By Roar Bjonnes
In the past few decades, we have witnessed four main crises within capitalist countries – finance and inequality crises, which are a direct consequence of the economic policies backed up by neo-classical economics, as well as resource and environmental crises. The two latter crises are more appropriately linked to the industrial revolution and economic expansion of the past two hundred years. The strain on resources and degradation of the environment have been going on throughout the past four hundred years, from the mercantile economic era to the classical capitalist era to the neo-classical era we now are in, and there are few or no aspects of traditional, capitalist economic theory which address this problem.
The current resource and environmental crises are the most serious threats facing humanity today. Consequently, a renewed interest in solving these problems has resulted in the growth and popularity of various “green” parties in many countries.
While there are technical challenges in solving the environmental crisis, these challenges can be overcome with the right political will. The main problem is that the policies needed to implement changes are generally contradictory to short-term profit motives, and thus classical or neo-classical economic thought largely ignore environmental problems altogether.
Economic historian Karl Polanyi was perhaps the first to warn us of this issue. Already in 1944, he asserted in his milestone book, The Great Transformation, that society needs to control the market economy, and not, as today, allow the market to control society. He also warned of the ecological consequences of unbridled markets. Even though Polanyi’s ideas have been largely ignored by mainstream economists, his message, that economics cannot be separated from the way we live, has come to the forefront of today’s green movement.
The first modern economist who specifically talked about this topic, and which now is at the heart of green political thinking, was the British economist E. F. Schumacher. What Adam Smith did for classical economics and Marx did for socialism, Schumacher did for green economics: he laid the foundation for further ideological thinking. In his path-breaking work published in 1973, Small is Beautiful: A Study of Economics as if People Mattered, he presented a thorough critique of capitalism’s main shortcomings and suggested a way to live on our planet of finite resources without going beyond the inherent boundaries of ecology. He suggested we develop a sustainable lifestyle and economy nearly 20 years before the word sustainability was made fashionable by the 1987 Brundtland Commission at the United Nations.
Schumacher’s book introduced the term “natural capital,” which brought Polanyi’s message into the arena of the environment. If we create an economy that abstracts itself from nature, they both argued, we will inevitably destroy this invaluable resource. All our current environmental problems have brought home the huge costs of the market economy’s faulty abstractions. We have interfered with many of the life support systems of this planet, and if the trend continues, the capacity of our planet to support future generations can no longer be taken for granted. Without a sustainable environment, there can be no sustainable economy.
Accounting for Natural Capital
Green economists have, since Schumacher’s time, compellingly argued that we need to account for natural capital. “Today we understand natural capital,” writes green economist Paul Hawken, “as the sum total of renewable and non-renewable resources, including the ecological systems and services that support life. It is different from conventionally defined capital in that natural capital cannot be produced by human activity.” [1] Most importantly, natural capital, such as fossil fuels, fish, and animals, cannot be replaced by human activity. Once they are lost, they are lost forever.
The green movement argues that the problem with the capitalist system is that it is not rooted in an ecological understanding of how the world works. The very source of the word economics comes from the Greek oikos, which means ‘earth household’. Understood in an ecological context, economics is thus about taking care of the earth as if it is our own household, our home. But neither socialist nor capitalist theorists have seen economics that way. Therefore, both socialism and capitalism, in all their variants, have contributed to the ecological resource and economic systems crisis we are now in.
A New Economic Worldview
Schumacher did indeed understand this predicament. He pointed out that our ethical and philosophical worldviews have great political and economic consequences. He suggested two main reasons for our economic and environmental problems: 1) building an economy on the individual’s desire for wealth and 2) separating economics from ecology. Schumacher was one of the first to provide these revealing insights into an economic system he aptly described as “the institutionalization of individualism and non-responsibility.” [2]
Directly or indirectly inspired and influenced by Schumacher’s Small is Beautiful worldview, American businessman-turned-environmental activist Paul Hawken wrote the book Natural Capitalism; physicist and third-world farm activist Vandana Shiva developed a new vision for rural economies in India; architect William McDonough and chemist Michael Braungart have created revolutionary cradle-to-cradle industrial design innovations by copying the way nature works; the European green movement has inspired and founded political parties influencing governments all over the EU; triple bottom line economics have become a new standard by showing corporations that profit, people and planet need to be part of economic planning and accounting. Activist Vandana Shiva argues that what the proponents of free markets see as proof of underdevelopment can be signs of a good and balanced life:
I come from the Himalayas and even today we have villagers in the high mountains who have zero cash income, but they are not poor for that. They have good woolens…that can keep you warm even in the snows, beautiful homes, lovely structures that protect you from climates,… nutritious foods, clean water, to me those are the indicators of whether you have the good life or you don’t. Now without a dollar a day you can have the good life if your ecosystems have not been spoiled, your rivers flow, your forests are intact, your agriculture has not been destroyed, your knowledge has not been eroded, your rights have not been taken away, and your culture gives you the means and mechanism to organize life in a way that gives dignity to all.[3]
The Growth of Green Values and Political Parties
Green Parties have, in the past three decades, sprouted up in most countries of Europe and other industrialized nations. The first Green Party to achieve national prominence was the German Green Party, famous for their opposition to nuclear power; they were founded in 1980 and have been in coalition governments at the state level for some years. In 2001, they reached an agreement to end reliance on nuclear power in Germany, and agreed to remain in coalition and support the government of Chancellor Gerhard Schröder in the 2001 Afghan War. This put them at odds with many Greens worldwide. The Swedish Green Party has had up to 25 members in government, while the European Green Party is represented in the EU parliament and supported by dozens of Green parties from all over Europe. There are also Green parties in the United States, Brazil, Australia, New Zealand, and Lebanon.
