CJP: What about the argument that it isn’t really capitalism that should be blamed for the current climate crisis, but rather industrialization itself? After all, the environmental damage that the former so-called socialist world (the former USSR and Eastern Europe) caused in its rather short life is now well documented.
NC: I would emphasize the phrase “so-called.” This is not the place to pursue the matter, but we should view with caution the claims of major propaganda systems. There have been two primary ones: the huge US system and its pathetic Eastern counterpart. They disagreed on many things, but not everything. They agreed that the radical perversion of socialism in Eastern Europe was “socialist”—the US in order to defame socialism; the Soviets, to try to benefit from some of socialism’s moral aura. We’re not compelled to follow suit.
The fact that capitalist logic, unconstrained, leads directly to destruction of the environment does not entail that it is the only possible source of this outcome. There is a great deal to say about the harsh and brutal process that turned Russia from a very poor peasant society, continuing to decline relative to the West as it had been doing for centuries, into a major industrial power, despite the terrible traumas of wars. But there is no escaping the fact that the environmental impact was devastating.
The Western mode of industrialization relied on slavery (creating “the empire of cotton” and the basis for much of the modern economy), coal (found in abundance in England, then elsewhere), and, in the 20th century, oil. Was this a necessity? Were there other ways to develop an industrial society, perhaps of a very different kind, with radically different social and economic institutions and concern for the human and environmental impact of decisions and implementation?
The question has not been extensively pursued, and answers don’t seem obvious. Until they are investigated I don’t think we can go so far as to cast the blame on “industrialization itself.” There might well have been roads not taken, radically different ones.
CJP: Bob, how do you conceive of the relationship between capitalism and climate change?
Robert Pollin: The rise of capitalism was certainly tightly bound up with burning fossil fuels to produce energy and power machines. Contaminating the atmosphere with CO2 emissions was therefore also tied up with the emergence of industrial capitalism.
But this connection is not simply a matter of manufacturing capitalists needing energy sources in general to power machines as the industrial revolution emerged in the late 1700s and early 1800s. What really happened is that coal began being used intensively in Great Britain in the 1830s to power steam engines for producing cotton and then other manufacturing products. At that time, coal was in the process of supplanting waterpower as the primary energy source in manufacturing. As of around 1850, 60 percent of all global CO2 emissions from fossil fuels were generated in Britain by burning coal.
However, as Andreas Malm has demonstrated in detail in his book Fossil Capital and elsewhere, the early 19th-century British manufacturers turned to coal and steam engines to supplant water wheels not because coal and steam provided a lower-cost, much less a cleaner, alternative to waterpower. Indeed, waterpower was less expensive at the time, and the technology for driving machines with water-power was more advanced.
Rather, the overwhelming advantage of coal and steam power was that they were not bound to specific locations. Waterpower could only be provided adjacent to where powerful streams of water happen to have been situated.
With coal, the manufacturing operations could be located anyplace where coal could be delivered and burned. This made it much easier for businesses to get people to show up in the factories to work, since, as was well known, the working conditions were mostly abysmal. As Malm writes:
When a manufacturer came across a powerful stream passing through a valley or around a river peninsula, chances were slim that they also hit upon a local population predisposed to factory labour; the opportunity to come and work at machines for long, regular hours, herded together under one roof and strictly supervised by a manager, appeared repugnant to most, and particularly in rural areas.
By contrast, as Malm explains:
Steam was a ticket to the town, where bountiful supplies of labour waited. The steam engine did not open up new stores of badly needed energy so much as it gave access to exploitable labor . . . an advantage large enough to outdo the continued abundance, cheapness and technological superiority of water.
Providing capitalists with this newfound freedom to locate their manufacturing operations wherever they could lure an exploitable labor force into their factories became, in turn, a propulsive force for the expansion of capitalism beyond Britain’s borders, into the rest of Europe, North America, and the colonies of the various European powers.
