The Environment and Capitalism

Friday, 6 March 2015 at 12:14
I was invited to represent the Green party at a discussion panel titled 'Capitalism and the Environment' at Southampton University on 26th Feb, organized by the Southampton and District Young Greens, Soton Marxists Society, and Green Action Southampton. In preparing for my presentation I wrote this article:

The Environment and Capitalism
Article for Green Action panel, 26th Feb 2015


What are we really evaluating?

To have a constructive discussion about the conflicts between Capitalism and the environment we need to be clear what we really mean by ‘Capitalism’ and ‘Environment’. Then, based on a set of values we hold in common we can collectively identify the conflicts and exactly where they lie. We can then say to what extent reform is possible and desirable, and whether any proposed reforms can contribute to a sustainable society, or whether they are in opposition to, or lay the ground for more radical and progressive social change.

What do we mean by ‘the environment’?

What has the environment ever done for us?

Silly question right? It doesn’t take much thought to realize how important clean air and water is, how priceless fertile land which allows our food to grow is, or how vital the fuels we use for heating and production are. Beyond that we can see that different parts of the environment are deeply connected and interdependent. There is the water cycle, where evaporation from oceans leads to rain cloud formation, which provides water for plants and food to grow, eventually cycling back out to the oceans. There are food chains where the health and population of one species depends on another, and that species on another, in a chain of predation. Most minerals also have cycles through nature, including the calcium in our bones.

What these simple observations reveal is that disturbance or damage to one part of nature’s cyclical operation will result in disturbance or damage to the other parts as well. Remembering that we have only one planet, it also becomes obvious that the supply of all resources are limited, and many are either irreplaceable once they are used up (like coal, gas and oil), or unrecoverable once an ecological balance has been tipped far enough (like the breakdown of crustacean shells with rising ocean acidity, or the extinction of species from climate change, pollution or over-hunting.

In summary, the environment is a set of interwoven systems that are:
  • Formed from and provide finite resources
  • Limited in carrying capacity
  • Cyclical and interdependent
  • Limited in ability to absorb disturbance, over-exploitation or other damage
  • Indispensable to human existence and well-being, not separate from us

What do we mean by ‘Capitalism’?

With Capitalism there are common associated ideologies about how the world is and should be, and there are fundamental organizational institutions. It’s the latter that really defines it, and those are:
  • The recognition and protection of private property by the state or equivalent authority.
  • Managing and distributing the resources of an economy through trade and markets.
The origins of these ideas can be traced back to the neolithic age and the agricultural revolution around 12,000 years ago. It was at this time that it first became possible for humans to store material value, or accumulate wealth, at any significant scale, and for large concentrations of people to exist together.

Under these conditions of wealth concentration being possible and large numbers of people co-existing together, the idea of private property can extend beyond the fruit of a person’s own immediate labour, and through trade and wage labour come to envelope the fruits of other people’s work as well. Because of this leveraging potential and a particular characteristic of markets, the division of social classes and the “haves” and “have nots” within a population arises.

That property of markets which leads to the enrichment of a few and comparative impoverishment of most, can be understood as cumulative competitive advantage. This begins where, all else being equal, small fluctuations in fortune and circumstance lead to one party of a trade doing better than another. At that point, that additional profit represents a competitive advantage, because it is additional resources to be invested in some way for yet more profit, it is additional security to allow more flexibility for when and how to trade in future, and it is additional volume to allow more competitive pricing compared to those with less. While fortune and circumstances will cause such advantage to fluctuate, it will in aggregate naturally compound, leading to yet more competitive advantage and hence further concentration of wealth.

Thus the natural tendency of markets left to themselves is monopoly and feudalistic distribution of economic means (only where the landlords no longer have to pay taxes to the king).

This is why all countries with somewhat reasonable average living conditions have things like anti-monopoly laws, taxes, and social safety nets. Because otherwise the market economy would eat itself, and the hierarchical social order would collapse (at least in its present form).

Implications of Capitalism for the environment

So how does all this relate to the environment and existing harmoniously or otherwise with it?

