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Can capitalism be green?
Most of the participants at the Johannesburg UN Earth
summit agreed that using some variant of capitalist market methods could solve
the environmental crisis. But is that true? PETE DICKINSON writes.
WHEN THE US government dumped the Kyoto agreement to reduce
global warming, millions of environmental activists throughout the world were
enraged. The message was loud and clear: that the interests of the
multi-national corporations – represented by the White House – come before
the looming environmental disaster caused by greenhouse gas emissions. Bush’s
blatant policy of defending the profits of US companies has brought into
question the credibility of international agreements between rival capitalist
powers and prompted a debate among left-wing environmentalists about the way
forward.
Virtually all the participants in the recent Earth summit,
however, agreed that using capitalist market methods was the only possible way
to avert the environmental crisis facing the world. This consensus encompasses
radical greens as well as George Bush, who differ only on the type of market
tool to use, or on the extent that the state should be involved in implementing
and policing their operation. To see whether any sort of market approach can
tackle the scale of the problem, it is necessary to look in some detail at the
different solutions on offer.
Property rights, tradable permits, & eco-taxes
THE CLASSIC METHOD put forward by the neo-liberal school to
take account of environmental damage is the ‘property rights’ approach,
which relies on direct negotiations between the parties affected to resolve the
issue. This requires that the property rights to the use of environmental
resources are defined and owned by someone. It is easy to see the practical
difficulties in this. For instance, it is hard to see what system of private
ownership could be imposed on the stratosphere and, even if it was, the number
of people affected by its malfunctioning runs into billions, all of whom could
seek redress from the owner, making the method unworkable.
This practical difficulty in using the property rights
approach has even struck some die hard free-marketeers and an alternative system
based on controlling pollution through the price mechanism has been worked out,
the so-called ‘make the polluter pay’ principle. The preferred route this is
envisaged as taking is by the trading of pollution permits, issued by a
government at a price reflecting the environmental costs and covering a specific
geographical area. Leaving aside for the moment the fiasco of the Kyoto permit
trading experience, it is not difficult to see that this scheme would also be
ineffective. For instance, the cost of building flood defences in Bangladesh in
20 years time, needed because of global warming due to emissions by US
corporations today, would not be included in the permit price, meaning that the
polluter is not really ‘paying’ at all.
An alternative to the permit system is the introduction of
an eco-tax, although this is regarded as a dangerously ‘socialist’ idea by
the neo-liberals, compared to the free trading of permits. The principle,
however, is the same, that by increasing the price of polluting resources, there
will be an incentive created to use them less and seek substitutes. Evidence to
show this works is put forward by comparing the experience of the USA and some
other advanced capitalist countries. Energy prices in the US are a third of
those in countries like Norway, whereas their emissions of carbon are about
three times greater per unit of GDP (quoted in The North, the South and the
Environment, Edited by V Bhaskar and A Glynn, Earthscan, 1995 p139). The tax
mechanism seems to work.
The issue is not so simple, however, when examined in more
detail. France, for instance, has a relatively good greenhouse gas performance
because she introduced nuclear power on a massive scale, which purely
coincidentally does not produce greenhouse gases. This was done for political
reasons, not because the price of fossil fuel was high, therefore questioning
the link between high fossil fuel cost and low pollution emission. Also, the
evidence shows that key economic factors that help create sustainability, for
example, the development of new non-polluting technology, would not be promoted
to any significant extent by adjusting prices through eco-taxes.
Even if taxes could play some role in reducing pollution,
there is the question of scale to be considered. The cost to the US for
significant cuts in greenhouse gases, of $400bn per year (around 3.5% of GDP and
similar to the US defence budget), shows that for such a programme to be
effective tax increases would have to be huge, significantly hitting the profits
of big business. It is significant that in Scandinavian countries where some
form of eco-tax has been implemented, companies are specifically excluded from
paying, and the whole burden is put on individuals. Another consequence of
eco-taxes is that the poor are hit hardest by their introduction because the
cost of warmth and cooking, usually provided by fossil fuels, takes up a large
proportion of their income. On a different level, this regressive effect also
applies to congestion charges, such as those proposed by the London Mayor, Ken
Livingstone, to promote the use of public transport.
Cost-Benefit Analysis.
COST BENEFIT ANALYSIS is a tool that has been used to assess
environmental risks and to reach a rational decision about future investment, by
giving values to different environmental effects using a common measure, ie
money. Costs and benefits that will fall on future generations are discounted at
an agreed percentage rate, to arrive at a ‘net present value’. In this way,
values can be easily compared and an objective balance of costs and benefits
created. Its success depends, however, on defining clearly what the costs and
benefits are, and for all the parties involved to agree on these definitions.
