Capitalism cannot help itself
Adrienne Buller's new book on the illusions of 'green capitalism' encourages us to reflect on capitalism's tendency to self-destruct
Reading The Value of a Whale during the Conservative Party leadership election — and indeed a gathering heatwave — is a surreal experience. The seriousness of climate change cannot be over-stated. Yet after decades of UK policy-makers paying lip service to pro-environment policies, sadly it does seem that the next Prime Minister will be, at best, indifferent to climate change, and at worst, openly hostile to the notion that we must transform our economy to address it.
Adrienne Buller’s outstanding book, however, perhaps helps us to understand why that might be the case. Buller argues, in short, that the various assumptions and prescriptions of the ‘green capitalism’ paradigm are flawed and failing. As such, if supporting capitalism (as we know it) and saving the planetary ecosystem (in its current form) are incompatible, perhaps it was inevitable that the Tories would largely abandon the latter objective, and instead focus on ensuring that capitalist accumulation continues unabated for as long as possible, so that its beneficiaries can prosper in whatever post-apocalyptic world we will soon inhabit.
Priceless
Paradoxically, this might imply that the climate change denial case has now finally been vanquished. Catastrophe is upon us, but there is nothing we can do about, or the costs of doing something about it may be larger than the costs of doing nothing. There is of course still a bit of denialism knocking around the Conservative Party, typified by Steve Baker and Craig Mackinlay’s Net Zero Scrutiny Group.
Buller shows us however that it hardly matters whether the science of climate change is accepted or not. ‘Green capitalism’ (the belief that nature can be protected by capitalist ideas and tools) is its own kind of denialism, since it upholds that we need only to broaden the application of neoclassical economics to our management of the natural environment, rather than consider whether economic logic might be part of the problem.
Green capitalism rests upon assigning value to nature, so that the cost of environmental damage can be priced into normal market operations, on the expectation that a higher price will make the benefits of environmental protection more visible. By recognising ‘natural capital’ and ‘ecosystem services’, investment decisions can properly account for how the depletion of the natural environment might affect long-term profitability.
For example, according to the International Monetary Fund, Buller’s eponymous whale can be valued at $2 million. This derives from whales’ contribution to eco-tourism (an industry which is ‘ironically detrimental to whale populations’), but also their ability to sequester carbon (a process which helps to mitigate climate change).
Yet the latter calculation depends of course on carbon emissions being assigned an economic value too. If carbon can be priced, the freedom to emit can be commodified and traded. Emissions can also be ‘offset’, by investing in carbon capture processes which can themselves be environmentally destructive, and over-ride the rights of communities affected.
And how are we even able to price the impact of carbon emissions, since the normal laws of supply and demand do not operate? Buller shows that the global regime for carbon pricing is based on highly questionable assumptions about a linear relationship between carbon emissions, rising temperatures, and climate change, and highly subjective judgements about discount rates (i.e. assumptions about how benefits accruing in the future can be priced in the present).
Simplistic
Simplification is necessary to make the economic models fit — and this is not to suggest that modelling the economic impact of climate change, as best we can, is not a useful exercise. But the real scientists are telling us unequivocally that the planetary implications of climate change are unpredictable, in part because the impact is unlikely to be linear: we do not know where the tipping points are.
The question of how to define and assign value is one of the oldest debates in economics and political economy. It has been addressed in recent work by Marianna Mazzucato, who criticises the blurred distinction between value and price in neoclassical economics. If the price of something is equivalent to its value, then we cannot distinguish between economic activities which create real value (e.g. developing and applying technologies which might help to address climate change) and those which extract value (i.e. rent-seeking).
In the green capitalism paradigm, there is not simply silence about the distance between value, and the price assigned by the market. Rather, there is a proclamation that, if we want to value something, we must create a price for it, even in the absence of a market. This is not only daft, it is dangerous. Since the price cannot possibly capture all of the consequences of economic activity for a complex planetary ecosystem decades and centuries into the future, we may be permitting the persistence — and even intensification — of harmful practices.
Growing
The Value of a Whale also cuts across the ‘green growth’ debate. The notion that capitalism will green itself is illusory, but this does not mean we must embrace a zero growth or even degrowth economy. Buller reminds us that the notion of economic growth is a relatively recent concoction anyway, and therefore not intrinsic to capitalist organisation.
We should focus on distribution ahead of production, redistributing wealth - and therefore the ability to pollute - away from those whose economic activities tend to cause most environmental damage. Yet many of the prevailing green capitalist solutions to climate change have little impact on consumption among the wealthiest, who are most able to pay carbon taxes, or afford to offset emissions.
The book says relatively little about industrial policy, and indeed the ‘Green New Deal’, which is effectively now a programme of large-scale investment in developing and rolling out green technology. This is not to suggest that I am a techno-optimist when it comes to addressing climate change, but it would have been useful to hear more of Buller’s thoughts on this prospect.
Buller briefly discusses Daniela Gabor’s concept of the de-risking state in this regard, and is right to do so. Too often, technological innovation involves early-stage public R&D, socialising the risks but privatising the profits. But does this mean the public sector should not invest? You do not need to be a techno-optimist to believe that humanity has not yet reached a technological abyss; there is scope for innovation which can help to make our lives better, not least by mitigating climate change. Mazzucato advocates a model by which the state would retain a stake in the technologies it helps to develop — therefore socialising rewards too.
