Can We Solve Our Climate Crisis Under Capitalism?
For much of the past year I have been more and more focused—obsessed maybe—with global warming and what we should do about it. This is the problem of our time, maybe of all time; it is also, just maybe, our ticket out of self-doubt and a long, low period where we seem to have forgotten the meaning of the public interest. America used to be capable of big things: winning World War II, building the interstate highway system, going to the Moon, enacting Medicare and Medicaid. These efforts pulled us together and made us proud and prosperous. Today we seem to take pride in…what exactly? Mostly in clever apps that weaponize our personal information to sell us more junk.
Fighting global warming, as outlined in the Green New Deal, is the kind of great effort that could unite us while transforming our society for the better. It is a lifeline that could stem what seems an accelerating slide into the populist abyss. If we have the courage to grasp it. So I want our country to commit to this hard task, to mobilize behind this fight.
Capitalism and the Climate Crisis
Thinking about global warming has made me think hard about capitalism. For decades environmentalists and worriers about population and scarcity have pointed the finger at industrial capitalism and its insatiable focus on growth. More people, always consuming more, is a formula for eventual disaster. We have delayed the consequences with better technologies—higher yield crops, cleaner fuels—but it now seems the bill is coming due. Every few months a new, detailed report shoves our face in the reality of global warming, species extinctions, water shortages, deforestation, and the dire consequences of billions of people in rapidly developing countries demanding (the nerve!) to live like Americans. It would take the resources of 3 or 5 planet earths to satisfy them.
A strong-minded set of fellow climate change activists believes that we cannot succeed unless we give up capitalism. Capitalism, they argue, is a system that cannot exist without constant growth; capital seeks the most profitable investments, and capitalist survival depends on the highest rate of return. Businesses, even if they wanted, cannot for long survive in a steady state; either they will go under, or be forced by demanding investors or circling take-over artists to increase profits. Further, the market shapes human beings into consumers who are constantly cajoled, tempted, and bludgeoned into wanting more, more, more. We are thus driven to use up the earth’s resources—its fossil fuels, its forests, its waters, its fish, its arable land, and on and on.
Naomi Klein, for instance, in her recent book On Fire: The Burning Case for a Green New Deal, argues for fundamental change: “The way out is to embrace a managed transition to another economic paradigm, using all the tools of planning just discussed. Increases in consumption should be reserved for those around the world still pulling themselves out of poverty.” Greta Thunberg was blunter in her September 2019 address at the UN: “We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth. How dare you!”
Even if individuals in the system sense that they are destroying the planet and dehumanizing society, they have powerful incentives not to acknowledge, or to minimize, the harm they are doing. First, their personal wealth and status depends on it. As Upton Sinclair famously said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
Second, they are supported by a powerful set of ideas that tells them the market is the optimal way of organizing human behavior, and the most moral thing they can do is keep on with business as usual. Hence we saw ExxonMobil and the oil industry conduct their own research in the 1970s showing global warming was happening and was a serious threat, and then mount a massive disinformation campaign to discredit the science and argue against doing anything about it. The mastermind behind this, ExxonMobil CEO Lee Raymond, was steeped in the individualist, anti-government mindset typical of the Texas oil-patch.
Bill McKibben in his recent book Falter: Has the Human Game Begun to Play Itself Out, offers a melancholy picture of how the Ayn Randian thinking that permeates the upper echelons of the Republican Party has led directly to its policies of climate denial. Her novels are favorites of officials in all parts of the Administration, including Rex Tillerson, Mike Pompeo, and Trump himself. Rand’s hyperbolic suspicion of the state and conviction that the least accommodation to government leads inevitably to collectivism leads her followers to dismiss any problem that might require government action.
What we think about capitalism is starting to seep into our politics. Bernie Sanders, by calling himself a ‘socialist’—though he is not, by most accepted definitions—has done a service by forcing people to at least consider the possibility of alternatives to capitalism. Other candidates will need to openly state what it is about capitalism that they like. But even though polls show that younger Americans have declining faith in the capitalist system, it seems unlikely that politicians angling for votes will dare suggest that there is anything fundamentally wrong with capitalism.
