Can we preserve the earth AND capitalism?

“Economic growth” is one of the most touted objectives of governments and companies around the world and seems to be a prerequisite of capitalism. Yet, we know that resources on our planet are limited, and the current economic system seems to lead humanity into a dead-end. Is capitalism in itself a contradiction to a sustainable economic system?

Fridays for Future, Extinction Rebellion and other climate activists have brought the debate about the “climate crisis” to mainstream politics. They brought the spotlight back to an old debate that started with the 1972 Club of Rome report: How can we preserve economic stability and prosperity without exceeding the boundaries of our planet’s resources? Most politicians’ reactions to this problem orbit around similar proposals: investing in renewable energies and electric mobility, improving recycling methods, investing in research etc. Yet, few have seriously questioned structural problems of and possible alternatives to economic growth – commonly referred to as the increase in economic performance or GDP (Gross Domestic Product). In his book “Prosperity Without Growth”, whose first edition appeared ten years ago, the scientist and former advisor to the British government Tim Jackson assesses the “dilemma of growth”. A stagnating or declining economy would in the conventional economic system lead to unemployment and recession, which we want to avoid at all costs for the stake of stability and prosperity. Economic growth seems to be necessary for capitalism to function properly. On the other hand, more production leads to more pollution, extraction of scarce resources and greenhouse gas emissions, which destroy ecosystems and make large parts of the planet increasingly inhabitable. Whereas there are various definitions of capitalism, most of them define private property, competitiveness and the objective of maximizing productivity and profits as its main characteristics. It is therefore based on investments that can only be afforded through debt. In order to pay off these debts, the return of the investment must be higher than the amount originally spent. Therefore, productivity must be increased constantly, and performance optimized in order to remain competitive, which will further exploit the earth. A seemingly vicious cycle.

What solutions are currently on the table?

The European Commission states in a 2018 communication that “sustainability and the transition to a low-carbon, more resource-efficient and circular economy are key in ensuring long-term competitiveness of the EU economy.” While asserting that private capital needs to be “reoriented to more sustainable investments” and that this “requires a comprehensive shift in how the financial system works,” the Commission remains within the logic of economic growth as a prerequisite for competitiveness on the global market. On a similar note, the new commission president Ursula Von der Leyen wants Europe to become a “world leader in circular economy and clean technologies.” This rhetoric seems to reflect the way most politicians in Europe approach the question of sustainability. They propose concepts such as “sustainable growth”, promoting improved recycling and other technologies. These solutions can be summarized as “decoupling,” the attempt to separate economic growth from its ecological impact by decreasing resource-intensity. 

What is missing from the public debate?

It remains questionable whether the measures currently discussed, even if they were implemented, would suffice to reach the objectives of the 2016 Paris Agreement and transform the current economic system into a more sustainable one. Tim Jackson acknowledges that technology can foster a more efficient use of resources and decrease the ecological intensity of production. However, he warns of the “myth of decoupling” that suggests technology could save us by overall reducing the environmental impact of the economy. Even though CO 2 intensity of the global economy has been falling since the 1990’s, absolute decoupling on a global scale is difficult to achieve, according to Jackson, as reduction in energy and resource intensity is offset by a growing population and an increase in economic activity and production at the same time. Technology is not evolving fast enough, and our efforts to use resources more efficiently while the economy is still growing will most likely not suffice to reach carbon neutrality and sustainability. Yet, even though it seems logical to at least consider a structural paradigm shift, ideas for different economic policies beyond the notion of growth seem to be absent from mainstream political debates. 

The main issue is the materialist and consumerist attitude in our society

The main issue in our economic system, according to Jackson, is the materialist and consumerist attitude in our society. If we depend on as many material goods as we currently do, technology such as wind power and more efficient production methods will likely not be able to compensate for the damage done to the planet. This becomes particularly evident as developing countries are aspiring to the affluent “Western” lifestyle, increasing their ecological footprint considerably. From an environmental perspective, it appears absurd that humankind would allow the entire world to pursue an economic system that structurally encourages consumption. Moreover, supposedly “green” solutions often are not as sustainable as they first appear. Electric cars, for example, pollute less than conventional cars, but the production of their large batteries needs more scarce metals and other materials. Their difficult extraction does great damage to entire ecosystems. Considering the overall ecological footprint, electromobility only makes sense if a vehicle is shared or used for long time periods. So, buying a new Tesla every few years can at best be considered as “green washing.” 

