Are capitalism and sustainability mutually exclusive? (Jonathon Porritt)
This is the question posed, by Jonathon Porritt, in an edited extract from his book, Capitalism As If The World Matters — in Resurgence Magazine (Issue no. 234 January/February 2006)
If the answer to the above question is yes, then the only “morally consistent response” is the overthrow
of capitalism, but if the answer is that capitalism and sustainability are compatible under certain conditions, then it should be possible to transform the present unsustainable model of capitalism so that it becomes sustainable — in a world where more
than two billion people live on less than two dollars a day. Critics of capitalism are not necessarily anticapitalist: rather they take the view that the current form of capitalism is not sustainable for the wellbeing of humankind. As George Soros, has said, the main enemy of an open [democratic] society is “the untrammelled intensification of laissez-faire capitalism
and the spread of market values”.
According to the political theorist Marcel Wissenburg, there is “no fundamental incompatibility between the pursuit of sustainability and political liberalism”; however, with the conflict between people’s growing needs and wants and limited
natural resources, there are limitations in the liberal position. If, as in Wissenburg’s view, people’s needs are considered as private affairs with control being “impermissible”, then Porritt says, “ [an] ecological abyss… awaits us if nine billion people are ‘permitted’ to acquire trinkets, get obese, travel the world, and own several cars — as so many of us already do
today”.
According to Jonathon Porritt, there is a strong case for arguing that a sustainable economy, one that can live side by side with democracy, is a market based economy, although this is not to say that capitalism is the only economic system with the potential to deliver a sustainable society in the future. In reviewing the defining characteristics of a capitalist system he writes that whilst markets existed long before capitalism, capitalism needs the marketplace as the principal mechanism for the exchange of goods and services. There seems to no reason why properly regulated markets, operating within a sustainable macro-economic framework, will not continue to be the most effective mechanism for the allocation of
resources. Furthermore, competition within such markets prevents the drift to monopoly.
One of the most important characteristics of a sustainable economy is to produce more output from the lowest possible throughput of energy and raw materials. And prices should reflect the true cost of the use of energy and resources. The exchange of goods and services through a market does not prevent sustainability, indeed new market based solutions
have emerged in the pursuit of sustainability — i.e. proposals for a global market in carbon trading; local farmers markets; LETS (Local Exchange Trading Systems), which combine market principles and the principles of mutuality and co-operation.
Some think that capitalism, with its “profit motive” and its inherent urge to maximise profits, has caused some companies to cut corners and to externalise as high a proportion of their costs [through pollution] as they legally can. Only governments
can force companies to bear these costs, through proper regulation and company law. Thus the concept of sustainable profitability should be viable and “even a necessary condition of making the transition to a sustainable economy as efficiently and painlessly as possible”. The balance between profit and sustainability will become an “increasingly
important test of real business leadership”.
In the rich countries, governments are working more in partnership with businesses, there being less new regulation of business; more governments may follow the USA and UK in opening up the public sector to privatisation and market forces. However, critics of capitalism point out that generating profits with a view to accumulating capital, as much and as
fast as possible, is building up a momentum to unlimited, unsustainable economic growth. In the capitalist system, profit is the “key measure of corporate success” ensuring rapid shifts in the productive base of any economy. And it is upon those profits that millions of people depend for pensions and investments. Yet, at this time it is difficult to dispassionately
judge the negative and positive aspects of the pursuit of profit as we have come through a period of extremes with corporate scandals and collapses. “Sustainable capitalism would necessarily need to find ways of limiting the concentration of
wealth”.
A further question arises — “is there any fundamental incompatibility between the right to own private property and the pursuit of sustainability?” Surely the principle of private ownership, if managed rightly, could help to underpin a sustainable society.
Free trade between nations and “open markets” is considered an essential aspect of capitalism and is still the focus of the IMF and WTO. However, “free trade” is coming under scrutiny and critics have drawn on the ideas of David Ricardo, who
wrote at the start of the 19th century. These critics “remind latter-day free apostles that the principle of comparative advantage was premised on the assumption that capital (as well as labour) stayed at home only the goods were traded internationally”. However, now capital is more mobile than goods and transnational corporations can move from country to
country to find cheap labour, cheap resources as well as lower environmental and social standards. So, now, capital tends to flow to countries with “an absolute advantage in these areas” leading to a lowering of standards as nations compete with one
another. “Footloose capital” can “externalise” its costs by shifting to countries with lower standards.