One major issue is that trade for profit seeks to externalize costs. Whether that’s the cost of not properly processing industrial waste before disposing of it, or increasing production to a rate that the soil or water or wildlife in a particular area can't sustain, or using dangerous chemicals in a product to increase profit margin, or lobbying for more oil industry development despite dire consequences for climate change, the environment often ends up paying. Attempts at legislating against such behaviour, though helpful, have proven inadequate. This is partly because of the influence concentrated wealth has over government and the legal system, and partly because whatever laws get put in place the pressure to find new ways around them and externalize costs always remains, so long as an economy is primarily controlled through markets.

Another key connection comes from realizing that organizing an economy around markets requires perpetual growth.

This follows from the wealth concentrating effect of cumulative competitive advantage. Without growth, wealth and resources either continue to concentrate, leading to social collapse from mass impoverishment, or the rich and powerful have to give increasing amounts of their wealth away – either through increasing taxes or by some voluntary means – thus undermining the social hierarchy which is the sociological fuel of capitalism. In a steady state economy, large inequality would become increasingly less socially acceptable, because the piles of riches being sat on would grow increasingly conspicuous, so even finding some technical way of maintaining the gap between rich and poor would be less tenable. Thus Capitalism inherently requires perpetual growth (or a totalitarian police state to manage economic decline). This requirement holds true even for a static population size.

It is also worth noting that the unquenchable hunger for growth is further entrenched and intensified by two other intrinsic elements of Capitalism:
  • The idea and use of interest baring debt, and a debt based money system, which accelerates the arrival of insolvency without growth. Due to wealth concentration, ongoing debt is necessary in order to allow general participation in the market. Having it accrue interest at a certain percentage follows from lenders wanting compensation for the lost access to capital/wealth which would otherwise accumulate in a market (due to cumulative competitive advantage). This ensures that the economic growth required is exponential.
  • Dependency on wage labour. In order to participate in the market and so take care of material necessities and pursue any social aspirations, the large majority of people have their labour as their primary source of value to trade. This means they become dependant on employment. Thus not only the rich but also the struggling parts of society and even some groups concerned with labour rights and social justice become ideologically and literally bound to economic growth – under Capitalism.

Doesn’t this built in requirement for endless growth completely disqualify Capitalism from being compatible with a sustainable coexistence with the environment of our finite planet?

Can Technology save us?

Those in favour of a market controlled economy (Capitalism) might argue that technological innovation and the resulting rise in resource usage efficiency offers a way for growth to continue even on a finite planet.

The trouble with this theory is that innovation is sporadic and unpredictable, while the structural dependency on growth is constant. So far, our rate of innovation and efficiency improvements have fallen far short of our growing energy and resource usage. Unfortunately another aspect of Capitalism is the threat-focused and narrow minded mentality it engenders, which is an impediment to the kinds of technological and social innovations that would be needed to bring civilization into a sustainable state. Yet another reason why under Capitalism technology isn’t going to save us is violent conflict. As technology advances so does our ability to devastate the environment with increasing ease, and there’s no business like the war business.

Finally there is the inherent conflict between technological development and wage labour, where there are ever fewer tasks a person can do that a machine can’t do more cheaply, now including such things as journalism, software development and medical diagnostics. The above issues are summarised in the table below.

Technological Innovation
Sporadic, unpredictable
Dependent on constant growth
Thrives with collaborative sharing
Engenders a threat-focused, short term mentality
Increases capacity for environmental destruction
Thrives on war and armed conflict
Leads to increasing redundancy of wage labour
Depends on wage labour
Conflicting characteristics of technological innovation and Capitalism

But will consumption really fall with falling inequality?

If high concentrations of wealth of the sort we have today (without descending into complete totalitarian control of an increasingly destitute majority), guarantees an endless rise in consumption and resource usage, what is to say that total consumption would really fall if wealth was less concentrated and so more people had more opportunity to consume in a market economy?

For the last 100 years the averaged GDP growth rate of the richest countries was about 1% faster during the mid 20th century than during the rest. It was during that period when the gap between the rich and poor within each country was smallest (due in part to strong labour organization and much higher top rates of income tax, and in part to the capital expenses of the two world wars).