Management
One of the strongest elements of the book is Buller’s critique of the asset management industry, and how it is sustained by market concentration, favourable regulation, and supporting narratives.
Buller details ‘greenwashing’ on an epic scale. On the one hand, the handful of firms which dominate the global asset management industry are now simply so powerful that they can get away with both not committing any meaningful capital to transformative green investments, and with the pretence of sustainable investment since they essentially determine for themselves what counts as green.
On the other hand, the problem is one of structure as well as agency. Asset managers have few incentives to allocate capital towards riskier investments; they exist to deliver short-term returns, and their power depends on their ability to do so. As such, industry practices simply mirror the underpinning economy they are investing in.
It is around this issue that we find overlaps between climate change and pensions provision. Pension funds are among the most important clients of the largest asset managers, and as such are often accused of herding behaviour which is ultimately against the interests of their constituent members (i.e. workers) in sustaining a habitable planet. Buller does a good job, however, of debunking the notion that pension funds are to blame for asset management practices — since the industry is now able to shape capital markets to its own ends, even large investors such as pension funds are at a disadvantage — and of articulating the dilemmas that all pension fund trustees face in balancing the need for short-term income and long-term sustainability.
Foundations
There is perhaps a more significant overlap between the two issues. Pensions provision and the natural environment are similar insofar as they are both essential foundations of economic life. Just as I argued in Pensions Imperilled that capitalism requires pensions provision to enable social reproduction, it also requires a functioning ecosystem to enable economic activity. But the relevant institutions and resources must be managed at least in part outside the capitalist process in order to endure.
However, the management of both domains has been compromised by the infiltration of capitalist ideals. Green capitalism tells us that commodifying nature will halt climate catastrophe. And pension systems throughout the world — nowhere more so than the UK — have been individualised and marketised, partially relinquishing employers and the state from responsibility for our welfare across the lifecourse. (The de-risking state — or what I call the replacement or substitutive state — is a feature of pensions provision too, with the state offering services to savers that the private sector cannot profitably serve, and subsidising the asset management industry via pensions tax relief.)
Capitalist accumulation is predicated upon mastery of the future, but the only thing we can be certain of is uncertainty. Individualised pensions provision, devoid of the state’s anchoring role, depends upon a vision of the future, which is baked into policy and product design in the present. If we know for sure that our savings will retain value over the long term, then we only need to focus on increasing the amount we save, not protecting what we save. Alas, we know already that this future will not come to pass. Similarly, the green capitalism paradigm tells us that climate risks are knowable and manageable; the problem is not capitalism per se, but the fact that capitalist discipline has not yet been applied to nature. But our faith in how nature will behave in future is misplaced.
(Interestingly, Buller cites Adair Turner approvingly on this point, specifically Turner’s argument that attempting to calculate an optimal level of global warming is ‘a dangerous delusion’. In a previous life, Turner was chiefly responsible for designing the auto-enrolment system that has midwifed the individualisation revolution in UK pensions provision. I would like to think Turner, who led the Pensions Commission in advance of the 2008 financial crisis, has since learned that any policy programme which depends upon our ability to precisely forecast the future is inherently flawed.)
The current frontrunner in the Conservative Party leadership contest, Rishi Sunak, is the only candidate who has not vowed to dilute the UK’s ‘net zero’ commitments and associated policies. Perhaps we should welcome this. However, Sunak, more than any other candidate, is ensconced in the green capitalism paradigm — optimistic about the finance sector’s ability to allocate capital to green investments, without substantive state direction.
If The Value of a Whale finds the audience it deserves, it will help to put another nail in the coffin of this illusory mission. But if we do soon accept that we lack the mastery over the future implied by green capitalism, will what comes next necessarily be any better?
In relation to pensions provision, the unravelling of auto-enrolment and individualised provision encouraged then Chancellor, George Osborne, to liberate people from the need to participate in private pensions — extending the scope of tax-free withdrawals, and ending compulsory annuitisation. This will lead to materially worse outcomes for lower-income savers. At the same time, we have seen the emergence of ‘collective defined contribution’ schemes, which might nudge mass-market pensions provision back into the realm of risk-sharing. (These developments do of course contradict each other.)
In relation to climate change, we have seen — most notably at the top of the Conservative Party — the reassertion of a fantastical Britannia Unchained perspective in which climate change barely registers. Even more alarmingly, we have seen the adoption of some pro-environment narratives by the far-right, as our inability to address climate change is used as justification for nationalism and border closures.
At the same time, again, there are signs that the notion of valuing nature might break free from its capitalist shackles. The United Nations’ Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services adopts much of the language of green capitalism, yet proposes a multitude of ways by which nature can be valued, reaching far beyond calculations of economic value into the realm of emotion and spirituality, advocating a greater role for citizens’ assemblies in relevant investment decisions.
So there is hope — there is always hope. Green capitalism might, at best, have bought us some time. But its failure at least clarifies the struggle ahead.