Sustainable capitalism

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Sustainable capitalism is a conceptual form of capitalism based upon sustainable practices that seek to preserve humanity and the planet, while reducing externalities and bearing a resemblance of capitalist economic policy. A capitalistic economy must expand to survive and find new markets to support this expansion. [1] Capitalist systems are often destructive to the environment as well as certain individuals without access to proper representation. However, sustainability provides quite the opposite; it implies not only a continuation, but a replenishing of resources. [2] Sustainability is often thought of to be related to environmentalism, and sustainable capitalism applies sustainable principles to economic governance and social aspects of capitalism as well.

Contents

The importance of sustainable capitalism has been more recently recognized, but the concept is not new. Changes to the current economic model would have heavy social environmental and economic implications and require the efforts of individuals, as well as compliance of local, state and federal governments. Controversy surrounds the concept as it requires an increase in sustainable practices and a marked decrease in current consumptive behaviors. [3]

This is a concept of capitalism described in Al Gore and David Blood’s manifesto for the Generation Investment Management to describe a long-term political, economic and social structure which would mitigate current threats to the planet and society. [4] According to their manifesto, sustainable capitalism would integrate the environmental, social and governance (ESG) aspects into risk assessment in attempt to limit externalities. [5] Most of the ideas they list are related to economic changes, and social aspects, but strikingly few are explicitly related to any environmental policy change. [4]

Governance and economic aspects

Economic aspects are clearest, perhaps because the economy is most easily associated with capitalism. Sustainable capitalism, as a policy outline, is an attempt to address and tackle the use of admittedly insufficient tools used today to measure the economic growth and the real value of countries, such as GDP or GO. Criticism of this form of growth measurement is centered on the fact that GDP fails to account for labor conditions and other environmental factors which have a long-term influence on the value which it measures. [6]

This concept follows recent trends that see forms of sustainable business as the preferred method for development, because of the way that these types of businesses offer a positive influence to their environment. Many of these stem from business-led corporate responsibility coalitions which aim to mitigate ESG impacts through mobilization of resources. [7] These business are not limited to the traditional non-profits we associate with corporate responsibility, but also can be independent, non-profit, for-profit, led by a board of directors or core-funded. [7] The wide spectrum of business types shows the gradual turn towards socially and environmentally responsible corporate governance.

Sustainable capitalism challenges the common model of the capitalist economy by its linear frame. Raw materials, either natural resources or intellect, when combined with a capital increasing mechanism, like worker power, create marketable products that are sold for money and waste. In the concept of sustainable capitalism, it appears to be necessary to shift to a more circular economy where the end product would be reinvested not only to the capitalist business or financial institution but into the basis for raw materials, and people who support this business. [8]

This type of circular economy would require more responsibility on corporate governance to reduce externalities. China has made advances in this area, increasing renewable energy industries, with an estimate that fossil fuels will no longer be the main source of energy by 2030; these steps toward change were forced in part by high pollution and population. [8]

In their manifesto, Gore and Blood propose key economic measures to change from the current form of capitalism:.

  1. Identify and incorporate risks from stranded assets.
  2. Mandate integrated reporting.
  3. End the default practice of issuing quarterly earnings guidance.
  4. Align compensation structures with long-term sustainable performance.
  5. Encourage long-term investing with loyalty-driven securities. [5]
  6. Reinforce sustainability as a fiduciary issue.
  7. Create advisory services for sustainable asset management.
  8. Expand the range and depth of sustainable investment products.
  9. Reconsider the appropriate definition for growth beyond GDP.
  10. Integrate sustainability into business education at all levels. [4]

The first five items are most related to economic changes, while the last five are actions more related to social aspects. Of these ten, only two are directly related to environmental aspects, and none explicitly suggest environmental policy changes.

