Green Capitalism: Fix or Folly?

The present economic and climate crises have increased pressures on international and individual governments to act. The solutions to these problems are seen within the walls formed by discourses [1] of neoliberalism, the economic growth paradigm and technological optimism. These discourses are essential gears in the oil guzzling capitalist machine.

As solutions to the aforementioned crises, we are told that arctic and oil sand development, electric cars, and carbon trading markets are the solutions to our environmental and economic woes (as if they were separate things). We are told that capitalism can be ‘green’.

Much of this course has dealt with understanding the conditions and contradictions of capitalism. I would; therefore, like to maintain this focus and cement a better understanding of this topic for myself and others who wish to debate these issues further. I will do this by summarizing critiques of capitalism from readings of this course and elsewhere.  I chose to do this because I believe that understanding capitalism is a fundamental precedent for any serious analysis of energy issues and society at large as it its logic pervades every area of social, political, and economic life.

In what follows I will review how capitalism works and how it has become dominant as a social system.  I will then argue why green capitalism is unwise as a long-term solution to mitigate climate change and improve the material conditions of society and life on earth.

I. Capitalism: Profit and Perpetual Growth

Capitalist Mode of Production

The requirements of capitalism  should ask us to question the wisdom of continuing our present course. Limits to capitalism have been talked about it before it reached the hegemonic globalized status it has today. David Harvey has made an significant contribution to understanding the mechanics of contemporary capitalism by looking back at the work of Karl Marx. I will borrow much of his material here to help illustrate the mechanics and limits of capitalism.

Figure 1:  Elements in the Process of Capitalist Mode of Production [2]

Figure 1 shows, the beginning and end of the cycle of capitalist accumulation is money; the object of capitalism is to use money to create more money.  Money buys raw materials, tools, and labour power to produce commodities destined for a market where they may be sold for an exchange value or price which realizes more money than was invested in the elements of production. To illustrate, the clothing factory owner, i.e. the capitalist, buys cloth, sewing machines, and electricity (means of production); then hires and pays wages to sewers and maintenance staff (labour power), to produce finished jackets and shirts (commodities) which are sold for more than the costs of production (profit). Money (i.e. profit) becomes the means and the end goal of capitalism, not production per se.  The cycle of money through production to realized profit, i.e. more money, this must continue indefinitely.[3]

So profits are the end goal of capitalists. Sustained profits are conditional upon constant growth in means of production and labour power, or the wealth creating capacities of society and nature. Each cycle of the capitalist motor produces profit, more money than existed previously, which must be reinvested in the cycle of production. Because there is more money after each consecutive cycle, and the goal of capitalists it to accumulate profits, more means of production or more labour power or some combination of both must be consumed in the process. Efficient use of material and labour inputs help to increase profits, but unless you reduce inputs to zero the requirement of perpetually augmenting throughput of energy and matter remains.[4] I will discuss this in more detail in the second chapter of this paper, however, the important point here is to note the exponential growth component inherent in the profit motive of capitalism.

These points are fundamental to understanding the crisis tendencies of capitalism, its terminal destiny and the growth paradigm that currently pervades global governance.

Daily life and Paradigms

Capitalism is not a simple formula for creating profits; it effects a complete makeover of society.[5] New technology introduced to increase productivity spreads throughout society effecting cultural changes in daily life. Wage labour in productive facilities from textile mills to office towers change gender roles as women and men change are forced to alter their daily geography commuting between work and home. Also, social relations change from equal exchanges of labour time (e.g. my dozen eggs for your litre of milk) to a system of exchange centred around profit (where laborers cede the fruit of their labour and their means of production to capitalists); commodities are produced with ever more complex chains of inputs and distribution concealing the exploitation of people and materials invested in their production. These neoliberal ethics permeate normal life.[6] Capitalism as a historically specific and socially constructed system of production and social relations becomes simply daily life.

So daily life is not just a natural unfolding of reality; things are not just as they appear. Daily life in capitalist society creates a paradigm governing explanations of the material world. When explanations change, as Newton and Einstein provided us in the realm of physics, paradigms change.[7] The real world, whatever that may by, does not change, only our interpretation of that world.[8]  Paradigms are not simply changes in the formula and equations used to explain the nature of gravity and light waves; they are changes in scientific culture involving its own set of traditions and values. When paradigms change, a new social order replaces the old, defining the normal codes of behaviour and belief. The growth paradigm of contemporary capitalism can be seen as a culture with implicit values, goals, and beliefs.[9]

