Written by Jane Chan

How to fix capitalism’s Achilles heel

Mangkhut. Europe’s heat waves. Australia’s ‘Day Zero’. All evidence that we are reaching critical mass when it comes to climate change. Despite rising temperatures, we are left cold when we look to those in power to make real, tangible, impactful change. 

If we fail to stop climate change now, we will grapple with the severe consequences later. 

Though scientists having reached a consensus on the issue for more than a decade, the functions of our legislatures have failed time and time again. And why is this?

Some blame the concept of capitalism itself. Derived from each human’s fundamental instinct for drive and greed, it’s premised on the constant purchasing of goods from consumers to prop up the market. Without consumer spending, the economy sputters and fails; recessions and depressions follow. The fundamental flaw is that capitalism’s creators did not want to face our reality: humans cannot play God. We can use resources more efficiently and we can use resources more sparingly, but we cannot turn water into wine.

How to fix capitalism’s Achilles’ heel - the assumption that resources are infinite?

However, this is not a reason to rid our economies of capitalism. It is not a disease, but instead a viable model for rapid economic growth, pulling billions into the middle class. Moreover, though damage under capitalism is large, it is matched or exceeded by alternate government systems. The communist experiments of the 20th century under Mao and Stalin both yielded great environmental damage through brutal industrialization. Meanwhile, the environmental Kuznets curve shows that wealth creation under capitalism pressures governments to address immediate issues such as air pollution. This provides a glimpse of hope that our economy can coexist with sustainable development.

Hence, the question is not, how do we rid ourselves of capitalism? Instead, it is how to fix capitalism’s Achilles’ heel - the assumption that resources are infinite?

As an economy, consumer trends towards veganism and minimalism are gaining popularity - Beyond Meat’s record-breaking IPO valuation in early 2019 is proof. However, their focus on the Western market vastly overlook nations where resource needs are projected to increase exponentially. This includes India, China, and African nations, whose projected accumulation of wealth cause citizens to adopt what they perceive to be richer, and more wasteful lifestyles. Therefore, these trends are not enough. In order to overcome the gargantuan obstacles we face brought on by overpopulation and resource exploitation, the economy needs to be overhauled, especially in regards to multinationals operating in developing economies, who face few consequences for the irreversible damage they incur upon the environment.

One method which could work was outlined three decades ago, in David Pearce and Edward B Barbier’s ‘Blueprint for a Sustainable Economy’. They argued that the environment, and the services it provides us, must be given value within our markets. Three decades later, action on climate change has stalled on the backs of special interest groups and the government’s complacency. Yet Pearce and Barbier’s theories still form the basis of our reluctantly-applied carbon taxes and must be expanded to reflect the urgency of climate change. To change the valuation of goods is to change the economy. To change the economy is to change the world.

It is only right for the polluters to pay now, instead of forcing the youth to pay later. 

Hence, the social cost of environmental destruction must be transferred to the polluters. Multinationals like mining company De Beers or timber merchant Jewson must take responsibility, where they pay, not only profits tax, but a tax for the social costs of soil erosion and its impact on the agricultural sector, or the social costs of the loss of flood prevention services from deforestation.

Infrastructure already exists for the development of a robust valuation method for all types of natural capital. Past compensation claims for environmental disasters have been satisfactory in performance, such as the determination of a $2.5 billion USD compensation for Exxon Mobil’s 1989 oil spill. This was done through a contingent valuation model, where surveys were used to balance the demands of activist-citizens with a polluter’s willingness to pay.

There are loopholes in this method, hence justifying immediate investment in adapting models, such as the one used for the 1989 oil spill, for wide-scale use in an efficient and accurate manner. Research and modeling should finetune how and to whom surveys are conducted for, ensuring accuracy and effectiveness. Once satisfactory, these models could be used to determine the costs borne to society from, for example, the loss of flood prevention services due to deforestation. This process would be a mandatory component for environmental impact assessments (EIA) in all operating territories of a multinational. This added step not only further informs the public of the project’s consequences, but provides revenue to the host government through a unitary tax.

This change in pricing forces the burden of environmental degradation to shift: it is only right for the polluters to pay now, instead of forcing the youth to pay later. Furthermore, such an environmental tax would transform the cultural trends which perpetuate our shared demise: such a system would drop demand for the most polluting companies, readjusting their incentives accordingly.

Yet, in today’s context, this system remains a distant pipe dream. To big business, taxes are a cardinal sin, and should our legislatures remain dominated by special interests and their lobbyists, the efficacy of policies aimed to tackle real issues will remain limited. Hence, the real solution lies in the ability of legislators to overcome corporate interests and focus on what the people need. After all, long-term security, which impacts the world, should always take precedence over short-term growth figures, which impacts the 1%.

The real solution lies in the ability of legislators to overcome corporate interests and focus on what the people need. 

There are numerous solutions; stricter campaign finance laws is one championed by Elizabeth Warren, and applicable to numerous countries. But simply hiring more experienced staffers for legislators would stop an office’s reliance on information and biases provided by well-funded lobby groups. Policies and arguments would be developed independent of companies, meaning governments that serve, not the companies, but for the people, and by the people. 

If we can extricate our governments from the chokehold of multinationals, as painful as it can be, we will regain the ability to fully tackle humanity’s biggest challenge: climate change. We will regain the ability to reform our economy. We will regain the ability to truly debate and pass bills which reasonably, yet adequately, tax polluters for all of their environmental exploits, and return the money back to their host country. 

Thus follows, that the real solution may not lie in the silver bullet argument of developing carbon capture technology, or forcing governments into carbon taxes. Instead, the real focus should be on fixing the systems which would pass these policies in the first place, influencing our debates about budget expenditures, the proposals made by the legislature.

The clock is ticking: global warming is fast approaching the point of no return. But the solution is simple. To fix the system, we need to ditch the lobbyists. Lest, we risk a doomed future of climate crisis and no way to repair it..