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Comment on this article The principal approaches to date for controlling the economy’s impacts on the natural world can be thought of as today’s environmentalism. This arena is where I have worked throughout my professional career. Now, near the end of my career, I find it impossible to be happy with the results. Important gains have been made, of course, including progress on local environmental problems like air and water pollution. But, all in all, today’s environmentalism has not been succeeding. We have been winning battles, including some critical ones, but losing the planet. The escalating processes of climate disruption, biotic impoverishment, and toxification that continue despite decades of warnings and earnest effort constitute a severe indictment, but an indictment of what exactly? If we want to reverse today’s destructive trends, to forestall further and greater losses, and leave a bountiful world for our children and grandchildren, we must go back to fundamentals and seek to understand both the underlying forces driving such destructive trends and also the economic and political system that gives these forces such free rein. Then we can ask what can be done to change the system. The sources of today’s environmental deterioration have been clearly identified. They range from immediate forces like the enormous growth in human populations and the dominant technologies deployed in the economy, to deeper ones like the values that shape our behavior and determine what we consider important in life. Most basically, we know that environmental deterioration is driven by the economic activity of human beings. About half of today’s world population lives in abject poverty or close to it, with per capita incomes of less than $2 per day. The struggle of the poor to survive creates a range of environmental impacts where the poor themselves are often the primary victims—for example, the deterioration of arid and semi-arid lands due to the press of increasing numbers of people who have no other option. But the much larger and more threatening impacts stem from the economic activity of those of us participating in the modern, increasingly prosperous world economy. This activity is consuming vast quantities of resources from the environment and returning to the environment vast quantities of waste products. The damages are already huge and are on a path to be ruinous in the future. So, a fundamental question facing societies today—perhaps the fundamental question—is: how can the operating instructions for the modern world economy be changed so that economic activity both protects and restores the natural world? With increasingly few exceptions, modern capitalism is the operating system of the world economy. I use “modern capitalism” here in a very broad sense as an actual, existing system of political economy, not as an idealized model. Capitalism as we know it today encompasses the core economic concept of private employers hiring workers to produce products and services that the employers own and then sell with the intention of making a profit. But it also includes competitive markets, the price mechanism, the modern corporation as its principal institution, the consumer society and the materialistic values that sustain it, and the administrative state actively promoting economic strength and growth for a wide variety of reasons. Inherent in the dynamics of capitalism is a powerful drive to earn profits, invest them, innovate and thus grow the economy, typically at exponential rates, with the result that the capitalist era has in fact been characterized by a remarkable exponential expansion of the world economy. The capitalist operating system, whatever its shortcomings, is very good at generating growth. These features of capitalism, as they are constituted today, work together to produce an economic and political reality that is highly destructive of the environment. An unquestioning society-wide commitment to economic growth at almost any cost; enormous investment in technologies designed with little regard for the environment; powerful corporate interests whose overriding objective is to grow by generating profit, including profit from avoiding the environmental costs they create; markets that systematically fail to recognize environmental costs unless corrected by government; government that is subservient to corporate interests and the growth imperative; rampant consumerism spurred by a worshipping of novelty and by sophisticated advertising; economic activity so large in scale that its impacts alter the fundamental biophysical operations of the planet—all combine to deliver an ever-growing world economy that is undermining the ability of the planet to sustain life. In short, my conclusion, after much searching and considerable reluctance, is that most environmental deterioration is a result of systemic failures of the capitalism we have today and that long-term solutions must seek transformative change in the key features