RWER issue 56: Richard Smith
Green capitalism: the god that failed
Richard Smith [Institute for Policy Research & Development, London]
Abstract
In rejecting the antigrowth approach of the first wave of environmentalists in the 1970s, pro-growth “green capitalism” theorists of the 1980s-90s like Paul Hawken, Lester Brown, and Francis Cairncross argued that green technology, green taxes, eco-conscious shopping and the like could “align” profit-seeking with environmental goals, even “invert many fundamentals” of business practice such that “restoring the environment and making money become one and the same process.” This strategy has clearly failed. I claim first, that the project of sustainable capitalism was misconceived and doomed from the start because maximizing profit and saving the planet are inherently in conflict and cannot be systematically aligned even if, here and there, they might coincide for a moment. That’s because under capitalism, CEOs and corporate boards are not responsible to society, they’re responsible to private shareholders. CEOs can embrace environmentalism so long as this increases profits. But saving the world requires that the pursuit of profits be systematically subordinated to ecological concerns: For example, the science says that to save the humans, we have to drastically cut fossil fuel consumption, even close down industries like coal, and massively retrench production across a broad range of unnecessary, resource-hogging and polluting industries. But no corporate board can sacrifice earnings to save the humans because to do so would be to risk shareholder flight or worse. I claim that profit-maximization is an iron rule of capitalism, a rule that trumps all else, and sets the limits to ecological reform — and not the other way around as green capitalism theorists supposed.
Secondly, I contend that given capitalism, workers and governments have little choice but to support “their own” corporations’ drive for growth because this is not socialism: No one is promising new jobs to unemployed coal miners, oil-drillers, automakers, airline pilots, chemists, junk food producers, plastic bag makers, advertisers, credit card vendors and others whose jobs would be lost because their industries would have to be shut down or retrenched to save the humans — and unemployed workers don’t pay taxes. So CEOs, workers, and governments find that they all “need” to maximize growth, overconsumption, even pollution, to destroy their children’s tomorrows in order to hold onto their jobs today, because, if they don’t, the system falls into crisis, or worse. We can’t “cut back” to save the planet because capitalism can’t solve the unemployment crisis any more than it can solve the ecological crisis. We’re all onboard the TGV of ravenous and ever-growing plunder and pollution. But as our locomotive races toward the cliff of ecological collapse, the only thoughts on the minds of our CEOS, capitalist economists, politicians and labor leaders, is how to stoke the locomotive to get us there faster. Corporations aren’t necessarily evil. They just can’t help themselves. They’re doing what they’re supposed to do for the benefit of their owners. But this means that, so long as the global economy is based on capitalist private/corporate property and competitive production for market, we’re doomed to collective social suicide and no amount of tinkering with the market can brake the drive to global ecological collapse. We can’t shop our way to sustainability because the problems we face cannot be solved by individual choices in the marketplace. They require collective democratic control over the economy to prioritize the needs of society and the environment. And they require national and international economic planning to re-organize the economy and redeploy labor and resources to these ends. I conclude, therefore, that if humanity is to save itself, we have no choice but to overthrow capitalism and replace it with a democratically-planned socialist economy.
I. Saving the earth for fun and profit
You may download the whole paper at: http://www.paecon.net/PAEReview/issue56/Smith56.pdf
Capitalism is the capture of government by the biggest owners of capital and land in order to extract subsidies at the expense of the public. It seems to me that capitalism has been very successful in achieving its goals.
I recall reading about an ancient game of football in which the aim of the game was kick the pig’s bladder from the mid-point between two villages to your home village. There were no other rules. By the end of the game several players were dead. Today football is still played, but it has fields with boundaries, rules enforced by penalties, red cards and suspensions.It is almost unknown for players to kill each other fighting.
Capitalism has too many advantages to abandon it, but it needs much stronger rules. Competition generally produces improved products and service. Socialism produced overpaid powerful entrenched bureaucracies which treated their employers (the general public) with contempt, and impeded productive activity and innovation. It had a bad environmental record. Change from socialism to capitalism in many countries reduced corruption.
