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Will capitalism sustain us?

7 months ago
Craig VanSandt
Solar panels surrounded by trees and a city

As I write this, I am attending a class, Alternative Economic and Monetary Systems, in Vienna.

I chose to spend some of my summer in this manner, because I have had increasing concerns about capitalism as a viable economic system, given its role in global climate change and increasing financial inequality. But leave it to my Strategy and Business Ethics students to ask the most relevant question: if not capitalism, then what is better? I have no answer, so I came to Vienna looking for one.

Clearly, capitalism has worked extremely well to raise living standards for large portions of the world’s population. However, just as clearly, capitalism has contributed to environmental degradation and wealth gaps. To the point of this edition of UNIBiz, is capitalism compatible with ecological sustainability?

As I am studying this question, I am beginning to wonder if capitalism is “the problem.” Or is it more basic than whatever economic system we might use? Might our real issue be that our societies face markedly different challenges today than when Adam Smith first outlined the basic ideas of capitalism in “Wealth of Nations?” There is a strong argument to be made that our primary concern now is dealing with abundance and overuse of natural resources, rather than overcoming scarcity and day-to-day survival. Capitalism is good at the latter problem. Can it be effective addressing the former?

Perhaps the real issue is what humans expect and want from our economic systems. In the face of scarcity and trying to survive, it is natural to want “more.” When we are capable of producing more than we need to live comfortably, while facing environmental constraints, our basic challenge is very different.

If that is accurate, it seems clear that capitalism can be compatible with ecological sustainability. Capitalism is a highly efficient and productive economic system. The issue becomes placing limits on use of resources, production levels, consumption, and pollution.

One of the things I have learned here deals with planetary boundaries — the limits of the various earth system processes (for example, biochemical flows or fresh water use) — and the need to restrict damaging actions before those systems are irreparably altered. Scientists working in this field urge us to create carbon budgets, so that we collectively do not exceed those boundaries. In turn, our economic system should operate within the carbon budget. Because capitalism emphasizes efficiency, it can be a key component in creating a sustainable environment — as long as we learn to operate the economy within ecological limits. Not only can we sustain capitalism, it may be central to sustaining our natural world.

 

The views and opinions expressed are those of the author and do not imply endorsement by the University of Northern Iowa.

Author

Headshot of Craig VanSandt

Craig VanSandt

As the David W. Wilson chair in business ethics, Craig is charged with fostering awareness, discussion and debate about ethical practices in business; educating students and the community about the social and ethical issues facing business; establishing UNIBusiness as Iowa’s best recognized platform for business ethics and the Wilson chair as the most prominent authority of business ethics; acting as a catalyst for high-quality research and debate regarding business ethics and the role of business in society; and enabling business to embrace an expanded role in promoting the common good. He also serves on the leadership team for the Center for Academic Ethics.

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Comments

Submitted by Fallyn Grubic on
This post kind of made me think of the "time to panic" article we read in class. In business classes we are taught that capitalism is the best form of economy. But I think it is important to note the flaws like stated above, that there are huge wealth gaps and the question: is capitalism realistic for sustaining the environment? I think in order for capitalism to work in a time when climate change is happening rapidly, there do have to be limits, boundaries, and budgets on the natural resources we use and how much carbon we emit. I think this will be very hard, since we as a society are used to producing without limits.

Submitted by Adam Schmidt on
This was a very well written article and it reminds me of the question that the Four Futures: Life After Capitalism by Peter Frase points out is capitalism sustainable? I think that capitalism, as it stands now, isn't sustainable. I think that there will have to a shift in the way humans think in order to make it sustainable. As pointed out in the article capitalism exacerbates inequality. The rich get richer while the poor get poorer. However, it's extremely effective in allocating resources. I think there should be a shift in the way that people will have to view capitalism to make it sustainable and viable for everyone. I'm not saying that we need communism or socialism economies because that too will cause more problems and answers. If we can find a way to keep capitalism's efficiencies while solving the inequality that it creates then I think it will become sustainable.

Submitted by Joseph Heintz on
I find this post very interesting because after evaluating the role that capitalism plays on society, I too wonder if capitalism is the right answer moving forward. However, like you brought up, if not capitalism, then what? I don't think anybody has an answer for that right now. The problem with capitalism is the wealth gap and with increasing competition amongst the business world, I'm not sure that wealth gap will be reduced anytime soon. One point that you made that I thought was very interesting is the fact that one major issue of capitalism is the limits on the use of environmental resources. Like you said, with ecological limits, capitalism could be a driving force in producing a sustainable environment. Very interesting read and was a well written article.