What this shows is that consumption certainly can increase with more equal distribution of wealth. But whether and how much it does will depend on the mainstream culture and legal framework around economic activity. The mid 20th century was when the then new culture of consumerism got into full swing. In the context of reduced economic inequality in addition to a widespread awareness of ecological limitations, strong legal restraints on production based on those limits, and a reduced systemic dependency on wage labour (which reduces requirements for consumption to create the profits to pay the wages), then there is at least decent scope for substantially reduced resource usage. In the present arrangement of concentrated wealth and power there is no such scope, not without a global cataclysm forcing it on civilization.

Capitalism Recap

  • Requires perpetual exponential growth due to wealth concentrating nature and thus ever increasing demand on limited natural resources.
  • By locking a host population into wage labour, the commoditisation of value, and the protection of social class, corrodes collective community and empathy.
  • Depends on technological innovation to perpetuate growth, which it also hinders through the threat-focused and short-term mindset it engenders, and which will ultimately make wage labour (a corner stone of social class) redundant.
  • Seeks to externalize costs of production and consumption, frequently leading to the environment taking those costs in the form of destabilisation, pollution and destruction.

Charting exponential growth and resource extraction

The following series of charts show the largely exponential growth in the use of various types of finite resources.

Agriculture related resource usage (source  FAO, 2003; International Fertilizer Association, 2008; FAOSTAT, 2009)
The intensive farming methods which are reflected in resource usage charted in the previous graph are resulting in massive erosion of top soil, which is already severely impacting food security for millions of people across India, Africa and China. Already tens of millions of people across this region can only afford to eat 5 days a week due to worsening arable land shortage. If the trend continues there will be an unprecedented global food crisis within decades.

Global water usage

GDP is the standard measure of economic growth, which is the driving force for increasing rates of resource usage.

Not a simple population problem

Alongside run-away resource usage, the global population continues to rise. While this does increase demand for resources, the size of the present population is much less an issue for sustainability than the way resource usage and consumption is so highly concentrated amongst a small, wealthy fraction of the global population.

Source: World Bank, 2008 World Development Index, 4

What we have now and the kinds of reforms it would take

So it’s not looking too rosy for Capitalism’s compatibility with the environment. Is there any hope for reforms making it workable?

Let’s consider the reforms or tweaks to a market controlled economy that we already have:
  • Income and trade based tax system, with a relatively small addition of property based tax.
  • Means tested welfare system with a still largely free at the point of access health service.
  • Some legal framework to limit the extend of monopolies developing, damage to the environment, and the amount of privately directed money that directly determines the decisions of government, through 'donations', lobbying, and other means.
In addition to these there is the crucial voluntary sector that picks up the short fall of the market to meet the needs of the population, for various kinds of support and caring. To get just a narrow sense of the value of the volunteering in the UK the total number of hours volunteered to charities and NGOs, valued at the median wage, is over £23,000,000,000 pa (source: NCVO).

Getting back to this list of current reforms or social policy interventions, clearly they are not sufficient, since resource usage and environmental damage continues to increase from a point that was already unsustainable decades ago.

Tax reform

Starting with our tax system, the problem with relying so much on income and transactions as a basis for tax is that it’s relatively straight forward to hide or repackage those things to avoid paying tax. Indeed this is exactly what happens. Many of the largest businesses in the UK, including Google, Apple, Amazon, Vodaphone, Starbucks and Boots (not to mention the banks) pay almost no tax at all. Even without that problem, to begin to stem the power concentrating effect of markets, income tax must be set at a progressive rate (higher for higher incomes), which sets up ideological conflicts with those who believe in the myth of self-made fortunes.

In terms of effectively tackling the wealth and power concentration which is forcing the pressure for economic growth, which is destroying the environment, tax based on property value is the most straightforward and robust. It also takes pressure off tax revenue when economic growth slows and total income declines. 

The current Green party policy document proposes the introduction of a land value tax (from EC791) to replace the dysfunctional Council Tax and National Non-Domestic Business Rates. Such a property tax, providing it is set at a sufficient level, forms one lever in freeing us from the environmental death grip of concentrated power. The Greens also support the principle of introducing a more general wealth tax (EC743), which could eventually and more efficiently replace income based taxes.