The support for green values and sustainable economics has become so ubiquitous in our society that world politicians and corporations such as Wal-Mart, Shell and Exxon have all subscribed to sustainable, green and third-bottom-line practices—in which not only profit, but also community and environmental goals are described in their business’ mission statements. But, as green activist Paul Hawken lamented in his book Blessed Unrest, even with three million grass roots organizations struggling to make the world more equal and greener, and corporations and politicians promoting green values, the actual, sustainable, green changes we have made are but “drops in a bucket.” The world is more polluted, more unequal, and more unsustainable than ever.
Conflicting Value Systems
There are two main reasons for this dire predicament. First, while there are many green parties and people with interest in the environment, none of these parties have become a leading force in a major country. But even if that were to happen, it is unlikely that much would change, due to the simple reason that it seems impossible to reform capitalism and make it truly “green.” The reason for this is that the driving force of the capitalist system is the profit incentive of individuals and companies. And, as we have seen throughout modern economic history, the profit motive, or the so-called “bottom line” of capitalism, has always been antithetical to environmental interests. But what are the reasons for that?
Human beings have many motivations, and the desire for wealth and profit is just one of them. Regardless of the observations of Adam Smith, very few people consistently try to maximize financial gain at the expense of everything else. Not everyone is always motivated by greed and selfishness.
The capitalist system is rigged in such a way that people with the most money have the power. Those who fit the stereotype of the rational profit maximizer, those who put their financial interests above everything else, are the ones who eventually achieve the most power in a market capitalist economy. It is in their interest to put short term financial interests above environmental interests. Consequently, within free market capitalism the political will to develop ecologically sound industrial policies israther weak. Trying to make capitalism greener and more sustainable is therefore not a practical strategy. As both Polanyi and Schumacher have pointed out, capitalism is, by its very nature, not green, sustainable, or cooperative.
The Profit Problem
Green politicians urge us to build upon the best of the market economy, but all capitalist reform strategies, from Keynes to neo-liberalism, from the welfare system to the greens, have one thing in common: they are attempts at circumventing, denying, or glossing over the systemic shortcomings of growth-capitalism’s basic principles. As history has shown, this only gives the multinational corporations more time to continue with their green-washed propaganda. Similarly, taxing corporations only makes them work even harder to find tax loopholes or tax havens to hide their profits.
While most politicians today support the cause to stop global warming, very little is being done to stop it. Capitalism is a colossal system embedded in its own self-fulfilling mission to increase profitat any cost. And unless one fundamentally alters its main premise – to create more profit, to amass more wealth – meaningful ecological reform is not possible. As Schumacher wrote, “the idea of unlimited economic growth, more and more until everybody is saturated with wealth, needs to be seriously questioned on at least two accounts: the availability of basic resources and, alternatively or additionally, the capacity of the environment to cope with the degree of interference implied.” [4]
Green Capitalism: An Inherent Contradiction
Since the publication of Schumacher’s green classic Small is Beautiful in 1973, the world has not become any more sustainable or greener. Despite the popularity of everything green, the corporations are ahead of the game and finding new loopholes to pollute and to pay less tax to maximize profit. The concept of green capitalism is a contradiction, and it is therefore unlikely its vision can develop a truly sustainable economy or save us from the environmental and economic crises we are in.
So far, we have traced the history of economic thought from the days of Mercantilism to green capitalism, to show how economic thoughts and theories have shaped the world and created the present multi-dimensional crisis we are facing.
It does not seem that any current economic theory by itself holds the solution to the complex problems confronting us. A return to the economics before the 1980s when higher taxes, better distribution of resources, and less conspicuous consumption were common, could certainly be helpful, but it would not be enough.
Green capitalism undoubtedly has some praiseworthy features and has attempted to address both resource problems and environmental degradation. Unfortunately, these attempts are rather shallow because of its underlying problem: growth and profit-motives as the main indicators of economic health. At best, green capitalism is an attempt to reduce the impact of environmental degradation within the constraints of the free market system. At worst, it sidesteps many inherent obstacles to real sustainability and thus, in the long run, will only increase the fundamental problems we are already facing.
If free markets, through the control of large banks and the financial system, continue to decide the allocation of resources, it is hard to conceive of a sustainable, green economy where environmental concerns are properly addressed. Hence the main lesson to be drawn from this short review of recent economic history is that the current economic system, whether in its light green or dark green versions, will not be adequate in solving the serious crises we face. As Polanyi and Schumacher pointed out long ago, the failure of the green movement today lies largely in its unwillingness to look beyond the current consumption- and profit-oriented economy and culture for political, economic, and environmental solutions. Therefore, it’s time to look for solutions beyond green capitalism.
[1] Paul Hawken, as quoted in E. F. Schumacher’s Small is Beautiful, 25th Anniversary Edition, (Point Roberts, WA: Hartley and Marks, , 1999), p. 5
[2] E.F. Schumacher, Small is Beautiful, (Point Roberts, WA: Hartley and Marks, 25th Anniversary, , 1999)
[3] Vandana Shiva, Real Wealth-Real Poverty–How Economic Globalization is Robbing the Poor of Wealth, [ a speech given at Scripps College in Claremont, California on Dec. 2, 2003.
[4] Ibid