Current CO2 concentration in the atmosphere

Climate change and capitalism

I’ve long pushed the view that the so-called “free market” (or capitalism or however you care to slice and dice economics in the US and similar countries) should not be viewed as an end in itself, an all-powerful mystical force to be worshiped, but as a very powerful tool to be utilized as we collectively see fit to meet our collective needs. Normally, I would consider that view to be so painfully obvious that it wouldn’t be worth mentioning. Of course, the US left anything even remotely resembling “normal” in our politics, economics, public discussions of serious matters, popular culture, etc., stranded by the side of the road many miles back. This is particularly evident regarding economics, where anyone running for public office practically has to dig up Karl Marx and ritually murder his corpse while bathing in the blood and entrails of sacrificed goats to be considered sufficiently orthodox.

So, I was quite happy to see this interview with Jon Koomey over at Climate Science Watch, a low-volume/very high quality content site you should track via RSS feed. As for the Koomey interview, I’ll quote just a smidge here, hopefully enough to entice you to click through and read it all:

Piltz Q: In your section “Profits are Good” you talk about how environmentalists and business need each other – that environmentalists need business to generate the wide acceptance of technologies and practices essential for creating a sustainable society, and that business needs environmentalists to call attention to when business practices are harmful to society.

Your way of framing this seems steeped in the Silicon Valley experience of creative, innovative venture capital and game-changing new businesses in the fields of information and communication technology. But isn’t there a larger problem of corporate power under the current system, in which corporate influence on government and politics can create substantial obstacles to holding business accountable for socially responsible action?

Koomey reply: I agree with your framing of the larger problem. There are those who always argue for less government, but markets cannot exist without government to define property rights, enforce contracts, and police the common good. Once we accept that reality, then the question becomes one of defining the kind of government we want. If corporate power wields undue influence and rigs the system, then the outcome will not be good for society as a whole. That’s the central argument, and it’s one the advocates for unregulated capitalism generally ignore. The rest of us ignore it at our peril.

As I’ve pointed out many times here, this notion that near zero government intervention in markets is some sort of capitalist nirvana is laughable; it’s nothing of the sort, as it would lead not to an economy that hums along efficiently, delivering the needed and desired goods and services, but one in which increasing concentrations of power — far worse than what today’s already excessive situation — would lead to monopolistic pricing (that’s higher) and all manner of abusive market practices that further enrich large corporations at the expense of small companies and individual consumers. It would not be nirvana, but dog-eat-dog anarchy, with some of the biggest and hungriest dogs in the fray being the fossil fuel companies. The only way we avoid that nightmarish scenario and have the kind of economy consumers want is via effective government intervention, in the form of laws and regulations that prevent practices that are not in the best interest of the public at large. A “free market”, what non-economists tend to call what economists know as “a perfectly competitive market”, can only be sustained with the expenditure of considerable oversight and diligence. And yes, that diligence includes not just the government watching the markets but the public watching the government.

Rick Piltz asks Koomey about Naomi Klein’s comments regarding how dramatic a change we need to make — “shredding the free-market ideology that has dominated the global economy for more than three decades”. His reply, in part:

I don’t agree with this framing of the problem. We need markets to help us attain wide acceptance of technologies, ideas and practices essential for building a sustainable world. That’s the only way we’ll be able to adapt fast enough to truly face the climate challenge.

There are good reasons to support a rethinking of the way government interacts with the private sector, but that doesn’t mean that capitalism is doomed, just that it has to be modified to reflect the new realities in which we find ourselves. The key is in redefining property rights. First, and most importantly, that means changing the property rights in the atmosphere, so that people can no longer freely dump pollutants there. People who use fossil fuels must pay the true cost to society of the pollution they cause, which is both fair and efficient for society as a whole.