Where profit is as stake this is easier said than done.
In capitalist terms, risks must be expressed in money terms
and probabilities of future adverse events clearly determined. For instance, in
one cost benefit analysis of global warming, the number of deaths that could
result due to climate change in the future was estimated. This calculated that
22,923 would die in the advanced capitalist countries and 114,804 (both very
conservative figures) in the rest of the world. The next stage in the analysis
was to put a money value on these lives, which resulted in a figure of
$1,480,000 per ‘advanced capitalist’ citizen, and $ 131,000 for everyone
else. It is hard to see the result of this type of analysis becoming the basis
of a mutual agreement based on justice and fairness. When this cannot be done,
which is the usual case, environmental risks are effectively ignored by using a
system of ordinary discounting.
Using this method, it has been calculated that the cost of a
nuclear accident, 500 years in the future, costing £10 billion at current
prices to future generations, would be 25 pence, discounted at 5%. In other
words, if a cost benefit analysis was made now about building such a power
station, 25p would go in the costs column to allow for a future accident.
Looking at the question another way round, if a compensation fund were created
now to meet the costs of this future accident, it would be necessary to invest
only 25p to raise the required sum, due to the workings of compound interest
over such a long period. The net present cost is clearly dependent on the
interest rate used, but there is no agreement on what it should be. This is not
surprising since it is difficult to predict interest rates five weeks in
advance, never mind 500 years. As one expert has said, "through the choice
of appropriate parameter values almost any (environmental) abatement policy can
be justified".
Constraints on capitalism
ALL THESE CAPITALIST theories to achieve sustainability –
property rights, tradable permits or eco-taxes – remain just that, theories.
The reasons why none of them have ever been implemented on any significant scale
are much more important than the individual criticisms that can be made of each.
The thinking elements of the capitalist class internationally realise that an
abyss is looming, so why can’t they take really decisive action?
The central contradiction of capitalism from the beginning
of the 20th century to the present day has been its inability to resolve the
conflicting needs of profit-driven production and the continuing existence of
nation states. In their quest for profit, the capitalists are forced to look for
new markets beyond their borders as their own market becomes saturated, bringing
them into conflict with rivals from other countries who are under similar
pressures. In abstract terms, the rivals could co-operate to more efficiently
exploit the rest of the world if the market was continually expanding, but this
is never the case for long with capitalism, as bust always follows boom. When
the market turns down, the tensions grow between the international rivals and
the big corporations look once more to their own governments to protect their
profits. This cycle will occur again in the developing downturn.
Any genuine solution to the environmental crisis, however,
must be international since all the main threats, such as global warming, ozone
depletion, or nuclear toxic waste contamination, affect the entire earth or
large parts of it. The main capitalist countries that account for the majority
of pollution though will never meaningfully co-operate if the profits of ‘their’
multinationals are significantly affected, particularly in a recession. This is
the fundamental problem that lies at the heart of the environmental crisis.
The fiasco over the Kyoto agreement demonstrates the
inability of the capitalist system to tackle the crisis. Kyoto is intended to
tackle global warming by cutting greenhouse gas emissions by a small amount in
order to go back to the 1990 level, in itself a modest target. The justification
was that this was the maximum that was politically feasible, but even this tiny
step forward, done at a time of economic boom, proved to be totally unacceptable
to the USA. The agreement was fixed so that no actual reductions in greenhouse
gases in the advanced capitalist countries (ACCs) were called for. Instead, a
system of tradable permits was introduced, the preferred ‘free market’
mechanism, where the ACCs could buy the rights to pollute from other countries
that were below their quota. This was possible because, very conveniently, the
base year from which calculations were made was 1990, just before the economic
slump in the former Soviet Union and Eastern Europe caused their greenhouse gas
output to fall by 50%. This meant that East European states would have a large
‘surplus’ of tradable permits to sell to the ACCs, probably at very
reasonable prices considering their desperate plight.
Why did the US Congress vote virtually unanimously to reject
this almost completely cosmetic deal? It was probably not because the immediate
price was unacceptable, since they had reached an agreement, although belated,
on the ozone issue that incurred costs to US companies. It was because they
regarded this as the thin end of the wedge, where, eventually, meaningful cuts
would have to be made. Since the US produces 25% of all greenhouse gases, almost
twice as much as their principal rivals in the EU, their profits would be
disproportionately hit by meaningful cuts. The lesson here is that if small
sacrifices only are needed, and they can be evenly distributed between rival
capitalists, as in the ozone case of CFC reductions, then limited agreements can
be made (although it is doubtful that even this would apply in conditions of
recession or slump). However, if profits are seriously under threat, then even
limited agreement is impossible, and this particularly applies if the dominant
world power, the USA, is the biggest potential loser.