of this contemporary capitalism. Speth writes that present-day capitalism is destroying the environment, “and that long-term solutions must seek transformative change in the key features of this contemporary capitalism.” In response, Amy Kahn Mann '95 “applaud[s]” him, and adds, “Importantly, Professor Speth does not dismiss capitalism, but calls for an improved version, one which incorporates a set of values beyond simply making and spending money.” First, it is unclear whether Speth, in calling for “transformative change” (a pleonasm), wants to reform or to overthrow capitalism. Second, Mann’s hope is absurd. The guiding motive of economic life under capitalism is profit. Everything else must be subordinated. Such a system must produce, repeatedly, the evils Speth has noted and many more. Since the few who benefit vastly from it will not give up their privileges without a fight, Speth deserves only a partial ovation, because he has neglected to call for struggle. Under capitalism, what gets in the way of profit is sacrificed: human beings, the environment, peace. Why does Firestone pay Liberian rubber-plantation workers, some only 12 years old—their shoulders oozing with sores from carrying buckets of sap for miles in the torrid heat—only $3 a day? Why do health insurers deny coverage to policy-holders who then die of treatable diseases? Why do our rulers manufacture reasons to invade countries with coveted resources, killing and displacing millions there? A profit-driven system must produce these effects. When the Exxon Valdez crashed in Alaska, its spilled oil fouled 1200 miles of coastline and destroyed the livelihoods of the inhabitants. Exxon’s high-priced lawyers persuaded the Supreme Court, appointees of millionaire presidents, to reduce the fine to less than the company’s profit for four days. How can human or environmental interests compete with capital? If our rulers were serious about reducing greenhouse gases, we would have clean, abundant public transportation, free of charge, with trains or electric or natural-gas-powered buses passing every few minutes. But public transportation is not a priority for our government, though it can find the wherewithal to get thousands of Hummers to Iraq. Public transportation agencies, unlike the oil companies and General Motors (which in its heyday bought up trolley companies around the nation then systematically destroyed them), do not make campaign contributions. Can anything short of revolution change such a system? Reform is a joke. Upton Sinclair’s muckraking indictment of the meat-packing industry, The Jungle, was published in 1906. 100 years later we suffer mad-cow disease and recalls of tainted beef. The meat-packing industry remains one of the dirtiest and most dangerous in America, with workers, often immigrants desperate for jobs, earning less than they earned 30 years ago. Congress passed Glass-Steagall in 1933 to protect us from the banking practices that led to the Great Depression. The big banks and their highly-paid lobbyists got the act repealed in 1999 under corporate-friendly Bill Clinton and Treasury Secretary Robert Rubin, formerly of Goldman Sachs, now president of Citibank. Consequences? First Enron, then a mortgage crisis throwing people out of their homes and decimating the financial system. Money will always find a way around “reform.” Some say the environmental horrors that occurred under communism prove the other system won’t work, either. But the end of capitalism and its nonstop aggression, one of the major difficulties socialist countries faced, would make socialism much easier to practice. And there are encouraging signs from socialist countries today. China has banned plastic bags, a feat nearly impossible here, where two cities that have tried, San Francisco and Oakland, are being sued by business interests. Cuba has replaced incandescent light bulbs with energy-saving compact fluorescent bulbs, and under pressure of the U.S. embargo, has replaced unobtainable chemical fertilizers with organic ones. Dumping capitalism is a first step towards halting the destruction of huge swaths of life of earth.
For an improved capitalism I applaud Dean Speth for this article. In a time when the health of our nation is too often measured only in terms of GDP, it requires courage to criticize the dominant model. Importantly, Professor Speth does not dismiss capitalism, but calls for an improved version, one which incorporates a set of values beyond simply making and spending money. A responsible modern capitalist system must include a greater concern for our natural environment, more investment in alternative technologies, the end of externalized costs and misguided corporate subsidies, and a voluntary examination of our society’s addiction to unfettered growth and consumption. In daring to challenge the sanctity of our current system, Speth advances the discussion and creates a foundation from which we can seek solutions. I am proud that my alma mater supports this kind of forward-thinking, candid work.
