It’s time for a new economic system that can take the place of Free Market Capitalism.
FMC has had a good run of it, carried forward on the backs of war, slavery, colonialism, polluting non-renewable natural resource extraction (starting with whale oil and continuing through coal and petroleum...), social injustice, greed, and corruption. In order to function properly, enlightened self interest apparently requires a periodic cooking of the books in order to even the account. In other words, it is not a closed-loop system.
FMC’s fundamental requirement for constant input of raw materials and inflated demand cycles has already exceeded the carrying capacity of our planet. Because we have a fixed amount of natural resources on Earth and there is a limit to the amount of pollution the planet can handle, this extractivist approach to the use of capital eventually leads to collapse.
Our planet is a closed system that requires only one input—the energy of the sun. We therefore need to perfect and transition to a closed-loop economic model that values natural capital in a way that brings about a stable or steady state. The economy on balance must operate on the energy input of the sun. Everything must be recycled, regenerated, or cultivated with stringent cradle-to-cradle design requirements.
Free Market Capitalism is just now waking to the fact that our planet is a delicate web of interconnected ecosystems and feedback mechanisms. When you upset the balance of one system by overloading it with toxic waste, spoils, spills, poisons, and greenhouse gas emissions, it causes unwise risk levels of the existential kind.
The nation state that wins the race to this transition will have the greatest advantage. They will not need to invest in upstream resource extraction, but can instead power their economy with renewable (free fuel) resources like solar. The new infrastructures required to operate such an energy-efficient and resilient world will also provide opportunities to advance social equity through cooperatives and community energy projects for example.
If the US is to take a global lead on this, it will require Washington DC start listening to people like Amory Lovins and Ellen Macarthur who have identified a pathway to this new kind of economy.
We need a new political movement (Natural Capitalists) that can pressure Democrats and Progressives to build policy platforms that accelerate a transition to a circular economy. We need our business schools to include the cost of natural capital on the balance sheets when calculating Net Present Value of investment opportunities. We need a price on emissions that reflects the social cost of carbon.
The prices of goods and services should not be determined by the irrational behavior of consumers, but rather by the limits of our interconnected natural systems.
This is the kind of shift that requires leadership at the very top and a massive public investment. It will require a shift towards social democracy, but more than that. Leaders like Emmanuel Macron, while a welcome reprieve from a trend towards Fascism (the form of government least critical of capitalism), are still uninterested in solving the unsustainable problems of capitalism as it currently operates. The extractivist model is deeply entrenched in our culture and supports the lifestyles of the world’s elite and powerful.
That said, the majority of the world’s population can clearly see that the benefits of shifting to a sustainable economic model now clearly outweigh the short term benefits to a handful of people that come from not shifting. Even Citibank and Shell Oil agree.
The clock is ticking and we should look at 2020 as a decisive election in this context.
Read more:
Paul Hawkin (article in Mother Jones)
A Road Map for Natural Capitalism (Harvard Business Review)
Natural Capitalism (Wikipedia)
Natural Capitalism: Creating the Next Industrial Revolution. Cover (1999)
The Circular Economy (Ellen Macarthur Foundation)