Is Capitalism to Blame?

Some people think we need to abolish capitalism to save the environment.

Bernie Sanders has a  book called It’s OK to be Angry at Capitalism.  There are certainly a lot of people across the political spectrum who feel that way. Capitalism is blamed for environmental destruction by many of the more radical segments of the Left. That’s not too surprising given the historic connection between the more radical Left and various forms of socialism. What may be more surprising is the number of people on the far Right who apparently have the same theory.

Although the anger may be a common factor, there may be less clarity about the target and what alternatives to favor.  Sanders himself blames “unfettered capitalism.” Mainstream economists would definitely agree about the need for government intervention to make capitalism work (for instance, to maintain competition), to deal with income inequality, and to protect the environment.

That’s not to say that most economists would agree with Sanders’s proposal, but the real debate is about what “fetters” to apply and how. I have some sympathy with his suggestion that we’ve let things get a bit out of hand and need a course correction. Regardless, the upshot is that Sanders wants major economic reforms rather than eliminating the economic role of markets.

Some other critics aim their ire at globalism or at the finance sector. They seem to favor a kind of localism, in which there would be much less international trade, little movement of capital beyond borders, or a return to locally based banks rather than national or international sources of capital like investment banks, private equity, etc.  Others, whether on the left or the right, may favor a much larger publicly owned sector or more government micromanagement of prices, wages, and investment.

Whatever else can be said about these ideas, I don’t see much reason to think they will matter one way or the other for environmental protection in general or climate change in particular.  State-owned enterprises in places like the old Soviet Union and in China have terrible environmental records. In the U.S., one of the few areas where state ownership and co-ops are important relates to public utilities. There doesn’t seem to be a clear connection between whether a utility is investor owned and its environmental performance. One reason is probably that voters and co-op members differ a lot in their environmental preferences, and non-investor owned utilities tend to reflect those preferences.  So investor owned utilities, which are responsive to shareholder interests but are also government regulated, may be more environmentally responsive than alternatives whose controlling stakeholders may or may not care about the environment.

Drastic reductions in international trade or capital flows also do not seem especially helpful to the environment. Closing borders is something we usually do to other countries as economic sanctions. In this case, we’d be essentially applying those sanctions to ourselves.   It’s true that cutting international trade would reduce marine shipping, which would reduce emissions. On the other hand, locally sourced materials and interstate transport might or might not have smaller environmental footprints.  Localism also cuts off cheaper sources of the materials and products needed for the energy transition, which would slow efforts to cut emissions. The same is true for cutting off international flows of capital or severely downsizing the financial sector, since doing so would reduce the amount of funding for the energy transition and raise the cost of capital.

Don’t get me wrong. I’m not arguing that more free trade or free flow of capital is always better, only that the effects of trade and capital barriers on the environment are unclear.  As with capitalism generally, completely unfettered trade or financial sectors aren’t an attractive options. It’s one thing, however, to say that we need more “fetters.” It’s another to say that the root cause of the problem is the existence of markets.


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Reader Comments

6 Replies to “Is Capitalism to Blame?”

  1. Will and Ariel Durant concluded:“When the group or a civilization declines, it is through no mystic limitation of a corporate life, but through the failure of its political or intellectual leaders to meet the challenges of change.”

    Why must we prove them to be correct one last time? Climate change disasters are totally out of control today?

    1. I refuse to believe that with all the brainpower you intellectuals say you have, you haven’t come up with solutions that have been successfully implemented by now.  You have the best incentive there is, your students and families should inspire you to unite and dedicate your resources to saving the planet so that future generations can continue to have an acceptable quality of life like we have been so fortunate to live, that many before us gave their lives to pass on to us. Tragically, today the IPCC and republican politicians also appear to have also given up.

      Like Churchill exhorted: “Never, never. never Give Up”, and we won WWII against incredibly overwhelming odds.

  2. There’s another problem with localist and uneconomic environmental solutions: Therw is little accounting for and reporting of environmental impacts, whether greenhouse gas emissions or otherwise. This is more than regulation. Can’t do something about these impacts until one is aware of them. I don’t see any policy that enables localist approaches unless it’s a strong and centralized tax on emissions and Carbon throughout the economy. I would like to see a similar on pesticides of all kinds. It might help to do the same on plastic but that could be counterproductive.

    1. As Nicholas Dirks said: “— so many intellectuals don’t want to take on the sort of complications and impurities that come from being public” and “Pure” academics keep proving it. 

      God help our newest generations whose future depends on the ‘Pure” saving the planet as we pass 419.55 ppm and +1.22C until The End. 

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About Dan

Dan Farber has written and taught on environmental and constitutional law as well as about contracts, jurisprudence and legislation. Currently at Berkeley Law, he has al…

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About Dan

Dan Farber has written and taught on environmental and constitutional law as well as about contracts, jurisprudence and legislation. Currently at Berkeley Law, he has al…

READ more