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Does ending climate change mean the end of capitalism?
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"True Cost" Pricing

Governments can impose taxes and levies that recognise the damage caused by certain goods to market forces and produce socially good outcomes

Context

Climate Change and the “Green” movement emerged within Western discourse in the 1970s and 80s. It was largely understood that intervention would be undertaken by national governments. With the collapse of the Soviet Union and the ascendancy of Reaganite economics, the 1990s saw the focus shift to the private sector as the driver for necessary change[1]. True Cost pricing challenges Neoclassical Economics, broadening the scope of what we would consider "capital" to include land, global temperatures and other natural resources.

The Argument

Contemporary Capitalism sees damage to the planet as “external” to market dynamics, as phenomena like pollution have no monetary value. The market, therefore, has no incentive to reduce environmental damage. Governments can introduce policies which reorient the market in favourable directions, introducing taxes to match the “social cost” of harmful goods like coal and tax breaks on sustainable technologies. Once green development is more profitable than fossil fuels, the market will naturally produce environmentally-friendly outcomes. [2]

Counter arguments

Policies like the Carbon Tax are regressive - they hit all consumers equally, so in relative terms hit poorer people hardest. It is very difficult to correctly measure something’s “social cost” accurately or proportionately - for example, with food, would you measure the carbon emitted from fertilising it, from harvesting it, from transporting it, from maintaining the land? On an international level, there is a material advantage in not introducing price controls. If you are the only country imposing price controls, your goods will be less competitive. Profits made by green businesses will still go into expansion and accumulation on a finite planet; all of which will use space, resources and labour. Solving the climate crisis will mean challenging the motive for profit and growth.

Proponents

Premises

[P1] The market is the primary driver of growth and innovation. Markets follow the profit motive, which is agnostic about “socially good” outcomes when they have no monetary value. [P2] Governments must intervene to make “socially good” [i.e: environmentally friendly] outcomes profitable.

Rejecting the premises

[1] The market, and the profit motive, are not the sole drivers of innovation. Many of our everyday technologies originate in the public sector [3] [2] Government intervention in the market is limited if the government is limited geographically or politically. [2] Government intervention robs consumers of their freedom to choose environmentally friendly options.

References

  1. https://www.elgaronline.com/view/9781840646733.00007.xml
  2. http://library.uniteddiversity.coop/Money_and_Economics/Natural_Capitalism-The_Next_Industrial_Revolution.pdf "Making Markets Work"
  3. https://www.weforum.org/agenda/2015/04/what-is-governments-role-in-sparking-innovation/
This page was last edited on Wednesday, 4 Dec 2019 at 15:55 UTC

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