Every now and again, a familiar claim is made that capitalism is ruining the world. According to the argument, capitalism needs economic growth in order for it to be sustainable. Economic growth is dependent on more output, which leads to more carbon emissions and pollution. Capitalism is bad news for the environment. This claim was repeated in a recent viral tweet by a New York Reverend.
This vague assertion about the alleged sins of capitalism is not unusual. People often use the word capitalism to mean evil and then happily point out capitalist Nordic countries to be examples of socialist utopias. It can all get very confusing. Her follow-up tweet to her concerns is crucial. It also reveals a fundamental misinterpretation at the core of these arguments.
The Reverend claims that economic growth, which is something capitalism tends to deliver, inherently requires depleting the earth’s resources (which presumably also means a constant increase in carbon dioxide emissions). Although it is true that economic growth has been highly emissions-intensive throughout history, it doesn’t necessarily mean that there will be an increase in resource use or emissions. This is largely dependent on technology, land-use patterns and the treatment for externalities. These are issues that market and non-market economies must deal with. It is not about capitalism.
In fact, it is entirely possible that the things left-wing activists hate about capitalism could get worse while environmental outcomes improve dramatically. Let’s look at one scenario.
Let’s say that the world’s economy has grown tenfold over twenty years. Bitcoin reaches a million dollars, crypto bros make a fortune selling NFTs, and metaverse investors who are part of the early digital land rush become unfathomably rich. The median income has remained static for whatever reason. The only people who have seen the inflation-adjusted real gains are a few narcissistic entrepreneurs. They have built their own sovereign islands, avoiding the IRS while the tax bases around the globe collapse. That sounds pretty grim.
There are many other things that have changed about this situation. The baseloads of the global energy grid are now nuclear and hydropower. Most of the remaining energy mix is made up of solar, wind and other renewable sources. The majority of the transportation sector is electrified. Intense innovations have significantly improved energy efficiency. Also, the most urgent environmental problems have been solved.
This scenario is hypothetical but it shows that capitalism could solve all our environmental problems. They could also be solved without having to address the issues left-wing activists hate about capitalism. This scenario is consistent also with a pessimistic leftwing view on capitalist dynamics. I don’t agree with it, but it highlights the fact that capitalism can be viewed as inherently incompatible with the environment.
When given the opportunity, markets are quite capable of solving problems. In addressing climate change, Tesla has done more than either the Venezuelan or Cuban governments. It doesn’t matter how rich Elon Musk is in terms of the environmental impact.
It is true that politicians in market economies are tempted to pursue growth at the expense of the environment. This is not a problem that only market economies face. The Soviet Union was known for prioritizing industrialization over the environment.
Technologies and policies that are not related to larger questions about capitalism versus socialists will have a negative impact on environmental outcomes. These distractions are more likely to distract from concrete solutions. Loudly condemning capitalism doesn’t help to reduce carbon emissions. If you want to reduce carbon emission, it is better to focus on actual policies to reduce carbon emissions and not moralizing about capitalism.