The problems with capitalism re environment would be mirrored in socialism. They are basically political and due to capital’s or labour’s excessive power, especially control of mass media. Intrinsic to the ecological crisis are two factors which are almost always ignored. 1. Growth in human population. Population must be reduced to between 1 and 2 billion to sustain widespread prosperity. 2. Economies would collapse without GDP growth under the present fractional reserve monetary system. Change to a 100% reserve system would make it possible to have a shrinking then stable GDP in tandem with decreasing then stable population . This would make it possible for per capita real income to be maintained at or lifted to a comfortable level if there was also investment in improved technology.
“Economies would collapse without GDP growth under the present fractional reserve monetary system. Change to a 100% reserve system would make it possible to have a shrinking then stable GDP in tandem with decreasing then stable population . This would make it possible for per capita real income to be maintained at or lifted to a comfortable level if there was also investment in improved technology”
Allen, I don’t understand the logic of this. Please, explain.
@Allen I absolutely disagree:
‘Competition generally produces improved products and service’
Contentious, as Richard Smith points out -planned obsolescence and the push to cut costs and produce cheap goods undermines the quality of goods and services and makes them un-sustainable and inferior.
I also don’t think we are talking about moving back to the horrors under Stalinist Russia. The countries usually identified as ‘Socialist’ countries are simply not socialist. An objective account of how the economies functioned proves this. Production was not centered around factory self organisation or for people’s need in Russia under Stalin. The production process was not democratically decided nor was anything.
The entrenched bureaucracy instead ran the economy ‘capitalistically’ in competition with the West. This is a product of history, whereby Russia emerged out of the defeated international revolution with a decimated economy, and the loss of the majority of its workers and its production capacity in the civil war. The Russian economy could hardly become socialist when it desperately relied on exploitation to overcome these weaknesses – to force peasants to provide the food for people to eat, and the workers to produce weapons to fight imperialism and launch an imperialism of its own. That is why Tony Cliff correctly identified Russia as State Capitalist.
‘Population must be reduced to between 1 and 2 billion to sustain widespread prosperity’
This is the same reified nonsense that Marx rallied against. There is no population number that simply obtains sustainability. Instead sustainability is conditioned on the interaction of people and the environment, on the organisation of production – or mode of production. The issues Smith raises about the inherent un-sustainability of Capitalism will persist regardless of population sizes. The point is then we simply do not know what size population would be sustainable – simply because it depends on what organisation of society takes place with that population size. Under socialism – with the likely massive reductions in waste, emissions, and resource usage – the sustainable population will be much higher.
Its also simply a mistake to see population as simply rising uncontrollably. Its not and is expected to peak due very much to economic development. In the immediate sense the highest emissions and resource depletion is coming from the developed world, where population growth is the lowest. Thus the key factor is capitalist development not abstract population levels.
Keep up the great work Richard Smith!
@Allen Cookson. How can labour be said to have excessive power when labour is the only active human factor in the economy?
Think of Greece and the bloated public service.
Allen Cookson
Think of Greece and the collapsed economy. Think of Greece and the large fund bets against it. Think of Goldman arranging money for Greece by underhanded methods and at rates it could never pay after the shock. Think of Greece as the scapegoat. Think of Greece as a nation now impoverished with many people likely living below a lving wage. Greece needs its public service or it will have little. So do many countries right now. Dont equate the word bloated with public services Allen. We are all over it. Its a misrepresentation and I dont buy it. After all the excesses and all the bailouts and injections = equate the word bloated with banks.
