Climate change, capitalism and the market
By Dan Lennon
There are two dominant views on how best to deal with climate change: ask the government to do it or let the market do it. It will probably be a combination of the two, but let’s evaluate the two options anyway.
Let the market, not the government, lead the way. The argument: the market is more efficient than the government in managing economic affairs, so the best way to deal with climate change is to leave it to the markets.
If market prices included the cost of damage to the environment from greenhouse gases, this could be true. But because it treats the atmosphere as if it were a free resource, the market – as history has shown – will avoid attacking it. To correct this, the cost of environmental degradation must be expressed in economic terms and valued in the costs of products and services.
That alone might have been enough 30 or 40 years ago, but the crisis is so advanced that an emergency response is needed, and it is best led by the government.
Ask the government to do it. The argument: capitalism requires constant growth. This growth leads to a constantly increasing demand for energy. The ever-increasing demand for energy creates more and more greenhouse gas emissions, so capitalism and the plan to reduce greenhouse gas emissions are incompatible.
The goal of capitalism is efficiency, not growth. Growth has been the hallmark of capitalism solely because of unprecedented population growth in the twentieth century and because of the inability to assess the cost of environmental degradation.
We are at the dawn of a demographic implosion comparable to the demographic explosion of the twentieth century. The damage to the environment will soon become so great that we can no longer ignore it. These two factors will allow properly regulated capitalism to do what it does best: adapt.
All the alternatives to capitalism have been tried and failed. Capitalism does not depend on growth to survive, but it does depend on sound regulation and people guided by a moral compass.
This message was previously posted on emagazine.com.
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