In combination with land value tax and reforms of income and corporation tax, the Greens propose phasing out VAT and replacing it with ‘eco taxes’ (from EC780), environmental damage taxes which directly disincentivize the kinds of consumption and production that are most damaging our eco-systems and undermining social wellbeing.

Of course, down-scaling production and consumption calls for wage labour no longer being necessary for subsistence, since putting the breaks on growth will depress employment. In the short and mid-term, reducing jobs in unsustainable businesses can be off-set with ‘green jobs’, employment based on transitioning to sustainable infrastructure and services, including energy production, transport, materials, construction, education, health, recycling and R&D. But ultimately the reliance on profit turning wage labour and consequently economic growth for livelihood must be removed if we are to have a sustainable and equitable future.

Welfare and Citizens Income

This leads on to the welfare system. Presently the complex system of means tested aid that we have creates both poverty traps and social stigma. It results in huge wastage of human time and potential, both to administer and to be on the receiving end of.

The Greens currently propose to have a Citizens Income, otherwise known as Universal Basic Income, which is unconditionally paid to everyone, regardless of any other income or employment status or intent. By making this sufficient to meet bare living requirements, the security this provides creates tremendous opportunity for the a large portion of the population to learn, development themselves and pursue genuinely productive and in some cases innovative work, paid or voluntary. This would be opportunity they don’t currently have with means tested benefits which effectively coerce people into accepting whatever wage labour is available, and so act as a subsidy for concentrated wealth wanting cheap labour. Its unconditionality would also remove the existing poverty trap of having most additional earnings removed by reducing means tested benefit payments (equivalent to a far greater tax on income than the very richest are supposed to pay). And since everyone would receive it, the stigma of social benefits would be lost.

While they are still fleshing through the details, the concept of an unconditional income for everyone actually has support from both the left and the right of the political sphere. Some of the right (e.g. Milton Friedman and followers) see it as a way to allow the market to continue even in the face of mass technological redundancy, while some of the left see it as laying the ground to exit Capitalism and transition to a sharing economy or collaborative commons. How much of each it will be, of course, depends on implementation details and what other political and economic policies accompany it.

The Green policy document for this year is not yet finalised, but I can express my own views on the matter. Previous research (see also this) has focused on revenue neutral implementations and on fairly minor changes to income tax levels. This is understandable with respect to not affronting too heavily the mainstream way of thinking about economics, in terms of money, and the so called ‘trickling down’ of wealth from the rich. But consequently it severely limits the level of CI so that the initial effect on wealth distribution is negligible, thus leaving the pressures on economic growth and environmental degradation unchanged. Nevertheless, by removing much of the means tested element of the social safety net, it would still be a substantial progressive step from which higher levels of CI could be moved to, which would start to allow a greater economic transition.

If we look at a Citizens Income as a key tool in a transition to sustainability then it must ultimately be about wealth redistribution and supporting a zero growth economy, or rather only intensive growth (coming from efficiency improving innovation) rather than extensive growth (coming from using up resources at a higher rate). If we can bring ourselves to face that fact then setting taxes and using other funding methods for more progressive levels of CI becomes a little simpler.

According to the ONS, the total private household wealth in the UK is £9.5 trillion, of which 44% is owned by the wealthiest 10%, and the least wealthy half of the population having just 9%.
ONS data also shows that the average (mean) income is £29,600 (2013), with 30,000,000 in some kind of employment. That’s equivalent to £13,875 per person in the UK.

With these figures it’s not too hard to imagine a combination of wealth and income tax that would allow a Citizens Income at a level that supports a dignified existence. In doing that it would also aid the transitioning to a zero extensive growth, sustainable economy and foster creativity and innovation, while still allowing some differentiation in income. Naturally, as the amount of paid wage labour decreased, tax funding would have to shift more from income to wealth tax in order to keep money circulating.

Regarding income tax, taking an historical perspective, much higher top rates should not be alarming. For much of the 20th century the top rate was between 70% and 98%. It’s only been since Thatcher that it’s tumbled, with predictable rises in inequality.

An additional source of intermediate funding, were it needed to smooth the transition, would be quantitative easing – providing the Citizens Income was set to automatically track any inflation.

