Can Capitalism Meet the Climate Challenge?

Last September Secretary-General António Guterres said, “the climate emergency is a race we are losing, but it is a race we can win.” He went on to claim that winning requires bold collective shifts in how people live on the planet. The climate crisis has always had human economics at its heart. It was not just the growing population of humans, but their industrial output in a capitalist economy that caused the exponential growth the Club of Rome’s 1972 report The Limits to Growth warned of. With floods raging and glaciers melting faster than ever that report is looking more and more prescient. Do we need to abandon capitalism to win the race?

Limits to Growth versus Models of Doom

I first heard this question as a college student only a few years after the Club of Rome hired a team of MIT researchers to probe the edges of the economics of population growth and industrial output. My professor at the University of California-San Diego, Roger Revelle, had co-authored the first paper to use the term “global warming” the year before I was born. His action on this issue inspired a whole generation of climate change activists and leaders, including most famously former vice-president Al Gore.

In his 1979 class on Science, Technology and Public Affairs, Professor Revelle had us read not only the Club of Rome arguments about the planetary limits but also the critique: Models of Doom. What I remember about the lively debates in that class is the sharp divide over whether we needed to scale back on human consumption or could rely on innovations like shifting to renewable energy to square the circle of capitalism and the human-driven acceleration of natural resource depletion. In short, the pro-limits side called for turning away from capitalism and their Models of Doom critics argued for meeting the climate challenges within the capitalist system. That friction lives on today in the debate between “green growth” and “degrowth”.

Green growth versus degrowth

Advocates for green growth embrace capitalism as we have come to know it. The term was coined in 2005 at the Fifth Ministerial Conference on Environment and Development in Asia the Pacific in Seoul. It joins discussions of sustainable development by the Brundtland Commission and the first Rio Conference to answer the challenges issued in the Models of Doom: finding solutions to environmental concerns that take account of politics, social structures, and human inclinations. The green growth model aims to promote more sustainable growth through internalizing environmental costs; improving ecological efficiency in production and consumption; and encouraging the development of markets for green products, services, and technologies. The objective is to “decouple” growth from environmental impact.

This model avoids the politically fraught strategy of telling people what they must give up to address the climate problem. It thus proved useful in response to the 2008 financial crisis and it has stuck. International organizations (from the UN to the OECD and the World Bank), governments (from the Republic of Korea to the EU to China), and think tanks have adopted and institutionalized its logic with indicators and formulas for measuring progress, including dividing Gross Domestic Product (GDP) by Domestic Material Consumption (DMC). Green growth is central to the UN’s Sustainable Development Goals, established in 2015.

Growth skeptics, though, argue that green growth will not address the earth’s ecological crisis. Degrowth advocates claim that supposed progress toward decoupling does not account for actual conditions. For instance, evidence of declining DMC/GDP in advanced economies does not account for material inputs that come from other places and thus undercounts the actual material. Despite indicators suggesting progress, environmental impacts are growing. To make headway against climate change, these analysts argue, we must question the system of capitalist growth.

This important debate is drawing more and more attention – over 2,000 people signed up to watch green growth advocate Sam Fankhauser and degrowth proponent Jason Hickel debate in the fall of 2022 with thousands more watching the YouTube video. Neither binary position, however, offers a truly viable and desirable way forward—something Fankhauser and Hickel even admit in their exchange.

Pragmatic alternatives

Despite, or even because of, this debate, there is growing momentum for pragmatic ideas that offer alternatives to the green growth versus no growth binary. These ideas hold promise for a new model of capitalism that enables both planetary sustainability and human well-being.

Pragmatic arguments center on how problems, or pushback from the world, can spur change. First theorized by American philosophers in the nineteenth and early twentieth centuries, pragmatism means more than simply practical. It sees the human world not as pre-determined but rather as “a universe still in progress, a place where no conclusion is foregone, and every problem is amenable to the exercise of what John Dewey called “intelligent action.” Crises can disrupt what people see as normal and make them aware of their interdependence. This can help mobilize around a new purpose. John Dewey made just this case in his 1927 book.

Pushback from the world can make people “think”. Thinking for pragmatists is more than simply consulting principles or preferences. It is weighing all our varied inputs to do what we think is right. Thinking depends on openness to inputs and the capacity to rearrange our perceptions to create something new. It requires interaction between representational and practical (or intuitive) knowledge. It is thus open to feminine and indigenous perspectives. And it is by its nature uncertain. Indeed, it embraces uncertainty as necessary for creativity.