Marx himself described this explosive growth of capitalism vividly in chapter one of The Communist Manifesto, writing: “The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connexions everywhere.”
The manufacturing capitalists of Marx’s era could not have been capable of nestling everywhere, settling everywhere, and establishing connections everywhere if they had remained location-bound, as they were with waterpower.
At the same time, we do know that, for both better and worse, capitalism can operate just fine in our present era without having to rely exclusively on coal, oil, and natural gas as energy sources. Workers are exploited in China, the US, Brazil, and Russia, among other places, by operating machines driven by hydroelectricity.
“Global capitalism did indeed emerge as Andreas Malm has vividly described, on the foundation of a fossil-fuel-based energy system.”Yet it is also the case that the expansion of clean energy supply—primarily solar and wind power—is creating opportunities for smaller-scale enterprises, which could be organized through various combinations of public, private, and cooperative ownership structures—that is, a variety of capitalist, non-capitalist, and mixed ownership structures. The performance of these non-corporate business enterprises has generally been quite favorable relative to traditional corporate firms.
One area where this has been clearly demonstrated is community-based wind farms in Western Europe, especially in Germany, Denmark, Sweden, and the United Kingdom. Variations on this wind farm model are also emerging in the US Midwestern farm belt. Private farmers, large and small, are siting wind turbines on their crop-growing and cattle-grazing farmland. This second use for their farmlands provides an additional, and often significant, income source for the farmers.
In short, global capitalism did indeed emerge as Malm has vividly described, on the foundation of a fossil-fuel-based energy system. It is also possible that the necessary clean energy transition could provide one critical cornerstone for advancing more democratic, egalitarian societies. But we should be 100 percent clear that this outcome is by no means guaranteed. No technology, either clean energy or anything else, can, by itself, deliver meaningful social transformations.
Egalitarian social transformations only happen when people effectively struggle to build political movements. When such political movements do emerge, technologies such as clean energy can then certainly play a critically important supportive role.
CJP: Capitalism is all about profits, and fossil fuels constitute the energy source that feeds the beast. Aren’t capitalist profits at stake if efforts were pursued to shift energy resources away from fossil fuels?
RP: It is certainly the case that the profits of private fossil fuel capitalists are at stake. Indeed, fossil fuel companies will need to be either put out of business altogether, or at least dramatically diminished, within the next thirty years. According to the best estimates currently available, the reserves of “unburnable” oil, coal, and natural gas in the ground that these private companies now own amount to about $3 trillion. These reserves can never be burned and thus converted into capitalist profits if the planet is going to have a decent chance of stabilizing the climate.
Of course, the fossil fuel companies will fight by all means available to them for the right to profit lavishly from selling this oil, coal, and natural gas still in the ground. But it is also important to understand that it will not present a major problem for the rest of the global economy if the fossil fuel companies are indeed prevented from selling their $3 trillion in unburnable assets.
Let me illustrate this point with a simple numerical example. Yes, of course, $3 trillion is a huge sum of money. But, as of 2019, it equals less than 1 percent of the $317 trillion in total worldwide private financial assets—the total value of all equity and debt assets outstanding.Still more, the anticipated $3 trillion decline in the value of private fossil fuel assets will not happen in one fell swoop, but rather will occur incrementally over a thirty-year period.
On average, this amounts to asset losses of $100 billion per year, or 0.03 percent of the current value of the global financial market. By contrast, as a result of the US housing bubble and subsequent financial collapse in 2007– 9, US homeowners lost $16 trillion in asset values in 2008 alone—about 160 times the annual losses fossil fuel companies would face.
The fact that the decline in fossil fuel asset values will occur incrementally over two to three decades also means that the shareholders who own the fossil fuel companies will have ample opportunity to sell their stocks and move their money into other stocks. As one important example, in 2014 Warren Buffett, the best-known investor and third-richest person in the world, announced that his holding company, Berkshire Hathaway, was doubling its holdings in solar and wind energy companies to $15 billion. This is even while Berkshire continues to hold large positions in conventional utility companies.