The Case for Capitalism
In these discussions I have so far resisted the idea that we need to abandon capitalism. First of all, it would be disastrous for creating the consensus we need to act on global warming if we started by saying, “First, let’s destroy capitalism.” Global warming skeptics already suspect that fighting climate change is a ruse for imposing socialism. Second, the alternative is never very clear, and the actual alternatives human beings have come up with have not been very appealing. I spent a good part of my professional career countering the Soviet Union, not a model most of us want to emulate.
It seems to me that capitalism is here to stay, in the sense that it is the economic face of modernity, of our rational and scientific worldview. While that dominates, so will capitalism.
Fortunately we have a range of capitalisms to choose from. My preferred model is a more humane, socially responsible capitalism—something more Scandinavian, perhaps. If we move away from the laissez-fairy-tale, neoliberal version of capitalism, I’ve argued, we can make capitalism work for the benefit of the many, instead of the few. What we need is a program to save capitalism from itself, before it self-destructs, or destroys the planet.
There are three big arguments, in my view, in capitalism’s favor. One is that it is enormously productive and has proven able, in a fairly large part (though by no means all) of the globe, to eliminate the problem of scarcity and its political counterpart, some form of aristocracy or oligarchy, with a few rich and powerful haves lording it over a mass of have-nots. Before industrial capitalism the world consisted of a tiny group of aristocrats and oligarchs lording it over a mass of abjectly poor peasants. The great wealth generated by capitalism has made it possible to raise much of the world out of misery and support a large middle class. With many exceptions and caveats, the standard of living, the security, and the happiness, of a large part of mankind has gone up. In principle this rise in wealth means we can have a much more egalitarian human community than was possible in most places in the past.
In this way capitalism enables democracy, and I think it is no coincidence that our liberal democracy and industrial capitalism began and grew together. The year 1776, when we signed the Declaration of Independence, was also the year that Adam Smith published capitalism’s ur-manifesto The Wealth of Nations.
Second, capitalism tends to create a less militarized and destructive society. It powerfully directs human pride and desire for status—our spiritedness or thumos—away from war and conquest towards commerce and making money. The aristocracy of the ancien regime delighted in combat and despised money-making. Today we honor soldiers but reserve our real admiration for entrepreneurs and successful hedge-fund managers. Our mores and manners have softened, as Steven Pinker describes in detail in The Better Angels of Our Nature: Why Violence Has Declined. We no longer hang people for stealing a loaf of bread.
The modern shift in political thought that provides the basis for liberal democracy is accurately described as a lowering of goals. Instead of expecting politics to make people good and pious and taking its bearings by some vision of human excellence, modern politics takes people as they are and tries to create peace, stability, and prosperity without assuming that human beings are angels. Capitalist dogma about selfish private interests producing public benefits perfectly fits this perspective.
Third, a capitalist system enmeshes the globe in a mutual inter-dependence that works against open conflict. Business and financial interests tend to see modern war as economically disastrous and to be avoided. There is money to be made, certainly, in preparing for war and producing the instruments of war, but generally not in actually using them. And today’s globalization differs from yesterday’s colonial exploitation: it is pulling developing societies into the modern economy as part of multinational production and distribution chains.
And the Case Against
Still, I have started to wonder if an acceptable form of capitalism is achievable. Unless we make a huge course correction, we seem to have reached a point of diminishing returns. Capitalism has its own versions of inequality and oligarchy, which if not recognized and thwarted, create a deeply unequal society. Recent scholarship, aided by new sources of data, seem to show clearly that in the US inequality has been rising for decades. What appeared to be a permanent era of economic and social leveling after WWII now seems a blip in a longterm trend of greater inequality. Thomas Piketty and others have shown convincingly that this is built into the way the system works, as the returns to capital outpace the returns to labor.
Further, inequality is inextricably linked to oligarchy. Great wealth is a source of great power, and great power in the hands of the wealthy is used to grow and perpetuate both wealth and power. Here in the US we have seen these interests mount a strategic campaign over many decades to shift our institutions in ways that favor money and property over people and voting. The Koch Brothers and their allies have largely seized control of the Republican Party and turned it into a vehicle for their vision of untrammeled free markets and less government. Trump campaigned on a different approach, promising to defend the working man, but in practice he has toed the free market line.