This disputation started with my denying Richard’s idea that sustainability required the end of capitalism. Certainly Richard has shown that capitalism as it is today has growth bias which is ecologically unsustainable. I believe that except in a benign ecologically sound dictatorship (most unlikely to arise), socialism would be ecologically unsustainable. History demonstrates that democratic socialism has often been environmentally destructive.One of many examples I could cite comes from New Zealand’s South Island west coast whence high quality coking coal is exported to large countries such as China. The sparse population and local economy has a high level of dependence upon the mines. Nearly all the mines are owned by state-owned Solid Energy. A 2010 explosion in the Pike River mine killed 19 men. It appears danger precludes resuming underground mining there. Overwhelmingly, it seems, the local population want open-cast mining there. This would involve large-scale deforestation of Paparoa National Park and destruction of the limestone landscape. Local pressure was the critical factor in allowing open-cast mining further north. A virgin habitat of a large endemic snail there saw a failed attempt to establish the species elsewhere. The pro-mining attitude of the population has always been the same in this region, even when NZ was a socialist state (according to a visiting Soviet delegation in the 1950s).
Bloggers here seem to forget capitalism includes small family-owned businesses, often innovative. My son, having just graduated with a good honours science degree, has been unable to get a job, so he has started his own cabinet making business using sustainably grown timber and non-petroleum derived glues and varnishes. He has no shortage of orders and can compete with Chinese and Vietnamese imports. No middle-men, minimal transport!
Carol, human contribution to the economy, includes employees, managers, contributors of their savings(investors). I used ‘Labour’ to mean employees. If any one of these groups gets too powerful, greed is likely to lead to environmentally harmful activities.
Alice, if every country was as fiscally irresponsible as Greece the world would be in permanent state of stagflation even with a Gini coefficient of zero. Because there would be no lenders, spending unaccompanied by production would see reckless money creation.
Eliot, your population comment shows you lack understanding of ecological economics. Look at Nigeria’s present and projected population pyramids. Consider its population momentum. Look at reserves of non-renewable resources which have no substitutes. Consider climate change, toxic outputs, quality of life, biodiversity. You sound as bad as the capitalists Richard rails against.
Merijn, because nearly all money is created by banks as an interest bearing debt, when a loan is repaid, interest as well as principal must be paid to the bank by the borrower. He must earn enough to pay this. Extra money must be created so that the interest can be paid. As most of this is debt, interest on the newly created money itself requires more debt money to be created. This is an unsustainable positive feedback loop. Empirical evidence supports this. New Zealand’s M3 increased 7.9% per annum over 21 years up to 2009. Considering the ecological imperative requiring decreasing Y in the quantity equation because of the physical limits of the biosphere, M or V must decrease if there is not to be hyperinflation. M cannot decrease in a fractional reserve system, as argued above. Therefore V must. That means recession. If the state created all money interest free, the growth imperative caused by interest would be removed and it would be possible to shrink an economy without stagflation. If population decreased along with decreased Y, per capita income could be maintained or increased. When output had decreased to a sustainable level, M need no longer decrease. Reform to the monetary system is necessary but insufficient to halt growth. Reform of the world trade system and strong regulation of capital flows and corporate behaviour, including payment for negative externalities are important.
Even if socialism were the answer to humanity’s ecological crisis, Richard’s solution is much less politically feasible than monetary reform and population decrease while retaining reformed capitalism. If reform were dome in the right way the productive sector would love it. Banks and the finance industry would fight it tooth and nail.
@Allen Cookson
How are managers not labour? And ‘investors’ do not create wealth, only labour does that. Investment is just money making money.
Hello, I have posted a critique of this article here:
http://greenreserve.blogspot.com/2011/03/green-capitalism-god-that-failed.html
A snippet of the critique sums up my thoughts:
Smith repeatedly comes back to the basic point with which I agree, if defined specifically: corporations (not capitalism) are unable to sacrifice growth now for any gain (not just environmental protection) later. He also comes back repeatedly to one point that is simply incorrect, which is that environmental protection and profit motive are irreconcilable. Finally, he persists in making the hyperbolic claim that the death of fossil fuels is the death of the global economy. As for the first, we know I agree. As for the second, Smith extrapolates this “fact” from statements made by leaders in the Natural Capitalist camp that have been overextended through the use of his third point, which is, of course, hyperbole.
A more fulsome argument is developed in the blog post, of course :)