The climate crisis calls for an immediate capping – not decapitating – of capitalism

A Lamborghini Sian on display at the second press preview day of the International Motor Show IAA in Frankfurt, Germany in 2019. (Photo: EPA-EFE / FRIEDEMANN VOGEL)

By Jeff Rudin

3 May 2021

The still-to-be-answered challenge in finding a way out of the impasse of the climate crisis is not what constitutes an ‘entirely new economy’ – the answers are plentiful – but rather how to achieve it. More particularly, this means how to persuade the majority of people to support the need for an entirely new economy. And how to do this in a way that most of the privileged few would remain privileged, but in a more measured way.

“The simple fact is, if the climate crisis is not going to bring on the collapse of modern civilisation, the world will need an entirely new economy.”

This beginning to a recent Daily Maverick article by Kevin Bloom serves to remind us of the enormous progress made in the foregrounding of climate change. From a beginning of, at best, just being recognised, it has progressed to increasingly being seen as a global crisis. This, despite the best efforts of the fossil fuel industry, the investors who live off that industry and the politicians who defend both.

A recent poll, for instance, found that climate change is an even greater worry than Covid-19 for young Europeans. Another EU poll found that 68% want their own country’s climate targets to be increased, while 84% support increased climate efforts in transport. A more detailed global survey by the United Nations Development Programme (UNDP) is even more compelling in its positivity. With 1.2 million respondents, the UN research is the largest study of public opinion on climate change ever conducted. These three polls represent striking progress. The challenge is no longer to persuade people, in large numbers, that climate change is real, or that it is of concern only for the future.

This progress is sufficient to allow us to address Kevin Bloom’s call for “an entirely new economy”. What this means is the big question.

When Mark Carney also calls for economic change, we know that the recognition of climate change is no more than the first big step. Carney – governor of the Bank of Canada and then the Bank of England between 2008 to 2020, co-author of the G30’s “Mainstreaming the Transition to a Net-Zero Economy” – is the current UN special envoy for climate action and finance. In this capacity he spoke on a high-level virtual dialogue on 19 April 2021 themed “Road to COP26: Opportunities, Challenges and the African Transition to Net-Zero”.

Like, Bloom, he, too, sees the unavoidable imperative of major economic changes. But now come the big differences: Bloom’s “entirely new economy” versus Carney’s much more limited need for “significant structural changes”. Variations of an “entirely new economy” would all be nightmares for Carney and the very powerful groups and interests he represents. Since it is these precise groups and interests who have most effectively resisted the changes needed to stop climate change, it is safe to infer the inadequacy of whatever form of ecomodernism they might have in mind.

For those of us concerned about the limits of Carney’s changes, the still-to-be-answered challenge is not what constitutes an “entirely new economy” – the answers are plentiful – but rather how to achieve it. More particularly, this means how to persuade a majority of people to support the need for an entirely new economy.

Who might champion the call for an entirely new economy?

A radical left answer would be the working class as an act of their self-liberation. The trouble here is that large sections of the working class (which includes the unemployed) have other, more immediately pressing needs, even if they are aware of the climate crisis. Moreover, those workers most aware of the crisis are also likely to be most opposed to the renewable energy (RE) remedy. For them, RE (seemingly) imperils their very livelihood, their jobs.

If the working class is not the immediate support base for this change, who, then, might be the champions of the change? The UNDP research suggests an answer.

Most striking in this previously mentioned global study of 50 countries covering 56% of the world’s population, is that positive support to “do something” about the climate crisis is directly proportional to both a country’s wealth and the educational level of respondents regardless of country.

Given that it is the privileged who are most concerned about climate change, the immediate question becomes: if we think the privileged are an important constituency, then we need to find genuine ways of allaying their specific class-related fears. Above all, is their fear of the stark choice ultimately being between climate catastrophe or a return to some form of early industrial, if not pre-industrial, way of life.

These fears are well captured by Malena Ernman, Greta Thunberg’s mother. Writing about Sweden, she notes, in “Our House is On Fire”:

“It’s not about listening and finding solutions. It has never been about that. Because who wants a solution to a crisis… that [would mean] everything has to change?… That the prevailing world order is responsible for a failure of cosmic proportions, since the threat is much greater than anything humankind has ever faced before. No, that’s inconceivable for anyone who does not want to see comprehensive change.” [p 248]

“The… secret is so simple. All you have to do is get as many people as possible to defend their little part of the universe. Their job. Their home. Their holiday. Their car. Their money. It’s about scaring as many people as possible with the threat of change and decline. And doing it to such an extent that in principle they are prepared to do anything to stand up for their own microscopic part of this gigantic world.” [p 251]

“Only a small minority live outside the planetary limits of what is sustainable. The problem is that we belong to that minority.” [p 261]

How do we address these real fears and understandable concerns? They might be “only a small minority” but they are hugely important both economically and politically.