Submitted by Emily Marlow on
I found this article to be interesting, because it brought new items to my attention that I hadn't thought of on my own or even in our Business Policy class. Certainly our economy in the current modern world is much different compared to the state of the economy when capitalism first emerged. I think it's important for people to not just jump to conclusions and assume "capitalism no longer is working" (even though that can be the easy thing to do), because of its flaws. I like how you took a step back and noticed the good things about capitalism, and thought about how it could be tweaked in certain areas to become more environmentally friendly. Capitalism might not be the best solution, but its worth considering how to make relevant adaptations to it in the mean time, until our society is able to prove there is a better alternative.

Submitted by Alex Mahan on
There is an obvious problem with climate change that needs to be addressed. It could be difficult to fix climate change with capitalism as our system. One could also make the argument that slowing economic growth will only delay solving the problems caused by humans. Either way we need to make changes to help climate change positively. To answer your first question, I don't think any system is better than capitalism. It got us to where we are now, and any change to that will only slow our advancements. We need to continue to get better and more advanced at the things we do to satisfy human wants and needs. We can mitigate the damage we have caused.

Submitted by Aaron Syverson on
I think that capitalism will sustain us and when it comes to the environment we need to make more of an effort to battle climate change. Capitalism raises the base of the pyramid which helps improve the lives of the less fortunate. When it comes to climate change the rich are the ones that need to take the lead due to the fact that they have the capital to spend on climate change.

Submitted by Emilie Thalacker on
This article is very interesting to me because it brought up different points that I haven't thought of. Professor VanSandt brought up a very good point when he said, "if not capitalism, then what is better?". Every economic system comes with pros and cons and unfortunately, we cannot please everyone. A large and ongoing concern around the world is environmental sustainability. Professor VanSandt talked about how capitalism and sustainability can be compatible, and I couldn't agree more. We need to do something before it's too late and our actions our irreversible. Very well written article!

Submitted by Phillip A Zimmerman on
You bring up an interesting point to merge capitalism and ecological sustainability. I think you also bring up an interesting point about what humans expect from the economic systems. Humans are naturally very greedy, and the more money we make, the more most of us crave. For most people, the desire to accumulate more money is overshadowing the desire to maintain a sustainable environment. This is an interesting concept.

Submitted by Zach Vande Weerd on
The class you attended in Vienna sounds very interesting to me. Overall, this article piqued my interest because as a native US Citizen, I've never known anything other than capitalism. And quite frankly, never have I even entertained any other economic system simply due to the fact that it has been so successful for my entire life. However, as I progress in my college career these discussions about the environment and financial inequality are addressed often. In my opinion, there have been great strides in regulating big business to follow environmental standards. Awhile back I came across a study that should this is in large part, due to the new generation coming up. For instance, you see millennials buying from brands that promote social equality and taking care of the environment (i.e Patagonia). In addition, as an accounting major I believe the future of audits will entail testing over a company's environmental "score" so that parties outside the organization can analyze if they want to invest in a certain company. Yes, capitalism has led to quite the wealth cap between the rich and poor, but ultimately it has led to a competitive market that has brought many great innovative ideas and products.

Submitted by Josie Hill on
I think capitalism has worked well in the sense that the government doesn't get to tell a company how to run their business (for the most part). That allows for creativity and innovation. But I do think the government should step in when it comes to the environment. We do have restrictions already in place such as emission regulations, but I think there needs to be more. In class we discussed whether a business should be responsible for the environment/community. In a sense, no. If the business is causing a river to be polluted, in the least they should be held responsible to try and "fix" it, but I think they also should be fined for it. If the river is being polluted by the community itself, that is the city council's job to clean it up. However, I think it is the right thing to do by a company to encourage its employers to volunteer. The problem with letting the businesses being "in charge" of taking care of the environment, is not enough people care about the environment to the extent of being less efficient or more costly. I don't believe CEO's are willing to make less money by changing a few things that help the environment. Air pollution, for example. I don't think someone who runs a factory is willing to release less pollution into the air if that makes their process more difficult. But if the government puts regulations on it, they have to abide by it. The environment affects everyone, even across the world. I think we need to do a better job in taking care of it. And i think the only way action will be taken is if the government steps in.

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