Capitalism on a habitable planet

Forest in Osaka, Japan (source Laitche)

Robert Newman used to be funny. Now he’s just laughable. No, I don’t mean that, that’s not fair, there is more to his argument than meets the eye. (He had a piece in The Guardian last Thursday, “It’s capitalism or a habitable planet – you can’t have both” – read it here.)

He writes that capitalism is based on “infinitely expanding markets, faster consumption and bigger production in a finite planet.” This makes it “not sustainable by its very nature.” Well, hang on. There are several problems here.

First, a market that is continually expanding might not be infinitely expanding – it might be getting ever closer to a maximum limit without ever actually reaching it.

Secondly, and more seriously, there is nothing that requires capitalism to require more and more materials. Think about the market for land in the UK. It isn’t growing all the time. Capitalism hasn’t created a new county, north of Norfolk, say. There is a finite amount of land on our island and, as demand increases, the price goes up.

The crucial point is that market forces are just as suited to getting the most out of limited resources as they are at exploiting limitless ones. They reward efficiency and discourage waste. It is no accident that industrial processes in capitalist countries are more energy efficient than their equivalent in former socialist countries where energy is much cheaper.

Think of all the fuss recently about the increase in Ukrainian gas prices. That’s because the price mechanism is slowly being brought into play there, rather than prices remaining unrealistically low. Under capitalism, that’s what one would expect.

There are problems caused by the modern economy, certainly, but they are the result of the lack of modern economic regulation, not its presence. The point is that there are externalities – costs to others – which are not factored into the cost of production. These fall into two types.

The first type are those which are simply exported. For example, Japan was one of the first countries to introduce forestry protection (from around 1700, according to Jared Diamond) and to this day remains the most heavily forested of any major industrialised country. However, Japan is also the world’s largest importer of timber and demand from Japan is ultimately responsible for much of the deforestation in south east Asia. Japan has not solved its forestry problem, merely dumped it somewhere else.

The second type are problems which are intangible, such as the emission of greenhouse gases. Like the first category of problem, they amount to the dumping of a problem on someone else, but unlike the first category there is not an immediate regulatory solution at national level. Increasing the cost of energy for industry in one country – to reduce greenhouse gas emissions there – might simply lead to the migration of industrial production to other countries where the cost of energy remained lower. This is the waterbed effect: press down in one place and there will be a bulge somewhere else.

What is necessary is that regulation can be applied internationally, not nationally. The fact that it isn’t, that is the problem, not capitalism.

Rather than thinking that we live under capitalism, it is better to think of capitalism regulated by liberal democracy. The problem that Robert Newman has identified is not caused by capitalism as such, but rather because liberal democracy is increasingly unable to regulate it properly.

Liberal democracy itself is organised principally at a national level, while both capitalism and the problems it causes have gone global. The social change that Robert Newman argues for should not be in the nature of capitalism but in the national nature of the liberal democracy that regulates it. That’s the argument that has to be won, and that’s no laughing matter.

About the Author