Capitalist theory ignores environmental change Speth is entirely correct in his conclusion that it is capitalism that is responsible for bringing the planet to the brink of environmental cataclysm. Capitalism, as it is currently practiced, is instructed by mainstream, neoclassical economic theory. This theory views the economic process as a closed, ahistorical cycle of production and consumption that neither induces qualitative change in the environment in which it is embedded nor is affected by such qualitative change. The term applied by the economists to accommodate the environmental degradation induced by consumption stresses—negative externalities (plainly saying the effects concerned are external to the theory)—says as much. These negative externalities are then supposed to be incorporated into market prices through Pigouvian taxes calculated by cost-benefit analysis, thus raising market prices and restraining individual market behavior from imposing consumption stresses upon the environment. The modern theory of nonlinear dynamics, however, teaches us that the information demands required to effect the necessary cost-benefit analysis are strictly infinite in magnitude. Indeed, not even infinite information may suffice. This is why cost-benefit analysis has been a manifest failure in curtailing the environmental damage inflicted by market behavior. If capitalism (and the market behavior it champions) is to be rendered innocuous, it will have to be embedded in the necessary selecting context of appropriate social institutions expressive of nonlinear dynamics' lesson that the whole is greater than the sum of the parts, thus necessitating the behavior of the parts be instructed by the whole. How this is to be done and what we would be throwing away if we don’t (i.e. a virtual infinity of qualitative improvement in the human condition), I have discussed at length elsewhere (See my paper, Sustainability: The Matter of Time Horizon and Semantic Closure, Ecological Economics, Volume 65, Issue 1, 15 March 2008, Pages 167-176).
Subsidies are the problem Professor Speth’s pain and despair over our seeming inability to recognize and address severe damage to our planet is palpable in his writing. But I do not think the problem we face arises from free-market capitalism. It grows from government subsidies to producers and consumers. In my experience, long-term solutions are more likely under a capitalist system, where incentives exist for innovation and change, than under economic systems based on coercion or centralized planning. When I worked at Bank of America in the early- and mid-1990s, they published a series on “Economic Growth and the Environment” that showed, domestically and globally, how individuals, cities, states, and nations that led the way in environmental protection enjoyed the highest sustainable rates of economic growth. Unfortunately, since that time, governments throughout the world—including our own in first or second position—have elected to subsidize highly polluting and inflationary industries (agriculture, energy, defense and real-estate development) at the expense of supporting free markets and the innovation they would otherwise bring. As a result, we have no functioning worldwide price mechanism that would signal people how to spend and invest in the face of rising demand for (yet falling supplies of) natural resources and an increasingly unstable global climate. The three leading culprits in unsustainable resource exploitation, China, India, and the United States have strong central governments that have repeatedly thwarted consumer and producer change. Yet each nation has a different cultural, economic and political framework. Entrepreneurs—including those engaged in financial and technological innovation—constantly try to create new products and new markets for consumers and producers. But when they must pay the full cost of their actions for new ideas and products (including profit reflecting the risk of their undertaking) yet compete with subsidized industry, the result is to put off needed change and stick with the status quo. A disguised price system makes it appear cheap for us to do so. Until legal systems allow free markets in products and services, yet require the payment of the full cost of extracting resources and using them, the reward system that triggers innovation and change cannot function. Imagine in this country alone if the price of domestically produced oil, gas, and coal—or hydro-power or even ethanol—was equal to its full replacement cost in economic terms. Energy prices would reflect the full cost of extraction, transportation, and use, including restoration of land, water and air quality, plus a profit commensurate with risk. Absent legislated subsidies, tax breaks, and ongoing legal shelter from the consequences of unsafe working conditions and pollution, as energy prices rose and fell, we would develop substitutes that made far more economic sense. And since the full cost of ruining the environment would be reflected in these economics—we would have the chance of enjoying a more sustainable life on earth. (And I mean enjoy. It’s a beautiful, wonderful place if we don’t wreck it.) Until we pay the total cost of what we use—and bear the total cost of the consequences of our actions—free of government subsidies—we will continue to suffer global degradation. The problem is not free markets. It is the legislatively and legally mandated transfer of costs and risk ingrained in global political-economic systems.
More government is not the answer Speth condemns capitalism as “undermining the ability of the planet to sustain life.” I believe it is the wealth created by capitalism which permits Dr. Speth to promote his environmental ideas, and which will aid our capitalist society to continue ameliorating the conditions which distress him. His book may provide better guidance, but more government, the left’s invariable recommendation, does not appeal to me—Hayek comes to mind. I will look forward to a book review in the Wall Street Journal or National Review for an informed opinion about Dr. Speth’s thesis. Publishing the author’s selection from his book seems like a dust-jacket blurb.
