A New Capitalism--or a new world? Here's a non-communist, market-based economic system that's both more democratic and more sustainable than capitalism.

• Author: Schweickart, David
• Position: Company overview

Marx says that revolutions are the locomotives of world history. But the situation may be quite different. Perhaps revolutions are not the train ride, but the human race grabbing for the emergency brake. --Walter Benjamin The subtitle of Joel Kovel's The Enemy of Nature (2007) states his thesis bluntly: The End of Capitalism or the End of the World? Kovel thinks we need a revolution--although he is fully cognizant as to how remote that prospect seems:

Growing numbers of people are beginning to realize that capitalism is the uncontrollable force driving our ecological crisis, only to become frozen in their tracks by the awesome implications of this insight. Paul Hawken, Amory Lovins, and Hunter Lovins also think we need a revolution, but of a different sort than the one envisaged by Kovel. Their book, Natural Capitalism (1999), is subtitled Creating the Next Industrial Revolution. Then-President Clinton is reported to have called it one of the five most important books in the world today.

Hawken and the Lovinses agree with Kovel that the current model of capitalism is problematic. "Capitalism, as practiced, is a financially profitable, non-sustainable aberration in human development," they argue. But they do not see the problem as residing in capitalism itself. They distinguish among four kinds of capital, all necessary for production: human capital, financial capital, manufactured capital, and natural capital. The problem with the current form of capitalism, they say, is its radical mispricing of these factors. Current market prices woefully undervalue--and often do not value at all--the fourth factor: the natural resources and ecological systems "that make life possible and worth living on this planet."

All economists recognize that market transactions can involve "externalities," costs (or benefits) that are not paid for by the transacting parties. All agree that there is a role for governments to play in rectifying these defects. The standard remedies involve taxation (for negative externalities) and subsidies (for positive externalities).

Hawken and the Lovinses argue that these remedies--properly applied--can work. The first step is to eliminate the perverse incentives now in place. They document the massive subsidies that governments currently provide for ecologically destructive behavior, e.g., highway construction and repair that encourage suburban sprawl, agricultural subsidies that encourage soil degradation and wasteful use of water, subsidies to mining, oil, fishing, and forest industries, etc.

The second step is to impose resource and pollution taxes so as to reflect the true costs of natural capital. The point is to level the playing field so that more sustainable energy technologies and more energy efficient processes can compete fairly with the destructive practices of industrial capitalism. We might even want to go further, and subsidize (at least initially) the technologies that reduce the negative environmental impact of our production and consumption choices.

If we take these steps, Hawken and the Lovinses envisage a bright future:

Imagine for a moment a world where cities have become peaceful and serene because cars and buses are whisper quiet, vehicles exhaust only water vapor, and parks and greenways have replaced unneeded urban freeways. OPEC has ceased to function because the price of oil has fallen to five dollars a barrel, but there are few buyers for it because cheaper and better ways now exist to get the services people once turned to oil to provide. Living standards for all people have dramatically improved, particularly for the poor and those in developing countries. Involuntary unemployment no longer exists, and income taxes have been largely eliminated. Houses, even low-income housing units, can pay part of their mortgage costs by the energy they produce. ... Such a future will come about, they say, if we harness the creative energy of capitalism and let the markets work.

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In essence there are two fundamental differences between the "ecosocialism" of Kovel and the "natural capitalism" of Hawken-Lovins.

* Kovel is deeply distrustful of the profit motive. He does not think greed can serve the good. Hawken and the Lovinses think that the profit motive can be harnessed so as to provide powerful incentives to develop sustainable sources of energy and to eliminate the energy waste so rampant today.

* Kovel is convinced that "grow or die" is an imperative of capitalism that renders sustainable capitalism impossible. Hawken and the Lovinses do not confront this argument directly, but appear to believe either a) capitalism is compatible with a steady-state, non-growing economy, or b) an economy can grow indefinitely without consuming more energy and natural resources than it can sustainably produce.

Let us focus on the second issue. The first will be addressed implicitly as we proceed.

Capitalism: Grow or Die?

Anti-capitalist ecologists always say this. In Kovel's words, "Capital must expand without end in order to exist." But is this true? It would seem not to be. Capitalism has survived prolonged depressions; the Great Depression of 1929 lasted a decade. Periods of stagnation have been even more common--witness Japan throughout the 1990s. To be sure, capitalism incentivizes growth, but thwarted growth does not appear to lead to death. We can point to lots of counterexamples.

It is not true either that the various ecological crises we are facing will bring about "the end of the world." Consider the Stern Review, commissioned by the British government, which has been applauded by most environmentalists for its strong recommendation that urgent action be taken on climate change. If nothing is done, we risk "major disruption to economic and social activity, later in this century and the next, on a scale similar to those associated with the great wars and economic depression of the first half of the 20th century."

This is serious. Some 60 million people died in World War Two. The Stern Review estimates that as many as 200 million people could be permanently displaced by rising sea levels and drought. But this is not the end of the world. Even if the effects are far worse, resulting in billions of deaths, there would still be lots of us left. If three-quarters of the present population perished, that would still leave us with 1.6 billion people--the population of the planet in 1900.

I say this not to minimize the potentially horrific impact of relentless environmental destruction, but to caution against exaggeration. We are not talking about thermonuclear war--which could have extinguished us as a species. (It still might.) And we shouldn't lose sight of the fact that millions of people on the planet right now, caught up in the savage wars raging in Iraq, Afghanistan, Pakistan, Somalia, Sudan, and elsewhere, are faced with conditions more terrible than anyone reading this article is likely to face in his or her lifetime due to environmental degradation. Nor will readers suffer more than most of the 3 billion people alive now who...