The fossil fuel companies could themselves follow the Buffett example by diversifying into clean energy. In fact, they are already doing so, if you believe their advertising campaigns. But the reality is that their forays into clean energy still represent a tiny fraction of their overall operations. Over decades, these companies have built up a capacity to earn super profits from producing and selling fossil fuel energy. They are not likely to achieve comparable levels of profitability with clean energy, because solar and wind technologies can generate power at a much smaller scale than fossil fuel technology.
We know, for example, that average homeowners most anywhere in the world can right now generate 100 percent of their entire electricity needs and save themselves money by putting solar panels on their roofs. Over time, the fossil fuel companies will have no way to compete against that.
“I am convinced that a viable Green New Deal for today needs to include substantial levels of public investment, public ownership, and hard-cap regulations.”This brings up a more general point. The profits of the fossil fuel companies are most certainly at stake through a clean energy transformation, as are those of ancillary industries, such as oil drilling and pipeline construction companies, the railroad companies that transport coal, and all the utilities that now burn fossil fuels to generate electricity. But there is no reason to expect that other capitalist enterprises should see their profits threatened because they have to rely on solar or wind power for their energy supply instead of oil, coal, and natural gas.
Electricity generated by onshore wind or solar photovoltaic panels is already at approximate cost parity with electricity generated by coal or natural gas. The costs of clean energy should also continue falling as the technologies come into more widespread use. Especially after the past forty years of massively rising inequality under neoliberalism, there is every justification for capitalists’ profits to be pushed waydown. But a clean energy transformation will not deliver this outcome on its own.
CJP: While there is no reason to think that capitalism cannot make a transition to clean energy resources, the fact of the matter is that short-termism guides the actions of most investors in the neoliberal age, so isn’t it a bit naive to rely on capitalists themselves to get us out of the climate crisis?
RP: To be fair, nobody really believes that capitalists on their own will get us out of the climate crisis. Even the long list of prominent orthodox economists that I referred to above who signed the January 2019 statement supporting a carbon tax are clear that government intervention is necessary to force capitalists to integrate the costs of ecological destruction into their calculations. That is exactly the idea behind their support for a carbon tax.
The real question then is: To what extent is public intervention in the normal operations of capitalist markets needed to mount a successful global climate stabilization project? In my view, as I discussed above, this will require much more forceful forms of government intervention than the carbon tax, certainly considering the carbon tax is a standalone policy. In fact, we also need public investments in the critical economic sectors, public subsidies for private green investments as well as strong regulations. This combination of policies will be capable of moving us off of fossil fuels much more quickly than what is likely through relying on a carbon tax–type intervention by itself.
If we look back at the mobilization project to fight World War II, the federal government did not just intervene through adjusting the tax system. The circumstances then called for much stronger measures, as they do now. Thus, as Josh Mason and Andrew Bossie show in a recent paper, during World War II, the Roosevelt government assumed a major role in the areas of public investment and ownership of the most critical industries.
This included 97 percent of the synthetic rubber industry, 89 percent of the aviation industry, 87 percent of shipbuilding, and 14 percent of even such an established industry as iron and steel.The Roosevelt government took over these industries because it was clear that, on their own, private capitalists were not about to assume the risks of raising production levels at either the speed or scale that the crisis warranted.
Our situation today is comparable. This is why, as I mentioned above, I am convinced that a viable Green New Deal for today needs to include substantial levels of public investment, public ownership, and hard-cap regulations. As one example, if some electric utilities are going to remain privately owned, then they must commit to reducing their level of CO2 emissions every year by set amounts that will ensure they reach the zero emissions target by 2050. The CEOs of the companies should then face jail time if they fail to meet these requirements. I flesh out these ideas in more detail in section 3, on the Green New Deal.