Jonathon Porritt recalls the opinion of John Maynard Keynes, unfashionable today: “…Ideas, knowledge, art, hospitality, travel — these are the things that should of their nature be international. But let goods be home spun wherever it is reasonable and conveniently possible, and above all let finance be primarily national.”
Then there are other factors, such as “Scale”, to be considered with Fritz Schumacher’s catchphrase: “small is beautiful”. This appeals to those who want “to keep relationships personal and direct, to retain the closest possible ties of neighbourhood and community, to keep supply chains short, and…ensure that things are kept as simple and
manageable as possible”. The underlying concern is that there is a dynamic in capitalism which distorts a balanced approach with the result that everything must get bigger (and richer) which “crushes human scale, diverse cultures and local differentiation”. Global capitalism now runs on unfettered expansionism because it has no self-correcting mechanisms as
to size. The world now produces in less than 2 weeks the equivalent of the entire physical output of the year 1900; total throughput in the global economy doubles every 25 - 30 years.
At the heart of the issue of scale is population growth. Growing populations need growing economies….. although it would be unreasonable to blame capitalism for this. “The concept of ‘production for human needs’ would seem to have little currency in the debate about sustainability and even less in discussions about contemporary capitalism”. Where basic needs are met it’s seen to be the natural by-product of rising economic prosperity but when these needs are not met (as for more than one half of humanity) faith in the promise of the “trickle down” theory of economics diverts attention away from “the thorny question” as whether basic needs will ever be met in the global economy. Indeed the United Nations Development Programme’s annual Human Development Report offers a sobering assessment “Development that perpetuates today’s inequalities is neither sustainable nor worth sustaining”. And in the UK, the work of the New Economics Foundation has
highlighted the chronic “disconnect” between the rates of economic growth and increases in human welfare.
In conclusion, Jonathon Porritt’s view is that “sustainability is a non-negotiable imperative for mankind”. Apart from some rare exceptions such as Cuba and North Korea, capitalism is likely to be with us for the foreseeable future, so sustainability must be delivered within a capitalist framework. He suggests that, “We don’t have time to wait for any big-picture ideological successor”.
This extract is adapted from Resurgence www.resurgence.org
For more information contact: Forum For The Future:
www.forumforthefuture.org.uk
If the answer to the above question is yes, then the only “morally consistent response” is the overthrow
of capitalism, but if the answer is that capitalism and sustainability are compatible under certain conditions, then it should be possible to transform the present unsustainable model of capitalism so that it becomes sustainable — in a world where more
than two billion people live on less than two dollars a day. Critics of capitalism are not necessarily anticapitalist: rather they take the view that the current form of capitalism is not sustainable for the wellbeing of humankind. As George Soros, has said, the main enemy of an open [democratic] society is “the untrammelled intensification of laissez-faire capitalism
and the spread of market values”.
According to the political theorist Marcel Wissenburg, there is “no fundamental incompatibility between the pursuit of sustainability and political liberalism”; however, with the conflict between people’s growing needs and wants and limited
natural resources, there are limitations in the liberal position. If, as in Wissenburg’s view, people’s needs are considered as private affairs with control being “impermissible”, then Porritt says, “ [an] ecological abyss… awaits us if nine billion people are ‘permitted’ to acquire trinkets, get obese, travel the world, and own several cars — as so many of us already do
today”.
According to Jonathon Porritt, there is a strong case for arguing that a sustainable economy, one that can live side by side with democracy, is a market based economy, although this is not to say that capitalism is the only economic system with the potential to deliver a sustainable society in the future. In reviewing the defining characteristics of a capitalist system he writes that whilst markets existed long before capitalism, capitalism needs the marketplace as the principal mechanism for the exchange of goods and services. There seems to no reason why properly regulated markets, operating within a sustainable macro-economic framework, will not continue to be the most effective mechanism for the allocation of
resources. Furthermore, competition within such markets prevents the drift to monopoly.
One of the most important characteristics of a sustainable economy is to produce more output from the lowest possible throughput of energy and raw materials. And prices should reflect the true cost of the use of energy and resources. The exchange of goods and services through a market does not prevent sustainability, indeed new market based solutions
have emerged in the pursuit of sustainability — i.e. proposals for a global market in carbon trading; local farmers markets; LETS (Local Exchange Trading Systems), which combine market principles and the principles of mutuality and co-operation.
