use UK bank services, because of UK is exiting, and retrieve their finances from UK back to homeland. How do you think, this will affect UK bank sector (and, as it is huge, huge part of economics)? It will collapse. You may say - but what's the difference between EU and UK, if both have a financial sector and banks? Yes, both have, but EU do have a big REAL sector (which can be an investment target to the banks, and supports it) and UK does not.

To conclude. That theory - about constant growth, provided with services constant growth - is applicable in a one-hegemony-world, which is globalised. While hegemonic growth its services, which is consumed by others, others, in return, provide something REAL. A bright example is the 'late-Washington' world - before Russian comeback to global powers. But now, as the world becomes multi-polar again, this is not more than a pure theory.

This is not an important question. It is a theoretical question about something that cannot happen.

First, it is unlikely that all the resources of the planet could be used because as the available resources of the planet are exhausted the scarcity will cause massive reductions in the number of resource consumers. So large is the planet and so few would be the number of resource users that the resource users would perish before they located all the resources.

Second, even if it could happen by the time it does happen, there wold surely be no identifiable economic system other than rampant chaos and nobody would be thinking about economic systems.

Third, the question is not a matter of a particular economic system since the economic system neither creates nor responds to such a scenario.

The point of a free market, which is how pricing is determined under capitalism, is that it reacts efficiently to supply and demand. If something drops in supply it will be harder to get ahold of, and vice versa. Accordingly, when an issue is greatly threatening, such as the issue of feeding an explosively growing population in the mid-20th century, capital will be allocated towards the problem until a solution is found - in this case the Green Revolution.

This is not to say that business and private allocation of capital is the solution to everything in this regard - when the costs are so widely spread that no one person or group is incentivized to fix it (the Tragedy of the Commons) it may become necessary for a larger regulatory body to be established. This is not, in a sense, a purely capitalist response, but it is a real-world response by self-proclaimed capitalist countries (Montreal Protocol).

So to answer your question, capitalism's answer to constant economic growth and finite resources is that we'll cross that bridge when we get there. When the oil wells begin to run dry, renewables will become more economic as fuel becomes more expensive. When the ratio of space needed for production to protein provided of beef no longer feeds a population properly, another source such as bugs will become more prevalent. Climate change is an example of a more intractable problem that will require more forethought, but there is growing concern worldwide on the topic and as the costs become better defined, it can be assumed that more initiatives will be taken on the topic.

Of course, freedom of information is essential to a free market, so this breaks down some when companies withhold information for selfish reasons (e.g. tobacco industry manipulation of research and to take it to a state level the US, Russia, Saudi block of the COP24 climate report) but historically the truth has prevailed. In such cases it is our duty as citizens to press for transparency and accountability.

Our current practices are not sustainable, so we'll just have to change our practices as they become untenable on an individual basis.

Assuming the premise, that resources were limited, the capitalist method would be to attempt to get whatever profits there were to be had in distributing whatever goods those limited resources provided. Really, the world has always had limited resources, over time the limits of which fluctuate, it's just that humanity has usually tended to operate well within those limits.

Several answers here already argue that free markets might still be for the best and keep civilization humming optimally along whatever the case, but it's also possible that for certain scarcities capitalism might be a poor fit, and at worst a fatal one.

For the fatal scenario, there would need to be a cascade of necessary great auks... i.e. the great auks became extinct due to the increasingly high market value of its feathers which were used to fill pillows. Here a free market destroyed a commodity, the price of which went up in a nasty feedback loop:

1. Kill auk, sell soft feathers.


2. Fewer auks, price goes up.


3. Any auks left? If so, go to step #1.

Of course auk feathers were luxuries, so people could live without them, but if similar feedback loops wind up up destroying necessities, we might behold a different sort of feedback loop:

1. Necessary commodity insufficient to maintain current populace.


2. Populace becomes fewer.


3. Enough of commodity yet? If not, go to step #1.