Presentation: Ecological Critique of Market Society

I thought I'd post this presentation text I've written for a philosophy department course called 'Concerns of the Market'. It is aimed to be a short introduction into the ecological critique of, as the course called it, 'market societies'.

It refers to a power point presentation that can be downloaded here or viewed here.

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1 Introduction

In this presentation, my aim is to give a short summary of the critique of market society and neoliberalism from the perspective of environmentalists and ecologists like Dennis and Donella Meadows, the authors of ‘The Limits to Growth’. This presentation will require some scientific discussion that is instrumental for a philosophical perspective. I believe that any fruitful philosophical inquiry into the moral problems of sustainability will have to rely on recent scientific discourse in order to ask the right moral questions. For example, questions like future generations’ rights to oil resources are outdated when it seems unlikely that there will be much left for these future generations, even when there is a consistent political-economic move to sustainable consumption. Rights to energy resources more generally might be more appropriate in this case.

I will break down this critique in two parts; the first dealing with the use of ‘sources’, the other with disposal of waste and pollutants in ‘sinks’. [figure 1, 2, 3] By sources is meant all natural resources that are used in an economy, from fishing stock and arable land to water supply and fossil fuels. By sinks are meant the capacities of ecosystems to absorb pollution and waste, from bacteria in rivers that break down sewage to the adaptivity of atmosphere to greenhouse gas emissions.

Obviously central to this critique is the notion of sustainability. I use the word here as meaning natural-economic conditions of necessity for the realisation of any reasonable interpretation of human flourishing for most people over time. Sustainability is often mistaken as some kind of moral value by itself. But, as long as we can agree that human flourishing in the future should also be an aim of political morality, so I can skip a lengthy discussion of Derek Parfit, what other value should political action ultimately have in mind, if not sustained human flourishing for all? Sustainability, then, concerns the natural boundraries for the sustained possibility of this moral end.

The question is whether societies in which markets are the dominant mechanism of allocation of goods and services are, or can be made capable of dealing fairly and effectively with the problems of increasing scarcity of resources and pollution. In other words: is there a morally acceptable capitalist road to sustainability? As I am approaching this question through looking at natural resources and sinks, Herman Daly’s widely used criteria for sustainable use of resources and pollution I think hits the nail on the head [figure 4]. If there are no questions about this definition of sustainability, I would like to proceed with the overview of the ecological critique of market society.

2.1 Sources

In countries where the price of non-renewable resources and unsustainably used renewable resources are set by the market (or are even subsidised), there is a gap between the use value of that resource and its exchange value, the price. As any normal commodity, natural resources are traded in the market, where supply and demand determine price. According to a central justificatory thesis in neoclassical economics, which treats natural resources like any other commodity, the market mechanism ensures efficient allocation of goods; but, of course, in this case we are dealing with depleting natural resources. Once used, they are gone, and somewhere along the way of depletion, (where maximum supply exceeds demand) price is set no longer by supply, demand and marginal production cost, but by natural scarcity and shortage.

So in so far as there are good reasons to assume that the exchange value, as set by the market at times of relative abundance, is much lower than the real use value of the resource, the market mechanisms of supply and demand cannot be relied upon to allocate non-renewable resources and depleting renewable resources efficiently. It follows that a society that allocates non-renewable resources in this market-based way is, from this perspective, wasting the ‘bank account’ of elementary resources considerably.

But the critique can go more fundamental. Market-based societies are also ill-prepared to adapt to depletion and scarcity of vital resources like energy or food that its economy is reliant on. A political-economic tradition of leaving allocation of non-renewables to the market produces a dependent economic infrastructure with the high consumption patterns that result from market underpricing. These infrastructures are the aggregates of long term investment; it takes several decades to replenish without extra costs the stock of cars, ships, factory equipment, electricity plants and so on. A market-based society that finds one of its essential resources depleting can maybe change allocation systems quickly, but it is stuck with the economic infrastructure and capital stock that is accumulated over time. This kind of exposure to resource shocks combined with the highly discussed increase in worldwide inequality can have morally unacceptable consequences- think of stagflation after the oil shocks of the 70s, food or water shortages and even the collapse of civilisation like on the Easter Islands. These are results of what the authors of LtG call overshoot- when a (socio-economic) system passes its external limits.