Is there any built-in check on this process within capitalism? Free market advocates always argue that capitalism is ‘self-correcting.’ According to Milton Friedman and other free market purists, in theory a totally free market would prevent inequality and wealth build-up. As fast as concentrations of wealth and business are built up, they are torn down by the churn of the market and the constant competition from new actors. But the theory rests on a simplistic view of human nature that has been debunked in detail by behavioral economics. In practice markets are never free, and their proper functioning requires energetic intervention by government to prevent monopolies, curb exploitation, arbitrate disputes and correct for market failures.
The Need for Government: Wealth and Oligarchy
So what kind of government intervention should we have? Attempts to guarantee equality by doing away with capitalism altogether, such as Stalin’s USSR or Mao’s China, are generally short-lived and hugely destructive. Many rulers see suppressing competing power centers as essential to a strong state, but suppressing capitalism to this extent ends up weakening the state by reducing growth and innovation. It cannot be sustained in a world where others take a different path, grow faster, and amass the financial, military, and soft power that comes with prosperity.
Autocrats, especially in the post-Communist period, have instead sought to get the benefits of capitalism while keeping it under their thumb. This has sometimes been successful, most noticeably in China, but means in practice that the political ruling elite becomes indistinguishable from the elite of wealth. Inequality is not checked, or only very partially, and we see a new ruling oligarchy. Further, China’s success is the exception, not the rule; more commonly autocracy stifles the market under a blanket of corruption and mismanagement, creating the worst of both worlds.
Democratic states have sometimes succeeded at least partially in regulating and overseeing the market to reduce inequality and oligarchy. This political success largely accounts for the failure of 19th century Marxist predictions of the impoverishment of workers and the complete concentration of wealth and power in the hands of a few capitalists. The growth of industrial capitalism was met, over a long period of trial and error, by pushback from democratic governments, who under pressure from voters broke up monopolies, regulated wages and working conditions, enabled the rise of powerful unions, created a social safety net, and in a thousand ways limited the reach of the market.
But these successes are under constant assault from wealthy interests. The quarrel that the wealthy have with democracy is deep and in some ways intractable. As Aristotle and many others since have pointed out, the rich are few, and the non-rich—the poor, the middle class—are many. A system that gives power to the many is potentially threatening to the rich; it will limit their privileges and constrain the way they use property and capital, via taxes and regulations and its control of government to create programs designed to balance the many advantages held by wealthy interests. This class struggle is inevitable if democracy works as intended and is not entirely ‘captured’ by special interests. The tools of democracy, the mass political parties controlling the institutions of government, will always to some extent clash with the tools of wealth—its control of business, its access to information and media, its legions of lawyers and accountants and experts, its lobbying and bribery and other hidden but powerful ways of influencing politics.
This friction can be fruitful when both sides recognize their need for the other and work within limits set by law and custom and shared values. Democracy can check capitalism’s excesses and provide a strong safety net to shield against the ups and downs of a market economy. A large middle class coupled to socio-economic mobility acts as a stabilizer, since its more ambitious members see themselves as potentially wealthy and hence resist too much redistribution, while those who are struggling push for greater equality.
Capitalism Unleashed: Reaganism and the Age of Greenspan
But what had been a successful balance in the US, resulting in the post-WWII boom of shared prosperity and egalitarian economic growth, was upended by the Reaganite shift in the 1980s. While Eisenhower’s Republicanism acquiesced in the reforms of the New Deal, Reagan made distrust of government—“government is not the solution to your problems, it is the problem”—the center of conservative politics and ultimately of a new conservative identity. In the Age of Greenspan (another member of the Rand cult), the new orthodoxy of less government, lower taxes, fewer regulations, the unquestioned superiority of the private sector, and privatization of public functions became accepted not just by Republicans but by much of the Democratic Party as well.
