“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 and employed by most western governments, ushered in a new economic age. It was from the changes initiated during the Depression years that a modified capitalist system emerged. 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 ground rules of economic activity.
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. Some of the giants of US finance, such as Paul Krugman, Lawrence Summers and Paul Volcker, have called for decisive government action in the marketplace. Even Alan Greenspan, the father of deregulation, has admitted that financial institutions can no longer police themselves.
Increased government intrusion in the form of equity ownership and market regulation is 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 the package 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 environmental deficits do not respond to Keynesian strategies because nature cannot be taxed in prosperous times to recover earlier deficit expenditures. Once nature goes into overdraft, 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. Neither does Mother Nature do bailouts.
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 pillaging 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? Why do we equate business cycles with climate cycles? 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.
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 and employed by most western governments, ushered in a new economic age. It was from the changes initiated during the Depression years that a modified capitalist system emerged. 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 ground rules of economic activity.
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. Some of the giants of US finance, such as Paul Krugman, Lawrence Summers and Paul Volcker, have called for decisive government action in the marketplace. Even Alan Greenspan, the father of deregulation, has admitted that financial institutions can no longer police themselves.
Increased government intrusion in the form of equity ownership and market regulation is 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 the package 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 environmental deficits do not respond to Keynesian strategies because nature cannot be taxed in prosperous times to recover earlier deficit expenditures. Once nature goes into overdraft, 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. Neither does Mother Nature do bailouts.
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 pillaging 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? Why do we equate business cycles with climate cycles? 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.
• 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 empty 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 incomes, 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 largely a function of wealth and income.• 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, such as “maximizing profits,” “toxic assets,” “robust growth,” and “consumer confidence” with both incredulity and anger.• Recognize the importance of a progressive taxation system, abandon constant pleas for tax cuts and outlaw 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 US the top 5 percent of the population controls at least 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 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 in a few years. If capitalism is unsustainable, then we are both complicit and culpable.
Capitalism cannot be reformed until we reform our own consumption behaviour, learn to live with less, reduce our bloated ecological footprints, and lower our material expectations. We, as individuals, first 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.