CJP: Noam, what are your thoughts on this matter? Can we realistically expect the current economic system, with profit-making as its driving force, to rescue humanity and the planet as a whole from the potentially catastrophic effects that lie ahead if we fail to contain the menace of global warming?
NC: If profit-making remains the driving force, then we are doomed. It would be the sheerest accident, too remote to consider, for pursuit of profit to somehow magically lead to the termination of such highly profitable activities as producing fossil fuels, or even far lesser forms of destruction. When we look closely, we commonly find that market signals are either wholly inadequate or are leading in entirely the wrong direction.
To take just one current case, developing technology to remove carbon from the atmosphere is of prime importance, but for venture capitalists in Silicon Valley, investing in long-term projects with no likely major profits is far less attractive than adding new bells and whistles to iPhones.
“National development projects, lucrative careers, and political power all depend on continuing the flow of large fossil fuel revenues.”The worship of markets is by now part of Gramscian hegemonic common sense, instilled by massive propaganda, particularly during the neoliberal years. The “religion,” to borrow Stiglitz’s term, is based on a particular view of human nature that is hardly compelling, to put it mildly. Do we really believe that humans would prefer to vegetate unless driven to action by profit? Or could it be, as a long tradition holds and ample experience reveals, that meaningful and creative work under one’s own control is one of the joys of life?
In fact, it is highly misleading to say that pursuit of profit has been the main driving force in the past, even in the domain of industrial production. Consider again what we are now using, computers and the internet, developed for decades primarily within the state-university system before the results of this creative work were handed over to private enterprise for marketing and profit. For the most part, the driving motive of those who carried out the essential work was not profit but rather curiosity and the excitement of solving hard, challenging, and important problems.
That’s commonly true of other research and inquiry on which the health of our society and culture has relied. True, what was created was integrated into the profit-driven economic system, but that is not a law of nature. Society could be constituted differently. Worker-owned and -managed enterprises, for example, can be expected to have different priorities than profit for bankers in New York—decent working conditions and ample room for individual initiative and leisure, for example.
And if those enterprises are linked together, and to truly democratic communities, something quite different might emerge: perhaps shared values of mutual aid and concern for a meaningful and fulfilling life rather than amassing commodities for oneself and enriching those who have capital to invest.
Can we realistically expect this? We don’t know. What will be “realistic” depends in part on our choice of action.
CJP: Having focused on the interconnectedness between capitalism and the climate crisis, we should not also forget that, in many cases, fossil fuel industries are publicly owned enterprises, which makes one wonder about the role of public entities under capitalism. Bob, how should we think of public entities and their contribution to the climate crisis?
RP: In fact, throughout the world, the energy sector has long operated under a variety of ownership structures, including public/municipal ownership and various forms of private cooperative ownership, in addition to private corporate entities. Indeed, in the oil and natural gas industry per se, publicly owned national companies control approximately 90 percent of the world’s reserves and 75 percent of production. They also control many of the oil and gas infrastructure systems.
These national corporations include Saudi Aramco, Gazprom in Russia, China National Petroleum Corporation, the National Iranian Oil Company, Petroleos de Venezuela, Petrobras in Brazil, and Petronas in Malaysia. None of these publicly owned companies operates with the same profit imperatives as big private energy corporations such as ExxonMobil, British Petroleum, and Royal Dutch Shell. But this does not mean that they are prepared to commit to fighting climate change simply because we face a global environmental emergency.
Just as with the private companies, producing and selling fossil fuel energy generates huge revenue flows for these companies. National development projects, lucrative careers, and political power all depend on continuing the flow of large fossil fuel revenues. We should therefore not expect that public ownership of energy companies will, by itself, provide a more favorable framework for advancing effective clean energy industrial policies.
__________________________________
Excerpted from Climate Crisis and the Global Green New Deal. Used with the permission of the publisher, Verso Books. Copyright © 2020 by Noam Chomsky, Robert Pollin, and C.J. Polychroniou.