My own literature research into the depletion of different non-renewable and depleting renewable resources has convinced me there is cause for concern in many cases; oil and natural gas production are in dangerous stages of decline considering the level of dependency of most societies on these resources. [figure 5 and 6] Potable water, fish stocks and soil fertility are, albeit in different ways, at more or less maximum sustainable levels of extraction or beyond these levels. Contrary to a still dominant academic consensus, I found that the models of the Club of Rome have been quite right so far.

The fundamental question for this course is whether sustainable use of these resources can be reached with ‘market based solutions’. My position here is a negative one. Sustainable use of resources seems to be contradictory to a central thesis in neoclassical economics and market-based politics: that supply and demand allocate resources through setting prices. This conclusion I see supported in historical economic and energy policy in capitalist countries. The countries that have made the most considerable steps towards resource sustainability, Sweden, Iceland and Cuba, have done this through direct government involvement and investment. But rather than expanding on my own political opinion now, I invite discussion on this topic after this presentation.

2.2 Sinks

The question of pollution and waste shares many characteristics with the one concerning (renewable and non-renewable) resource depletion. There are sustainable levels of pollution that can be absorbed by ecosystem sinks, but exceeding these levels for a longer time results in problems of overshoot.

The most global and well-known example of overshoot by polluting sinks is global warming. There are lower levels of greenhouse gas emissions that increase temperature, but will be corrected by the world ecosystems correction mechanisms. After a certain point, however, the ‘positive feedback loops’, or the ecosystem mechanisms that reinforce global warming, become stronger than the balancing correction mechanisms. The current scientific debate concerns when exactly this point is most likely reached. The debate ranges from 350 ppm, which was reached around 1985, to 450 ppm, which would be reached in 35 years at current rates of emission. [figure 7 and 8] This is a very serious issue: if greenhouse gas levels stay above this critical point for a longer time, the genie will be out of the bottle. Humans will have lost their grip on this potential global catastrophe.

Again, the question for this course is whether there is a credible market based road to sustainability on the pollution side of the ecology-economy system. There is one especially prominent market based scheme for reducing emissions, cap and trade. This is the system in place in the EU at the moment, and it is the one that is being proposed by the Obama administration as well. At first sight and with some generous reading of the institutional argument, it seems it could work. All that governments need to do is to set the amount of emission rights, and these can then be allocated by the market in these rights. That would mean that there is a limit for emission, while the market can efficiently decide how exactly these emission targets will be met.

But if one looks a little further into the range of institutions that are involved in these schemes, there are a lot of practical problems with such a solution that I would argue are not just accidental, but institutional and necessary. Emissions can be reduced by all kinds of administrative mechanisms (fe offsetting emissions in seperate projects abroad). Furthermore, markets in emissions rights create a secondary derivative market with its speculative bubbles, and corporations always have an interest in expanding the amount of rights that are actually issued. When the system was just introduced in the EU, for example, the market and lobbying power of big corporations like the German automobile industry was so strong it even accomplished to create rights for more emissions than are produced to begin with. In the ‘70s and ‘80s, emitting corporations universally denied global warming, in a fashion rather like the tobacco industry that denied smoking caused cancer. The history does make one suspect there is a logic in this so called 'partnership of the state and the private sector'. Most environmentalists, and myself included, would argue this is because corporations always have an interest in externalising costs and internalising profits, and will use their resources to obtain their end. This market power of corporations is an institutional fact that directly contradicts any credible move towards sustainability. As long as the market is at the centre stage of environmental policy, this policy will be the result of a tug of war between even the most well-meaning governments and international governmental bodies on the one side, and corporations that externalise the cost of battling against their pollution on the other.

3 Conclusion

If one tries to imagine a credible integrated road to sustainability on all the vital topics adressed and more there seems very little room for market dominance. The most market-based ideas that aim to address these issues in cohesion all emphasise a need for stable and unjeopardised move on the different fronts, requiring price stability for long term investment. A good introduction into these arguments is supplied by Richard Heinberg in 'The Oil Depletion Protocol'. This necessity implies a government setting prices and pushing the market in a sustainable direction. But such a scheme will have to fight the same battle with contradicting economic institutions and mechanisms, like corporate lobbying and externalising of costs. Therefore, considering the actual scientific debates and economic-political practice, I am led to the more philosophical conclusion that capitalism is inherently unsustainable. Real solutions for the problems of an overshooting ecologic-economic system necessarily lie outside market thinking and market practice. Whether this should be a reformist taming of the forces of the market or a radical overcoming of its logic I leave up for discussion. In any case, it seems only a fool could expect that forces from within capitalism itself will save it from its own overshoot.