Environmental aspects

As explained by Bruce Ledewitz, sustainable capitalism is the adoption and development of sustainable practices that protect natural resources, instead of spending it as capital. Ledewitz claims that in traditional capitalism, natural capital", meaning natural resources, will continue to decline and will limit monetary capital success, lifting the value of natural resources and replacing the definition of prosperity. He proposes that sustainable capitalism would institute policies and regulations to protect natural resources in addition to investing back into the environment in attempt to reverse the degradation. [9]

Social aspects

Social aspects of sustainable capitalism involve a positive reception toward climate change. Author Mohan Munasinghe explains that two specific ways that humans can respond to climate change are through adaptation and mitigation. First, adaptation is aimed at reducing the vulnerability of human and natural systems in the face of climate change stresses, while mitigation is aimed at lowering or removing greenhouse gas emissions to reduce radiative forcing of the atmosphere and the intensity of future climate change. [10]

Economist John Ikerd claims that environmental degradation happens under modern capitalism because the economy is divorced from ethics. [11] According to him, classical economists like Adam Smith had always intended for market economics to be tempered by property owners' moralities, and neoclassical economists put undue faith in the ability of markets to automatically adjust to physical and moral imperatives. Ikerd concludes that a system of environmental regulations founded on a popular, ethical consensus is necessary and sufficient to prevent excessive climate change. [11]

Sustainable capitalism is also viewed as a non-transcendent, regulated commodity to humanity due to the ever-increasing demands of environmental regulation. [12] Geoffrey Strickland emphasizes that current discussions on economic development are led by the notion that human reproduction is a commodity that must be regulated and improved in order to encourage market efficiency, which is a phenomenon that counteracts the growth of capitalism. [12]

Criticism

Marxist view

According to the Marxist understanding of capitalism as production for profit, it is impossible to prioritize environmental sustainability without abolishing capitalism. Ernest Mandel claims that when profit maximization requires a business to pollute the air, "the simple right to clean air is abolished". [13] Under his conception of capitalism, profit necessarily subjugates the environment, and properly accounting for the social costs of production requires some form of socialist planning. Any attempt to adequately protect the environment within such a capitalist framework is doomed to fail, so the argument goes, because society simply is not structured to be willing to sacrifice private profits for public endeavors on this scale. [14]

Sustainable capitalism as an oxymoron

The Capital Institute describes the concept of sustainable capitalism as an oxymoron. [15] They argue that modern capitalism is not designed for cooperation and much of the proposed measures in the manifesto are insufficient. [15] Regeneration, cooperation, and well-being are aspects of sustainability that do not coincide with what capitalism has evolved to be. Efforts may be made to reform current capitalistic practices, but mass movements focusing on environmental concerns that do not create a radical change of the system are not likely to succeed as they go against what capitalism was designed to achieve. Capitalism and sustainability are mutually exclusive ideas given the current model. [15]

Government reluctance

Critics such as Neil E. Harrison argue that the government would likely be resistant to sustainable changes for the current capitalist model. Since the capitalist government was built upon capitalist ideals and business interests, he argues, the government is dependent on the system. [3] Often, the government is most focused on overt crises rather than long-term solutions to problems that are not readily apparent. His main argument is that beyond the current structure, authority is not enough to control the social and economic aspects enough to truly impact the environmental needs. [3]

See also

Related Research Articles

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price systems, private property, property rights recognition, voluntary exchange, and wage labor. In a market economy, decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in capital and financial markets—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.

<span class="mw-page-title-main">Sustainable development</span> Mode of human development

Sustainable development is an organizing principle that aims to meet human development goals while also enabling natural systems to provide necessary natural resources and ecosystem services to humans. The desired result is a society where living conditions and resources meet human needs without undermining the planetary integrity and stability of the natural system. Sustainable development tries to find a balance between economic development, environmental protection, and social well-being. The Brundtland Report in 1987 defined sustainable development as "development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs". The concept of sustainable development nowadays has a focus on economic development, social development and environmental protection for future generations.

State capitalism is an economic system in which the state undertakes business and commercial economic activity and where the means of production are nationalized as state-owned enterprises. The definition can also include the state dominance of corporatized government agencies or of public companies in which the state has controlling shares.

<span class="mw-page-title-main">Market economy</span> Type of economic system

A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.