Of course, one can play all sorts of semantic games and argue endlessly about how much one can change our current incarnation of capitalism before we’ve crossed the line from tweaking it into replacing it. (Theseus’ Paradox, anyone?) In general I agree with Koomey, however: We have to recognize the critical role of markets to develop and deliver the hardware (turbines and solar panels), software, and financial tools (production pricing agreements for solar power), but we shouldn’t think for a nanosecond that it will produce exactly what we desperately need on its own.[1]


[1] A key reason why we can’t trust the all-seeing, all-knowing market to magically provide for our needs is, of course, timing. The “free market” is spectacularly good at allocating resources in the short run in response to price signals. But it is just as spectacularly bad at taking action long before such signals appear. Left entirely to the pricing signals of the market, we would burn fossil fuels at a horrific clip until alternatives became cheaper, almost entirely through the rising price of such fuels as supply was challenged to keep up with demand. Without government intervention in the markets in the form of CAFE regulations, subsidies for renewables, etc., we’d see even less development of alternatives and therefore even less reduction in our CO2 emissions.

Oh, and if anyone is tempted to post a comment braying about how much US emissions have dropped because cheap natural gas has displaced a lot of coal burning for electricity generation, save your keystrokes unless you can also make a case for that shift being both permanent and enough to reduce our CO2 emissions from that sector.

5 comments to Climate change and capitalism

  • Great, important stuff. And absolutely correct that it’s become impossible to discuss in mainstream US politics (and elsewhere). Apologies for self-linking; I’ve spent a bit of time mulling over what forms of ‘social technology’ can do, here’s one looking at drug production and arguments that only traditional market-plus-IP can do the job. Really? Exactly why, if that’s the case? Particularly pertinent now as the UK coalition government has succeeded in breaking open the NHS to the gales of international (ahem) ‘competition’.

    This is the weirdest aspect of all this. It’s not that capitalism’s dynamism is being released. Mostly, it’s that taxpayer’s money is just being funnelled into private hands through awful long-term contracts where private lawyers run rings around their public counterparts, removing the very incentive that it’s meant to capture. As Krugman puts it, the bizarre cronyism result takes very little that’s good from the private sector. In fact, possibly, the worst of all sides: guaranteed public cash flows minus any accountability or civic responsibility.

    Which supports your point completely: no-one is actually thinking about how the incentive structure is meant to work. It’s just “private good public bad” crass ideology. Anyone with half a brain can work out that different social technology structures are good for different things, and probably need careful testing and slow, organic development. (This was one of Elinor Ostrom’s points: the world is a set of deeply empirical specific cases; high-level principles may exist, but they can’t be applied from on-high.) We seem to be moving to a world where everything’s exactly ass-backwards.

    *slightly off-the-wall para follows*

    Any easy answer I often fall back on: Mammon is real. By which I mean, money as a system has created a set of structures that support it in very particular ways. For instance, being able to buy all the best PR means being uniquely positioned to shape human perceptions of how we should live. It’s also why financiers are paid so much: they’re right at the face of the thing, closest to its central dynamic of merely recreating and expanding wealth for its own sake. It’s simple evolution, as well as simple economics: the weaker, unfed systems die out. This makes it very difficult to change. Hmm, that’s starting to sound terribly Gramscian.

  • Eek, please fix that last broken link for me! Sorry.

  • Also: do you have any ‘subscribe to comments with email updates’ options available? This is one of the few blogs without it that I’m good at coming back and checking, but an email option would be awesome…

  • Lou

    Dan:

    I’ll have to scout around for a WordPress add-on that does that.

  • disdaniel

    “It would not be nirvana, but dog-eat-dog anarchy, with some of the biggest and hungriest dogs in the fray being the fossil fuel companies.”

    I’m really not sure that would be the case. Any real anarchy will savage oil company profits (you think businesses are paralyzed by the uncertainty of Dodd-Frank…?) as global corporations retrench to the most basic aspects of their businesses. As demand falls so do the massive profits the fossil fuel companies have come to rely on.