Capitalism and Sustainability
"Can we, the stakeholders, demonstrate the ethical imperatives that will shape a gentler, more ecological capitalism or will capitalism, driven by greed and self-interest, simply self-destruct?"
Presenting ... another essay by Hugh Robertson in the series, "Econoclastic" Economics, which examines the intimate, and often perverse, connections between our economic system and the environment. Hugh is a retired educator, environmentalist, and one of the first members of the Future Generations Party and Movement in Canada.
Capitalism and Sustainability explores the implications of the current global economic and financial collapse, and governments' response to this crisis, for the environment and for the capitalist system itself. It concludes by presenting a series of principles for creating a "sustainable capitalism" from the ruins of the existing system by replacing the imperative of continuous growth and consumption with the concept of a "steady state" economy based upon a clear recognition of the ecological limits of the planet.
[NOTE FROM FUTURE GENERATIONS RIGHTS: Right now, we're advocating a huge economic leap as we invest and grow our way into a new renewable energy economy. But once we get ourselves to a zero-carbon economy, we're all for steady state economics, combining capitalism and sustainability.]
Do we want to be remembered as the generation that saved the banks and let the biosphere collapse?
— George Monbiot
A major economic crisis, the Great Depression of the 1930s, ended the age of laissez-faire capitalism. The interventionist ideas of John Maynard Keynes, formulated in response to the crisis, ushered in a new economic age. As well, the Depression also saw the rebirth of a modified capitalist system. Now, both an economic as well as an ecological crisis threatens to engulf contemporary capitalism.
The twin pillars of the capitalist system – private ownership and free markets – are undergoing a significant shift as a result of the financial meltdown. The days of companies "privatizing the profits" and governments "socializing the losses" are gone forever. It is no longer business as usual as governments worldwide rewrite the groundrules.
The US government has taken an ownership stake with massive investments in a number of failing banks and investment houses, all titans of American capitalism. Even the dreaded term "nationalization" is floating wraith-like through the corridors of power. The other icons of American capitalism, the automobile companies, are still on life support awaiting their bailouts.
The mantra of the market is also in freefall. The machinations and manipulation of the financial markets – and the ensuing public outrage – are forcing the US government to regulate both transactions and compensation levels. In a recent announcement, Alan Greenspan, the father of deregulation, admitted that stock markets can no longer police themselves. Other giants of US finance, such as Paul Krugman, Lawrence Summers and Paul Volcker, have all called for decisive government action in the marketplace.
Increased government intrusion in the form of equity ownership and market regulation are part of the compromise that capitalism will grudgingly tolerate to survive. Another important feature of government activism is the trillion dollar US stimulus package. But it is primarily a short term economic, and political, fix to increase consumer spending, ramp up production and create jobs. Saving capitalism is only secondary.
The economic rescue plan itself poses grave environmental risks regardless of the mutant form of capitalism that emerges from government intervention. Keynesian deficit spending might kick start depressed economies in the short run but it is ruinous for our natural ecosystems because boosting consumption will only expedite environmental degradation. We will get short term jobs and long term landfills and ballooning levels of carbon dioxide.
Furthermore, nature cannot be taxed in prosperous times to recover earlier deficit expenditures. Once nature goes into overdraft, as it does deeper each September on Earth Overshoot Day, the debts keep accumulating. There is no collateral for environmental deficit borrowing and no Keynesian strategies have yet been devised to rescue the planet from bankruptcy. We conflate business cycles with climate cycles at our peril.
Capitalism is in decline not because of the financial crisis, the deepening recession or government constraints. Capitalism is dooming itself because it is polluting and depleting its resource base – natural capital – in its frenetic pursuit of profits and growth. The tragedy of modern capitalism lies in its denial that there is a biophysical limit to exponential consumption and growth.
Will we not learn until we have passed a tipping point of no return that plundering the environment to sustain the economy is utter folly? Do we view nature simply in terms of investment opportunities? Do we not realize that a healthy environment is the bedrock of a healthy economy? Are we not aware that an ecosystem properly managed is inexhaustible?
Modern capitalism is on a collision course with nature and it can only save itself by respecting nature's limits. The fundamental question now facing capitalism is how it can reform itself in a world experiencing both ecological and economic stress.
Principles of Sustainable Capitalism
- Accept that markets will be regulated and that some limits may be imposed on private property and patent protection.
- Adopt a long term sustainable vision rather than short term exploitation for quick profits.
- Renounce the notion of constant expansion and growth. Encourage the concept of a "steady state economy" which emphasizes qualitative economic development not quantitative economic growth.
- Restrain consumption rates that simply fuel growth. Discourage marketing media attempts to persuade us to borrow and spend recklessly.
- Reduce unnecessary production and eliminate "planned obsolescence." Produce durable products for human needs and not for corporate profits.
- Curb resource depletion and focus on conservation, recycling and renewable technologies.
- Revise statistical accounting systems, such as Gross Domestic Product, so that they reflect externalities like pollution and public health.
- Ensure that the market place fairly allocates resources and products. There is enough land, water, air, minerals, food and money for all to share equitably.
- Preserve the notion of creative entrepreneurship and innovation but restrain self-interest and control income disparities. Environmental waste is a function of wealth.
- Review the practice of free trade and its global environmental effects.
- Modify the terminology of economic theory and business practice. Future generations will view terms like "maximizing profits," "toxic assets," "robust growth," and "consumer confidence" with both incredulity and anger.
- Recognize the importance of a progressive taxation system, abandon pleas for tax cuts and discourage off-shore tax havens.
- Control excessive profit and compensation levels in all enterprises. The earnings of the top executives in North America are 350 times the average worker's wage.
- Encourage an equitable distribution of wealth in society. In the United States, the top 5 percent of the population controls 70 percent of the assets.
- Do not promote the privatization of basic human rights, such as water.
- Encourage governments to eliminate subsidies and introduce true-cost pricing for resources.
- Refocus the stock market on its traditional role of raising investment capital for development projects. Discourage the increasingly prevalent "casino mentality."
Will these changes gut capitalism? Not likely because capitalism is a flexible ideology and it will adapt to changing conditions shaped by environmental exigencies or government policies. A transformed and revitalized capitalism will retain its dynamism.
The Real Challenge
The real challenge in reforming capitalism lies in first acknowledging our denial. It is too easy for us to blame some abstract ideology for crimes against nature or accuse the advertising industry of manipulating our tastes. We are capitalism; we are both the foot-soldiers and the custodians of our capitalist economy.
As consumers and participants in a capitalist economy, many of us have shared in the spoils of the system. We stoke the fires of cut-throat competition in our pursuit of ever lower prices. We cheered the "irrational exuberance" of the stock markets because our investments escalated in value . . . until recently. We proudly boasted that the market price of our house had doubled. If capitalism is unsustainable, then we are both complicit and culpable.
Capitalism cannot be reformed until we reform our own consumption behaviour: until we learn to live with less, until we reduce our bloated ecological footprints and until we lower our material expectations. We, as individuals, have to take responsibility and live within nature's biocapacity before the "system" can adjust and adapt.
Can we, the stakeholders, demonstrate the ethical imperatives that will shape a gentler, more ecological capitalism or will capitalism, driven by greed and self-interest, simply self-destruct as the Marxists predict? In an era desperately seeking hopeful solutions, it would be tragic if "sustainable capitalism" was dismissed in the history books as merely an ephemeral oxymoron.
— Originally published in the
New Edinburgh News
in Ottawa, Canada. Reprinted with permission of the author.
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