II. Green Capitalism: Facts and Arguments

Carbon Trading

Perhaps green capitalism is our best hope given present concerns over climate change and green house gas emissions from fossil fuels. Newell and Patterson[10] suggest this may be so; they argue that despite the deficits of capitalism, we exist within its grip and must therefore look seriously at harnessing the forces present within capitalism to find solutions to imminent problems such as climate change. In this view, finance capital should be used to create a market for carbon credits.[11] Carbon credit markets would involve the governance of the sale and certification of carbon offsets through two mechanisms established by the Kyoto Protocol: First, the Clean Development Mechanisms (CDM) would function as a centrally regulated carbon offset program for national governments to abate their greenhouse gas emissions through purchase of credits which are supplied by the certified carbon emission reductions of projects elsewhere who sell credits to buyers.  These credits are organized in market instruments such as The World Bank’s “Prototype Carbon Fund” which motivates “..involvement from the private-sector financial world in the financing, creation, and selling of carbon offset projects and carbon credits in the CDM.”[12] Voluntary carbon offsets (VCO) function in a similar way but outside national government channels. VCOs allow private organizations or individuals to buy carbon offset credits even if their national government did not sign onto the CDM agreement.[13] These markets are administered by non-governmental organizations. In short, carbon markets price carbon and create an incentive to purchase credits while they are inexpensive in order to sell them later for a profit. They also allow individuals and corporations to buy the right to pollute today. Carbon offsets could be viewed as a “spatial fix”, i.e. a way of overcoming barriers to capital accumulation at home by utilizing cheaper alternatives abroad.[14] Carbon markets are similar to the spatial fix seen by deindustrialisation where firms exported production overseas to evade high labour and production costs at home. Carbon trading is in this sense a novel reconfiguration of the ways capitalism overcomes obstacles to accumulation.

Carbon trading may hold promise of a short term reduction in the intensity of the growth of greenhouse gas emissions; however, proponents of these views underestimate or ignore the fundamental contradictions, inherent crises, and terminal prognosis of capitalism. In the next segment I will use the example of carbon trading to illustrate one way capitalism is going ‘green’. I will then discuss its key flaws: The myth of decoupling, delusions of efficiency, and the social and environmentally degrading contradiction of capitalism.

The Decoupling Myth

As previously discussed, capitalism requires constant inflation of profits and inputs of labour and material energy in various proportions due to the productivity of labour and technology of production (see figure 1). According to Herman Daly this requires the following assumptions: 1) the economy is a closed system of infinite biophysical energy and materials; 2) the economy exists in a non-physical dimension or; 3) the laws of thermodynamics are invalid.[15] If we accept that the world does have physical limits in productive potential; that the earth has limited capacities to organize energy into useful materials and energy; and that our consumption, and following entropy, of this energy should not exceed this capacity, then we should seriously question those who propose perpetual capitalism; likewise, as I have previously discussed in earlier articles,[16] we should not ignore the fact that consumerism has real material harms linked which we avoid through export the miasmal industries which produce our shoes and cellphones.

Jevons Paradox: Inept Efficiency

The view that capitalism can be sustained by reducing carbon intensity, or increasing energy efficiency (absent of caps on absolute resource usage) is suspect given the observations provided by the Jevons paradox. William Jevons, a 19th century neoclassical economist, predicted the rising consumption of coal after the implementation of more energy efficient machines.[17] Jevons did not see this exponential increase in consumption as a result of capitalism, but rather a natural phenomena, similar to Malthus’ theory of population boom and bust. He did not see it as the result of the social construction that is capitalism. He too was caught up in supposed ‘natural’ status of the the growth paradigm.[18]

Nevertheless, he made the striking observation that rising efficiency in the use of resource increases the rate of consumption of that resource. For example in Jevons day, the steam engine decreased the amount of coal required by factories of 19th century British industry. This increased energy efficiency and lowered demand for coal, which made it all the more practical to use a fuel source; consequently, coal consumption soared as ever more efficient modes of production increased fuel efficiency, lowered demand, and maintained an attractive price for coal. Due to the close causal relation between resource efficiency and resource consumption, Jevons paradox is also known as the ‘rebound effect’.[19]

The Jevons paradox raises serious doubts regarding the energy efficiency rhetoric proposed by green capitalism. Applying the paradox to carbon trading is illustrative of this paradox. If we commodify the atmosphere as a sink of greenhouse gases (i.e. carbon credits), then lowering the use of carbon credits as an input of production will become an economic imperative for firms as would the lowering of wages or increasing labour productivity. If we use the commodity coal as an analogy to the commodified atmosphere, efficient use of coal promoted accelerated its consumption. Similarly, efficient use of carbon credits will lower demand for for this commodity, tempering rises in price, and therefore increasing its overall consumption. A similar analogy could be made for electricity or any other resource. This paradox raises serious doubts about the decoupling of economic growth from increases in energy and material inputs. Tim Jackson explains: “However much material efficiency you can squeeze out of the economy, eventually you’ll reach a limit, at which point continued growth will push material throughput up again.”[20] This is not to say that efforts to improve energy efficiency are futile, but, as Tim Jackson and Herman Daly argue extensively, a steady state economy and caps on resource usage are required to effect any real absolute declines in their consumption.[21, 22]

Critical Contradictions

Capitalism depends on the central control of energy resources by managerial classes and a reserve army of destitute labour. The integration of these contradictions in capitalism undermine claims that ‘green’ capitalism provides any novel or durable solutions.