There are many reasons this shift was politically and ideologically successful. But underneath appeals to individual rights and traditional values lies the enduring class conflict and the desire of many businesses and wealthy individuals to limit the power of the people as exercised through elections and democratic government. Weakening government is a way to weaken democracy, without assaulting it head-on. The entire long-term program of the post-Reagan conservative movement has revolved around bolstering every aspect of the American constitutional system to emphasize its least democratic features, and exploiting every loophole to increase the power of wealth and property.
This is why we have seen Republicans at the center of gerrymandering, voter-suppression, support for the electoral college, court packing, and a host of new legal doctrines designed to make property rights trump democratic rights. The conservative mantra that “The US isn’t a democracy, it’s a republic!” reflects the same effort. Fear of majority rule has risen to the top as conservatives see a country moving demographically towards more minorities, more urbanites, and less Christianity. How can we stop this, they think? For conservatives, ‘democracy,’ understood as the rule of the majority, is becoming a dirty word. And if you want to undermine democracy, a professed love of free markets and a preference for property rights over other rights is an easy cover.
This makes it very difficult to have a genuine discussion about capitalism and how to reform it. Even fairly modest policy changes are attacked as tantamount to communism; never mind the much more sweeping and difficult changes needed to address the climate crisis. This didn’t used to be the case, even here in America. Progressives and New Dealers made frontal attacks on capitalism and big business. Remember Teddy Roosevelt’s “malefactors of great wealth?” Remember Franklin Roosevelt’s response to attacks from big business: “I welcome their hatred!”? Today this language, used by Bernie Sanders and Elizabeth Warren, horrifies centrists of all stripes.
Saving Capitalism from Itself
American progressives have often argued that their reforms aim to save capitalism, not bury it. And make no mistake, capitalism today is in deep trouble. If conservatives and capitalists dig in their heels, one of three outcomes is likely. One, the world’s climate and supporting ecosystems will collapse dramatically, leading to the likely end of capitalism, or at least of many capitalists. Or two, the people of the world, seeing that their climate and ecosystems are heading for collapse, and a miserly few have hoovered up more and more of the world’s wealth, will rise up and tear down the institutions and people they see as responsible. Leading to the likely end of capitalism, and many capitalists. Or three, ruling oligarchies will clamp down more and more harshly to keep unrest from exploding. Leading to the end of liberal democracy and anything approximating free markets.
I would like to see us instead try a concerted program of pro-capitalist reform. Let’s make the effort to get bankers and businessmen to recognize that capitalism is much too important to leave to capitalists, that preserving its positive qualities is going to require more oversight and intervention. Capitalism today is drowning in unearned wealth, inequality, failure to price in environmental and climate damage, and oligarchic intervention in politics. Pace standard conservative talking points, capitalism can thrive with higher taxes and a bigger social safety net. It does in other advanced industrialized countries. (Denmark, for instance, is rated more highly than the US in the World Bank’s latest study of the ease of doing business in different countries.) It did here in the US during and after World War II. If capitalists join in the reforms needed to deal with the climate crisis, they will thrive, and so will the capitalist system.
But I am not sanguine that we can bring this about. The desire to make more money, to hang onto it by any and every means, to pass it on to one’s children and heirs, is extremely strong. Once the institutions and supporting intellectual and cultural framework are in place to make this happen, it is very hard to undo. The economic historian Walter Scheidel tells us in his book The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, that when inequality and oligarchy have taken root they are only dislodged by extreme means: civilizational collapse, plague, revolution, or major wars. Most of us would agree that we would be better off avoiding such solutions. But Scheidel does not think normal democratic politics is up to the task.
The economic shift we Americans must make to save our planet is not small. The right comparison is probably not to the original New Deal, or even World War II, but to the end of slavery. When slavery was abolished, slaves were the largest single source of wealth in America, and the cotton empire that slaves made possible was fueling the rise of industrial capitalism not just in the United States but the entire Euro-Atlantic region. Slavery was not ended peacefully. Today the fossil fuel industry is similarly central, and its rapid end would be similarly disruptive.
