Capitalism cannot solve climate change, economic democracy and a public wealth economy could

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Climate change is real and happening now – the scientific data is overwhelming, and the global news is telling the story of fires, droughts, hurricanes, heatwaves, etc.  Yet despite this knowledge, despite all the international meetings, and all the emissions and sustainable development goal setting, humanity has made no significant movement on climate change.  Why?  Perhaps because globally, the attempt to use neoliberal capitalist strategies to solve a massive socioecological problem generated by capitalism is bound to fail.  Stuart et al. (2020) labels this concept the “capital-climate contradiction” or, more generally, the capital-socioecological contradiction.  For example, Sustainable Development Goal #8 of a 3% or greater economic growth rate globally stands in direct opposition to several of the other goals, including climate change.  Exponential economic growth has led to an exponential increase in consumption of energy and materials, which has led to exponentially increasing carbon dioxide, nitrous oxide, and methane in the atmosphere, which is causing climate change.  At the same time, the last 70 years of exponential economic growth has led to increased social inequality both within and across countries, particularly since 1980. Thus, SDG goal #8 will lead to increased environmental degradation and social inequality. Why is this so?  I believe this comes back to the Lauderdale paradox – either government policies can increase private wealth or they can increase public wealth, but they can’t do both.

Jen Hinton (2020), in a wonderful article entitled “Fit for Purpose,” addresses this using causal loop diagrams that demonstrate the reinforcing feedback loops that drive for-profit capitalism.  Her work demonstrates how these feedback loops lead to both increased social inequality and increased environmental degradation when the system goal is ever increasing profit.  Capitalist systems need to not only have profit, but the profit must grow on an annual basis.  This need, as Polanyi feared in The Great Transformation, has led to the commodification of everything – labor and land, yes, but also food, natural resources, lifeforms, healthcare, education, entertainment, and leisure among others.  Three main feedback loops are involved.  The consumerism feedback loop drives increased consumption by commodification, advertising, and planned/perceived obsolescence that increase sales that increases profit that increases production capacity.  The consumption of goods and services both directly and indirectly (e.g., land conversion for industrial agriculture and extraction of energy and minerals, GHG emissions, waste) result in environmental degradation.  This massive increase in consumption and waste production, primarily by the wealthiest 1% of the population, has resulted in the four planetary boundaries of climate change, biodiversity loss, land system change, and nitrogen/phosphorus biogeochemical cycles being surpassed.  Given the amount of pesticides and plastic emitted into the Earth system, the novel entities boundary has likely been surpassed, the ocean acidification boundary is close to being surpassed, and the freshwater boundary has been surpassed in several regions around the world.  Clearly, the exponential economic growth demanded by capitalism has led to significant environmental degradation.

Market expansion, however, has limits, and people can only buy so much.  Therefore, exponentially increasing profits also requires wage and labor suppression feedback loops.  Wage suppression includes free trade policies that find the least expensive sources of labor as well as tactics that stop labor organization and eliminate worker benefits.  This strategy has become more extreme over time, culminating recently with the “gig economy.”  The political capture feedback loop shows that as wealth increases, political power increases as well.  The power is used to capture the political process and use government policy to suppress trade unions, deregulate industry and finance, reduce the effectiveness of labor and environmental regulations, and reduce taxes on corporations and the wealthy.  In addition, the implementation of austerity programs eliminates government benefits and reduces public wealth by reducing spending on social safety nets, infrastructure, higher education, and health care as examples.  These three loops interact with some others described in the paper to increase profit because that is the system goal.  This is the heart of the capital-climate contradiction.  The neoliberal capitalist system goal is profit, and the system is structured to exponentially grow private wealth for the few.  Thus, tools developed by capitalism to “solve” climate change – green technology, carbon trading schemes, “green” growth – will all fail because they do not shift the system goal away from growing profit exponentially. These tools of capitalism will inevitably lead to more environmental degradation and greater social inequality.   To be clear, environmental degradation and social inequality are features of the capitalism system.  How can society solve climate change then, if not by the tools of capitalism? A shift to a public wealth economy, increased economic democracy, and an increased reverence for Gaia must be part of any solution.

