Capitalism and the Global Environment

David P. Turner / January 15, 2021

Humanity is beset by global scale problems, notably climate change, pandemics, and geopolitical struggles.

Clearly, global scale solutions and – broadly stated – more global solidarity are needed.

The most obvious factor currently binding together nearly all humans and nations on the planet is the global economy.  That economy is rooted in capitalism, albeit in various forms (e.g., free market capitalism, crony capitalism, state capitalism, and monopoly capitalism).  Thus, capitalism is a logical place to look for both the source of our global scale problems and perhaps even, in its reform, solutions to those same problems.

The ubiquity of capitalism is not in doubt.  Its characteristic feature is a market that allows for competitive exchange of goods and services.  Legal support for accumulation of capital and its investment in profit making enterprises is foundational.  In recent decades, capitalism has taken on a global character, featuring globalization of the labor market and capital flows.

The upsides of national level and globalized capitalism include efficiency in the distribution of goods and services, economic growth to support rising standards of living, and the availability of capital for investment in productive enterprises.

Important downsides include growing inequality of wealth and income, both within and between nations, growing instability of the global financial system, and growing environmental degradation at all scales.

This blog post is primarily concerned with the relationship of capitalism to the global environment.

The impact of capitalism on the global environment traces back to its fundamentals.  A capitalist organizes labor to manipulate natural resources and create products, which can then be sold in a competitive market.  Income from product sales pays for the costs of production, for personal or corporate profit, and possibly for expansion of production.

Key problems with respect to the environment lie in the propensity for expansion and the pressure to minimize costs.

Because of the competitive nature of capitalism, producers are compelled to expand.  More profits mean more capital to invest in beating competitors.  Expansion tends to allow economies of scale that help minimize costs, hence increase competitiveness.  However, production cannot expand indefinitely on a finite planet.  Graphic examples include unsustainable use of ground water for irrigated agriculture, and unchecked conversion of rain forests to soybean fields. 

Minimizing costs often means externalizing environmental costs.  Greenhouse gases such as carbon dioxide are freely emitted as a byproduct of the fossil fuel combustion that powers much of the modern economy.  The emitter does not pay the cost of climate change impacts.  Economic globalization makes the externalization of environmental costs easier by shifting production to countries with relatively weak regulation of pollution.

It is time for a global scale reckoning of capitalism, in all its forms, with the fact that nearly eight billion people and a biosphere need to co-exist on what has become a crowded, rapidly warming, planet.  Capitalism clearly causes environmental problems that it cannot solve.

Despite the fact that global climate change “changes everything”, capitalism is not going to go away.  A primary mechanism by which to modify capitalism is policy changes at the level of the nation-state.  Historically, the relationship of western capitalism to the state has undergone several major transformations and the time is now for the next reset.

A very brief history of that relationship runs as follows.

The Capitalist State arose in the 19th century in association with the Industrial Revolution.  This type of state strongly supported rapid expansion of capitalist enterprises but displayed limited concern for workers or the environment.

Reaction to inequality in wealth and overexploitation of workers led eventually to the Welfare State in which government expanded and supported provision of decent wages, health care, and old age income (e.g., the New Deal in the U.S.).  By the 1960s, the issue of environmental quality also began to be considered a governmental responsibility.

By around 1980, the Neoliberal State (think Reaganomics) began to replace the welfare state.  Here the size of government shrank, i.e., lower taxes and less regulation.  Capitalists were again given free rein to maximize profits. 

Forty years later we find ourselves with vast inequality in the distribution of wealth and income, in America approaching levels in the early 20th century, and an alarmingly deteriorating global environment.

The appropriate transformation at this point is from the Neoliberal State to the Green State.  Governmental concern for the environment must rise to the level of its concern for economic, security, and social welfare issues.  The economic system is then seen as embedded in a society and constrained by the local and planetary ecology.  If the goal is a sustainable Earth system, governments will have to increasingly intervene in the economic system to moderate capitalism’s worst excesses.

The transformation to Green States will require well educated citizens who share environmental friendly values, reformed corporate governance, and leaders who employ government to protect rather than exploit common pool resources (e.g. a carbon tax).    

Note that economic inequality and environmental quality are linked by the notion that people who are not materially secure are not in a position to support potentially costly policies that improve environmental quality.  Consequently, redistribution of income and wealth to improve material security are critically important – not only for the sake of social justice but also for the sake of the environment.  More ominously, highly skewed distributions of wealth are historically associated with violent conflict, which often has adverse environmental consequences.

Moderating the impacts of capitalism on the global environment will require innovations in Earth system governance that parallel the transformations at the nation-state scale.  The institutions of global geopolitical governance, economic governance, and environmental governance must be redesigned and empowered to protect the global environment.  Thus, we might speak of fostering a green planet (or Green Marble as I have termed it).  The vision of a Global Green New Deal from the United Nations outlines some steps that will move us in that direction.

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1 thought on “Capitalism and the Global Environment

  1. Judging from the way people in the US have ignored the science about masks and the spread of Covid, I think it will be a hard road to convince any of those groups of science deniers to agree, in a popular sense, of the pressing problem of carbon dioxide and other greenhouse gasses acquistion that is warming our planet.

    Of course, the American population is not a very big proportion of the world poplulation, luckily.

    I am not without hope but have dread thoughts.

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