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Preventing A Climate Emergency: Is Capitalism The Problem Or Part Of The Solution?

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The global climate emergency is increasingly under the spotlight. Socio-political movements, such as Extinction Rebellion, are actively campaigning against environmental destruction, highlighting the threat of mass extinction and the social collapse the planet currently faces.

While some have argued that those behind Extinction Rebellion are anti-capitalist in their ambitions, others have expressed counterpoints to this view. Mark Carney, Governor of the Bank of England, for example, has argued that capitalism “is very much part of the solution” to the climate crisis.

Both positions resonate with ideas expressed by Austro-Hungarian socio-economist Karl Polanyi. Polanyi argues that capitalism will, if not constrained by society, “annihilate” the natural environment it needs to operate. In their pursuit of profits in a ‘free’ market, capitalists will use natural resources to produce goods as cheaply as possible, with little regard for the environmental impact of their production processes. To prevent such a process from unfolding, society needs to set limits to what companies can do and how they do it, Polanyi argues.

The conflicted role of Parliament

Extinction Rebellion calls for the establishment of a Citizen’s Assembly, arguing that Parliament cannot take decisions that are in the long-term interests of society or the environment. Other public figures, though, like Carney, alternatively refer to Parliament and legislation as the appropriate way to air society’s concerns and to regulate firms’ behaviour. While Parliament has legitimacy, many would acknowledge fears that parties are wont to use big issues – environmental ones included – as political footballs for their own ends. They may also be influenced by companies’ lobbying efforts.

The responsibility of businesses

Outside the political arena, the role of businesses in limiting the impact of climate change is increasingly scrutinised. Austro-Hungarian intellectual Joseph Schumpeter argued that capitalism is never stationery and that it is always evolving, continually innovating and creating new products and markets in a process of ‘creative destruction’. Recently, Carney referred to the changing emphasis that investors and others are placing on environmental concerns, while BlackRock’s Larry Fink has spoken of the need for corporations to act responsibly.

Firms that do not adapt or listen to their investors and customers risk being ‘destroyed’ compared to newly-created start-ups that better cater for their customers’ and their owners’ demands and concerns. For Carney, capitalism, shepherded by parliament and others, will adapt to meet the challenges posed by the environmental emergency. For Extinction Rebellion, though, the capitalist system itself is largely to blame for the climate emergency.

In 2009, the member states of the European Union agreed a directive to promote the use of energy from renewable sources as a share of total energy. The collective target is for 20 per cent of energy to come from renewables by 2020, with each member state having an individual target depending on the size and make-up of the country.

Data show that the ability of member states to meet or exceed their targets appears to be related to the role of stock markets in financing companies. In general, the higher the level of stock market capitalisation as a percentage of GDP, the further away from meeting its target that member state is likely to be. Put another way, different types of capitalism are better able to shift to renewables. Large stock markets and concentrations of institutional investors appear to impede the transition to a greener outlook.

It all demonstrates how capitalism sits at the heart of the climate emergency. It has the potential to be an integral part of the problem, or the solution. Achieving the latter may help secure the future of capitalism itself.

Dr Matthew Allen is senior lecturer in organization studies at Alliance Manchester Business School

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