As Donella Meadows pointed out, the greatest leverage point in a system is the system goal.  At best, most policies addressing climate change in the capitalist system creates weak balancing feedback loops (e.g., carbon trading schemes) or adjusts input variables (e.g., carbon taxes), which have little effect because the goal is still growth.  Here, I return to the Lauderdale paradox.  If the system goal of capitalism is exponential growth of private accumulation, then shifting to an economic system goal of increasing public wealth is necessary to solve the capital-climate contradiction.  Jen Hinton suggests that a “not-for-profit” economy, or what I would call a public or community wealth economy, combined with a sufficiency ethic would greatly reduce consumption and improve economic equality.  In such an economic system, the purpose of business profit is to invest in social and environmental benefits thereby increasing public wealth. Business investment is debt or donation based with no private financial rights, and the ownership is either personal for small businesses or collective for larger firms.  Companies in a public wealth economy still strive for profit, but do not have shareholders, thus the system goal of exponentially growing private profit that is siphoned from the real economy is removed.  Surplus profits of the companies are invested in the workers and the local community.  Taxes are invested in public wealth, and the size and power of corporations are strictly regulated.  Such a system has strong balancing feedback loops that reduce income and wealth inequality, increase environmentally and socially beneficial activities, and strengthens regulations on the environment, labor, and financial entities.  Such an economy works against commodification of the environment, health, education, leisure, and labor and re-embeds the economy within society.  Broadly, a public wealth economy is post-capitalist and pluralist, including solidarity economies and commoning.

An important part of any public wealth economy would be increased economic democracy.  Workers should share in the fruits of their labor and the public wealth goals of the business.  This is far more possible when wealth is not siphoned in to private accumulation as in capitalism. In some cases, this may be very direct, as in the case of a worker co-op, and in other cases it may be increased pay and benefits and stronger labor unions.  Reducing the power of transnational corporations is important for a greater localization and diversity of production, redistribution of income and capital assets, and a greater diversity in the modes of production in terms of scale and employment.  This is similar to the idea of the commons, where the goal is to distribute value equitably, both socially and environmentally.  In terms of utilities and important industries, public ownership allows the objectives and goals to be set by the community rather than the singular goal of increasing shareholder wealth.

The ecosystem of a public wealth economy with embedded economic democracy is outlined by The Next System Project (thenextsystem.org). Potential components of the public wealth economy include public banks and credit unions, publically owned utilities (e.g., water, electricity, transportation, communication, and pharmaceuticals), public holding companies, participatory budgeting, worker cooperatives, community land trusts, small businesses, among others.  And, this is already happening.  Many not-for-profit businesses exist, ranging from small family-owned businesses to Fortune 500 companies (e.g., State Farm Insurance).  Credit unions are common in the United States and remunicipalization of utilities, especially water systems, is surging around the world. Experiments with worker co-ops have been successful.  More importantly, creating a new social imaginary of a public wealth economy and critically analyzing the currently dominant capitalist system can lead to a process of “unmaking” capitalism and “making” an alternative set of public wealth economies.  Like natural ecosystems, the ecosystems of public wealth economies should be diverse in order to meet the needs of people in different parts of the world.

A public wealth economy, however, does not guarantee a sufficiency ethic.  Globally, a reverence for the interdependent web of being that is Gaia must become a central cultural value.  Capitalism has taught us to treat Earth simply as a resource to be commodified, which is expressed in terms like “natural resources” and “ecosystem service valuation.”  Capitalism tells us Earth has an infinite ability to produce resources and infinite ability to absorb waste for our industrial social metabolism.  But the environmental degradation of the Earth and resultant social pressures tells a different story.  Climate change is just one symptom of a planet that we do not respect, abused by an extractive economic system.  The solution thus requires a significant shift in our cultural values and worldviews that re-embeds society within the environment.  The forms of Buen Vivir in South America are an example of a social movement that intrinsically values nature and develops a vision of how people should live within the limits of Earth.  This push for a greater reverence of Gaia is embodied in the constitutions of Ecuador and Bolivia and, at the global scale, is manifested by proposed ecocide laws (www.stopecocide.earth/).  Any understanding of geologic history makes clear that we need Gaia, but Gaia doesn’t need us. Thus, a deeper reverence for the interdependent web of being is a requirement for a successful public wealth economy that respects planetary limits.

Why is a public wealth economy, locally or regionally developed with a sufficiency ethic and reverence for Gaia, a solution for of climate change?  Because the system goal is no longer growth, but meeting the needs of people sufficiently and equitably within the limits of what Earth can provide.  This approach could both reduce global consumption of materials and energy and create development space for low income countries.  Is this a pipe dream?  Not at all.  Capitalism, with the system goal of never-ending growth on a finite planet is the pipe dream.  Public wealth economies, with a system goal of sufficiently meeting needs of society, are a path to a sustainable world.  Humanity really doesn’t have a choice.

 

References

Stuart, D., R. Gunderson, and B. Petersen, 2020, Climate Change Solutions: Beyond the Capital-Climate Contradiction: University of Michigan Press, Ann Arbor, MI.

www.press.umich.edu/10052020/climate_change_solutions

Hinton, J., 2020, Fit for purpose? Clarifying the critical role of profit for sustainability: Journal of Political Ecology, v. 27, p. 236-262. doi.org/10.2458/v27i1.23502

 

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