A carbon tax is the answer Dean Speth lays the blame for environmental pollution squarely at the door of “capitalism.” The dominant modes of economic organization in Eastern Europe and China are as far from capitalism as chalk is from cheese. Yet each coal-burning factory China brings online sends up curtains of visible smog into the atmosphere as well as the invisible carbon dioxide that will lead to global warming. Poland and other non-capitalistic nations in Eastern Europe cycle pollutants into the air its citizens breathe and warm up the atmosphere as well. At this point, distinctions between capitalistic and non-capitalistic economies begin to fade. Factory managers in both modes of economic organization are directed to minimize their production costs. They have a powerful incentive to dispose of wastes in the cheapest mode possible. Often this consists of dumping the wastes into the mantle of air that envelopes the earth or into water close to the factory’s drain pipes. Because no one has legally defensible property rights in these environmental “sinks,” they become the cheapest way for plant managers in both socialistic and capitalistic regimes to dispose of their wastes. But, as is well known, they impose uncompensated costs on the rest of society in the form of illness (and higher medical bills), lowered property values, and other discomforts downstream or downwind, and eventually global warming worldwide. One way to curb abuse is to impose costs on enterprises for the indiscriminate discharge of wastes into common environments. My favorite candidate is a carbon tax. As every student learns the first few weeks of any basic economics course, taxing anything reduces the quantities produced. Subsidies increase them. Faced by tax bills that grow with the amount of emissions discharged into the environment, firms will search for ways to minimize emissions, or lose market share to competitors who do. (How socialistic systems will be able to levy such taxes is less clear. It is not known how successful one government agency will be if it tries to levy charges on another.)
Capitalism, communism, and cows Before Speth gives up on the virtues of capitalism, he might want to consider the following comparison of “isms,” compliments of my father:
Under any system, growth is the problem Given the fall of Soviet communism, Speth was entirely correct to define the source of challenge to the global environment that we face today as “the problem with capitalism.” As a historical matter, however, it is worth noting, as RAND Corporation author D. J. Peterson chronicled in a 1993 book subtitled “The Legacy of Soviet Environmental Destruction,” that even without such core economic concepts as private employers, competitive markets, the price mechanism, and the modern corporation, the former Soviet Union did a bang-up job of despoiling the environment. Under whatever economic system, what Speth called “the administrative state actively promoting economic strength and growth” long has been a critical driver of environmental deterioration. It will require an almost unimaginable degree of popular understanding of the threat around the world to generate sufficient political will to change course toward sustainability.
First, we must change ourselves I agree with Speth’s assessment that “today’s environmentalism has not been succeeding. We have been winning battles, including some critical ones, but losing the planet.” But I disagree with his understanding of what it means to “go back to fundamentals and seek to understand both the underlying forces driving such destructive trends and also the economic and political system that gives these forces such free rein.” Speth then attempts to make a shift in issue orientation, without (to paraphrase Einstein) departing from the mind that created the problem in the first place. He is still stuck in abstractions about “the system,” convinced that we can ultimately change destructive systems without changing ourselves. This is a remarkably stubborn fiction in academic and public policy circles. I’m always surprised when intelligent people fail to notice or mention the concurrent need for self-transformation that must accompany efforts to change the world “out there.” The need for a “change of heart” is difficult to quantify, and so is typically left out of the formula of most public-policy change manifestos. This way we can pretend to be at the controls of our intellectualized culture, forever moving around the external pieces—whether of the market economy or the political process or the academic orientation—without ever having to make real changes in the ways we actually live our lives. This inner obligation to transform our own lives need not be at the expense of our efforts to change societal systems. Quite the contrary. But in my experience this obligation does call forth—for lack of a better word—some dimension of spiritual discipline and practice. As the Dalai Lama has put it, “Spiritual practice involves, on the one hand, acting out of concern for others' well being. On the other hand, it entails transforming ourselves so that we become more readily disposed to do so.” To my way of thinking, it is our capacity to reunite these two orphaned dimensions of the change process—inner and outer—that constitutes a real return to “fundamentals.”