Some think that capitalism, with its “profit motive” and its inherent urge to maximise profits, has caused some companies to cut corners and to externalise as high a proportion of their costs [through pollution] as they legally can. Only governments
can force companies to bear these costs, through proper regulation and company law. Thus the concept of sustainable profitability should be viable and “even a necessary condition of making the transition to a sustainable economy as efficiently and painlessly as possible”. The balance between profit and sustainability will become an “increasingly
important test of real business leadership”.
In the rich countries, governments are working more in partnership with businesses, there being less new regulation of business; more governments may follow the USA and UK in opening up the public sector to privatisation and market forces. However, critics of capitalism point out that generating profits with a view to accumulating capital, as much and as
fast as possible, is building up a momentum to unlimited, unsustainable economic growth. In the capitalist system, profit is the “key measure of corporate success” ensuring rapid shifts in the productive base of any economy. And it is upon those profits that millions of people depend for pensions and investments. Yet, at this time it is difficult to dispassionately
judge the negative and positive aspects of the pursuit of profit as we have come through a period of extremes with corporate scandals and collapses. “Sustainable capitalism would necessarily need to find ways of limiting the concentration of
wealth”.
A further question arises — “is there any fundamental incompatibility between the right to own private property and the pursuit of sustainability?” Surely the principle of private ownership, if managed rightly, could help to underpin a sustainable society.
Free trade between nations and “open markets” is considered an essential aspect of capitalism and is still the focus of the IMF and WTO. However, “free trade” is coming under scrutiny and critics have drawn on the ideas of David Ricardo, who
wrote at the start of the 19th century. These critics “remind latter-day free apostles that the principle of comparative advantage was premised on the assumption that capital (as well as labour) stayed at home only the goods were traded internationally”. However, now capital is more mobile than goods and transnational corporations can move from country to
country to find cheap labour, cheap resources as well as lower environmental and social standards. So, now, capital tends to flow to countries with “an absolute advantage in these areas” leading to a lowering of standards as nations compete with one
another. “Footloose capital” can “externalise” its costs by shifting to countries with lower standards.
Jonathon Porritt recalls the opinion of John Maynard Keynes, unfashionable today: “…Ideas, knowledge, art, hospitality, travel — these are the things that should of their nature be international. But let goods be home spun wherever it is reasonable and conveniently possible, and above all let finance be primarily national.”
Then there are other factors, such as “Scale”, to be considered with Fritz Schumacher’s catchphrase: “small is beautiful”. This appeals to those who want “to keep relationships personal and direct, to retain the closest possible ties of neighbourhood and community, to keep supply chains short, and…ensure that things are kept as simple and
manageable as possible”. The underlying concern is that there is a dynamic in capitalism which distorts a balanced approach with the result that everything must get bigger (and richer) which “crushes human scale, diverse cultures and local differentiation”. Global capitalism now runs on unfettered expansionism because it has no self-correcting mechanisms as
to size. The world now produces in less than 2 weeks the equivalent of the entire physical output of the year 1900; total throughput in the global economy doubles every 25 - 30 years.
At the heart of the issue of scale is population growth. Growing populations need growing economies….. although it would be unreasonable to blame capitalism for this. “The concept of ‘production for human needs’ would seem to have little currency in the debate about sustainability and even less in discussions about contemporary capitalism”. Where basic needs are met it’s seen to be the natural by-product of rising economic prosperity but when these needs are not met (as for more than one half of humanity) faith in the promise of the “trickle down” theory of economics diverts attention away from “the thorny question” as whether basic needs will ever be met in the global economy. Indeed the United Nations Development Programme’s annual Human Development Report offers a sobering assessment “Development that perpetuates today’s inequalities is neither sustainable nor worth sustaining”. And in the UK, the work of the New Economics Foundation has
highlighted the chronic “disconnect” between the rates of economic growth and increases in human welfare.
In conclusion, Jonathon Porritt’s view is that “sustainability is a non-negotiable imperative for mankind”. Apart from some rare exceptions such as Cuba and North Korea, capitalism is likely to be with us for the foreseeable future, so sustainability must be delivered within a capitalist framework. He suggests that, “We don’t have time to wait for any big-picture ideological successor”.
This extract is adapted from Resurgence www.resurgence.org
For more information contact: Forum For The Future:
www.forumforthefuture.org.uk