Recent Critiques of Capitalism
I define capitalism in the fashion of Karl Marx and Max Weber, as the system where most production is carried out with privately owned means of production, capital hires legally free labor, and coordination is decentralized. In addition, to add Joseph Schumpeter’s requirement, most investment decisions are made by private companies or individual entrepreneurs. (Milanovic)
To test my thinking I wanted to look at some analyses of modern capitalism. Are there realistic alternatives? Branko Milanovic asks this in his new book Capitalism, Alone: The Future of the System That Rules the World. Milanovic has been our great guide to global inequality, the inventor of the famous ‘elephant curve’ showing how globalization has benefited the poor in China and India, and the rich in America and Europe, while hurting the working class in the developed world.
As his title suggests, he thinks the best we can do is shift to a different variant of capitalism. According to Milanovic, today we have two major variants, the liberal meritocratic version represented by the US, and “political capitalism” represented by China. They differ primarily in that under the US version wealthy interests rule indirectly, by funding candidates and parties and lobbying elected officials; while in China they rule directly through a fusion of political and business elites.
Unfortunately Milanovic fails to grapple with capitalism’s weak underbelly. He dismisses any and every threat to capitalism; in particular, he poo-poos resource exhaustion and global warming as examples of the kind of doomsday predictions we have regularly proven wrong. Similarly he thinks robots and artificial intelligence will end up creating more new jobs than they destroy, with the tired argument that “that’s how it’s happened before.” The notion that this time might be different doesn’t enter his thoughts.
More generally, Milanovic doesn’t think that there are resources within human nature, things that we value that are at odds with making money, that might cause us to step back. He suggests our preference for democracy will fade if we think political capitalism can give us higher growth rates. Our resistance to becoming commodities is no longer serious, as we have acquiesced to becoming ‘human calculating machines.’ So there is no Rubicon that capitalism might cross, whether it’s replacing us all with robots or re-designing our genome, that is likely to lead to a revolt.
If that is indeed your judgment, it is hard to see a way out of the box that capitalism has us in. We crave the wealth that capitalism offers and have no alternative measure for a good life, and acquiesce to being crushed by rising inequality and the ability of the rich to gain control of the levers of power.
For reasons that are unclear, Milanovic does not advocate that we in the US look to existing social democracies as models, even though he admits they have many of the features he thinks desirable. For a close-up look at the social democratic alternative a good place to turn is Lane Kenworthy’s Social Democratic Capitalism, which offers a detailed look at realistic policy choices to shift our system.
Kenworthy is a longtime toiler in the vineyard of comparative economic and social research. On issue after issue—healthcare, education, unemployment insurance, taxation, overall quality of life—he can show where the US falls short, sometimes very short, of what has been achieved in the best social democracies. And he can outline what policies are needed to do better. There is no need for a ‘revolution,’ only for the US to step back from its current willingness to bow down to money and markets.
Kenworthy’s starting point is empirical and far from Marxism or Randism: “To this point in history, the most successful societies have been those that feature capitalism, a democratic political system, good elementary and secondary (K–12) schooling, a big welfare state, employment-conducive public services, and moderate regulation of product and labor markets.”
While none of these are even vaguely radical features, a few seconds thought forces one to acknowledge that moving the US in this direction would be opposed by very powerful forces, who would characterize it as ‘communist’ and ‘un-American.’ Hence while the goals are relatively modest, getting there would require a major political upheaval. This is because the US no longer has a “democratic political system;” it has instead a type of oligarchy.
American-Style Capitalism Will Not Stop Global Warming
What about our starting point, the crisis of global warming? Milanovic thinks the same forces that create and sustain global capitalism will cope with resource strains without any major dislocation. On this I think he is almost certainly wrong. The most detailed proposals for a market-based solution to climate change call for a steep carbon tax that would reduce consumption and promote the development of cleaner and more efficient energy sources. This is an important part of many comprehensive plans, but few experts believe it would be sufficient. We will need a lot more direct government intervention—regulations, directed investment, restrictions on consumption, maybe nationalizing key industries—to meet emissions goals.