Energy is an essential means for survival. It is therefore in the interests of the capitalist class to maintain control over the price and distribution of energy as this directly influences the cost of living and thus wages. It is also important to separate free individuals from energy, and other means of subsistence, in order to coerce them into waged labour.[23] People with alternative means of survival besides money will be harder to control. The history of capitalism has been the gradual transfer of means of subsistence, e.g. land, tools or skills, through from individuals, to a managerial class. The Alberta oil sands are a good example of the degradation of land surrounding communities subsisting directly off the land.[24] As the land is degraded these communities are left with no other option but to work ‘freely’ as waged labourers for the very industries which forced them to abandon their traditional livelihoods.[25] Separating energy  from the hands of people to provide their own means of subsistence the alienates people from their determining the terms of their survival.

The maintenance of a reserve of army of labour is another tool capitalism employs to coerce people into the confines of wage labour.[26] A large population of unemployed and desperate people, slowly dispossessed of their energy autonomy, discipline the employed wage labourer to the regime of waged employment. The worry of unemployment, without the means of survival is a powerful tool to keep labour power in line with the imperatives of profit accumulation. These inherent social injustices are ignored by the rhetoricians of green capitalism in debates on the economic and climate crises. We hear talk of renewing economic growth as the solution to our problems. Nothing else matters unless the engine of capitalism is ticking along at a steady rhythm.

Conclusion

Capitalism may have had its benefits. Certainly many of the technologies sprung from the competitive innovation of profit driven activity have and will prove vital to the practical solutions of the future. However the inherent flaws are too often dismissed as necessary evils. The necessary growth of capitalism defies the physical limits of the earth’s capacity to support life. This is not only a threat to our own species, but more importantly the survival of much of the rest of the biosphere. This may be deemed overly pessimistic. I would be happy an open to being proved wrong however, I don’t see any building pile of evidence. The benefit of the doubt must be transferred to those who claim that the present growth trajectory of the social system that is capitalism is the only way. Changing paradigms is not as easy as a three step plan. It will require courage and coordination, luck, and perhaps dose of disaster. It will also require more than a simple technological transformation of status quo capitalist society. Electric cars and wind farms will not guarantee a more equitable, just and fulfilling human existence as much as advertisers spend on telling us so.

Endnotes

1. Discourse is a term popularized by Michel Foucault. In this view discourses are modes of thinking which are historically and culturally unique and contain, produce, and maintain subjects through repetition of texts. See his Archaeology of Knowledge 1972.)

2. Figure 1. David Harvey, “A Talk on Marx’s Method at Berkley,” (Video Stream), 1 hour, 7 mins. http://davidharvey.org (Accessed Dec. 9, 2010.

3. Ibid.

4. Ibid.

5. Ibid.

6. Ibid.

7. Stephen Purdey, “The Growth Paradigm in International Relations,” Ph. D. Thesis, University of Toronto, 2007. 50

8. Ibid.

9. Ibid., 21.

10. Peter Newell and Matthew Paterson, Climate Capitalism (UK: Cambridge University Press, 2010).

11. Ibid., 94.

12. Adam G. Bumpus and Diana M. Liverman, “Accumulation by Decarbonization and the Governance of Carbon Offsets,” Economic Geography 84, 2 (2008): 133.

13. Ibid.

14. Ibid., 134.

15. Herman Daly, “From a Failed Growth Economy to a steady-state economy,” United States Society for Ecological Economics bi-annual meeting (Washington D.C.: American University, 2009).

16. I discussed this in my previous post titled Discourse and Lifestyle Politics.

17. John B. Foster, Brett Clark, and Richard York, “Capitalism and the Curse of Energy Efficiency: The Return of the Jevons Paradox”, Monthly Review Nov. (2010): 1 http://content.ebscohost.com.

18. Ibid., 7.

19. Ibid., 2.

20. Tim Jackson, “Recovery Without Growth,” Renewal 117 no. 3 (2009): 47.

21. Tim Jackson, “Prosperity without growth? The transition to a sustainable economy.” Sustainable Development Commission. 2010. pp. 6-11. http:// www.sd-commission.org.uk

22. Herman Daly, “From a Failed Growth Economy to a steady-state economy,” United States Society for Ecological Economics bi-annual meeting (Washington D.C.: American University, 2009).

23. Koyla Abramsky. “Energy, Work, and social reproduction in the world-economy,” in Sparking a Worldwide Energy Revolution,  ed.  Koyla Abramsky, AK Press, Oakland CA, USA (2010): 90-92.

24. Andrew Nikiforuk, Tar Sands: Dirty Oil and the Future of a Continent, Vancouver B.C.: Greystone Books. 2008. pp. 14-15.

25. Koyla Abramsky. “Energy, Work, and social reproduction in the world-economy,” in Sparking a Worldwide Energy Revolution,  ed. Koyla Abramsky, AK Press, Oakland CA, USA (2010): 93.

26. Karl Marx, Capital: Volume I, UK: Penguin Group, 1976. 781.