Will capitalism sustain us?
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.