Some of the pragmatism has emerged quietly. American journalist, climate change thinker, and New America National Fellow David Wallace-Wells argues that the impact of the U.S. 2022 Inflation Reduction Act legislation passed by Congress late last year will be much more positive because it doesn’t meet the same headwinds it would have a few years back. While some argue that the $369 billion in climate and energy spending called for in the new law is much too small, Wallace-Wells contends that it doesn’t need to be as large as he would have thought even in 2019 when he wrote his hair raising book, The Uninhabitable Earth. “Thanks to technological change and the plunging cost of renewables, a growing political and cultural focus on decarbonization and increasing awareness of the public health costs of pollution and market trends for things like electric vehicles and heat pumps, it’s genuinely a whole new world out there.” The combination of green growth economics, increasing environmental awareness, and government action like the Inflation Reduction Act have made it likely that instead of reaching four or five degrees Celsius of warming, warming this century will be between two and three degrees. As Wallace-Wells reminds us, though not yet enough, this is still important progress.

The political and cultural shifts Wallace-Wells notes are not only focused on what we have to sacrifice to address climate change. New ideas are gaining traction that open windows to a different understanding of human potential with implications for a more holistic, people and nature-centered, model of capitalism. Kate Raworth argues that creativity could grow if people faced natural constraints rather than trying to conquer them. What if people opted for more leisure time and valued work-life balance rather than focusing exclusively on material?

Pragmatic “thinking” and Human-Centered Capitalism?

These ideas intersect with those of human-centered economists like Amartya Sen as well as indigenous approaches to the earth. They open the way for recentering what Amitav Ghosh, in his acclaimed book, The Nutmeg’s Curse, calls “vitalist” modes of thought that revere the meaning and agency of the natural world rather than looking at it only as something to exploit. It isn’t necessary to choose between seeing the climate crisis as challenging the good life as the Limits to Growth argument did or leaving it alone as the green growth model does. We could instead see the climate crisis as an opportunity to make lives better. According to economist Carlota Perez, it is an opportunity to transform our society in a way that is also fairer and socially sustainable. Could a capitalist economy be built on human thriving rather than growth? Could human and ecological thriving be compatible?

We don’t have to use our imaginations to answer these questions. Many have researched capitalism’s variety of forms, and their intersection with growth models. In the wake of the financial crisis, economists such as Mariana Mazzucato have unveiled neoliberalism as resting on myths around the “true” capitalist spirit. In fact, she argues, capitalism has manifested many different spirits in different times and places. If capitalism has changed before, it can change again.

Mazzucato’s advice focuses on attention to mission and building a mission economy—one that is inclusive, sustainable and driven to address concrete problems. Her focus on mission is relevant not only to climate change but also to the other global problems it interacts with, like the pandemic. Others have written similarly about how global crises could be a spur to change. Margaret Levi, for instance, wrote that COVID joined humans in a community of fate that she hoped could shift the normative prescriptions upon which the political economy works. Susan Sell also saw the pandemic as casting the failures of 21st century capitalism in sharp relief and opening pathways to change.

We can witness pragmatic “thinking” in the experiments that Mazzucato and others have informed. In a 2019 Wired article, Joao Medeiros explains that in Mazzucato’s efforts with the British government to address healthy aging, participants struggled with the definition of “healthiness.” Initially, they considered the scenario of an Alzheimer's patient who is completely independent in the home and assisted by cutting-edge technologies. But the mission leader questioned that goal. “Why obsess about independence? How about nurturing co-dependency instead?" Similarly, on the future of mobility, advisor and musician Brian Eno questioned the assumption that getting from A to B quicker was the goal. “How about going slower and appreciating life?”

Pragmatic thinking about the climate crisis resists the growth/no growth argument around set means and ends. Instead, it encourages attention to the interconnection of issues (and crises) to prompt open reflection about what the problem really is. This approach thus opens the potential for creative approaches to how humans might thrive with more attention to the various elements of human life.

Pragmatic economic thinking has connected with progressive politicians in the US and elsewhere and its ideas informed initiatives like the Green New Deal. There is also evidence that technocrats within governments, like central bankers, have taken a more active stance where they acknowledge that they shape and make markets. And capitalists themselves have taken note. From the Business Roundtable’s 2019 redefinition of the purpose of a corporation to business schools’ increasing focus on social justice and the climate crisis.

None of these moves suggest the wholesale rejection of capitalism that some degrowth advocates have called for. But the shifts promise something more than just green growth. They portend, at the very least, a different capitalism. Whether these shifts develop in a way that addresses climate and related problems will depend on whether and how they alter the structural manifestation of 21st century capitalism, including financialization and the ever-growing role of digital space. We cannot know whether these changes will meet the climate challenge but we should not dismiss the possibility that their challenge to dominant narratives can carve out space for a more human and ecologically attentive political economy, whatever we choose to call it.