16/07/12
by

Capitalism Can Save Us All

capitalism

Money and the planet should just get along

Salient’s Lance Cash explores whether capitalism can actually solve our woes by asking academics, economists, a sailing instructor and his mum. 

Shit has hit the fan. We all know it. Our environment–our very own planet–is in a bad state, and we know we can’t keep going on this way. It’s increasingly obvious that this is no longer simply about saving the trees and hugging whales. The impact of environmental degradation has become an economic issue, a health issue, a human rights issue, and in sum: a moral issue of inter-generational injustice.

Today’s generation of young New Zealanders will inherit the impacts of contemporary environmental decay. Put more simply: if I throw shit into a fan, sometime in the future that shit will splatter all over me and probably someone else. Personally, I don’t want to inherit a shitty future because of the failures of the present, especially if we have opportunities to solve this crisis.

So then: how do we ‘save the world’? How do we prevent on-going environmental and resource degradation, and ensure that we and our children inherit a future that isn’t ‘shit’?

Unfortunately it doesn’t seem likely that seven billion people will happily and spontaneously shift into sustainable eco-communes. And so far the revolution has not been televised.  Instead of overthrowing the whole system, we use an idea that’s been going on for a while now. The idea is capitalism, but a capitalism that is retrofitted for different purposes as ‘green economics’.

Now this isn’t some fringe hippie idea, and the people promoting it aren’t a bunch of stoners. The people I’m talking about are among the biggest and wealthiest players in the world.

For example, in June Brazil just hosted one of the biggest international negotiations of the decade: Rio+20. More than 40,000 people attended the event, including over 100 Heads of States, politicians, mayors, civil society leaders, financial institutions, CEOs and corporate giants.

On the tip of every tongue was the same idea: green economics–or the intentional manipulation of the market to achieve sustainability. This can take the form of taxes on environmentally degrading economic activity, or a carbon pricing scheme like the NZ Emissions Trading Scheme. The hope is that these systems will discourage environmentally degrading economic activity, and encourage more sustainable economic behaviour. Tax revenues could then be used for wealth redistribution, or to fuel rapid investment in zero carbon infrastructure and energy production. However the cynic in me–and you–knows that I lack the authority to be the single voice stating that this will actually work.

So I asked my Mum.

She told me, “a tax to encourage sustainable production and purchasing, for the future of our planet sounds good. Will people be willing to participate? I’m not so sure.” You’re right, Mum. It does sound nice, but why do people think we need to distort the market in order to ‘save the world’ and our assets? To answer that question I sought the advice of a Mr Jeremy Grantham.

“To leave it to capitalism to get us out of this fix by maximizing its short-term profits is dangerously naïve and misses the point,” he said, “capitalism and corporations have absolutely no mechanism for dealing with these problems”. Now, these aren’t the words of a crazed Marxist from Aro Valley. These are the words of a British investor, co-founder of asset-management firm GMO: a man people have trusted with 190 billion US dollars.

To state it simply: capitalism in its current form fails to factor into the price of anything you buy the actual environmental harm caused by that purchase. For example: if I buy organic cane sugar to calm my anxiety about being a planet destroying consumer, I’ll likely do so without realising that the purchase of that product in fact contributed to the rapid deforestation of rainforests in Paraguay. The market doesn’t communicate this.

Alternatively, let’s say I buy myself a new iPod so I can privately listen to One Direction without the fear of being ostracized by everyone I know. None of the toxic damages involved in the production of that iPod–those that are destroying Chinese rivers, contributing to acid rain and placing Chinese citizens at risk of cancer–are considered in the price. We’re ultimately looking at a complete disconnection between the flows of economic activity and the natural flows of our planet.

Yet the inclusion of the appropriate market incentives is not far away. The practical implementation of the ideas has happened in some places, such as the carbon tax in Australia, India and Costa Rica. Even rapidly industrialising economies like China and South Africa are set to introduce a carbon tax in the next few years. It sounds nice, but will people actually accept it?

A sailing instructor I know named Rosalind told me, “the problem with talking about taxes and regulations is that it can be seen as a restriction on individual freedoms, and immediately politicises the debate, alienating the political right”. My mum too was skeptical that the idea would be embraced because people would be too concerned about the impact it would have on the economy in the short term. “Government action generally reflects popular opinion,” she said, “if we want these systems, then greater awareness would be needed among the public”. This could be seen only a few weeks ago when thousands poured onto Australian streets to protest against the newly introduced carbon tax, fearing its impacts on the Australian economy. Even if the best idea were to drop capitalism altogether and live in happy Marxist eco-communes, I somehow doubt the protestors–and my Mum–would join them.

At home in New Zealand, the Emissions Trading Scheme was implemented to reduce our carbon emissions. However, according to economist Geoff Bertram, the scheme has been weakened too much by its pursuit of short term economic growth to actually significantly reduce emissions. He describes it as “basically window-dressing to enable New Zealand to sell to the world the idea that we are ‘doing something’”.

To find out if these systems could actually work, I sent an email to Simon Terry, a former investment banker, financial journalist and the current Executive Director for the NZ Sustainability Council. Terry argued that “with sound governance arrangements, economic instruments can deliver good outcomes, but they are rarely the only thing needed and sometimes cannot cope with the interlocking complexity of nature.”

Rosalind the sailing instructor remained skeptical, describing these market systems as “inherently oxymoronic, because a capitalist relationship with the world will always be characterised by opportunism and disconnection. You wouldn’t want a capitalist relationship with your partner, would you?” Aside from questioning my dating ethic, Rosalind raises a major concern about the inherent nature of capitalism. Our planet is finite and has inherent limits, yet every economy across the world is driven towards economic growth in pursuit of the continual accumulation of wealth. Infinite expansion cannot continue within the finite. But is it possible to create a capitalist economy without growth?

“To effect positive change,” Rosalind argues, “you have to work within the framework of what you have now, rather than wasting time working in the nebulous realms of idealism.” It doesn’t matter if you are a fan of the idea of capitalism or not, it is very clear that it is here to stay, and these market-based incentives will only become more popular. The 21st century is set to be defined by the challenge to solve the environmental crisis and solve poverty. I’m not too sure how it will all play out,  but I know one thing for sure: it’s about time I got to work on that veggie garden. ▲

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