Would Kenworthy’s social democracy tackle it? The central question is whether a more genuine democracy, not the oligarchy we have now, would agree to the demands and sacrifices needed for a serious climate change effort. A society that has strong social programs and supports in place, and in which most citizens think political leaders are reasonably responsive to what the people want, would seem more likely to take the risks associated with climate action than a society where many people feel precarious and marginalized. If climate action means—as it surely does—revamping the economy in ways that dislocate a lot of people, it would seem these people would accept change more readily if they were confident they and their families will be supported during the transition.
This is the strategy behind the Green New Deal. It combines the project of the climate crisis with the project of social democracy. It asks us to achieve both under the same umbrella. Criticism that this is too ambitious or that the two projects are unrelated is off the mark. It is hard to see a lot of Americans saying yes to the economic upheaval of the Green New Deal without the accompanying safety net, and without hope that the upheaval will result in a permanent change to a more equitable society.
Already a majority of Americans agree that climate change is real and we should do more to stop it. A majority supports universal health care, higher taxes on the rich, and other social democratic policies. What is preventing us is not public opposition but the relentless efforts of special interests.
It is true, however, that support for a Green New Deal rests for the most part on buying into what is called “green growth,” the argument that we can maintain present levels of consumption and growth while switching to clean sources of energy. There is no need for major changes in lifestyle. This is understandably politically attractive, but most experts think it is wildly optimistic. Renewable energy sources cannot fully replace fossil fuels. Really going green will require us to consume less, drive and travel less, grow and eat food differently, and adjust our lives in a thousand large and small ways.
This reality is at the center of the emerging “de-growth” movement (which you can read about in a recent New Yorker article “Steady State: Can We Have Prosperity Without Economic Growth?” ) De-growthers call for a shift in production and consumption, from global to local, from mass markets to local markets, from goods to services. This would have to be triggered by a change in priorities, catalyzed by the threat of climate change, away from consumerism and wealth maximization as the goals of individual and public policy.
Some de-growthers talk about dismantling capitalism, while others speak of “post-growth capitalism.” Whatever the terminology, this would be a huge change taking many decades—much too slow to meet urgent climate crisis goals. It is also obviously 180 degrees from the drill-baby-drill, all-growth-is-good-growth thrust of current US policy.
I think there is a plausible path, some version of the Green New Deal, to tackle the climate crisis within an overall capitalist system. However, in America implementing such a program is akin to rebuilding the engine of a ship at sea—it requires putting in place the elements of a robust social democracy at the same time that we put in place an unprecedented program of economic reform. This is not impossible, but would require tremendous political will and public support.
Unfortunately this is not what we have in today’s America. Instead we have deep divisions, with one party pathologically opposed to social democracy and climate action, and the other party uncertain of its commitment.
But China’s Might
Our abdication of leadership leaves the field to others, especially China. China’s leaders could easily decide that a major effort on climate offers China an opportunity to accelerate development, move ahead of its rivals in the West, and demonstrate the superiority of ‘political capitalism.’ Under Xi Xinping, China sees itself as vying with the US for global leadership in the technologies of the future. Already China is leading the world in making and installing solar panels. It may see a similar opportunity in building nuclear reactors.
A less likely but not impossible scenario is a right-wing climate strategy, probably originating in Europe. Europe’s nationalist, anti-immigrant movements are less enamored of the free market and small government than their American counterparts. They are therefore less afraid of the ‘big government’ implications of climate action. An ‘avocado politics’—green on the outside, brown within—that justifies a strong state to stop immigration, force a rapid shift to less growth, and keep the rest of the world from using scarce resources needed by the West could be quite popular. Including, I suspect, here in the US.
The dominance in America, at precisely this juncture, of the most retrograde version of capitalism poses a terrible danger to capitalism and democracy, not to mention human civilization. It abandons the high road to China and its authoritarian version of capitalism to take up the mantle of multi-nationalism and savior of planet Earth.
It is possible, of course, that the US will change course again with the next election. Americans could find themselves mugged by reality, like Australians during this year’s fire season, and turn away from their current path. If not, Earth’s inhabitants will draw their own conclusion about which system is preferable.