<span class="mw-page-title-main">Triple bottom line</span> Accounting framework

The triple bottom line is an accounting framework with three parts: social, environmental and economic. Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create greater business value. Business writer John Elkington claims to have coined the phrase in 1994.

Eco-capitalism, also known as environmental capitalism or (sometimes) green capitalism, is the view that capital exists in nature as "natural capital" on which all wealth depends. Therefore, governments should use market-based policy-instruments to resolve environmental problems.

A green economy is an economy that aims at reducing environmental risks and ecological scarcities, and that aims for sustainable development without degrading the environment. It is closely related with ecological economics, but has a more politically applied focus. The 2011 UNEP Green Economy Report argues "that to be green, an economy must not only be efficient, but also fair. Fairness implies recognizing global and country level equity dimensions, particularly in assuring a Just Transition to an economy that is low-carbon, resource efficient, and socially inclusive."

The law of the value of commodities, known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic The Poverty of Philosophy (1847) against Pierre-Joseph Proudhon with reference to David Ricardo's economics. Most generally, it refers to a regulative principle of the economic exchange of the products of human work, namely that the relative exchange-values of those products in trade, usually expressed by money-prices, are proportional to the average amounts of human labor-time which are currently socially necessary to produce them within the capitalist mode of production.

A sustainable business, or a green business, is an enterprise that has a minimal negative impact or potentially a positive effect on the global or local environment, community, society, or economy—a business that strives to meet the triple bottom line. They cluster under different groupings and the whole is sometimes referred to as "green capitalism." Often, sustainable businesses have progressive environmental and human rights policies. In general, a business is described as green if it matches the following four criteria:

  1. It incorporates principles of sustainability into each of its business decisions.
  2. It supplies environmentally friendly products or services that replace demand for nongreen products and/or services.
  3. It is greener than traditional competition.
  4. It has made an enduring commitment to environmental principles in its business operations.

Post-capitalism is in part a hypothetical state in which the economic systems of the world can no longer be described as forms of capitalism. Various individuals and political ideologies have speculated on what would define such a world. According to classical Marxist and social evolutionary theories, post-capitalist societies may come about as a result of spontaneous evolution as capitalism becomes obsolete. Others propose models to intentionally replace capitalism, most notably socialism, communism, anarchism, nationalism and degrowth.

<span class="mw-page-title-main">Criticism of capitalism</span> Arguments against the economic system of capitalism

Criticism of capitalism is a critique of political economy that involves the rejection of, or dissatisfaction with the economic system of capitalism and its outcomes. Criticisms typically range from expressing disagreement with particular aspects or outcomes of capitalism to rejecting the principles of the capitalist system in its entirety.

Degrowth is an academic and social movement critical of the concept of growth in gross domestic product as a measure of human and economic development. Degrowth theory is based on ideas and research from a multitude of disciplines such as economics, economic anthropology, ecological economics, environmental sciences and development studies. It argues that the unitary focus of modern capitalism on growth, in terms of monetary value of aggregate goods and services, causes widespread ecological damage and is not necessary for the further increase of human living standards. Degrowth theory has been met with both academic acclaim and considerable criticism.

Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish communism from capitalism, and is one of the fundamental defining characteristics of communism.

Throughout modern history, a variety of perspectives on capitalism have evolved based on different schools of thought.

The commodification of nature is an area of research within critical environmental studies that is concerned with the ways in which natural entities and processes are made exchangeable through the market, and the implications thereof.

Traditionally, market orientation (MO) focuses on microenvironment and the functional management of an organisation. However, contemporary organisations have widened their focus to incorporate more roles, functions and emphasis on the macro environment. Firms have been concerned with short run success and often not taken into account the long-run ecological, social and economic effects from their activities. Despite growth in the MO concept, there is still a need to reconceptualise the concept with a greater emphasis on external factors that influence a firm.

<span class="mw-page-title-main">Corporate environmental responsibility</span>

Corporate environmental responsibility (CER) refers to a company's duties to abstain from damaging natural environments. The term derives from corporate social responsibility (CSR).