Can capitalism be sustainable?

According to Jackson, capitalism must not be dismantled, but he advocates for a radical transformation of the current kind of capitalism. Based on different studies that assess alternative macro-economic models, he argues that a “post-growth economy” is possible. Instead of exclusively rewarding labour productivity of companies and GDP growth of countries, new macro-economic variables that focus on environmental impacts and sustainability should be introduced. Investments should be redirected, and investors be rewarded for taking these dimensions into account. Societies would also need to find a better balance between private and public interests, increasing revenues through a financial transaction tax or other fiscal instruments. The objective would be to finance more public goods and common infrastructure, for example recreation areas where people would pursue other hobbies than “going shopping”. Money itself is not the problem in a sustainable economy but the excessive focus on material goods. The social status of immaterial goods, art and culture would need to be valued more, part-time work facilitated, and a better work-life-balance encouraged. When people work and consume less, they need to find fulfillment differently. A post-growth economy would therefore focus more on services in local communities than on resource-intensive production. If more people worked in less resource-intensive sectors such as health care and education and their jobs were appreciated more and better paid, this would benefit all of society. Jackson does not seek a centralized bureaucracy-state but a progressive state that would play a more important role, particularly on the local level. It would increase public control on money supply and specifically support sectors that locally employ high numbers of workers but minimize their environmental footprint. 

The state of Bhutan is an exceptional example of a post-materialist laboratory

Following this approach, we could imagine states reshaping capitalism without abandoning the logic of a market-based economy. They would adhere to a mix of private and public goods but steer choices through incentives, taxes and caps on resources. Though certainly not an easy model for Europe, the state of Bhutan is an exceptional example of a post-materialist laboratory. In its 2008 constitution, the small mountain kingdom defines the objective not primarily to pursue growth of GDP but rather GNH – Gross National Happiness. Four pillars guide its government’s priorities: sustainable socioeconomic development, environmental conservation, preservation and promotion of culture, and good governance. Bhutan also has imposed a fee of 250 dollars per day for tourists and heavily restricted advertising. 

How utopian is capitalism without growth?

Of course, wanting to import the Bhutan model to Europe would be far-fetched. Making our economy sustainable seems to be a long way to go, given the fact that our prosperity in Europe has only been possible by extracting resources and externalizing negative environmental and social impacts. Multinational companies are criticized by climate activists and globalization critics because they have done great damage to our planet and exploited workers in developing countries. At the same time, they have contributed significantly to the economic prosperity that we all benefit from and created far more jobs than the sector of more sustainable and local services currently would be able to provide. It remains vague how exactly an economic system that guarantees real sustainability without incentivizing excessive consumerism could look like. Yet, democracy allows Europe’s societies to debate on how to transform its economies. Instead of talking about single measures, European politicians could lay out long-term visions whose implementation would certainly exceed their mandate but could become a European example of a post-growth economy on a global scale. Questioning the prerequisite of economic growth – at least growth in the resource-extracting economy – would be the first step in this debate. 
Changing an affluent, materialist lifestyle, however, would not only need to happen on the political but also on the societal and cultural levels. Reducing consumerism would mean to change ideals and norms portrayed throughout popular culture and all of society. Today, we already see change happening: Even in the most materialist societies of the world, consuming not only more responsibly but decreasing consumption in general is gaining popularity. This could also open a political window of opportunity to transform increasing awareness into concrete proposals for a sustainable post-growth capitalism and finally lift them from an academic niche to the forefront of the political stage. If we do not want to let too radical anti-capitalist and possibly anti-democratic ideas emerge, it might be time for a paradigm shift.

Frederic Göldner is editor-in-chief for Eyes on Europe and a master student at the Institute of European Studies.