Direct state intervention
DIRECT STATE INTERVENTION to reduce pollution, although
still operating within the framework of a market-driven society, has been
largely discarded as an option by the dominant neo-liberal alchemists, who
dismissively label it ‘command and control’. Some pro-capitalist
commentators though are beginning to reconsider this attitude, because they
think direct intervention may actually work, in contrast to neo-liberal
theorising. A strategy that they propose is to impose a legally enforceable set
of standards to control emissions, but other options could also include more
radical measures. For instance, to redirect production to non-polluting sectors,
to restrict consumer choice to eco-friendly products or to prescribe that energy
should be produced by renewable sources.
As the environmental crisis deepens, the attractiveness of
this approach will grow, particularly to those on the left or active in the
green movement who can see the impotence of purely market-based ideas. Although
state intervention could have an effect if it was applied in the all the major
polluting countries in a large-scale manner over the long-term, the question is
– will it be? It is possible that an individual country will begin to
implement small-scale environment-friendly measures, such as in Germany now, or
in Scandinavia. However, as soon as the level of investment by the state
threatens profits through higher taxes, as it must if the measures are to be
sufficiently large scale to be effective, the big companies will scream that
their international competitiveness is being undermined. Since in the context of
capitalism, the priority of the government of each country is to protect the
interests of the multi-national companies based inside their borders, any
meaningful environmental programme will then be dropped.
Imperialist rivalry will prevent the international
co-operation that is essential to make progress, since the environment will be
treated as a ‘free good’ by the multi-nationals that dominate production and
will continue to be exploited at little cost to themselves.
Socialism and the environment
THE EARTH IS clearly on the path to ecological catastrophe.
This road will be marked by, amongst many other examples, the destruction of
large areas of the habitable globe due to global warming, the chemical
degradation of the atmosphere leading to an epidemic of cancer, and bequeathing
the problem of toxic waste disposal to future generations, for up to 100,000
years.
The responsibility for this situation lies at the door of
capitalism, a system controlled by the infamous ‘hidden hand’ of market
forces, and driven by profit. The market economy has an in-built need for
permanent growth, propelled by competition and the quest for profit, but at the
same time, apparently paradoxically, suffering from regular slumps in
production. Both tendencies lead to waste and environmental degradation, as does
the anarchic, unpredictable nature of the market economy. The alternative is a
social system based on need not profit, that would have enormous inherent
advantages from the viewpoint of saving energy. For instance, it would avoid the
duplication of resources, planned obsolescence and wide-scale destruction of
factories, plant and machinery in slumps, characteristic of the capitalist
profit system. Eliminating these features of the system will have a significant
impact in increasing the efficiency of energy usage and therefore reducing
pollution. A socialist system, as well as avoiding the waste inherent in
capitalism, will offer the overwhelming environmental advantage of providing
conscious democratic control through planning.
According to most environmental activists reducing global
warming and other environmental threats to sustainable levels is not just a
technical issue, but is closely tied to the question of reducing or reversing
economic growth. Since this has great implications for the possibility of
abolishing poverty throughout the world, which is a pre-requisite for building
socialism, a different strategy needs to be explored. An important aspect of
this debate, which is only just beginning to be considered, is proposing an
alternative to the market system, whose single-minded quest for profit is the
prime cause of unsustainable environmental destruction. Although the collapse of
the Soviet Union and the degradation of the environment in Eastern Europe during
the Stalinist period appeared to discredit the ideas of planning as an
alternative to capitalism, the planned use of resources, as compared to the
anarchy of ‘free enterprise’, will be the essential tool to tackle the
problem of global warming and other threats. Such a planned economy, if it is
democratically controlled, is an alternative both to capitalism and to the
perversion of socialism practised in the former USSR.
New Technology
ALTHOUGH IT IS
theoretically possible that the bacon will be pulled out of the
environmental fire by a fortuitous new invention, for example, a
technology like nuclear fusion that promised to produce large quantities
of energy cheaply and without pollution, there is nothing viable on the
horizon. The market system has been unable to provide the scientific
breakthroughs that are needed.
One of the reasons is that
under monopoly capitalism, new technology is the result of long-term
incremental advances by teams of scientists and engineers working for
big bureaucracies in multi-national corporations, where to change course
to a radically different direction is very difficult due to
bureaucracy.
Furthermore, the huge costs
of developing the new approaches that are needed in the energy field
deter most companies from entering the market. Also since the lure of
profit is still ultimately the reason for investment in new technology,
it will be introduced in those sectors that are most profitable in the
short and medium term, i.e. for fossil fuel technology rather than
renewable energy generation. |
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