My immediate answer is that what “we” have been doing doesn’t help. By “we” I mean those of us who recognise Kevin Bloom’s call for “an entirely new economy”. We are the “degrowth” movement; we are embodied in the call for a “steady state economy”. Given the pervasiveness of the idea that “growth” is not only good but essential for economic wellbeing, including such basic things as employment, the mere suggestion of anything involving “degrowth” invites dismissal. “Steady-state” is evocative of “sustainable”, which is much better PR than “degrowth”. However, it doesn't address the fears of the “small minority” regarding the privileges they will lose: “Their job. Their home. Their holiday. Their car. Their money,” as Malena Ernman tells us, so pithily.

Worse still, the term, steady-state, fails to allow for the global majority who know little, if anything, of what Ernman refers to as “the planetary limits of what is sustainable.” Given the inequalities within countries, they may well be aware of their own limits, of their own exclusions. Either as servants, waiters or just as workers – whether or not they’re involved with the manufacture or distribution of luxury goods – they will viscerally know what is not for them. This knowledge-from-a-distance is the usual limit of their direct experience of the 21st century.

An “entirely new economy” must begin with this challenge of placing the privileged “microscopic part” within the poverty of the surrounding world. A vast expenditure of resources – both physical and financial – are integral to this new economy. Apart from where these resources are to come from, this means standing degrowth on its head and postponing notions of a steady-state economy.

Climate change is a luxury in this global context. Or is it? Might there yet be a win-win way out of what appears to be a number of dead-ends, or a series of impossible either/ors?

A closer look at the innards of our global economy offers hope: hope for both the majority of those excluded from the 21st century as well as the (relatively) small minority who alone experience 21st-century privileges. The realisation of each hope however is dependent on the achievement of both. This – as will be seen in what follows – is because of the complex of interconnections that link all countries and all regions into a whole-world economy. Climate change is a global phenomenon for physical as well as economic reasons.

Hope for the small minority

A Lamborghini Sian on display at the second press preview day of the International Motor Show IAA in Frankfurt, Germany in 2019. (Photo: EPA-EFE / FRIEDEMANN VOGEL)

I begin here because of the catalytic potential of this “small minority”.

I begin, more prosaically, with motor cars. A recent Daily Maverick article, titled, “Lamborghini Had Its Most Profitable Year Ever During Covid,” attributes this achievement to the “wildly successful Urus SUV and the sold-out runs of… supercars such as the $3.3-million Sian.” Powered by a 6.5-litre V12 hybrid engine, the Sian accelerates to 100km/h in 2.8 seconds and has a top speed of 350km/h. First released in 2019, they were sold out “the minute they went on sale”.

The Daily Maverick article informs us that “Chinese car buyers in recent years have developed an appetite for ultra-luxury SUVs” such as Rolls-Royce, Bentley, Lamborghini and Ferrari. According to the article, “In China, as elsewhere, high-performance, mid-six-figure SUVs outsell the rest of the sedans and sports cars in those manufacturers’ lineups. Last year the Urus accounted for 59% of Lamborghini sales worldwide.”

Few among these particular car buyers, it is safe to assume, would support any call for an “entirely new economy”. It is equally safe to assume that few of Malena Ernman’s “small minority” are among this group. This isn’t to say that they don’t hanker after these ultimate status symbols – after all, that is the purpose of status symbols – but they are unlikely to oppose the view that such vehicles have no place in a world facing climate change, resource depletion, environmental degradation and gross inequality. Indeed, they are likely to champion such a view, if it means they could keep their own much more modest cars.

And this is the point.

A modest call making it illegal to manufacture cars capable of exceeding a speed of say, 120 or even 140km/h could be a popular call, and not least because of its impact on road deaths and injuries. Equally popular, and for similar reasons, would be the banning of SUVs and the requirement of a special licence for four-wheel drive vehicles issued only on the basis of demonstrated need. The remaining light passenger vehicles would be subject to maximum weight, engine, and wheel size considerations. Climate, resource and eco-rationality would also restrict the frequency of new models, even if the changes were more than cosmetic.

The absurdities of the car industry – used here for shorthand, illustrative purposes – are replicable throughout the economy. Once accepted, application of the principle of curtailing the seemingly natural right of anyone – in practice, a few individuals – to produce anything likely to maximise their own profit is limited only by our own imagination, ingenuity, and sense of urgency. Rather than – to again use Malena Ernman’s words – “scaring as many people as possible”, the ideal is to scare as few people as possible. And to do so on behalf of everyone else. Some change is unavoidable if we are to avoid climate change. However, the majority of the privileged few would remain privileged, but in a more measured way.

With them as allies, rather than opponents, the accumulative, knock-on effect of this capping of capitalism would be enormous.

Freeing physical and financial resources

Again, using cars as illustrative, the minerals, other materials, machinery, brain, and labour power liberated from their hitherto profligate use would be available for other purposes. Moreover, these purposes would be for societal benefit rather than profit maximisation and would, additionally, be subject to democratic control. The exercise would be comprehensive, beginning perhaps with cell phones and computers – and including bottled water, even when not transported from across the world.