<span class="mw-page-title-main">Extractivism</span> Process of extracting resources from the earth

Extractivism is the removal of natural resources particularly for export with minimal processing. This economic model is common throughout the Global South and the Arctic region, but also happens in some sacrifice zones in the Global North in European extractivism. The concept was coined in Portuguese as "extractivismo" in 1996 to describe the for-profit exploitation of forest resources in Brazil.

Progressive capitalism is an approach to capitalism that seeks to improve the current neoliberal American capitalism that emerged in 1980. Progressive capitalism aims to improve economic results through four defining beliefs, namely the vital role businesses play in the economy by creating jobs, fostering innovation, enabling voluntary exchange, and providing competitive goods and services; the recognition of the important role public goods, public institutions, public services and public infrastructure play in supporting businesses including: research, schools, health care, social insurance, taxation, labor law and regulation of markets; the need for the state to be involved in design and oversight of the playing field; and the integration of social justice, stewardship of natural resources and responsibility to all major stakeholders. It is being advocated by Ro Khanna and Joseph Stiglitz.

<span class="mw-page-title-main">Environmentalism in China</span>

Environmentalism in China consists of philosophical concepts and the movement within China with the goals of preserving its environment and addressing environmental issues.

References

  1. ↑ Mitra, Basavadatta; Gadhok, Saagar; Salhotra, Shivam; Agarwal, Sakshi (2011). "The convergence of sustainable capitalism". 2011 IEEE International Professional Communication Conference. pp. 1–7. doi:10.1109/IPCC.2011.6087226. ISBN   978-1-61284-779-5. S2CID   31292223.
  2. ↑ Schweickart, David (1 January 2009). "Is Sustainable Capitalism an Oxymoron?". Perspectives on Global Development and Technology. 8 (2–3): 559–580. doi:10.1163/156914909X424033.
  3. 1 2 3 E., Harrison, Neil (2013-01-01). Sustainable Capitalism and the Pursuit of Well-Being. Routledge. ISBN   9781306218047. OCLC   866837827.{{cite book}}: CS1 maint: multiple names: authors list (link)[ page needed ]
  4. 1 2 3 https://www.genfound.org/media/pdf-wsj-manifesto-sustainable-capitalism-14-12-11.pdf [ bare URL PDF ]
  5. 1 2 "Sustainable Capitalism" (PDF). Retrieved February 18, 2017.
  6. ↑ "Investopedia 100 Top Financial Advisors of 2019".
  7. 1 2 Nelson, Jane (27 March 2013). Corporate responsibility coalitions : the past, present, and future of alliances for sustainable capitalism. Stanford University Press. ISBN   9780804787109. OCLC   815044298.[ page needed ]
  8. 1 2 Mathews, John A (2015-01-01). Greening of capitalism how Asia is driving the next great transformation. Stanford Economics and Finance. ISBN   9780804793162. OCLC   931609928.[ page needed ]
  9. ↑ Ledewitz, Bruce (2002). "The Constitutions of Sustainable Capitalism and beyond". Boston College Environmental Affairs Law Review. 29: 234–239 – via HeinOnline.
  10. ↑ Munasinghe, Mohan (2010). "Addressing the Sustainable Development and Climate Change Challenges Together: Applying the Sustainomics Framework". Procedia. 2 (5): 6634–6640. doi: 10.1016/j.sbspro.2010.05.005 .
  11. 1 2 Ikerd, John (2008). "Sustainable Capitalism: A Matter of Ethics and Morality". Problems of Sustainable Development. 3 (1): 13–22. SSRN   1483005.
  12. 1 2 Strickland, Geoffrey (2013). "True Development and the Human Person: Transcending Contradiction in Discerning a Sustainable Capitalism". Journal of Markets and Morality. 16 (1): 17. ProQuest   1438853641.
  13. ↑ Mandel, Ernest (1978). Late Capitalism. Verso. p. 577.
  14. ↑ Mandel, Ernest (1978). Late Capitalism. Verso. pp. 577–578.
  15. 1 2 3 "John Fullerton: Is Sustainable Capitalism an Oxymoron?". Capital Institute. 28 June 2010.
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