The problem is scientific illiteracy Dean Speth got the problem right : exponential growth is not sustainable. But he has the wrong cause. Capitalism, per se, is not what creates out-of-control growth of either population or economic activity. The whole spectrum of economic ideologies, from Marxist socialism on the far left to extreme libertarianism on the far right, promises endless growth and prosperity for all. For many decades, the USSR delivered growth and an improving standard of living, as well as lots of pollution. But pragmatic experience has led almost all countries but a few to adopt some version of a regulated market economy with a welfare state. What isn’t working properly? Not the market economy or the welfare state, though none are perfect. It’s the regulations, including the legal and political systems. Whenever the market (or anything else) sends signals indicating that growth is causing a problem, the response is to create a subsidy or write a regulation. Amtrak is organized; transit is subsidized. EPA regulates emissions. These actions provide temporary, symptomatic relief: energy-efficient transportation and reduced air pollution. But these actions are taken so that growth can continue for another generation, even if the ultimate consequence must be some sort of collapse. The intrinsic problem is scientific and mathematical illiteracy, not among the majority, but within the elite: the politicians, corporate managers, economists, and even many scientists, engineers, and mathematicians. This is not “rocket science,” it’s just the compound interest formulas that used to be taught in the eighth grade. Constant rate (exponential growth) doubles the size of something in fixed time intervals. Ten of these give a factor of 1024 (2^10), so 20 yields more than a million. Pick whatever level of absurdity you wish, and this kind of growth will get you there. Don’t blame the capitalists, who are just trying to make a buck. Don’t blame the socialists, who are just trying to redistribute the bucks. It’s the teachers, from the eighth grade up through the graduate schools, who are drowning students in academic esoterica without providing the most important fact of the mathematical, physical and biological sciences: exponential growth is not sustainable by any kind of technology, economic system, or political actions. The only feasible option is a sustainable, steady-state economy. With those constraints, nations can choose a smaller population with a high standard of living or a larger population with a lower one. But, “You can’t have your cake and eat it too.”
Humpty Dumpty and Speth When proto-humans lived in caves and were hunter-gathers, the natural world was uncorrupted. Admittedly, it was a highly dynamic natural world, with minor perturbations sometimes having surprising impacts on far-removed parts. Some of those perturbations were caused by proto-humans but they were just part of the natural world, like rabbits or saber-toothed tigers. When humans crawled out of their caves and began to practice agriculture—in their individual self interest—nature began to suffer and capitalism began to grow. That was the beginning of the long downhill slide that Gus Speth so decries. And it has all happened in the last 20,000 years—the flick of an eyelash in the larger scheme of things. It may well be that humans (whether natural or unnatural) will excessively populate, excessively consume, or excessively fight so as to destroy the planet. Apparently Speth believes so. I suspect that Humpty Dumpty is still sitting on the Wall, and it is an open question as to whether or not he’ll take a Great Fall. Despite the pessimism, let’s assume that Speth is right. All the King’s horses and all the King’s men will not be able to put it back together again. Perhaps the wisest response is: So be it. That’s just the way the natural world is. The Great Fall is not likely to occur during the lifetimes of Speth or me. Nor of our children or grandchildren. After that, I don’t really care all that much. Even a very low discount rate sets some limits on human concern. If Speth is calling for a negative discount rate, then the natural world, which he does so dearly love, will surely defeat him.
Capitalism can solve the problem It’s difficult to ascribe our environmental challenges to capitalism when the biggest emitter of CO2 (China) is run by a Communist Party; when many of our most polluted cities are in the former Soviet Union; and when capitalist countries score best in Yale’s 2008 Environmental Performance Index. We won’t overcome our environmental problems by following James Gustave Speth’s advice and turning away from capitalism. Who’s going to develop the car batteries and solar panels we’ll need to cut our CO2 output? Not a bunch of bureaucrats following Soviet-style five-year plans. I’ll place my bets on hordes of Silicon Valley startups chasing after $5 billion IPO prizes.
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