Legal framework and governance

Regarding the legal framework that we have to curb the worst excesses of concentrated power, given the well known revolving door between government and industry, frequent corruption scandals, and distinct lack of big corporations paying much tax, not to mention the prospect of ratifying TTIP, it is rather inadequate.

Much of the problem can be tackled with increased transparency, and the devolution of real decision making power to a larger portion of the population. It is the concentration of both economic and political power that forms such a viscous cycle. The entrenchment of a political establishment makes economic reforms much harder and insufficient on their own in securing a sustainable socio-economic system. On this front the Greens have a clear policy and philosophical basis for de-centralising political power and having a finer grain and more participatory form of government, along with a genuine power of recall for representatives, and the forming of a politically and socially progressive legal constitution.

As a direct result of such reforms, bringing public services, including energy supply, back into public control would be much easier, as would be protecting the NHS. Similarly passing effective environmental policy that reflects the public will, without being subject to the profit making convenience of big business, would be achievable.

Regarding the problem of creating national debt when creating central bank money, and of commercial banks creating the far larger fraction of the money in our economy through the provision of loans far beyond their deposits, the Green policy (from EC660) is to reform this to remove much of the unsustainable growth forcing factor of runaway debt interest (along with other gross social iniquities of the present monetary system), somewhat along the lines of the Positive Money proposals.

The intent of reform and taking the chance

After that summary of our existing tweaks to Capitalism (sometimes euphemistically referred to as ‘Social Democracy’) and brief introduction to progressive Green policy, perhaps you’re getting a sense of the type of reforms it will take to get off the path to collective destitution that we are currently on. This transition calls for:

Going from: Reforms that effectively service and support the continued concentration of power and capital amongst the few, and thus facilitate ongoing environmental degradation, whilst perpetuating a threat-focused short term outlook.”

Moving to: Reforms that actively dismantle or diffuse the forcing factors of markets and property which exploit to destruction both physical and social environments; allowing a progressive, more collaborative socio-economic paradigm to emerge.”

By making that shift we will simultaneously wind down the manufactured and divisive culture of consumerism, which in itself will free up tremendous amounts of human time and energy for more genuinely enriching pursuits.

Clearly if we as a social collective were to see through such reforms, we might still for a time have markets, but we would have made a paradigm shift in our sense of value and social and environmental awareness that is clearly outside the bounds of Capitalism, and which I believe lays the ground for a sharing economy or the collaborative commons.

But is there time?

It’s true we are running out of time to implement these progressive reforms, and for that reason some groups are advocating a good old violent revolution, or the types of capital repossession that would instigate widespread violence. While the prospect might feel exciting and satisfy frustration and a sense that something big must be done now, the reality of mass violent social upheaval would almost certainly be terrible for everyone and help to create a worse version of what we already have. It would help to create more of the threat-focused, short-term, authoritarian thinking that is already steering us collectively in the wrong direction.

Even without setting the streets alight, there is already a much darker future being prepared for, which would take the perpetuation of concentrated power and market economics on a finite planet to its logical conclusion – diminishing growth along with rapidly diminishing population and civil liberties and increasingly literal economic slavery of the masses, so that as resented as the exploitation and domination is, there is little that can be done about it.

As we all now know, the infrastructure of the surveillance state is already in place across much of the world, while the police become ever more militarized and the definition of ‘terrorism’ and ‘national interest’ ever more broad and flexible, resulting in a growing crack-down on peaceful protests. If this dystopian picture seems hyperbolic, consider that the last century saw several such societies establish themselves in a matter of years to threaten world domination, with lesser technologies for mass control than exist today. The longer mass austerity and social injustice continues, the more dangerous the situation becomes.

If we don’t want more of that and believe a better way is at least worth trying for, I’d suggest we can start by rejecting the political parties that have helped lay the ground for such a dark future, and support one that shows a clear understanding of the challenges we face.

I believe the Greens offer a sensible and progressive set of policies that really engage with the realities of our existence in the world, and are something you can actually vote for. And while success is not guaranteed, unlike with the other parties on the voting slips that are still enamoured with Capitalism, neither is failure.

I hope that we can collaborate together to find a more collectively prosperous and sustainable way forward.


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