Replication of this process throughout all sectors of the economy has still further beneficial effects. A more socially rational use of the natural and human resources, for instance, means a greatly reduced advertising industry. “The problem is that we who already have enough in every way are encouraged to take more. Buy more. Drive more. Eat more. Do more.” [Malena Ernman, p.261]. Think, instead, of the enormous resources used by an advertising industry increasingly reviled but seen as regrettably unavoidable only because it is (currently) an essential source of income.

To all this, add the money that would become available. Vast quantities would immediately be accessible, from two interrelated sources: money not spent on resources no longer needed and money made available because – to offer a single car example – SUVs were no longer on sale.

The socially aware mobilisation embedded in all of this opens other simple measures. Like, for instance, insisting that the US Internal Revenue Service (our SARS) collects the $1-trillion yearly shortfall owed under current law. The top 1% of US taxpayers, who are responsible for most of this evasion are also the people most likely to oppose the modest reforms being suggested here. Additionally, the $1-trillion annual evasion does not include the notorious tax breaks and shelters that last year resulted in 55 of America’s largest companies paying nothing in corporate taxes, despite collectively making about $40-billion in profits.

And there’s still more: Although the headline US corporate income tax rate is 21%, “the official rate is not the point”, according to the Financial Times, the source of all this information. The effective US corporate tax rate is just 11.2%! President Joe Biden wants to increase the legal rate to 28% to help pay for his various programmes. Just imagine how much money would be available if, as a bonus form of capping capitalism, it was actually collected.

Which brings us to …

Hope for the excluded majority

Two other major sources of existing resources are available: vast idle capital and productive capacity. These resources, like the ones detailed above, are not new but lie usually unseen in the unavoidable waste of our very uneconomical economy. These resources open the possibility of opening the 21st century to everyone, and doing so with an impact on climate change that could well be (partially) offset by the savings made by the modest adjustments of the majority of Malena Ernman’s still-privileged in “their little part of the universe”.

While economists differ as to what constitutes surplus capital, they all agree that it is measured in trillions of dollars worldwide. In terms of the narrow definition — cash on balance sheets — US non-financial corporations were sitting on just over $5-trillion dollars by the end of 2020, according to the Federal Reserve Flow of Funds. The total global amount is not readily available, but it is indicative that 13 of the top 25 global public companies by cash on balance sheet were non-US companies. The broader definition – of free cash – is that part of the corporate cash flow not held as cash deposits but spent on mergers and acquisitions, stock buybacks and other financial instruments. It dwarfs the already gigantic $5-trillion, even though not easily quantifiable.

This enormous amount of capital – idle because of want of investments to generate suitable levels of profit – is conjoined with idle productive capacity, idle for the same reason as idle capital. In the US, this unused productive capacity averaged a staggering 21.4% of total capacity during the 52-year period, 1972-2020, with a one-year low of 14.9% and a high of 33.3%. Egregiously, it is a blight common to virtually all countries. The EU average, for instance, during the period 1985-2019, was 19.99%; for South Africa, it was 19.12% for the period 1971-2019.

Alongside this enormous idle capacity are the real and urgent needs of billions of people. Given the size of the productive capacity that it not being used, this is unconscionable waste. But it is also a solid basis for hope, restitutional hope.

Building Back Better (BBB)

This UN programme from 2015 focuses on infrastructural reconstruction caused by various disasters. Yet, it well lends itself to rectifying past crimes committed in the name of colonialism, imperialism and racism. In this sense, we are speaking about reparations. But with a difference. The seeming altruism is also self-protective. Climate change already kills and destroys the lives of increasing millions in the former colonies. It will get only worse. It has already created the problem of climate refugees seeking illegal entrance into the increasingly fortified sanctions of the rich world. It will only get worse; much worse.

The good news for most people is that regulations unknown outside of war – but modest ones for all that – are waiting to be invoked. They essentially restrict the profligate purchases and lifestyles of the super-extravagant while still leaving the privileged privileged. Yet these adaptations combined with the marshalling of the worldwide idle capital and industrial capacity provide the resources to correct some of the global inequality and to do so, in no small measure, by providing work – and hence an income and dignity – to millions of people required to build – not a destroyed 21st-century infrastructure – but one that has still to be provided for most of the world’s peoples.

Win-win solutions need not be utopian. However, in the context of the climate crisis, we delude ourselves if we think we have a choice.

In the words inspired by Greta Thunberg, but voiced by her mother:

“What needs to be done is crystal clear. All that’s left to do is make a choice. Economy or ecology? We have to choose.” [p 276]

Except, I’m offering the choice of both a capped capitalist economy and ecology (or, at least, the beginnings of a sustainable ecology). DM

Jeff Rudin works at the Alternative Information & Development Centre (AIDC).

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