The greening of capitalism?

This article is adapted from a talk at the Northeast Socialist Conference in October 2009 in New York City.

Green capitalism

I’M GOING to start out with pretty basic concepts about green capitalism. I want to begin with a definition and then move on to discuss some of the concepts that lie beneath it and how they operate in application.

What is green capitalism? It’s now permeating our culture, with eco-friendly products and slick marketing from companies such as the oil giants BP and ExxonMobil, and the world’s largest retailer, Wal-Mart. Green capitalism has also worked its way into the highest echelons of political power in the United States. Barack Obama has put forward clean energy and green jobs initiatives; even John McCain dragged the party of global warming skeptics on board for green-collar jobs in the 2008 presidential election. Green capitalism is an approach that says we can use the levers of the market to fix the broken environment—that’s its fundamental reasoning.

Green capitalism’s proponents argue that because fossil fuels and most other natural resources are limited and dwindling, the economy will inevitably run up against shortages. As resources become scarcer and therefore more expensive, all businesses will have to figure out how to do more with less. The upside, green capitalism tells us, is that using fewer resources—energy, raw materials, water—is good not only for the planet but also for profits. The less a company spends on inputs and the more efficiently it runs its operations, the heftier its margins will be; being ecologically prudent is a surefire way to boost the bottom line. What’s more, those who’ve shifted to eco-friendly methods will be poised to clobber their less-green competitors when the environmental shit hits the fan.

A host of writers are now singing the praises of eco-capitalism. From Thomas Friedman with his Flat, Hot and Crowded, to business writers Daniel C. Esty and Andrew S. Winston’s Green to Gold, not to mention the older classic Cradle to Cradle by William McDonough and Michael Braungart, the green marketplace is where it’s at. These writers all observe that business as usual isn’t working. Long the defining text of this movement Natural Capitalism: Creating the Next Industrial Revolution by Paul Hawken and Amory and L. Hunter Lovins argues that “Industrial capitalism…neglects to assign any value to the largest stocks of capital it employs—the natural resources and living systems, as well as the social and cultural systems that are the basis of human capital.” OK, I can agree with that diagnosis. The authors say this devaluing allows for the externalization of costs onto the environment, into the future, and onto less politically powerful populations. I can agree with that too.

Some of what green capitalism promotes on the solutions side is compelling and worthwhile too. Biomimicry, for instance, is the notion that industrial production would benefit from copying production processes in nature. One example is a spider web. The silk that a spider spins is incredibly strong, as strong as Kevlar, which is used in body armor. Spiders spin this from digested bugs—no external energy, no synthetic chemicals, nothing else. In contrast, to make Kevlar you need a lot of energy and all kinds of chemical inputs, which produces a lot of toxic waste.

Another idea is leasing consumer products such as cell phones or refrigerators. You get the service—the ability to communicate and keep your food cold—without buying the actual hardware. Because manufacturers lease out these goods and take them back—for repairs and salvaging parts for new units—they have the incentive to turn out the most durable and serviceable commodities possible. Currently Xerox uses the service-leasing model with a line of its copiers, Document Centre, and it has led to a dramatic cut in waste—on the production side and the consumption side. This transformation of how we produce and consume is already happening and can be implemented across the board in a range of other sectors.

In its theoretical approach, green capitalism—which it must be said is not a static or uniform ideology—runs up against some serious problems, however. According to the thinking, the result of externalizing costs is not only social and environmental dysfunction; you also get a gravely malfunctioning market. Fix this problem and you’ll have turned the ship around. Friedman, Hawken, the Lovinses, and others focus on distortions from government subsidies and trade policies that are skewed toward the biggest polluters. The result is that consumers don’t have all the information they need to make good choices. Green capitalism adopts Adam Smith and the classical economists’ notion that if the market is transparent and consumers have full information then they’ll make rational choices. In turn those marketplace decisions will encourage ecologically sane production.

A key mechanism for integrating costs thereby rendering full information is fleshed out by Paul Hawken in an earlier book, The Ecology of Commerce—cost/price integration. Also known as true cost pricing, the concept is to factor into consumer prices the full costs of clear-cutting forests, fossil fuel extraction and refining, and all these bigger processes that go into making the most basic things we use in our daily lives. Cost/price integration is popular in the mainstream environmental movement and is an alluring notion. According to green capitalism, this would create greater market transparency. In doing so, the fewer resources a manufacturer uses in producing something, the cheaper the product would be. Conversely, the more raw materials, energy, water, and the like a manufacturer consumes, the more expensive a product would be. Looking out for their own self-interest, consumers will gravitate toward the least expensive and therefore, least resource-intensive goods. Due to the laws of competition, other manufacturers will have to follow suit leading us to achieve the goal of protecting the planet and human well-being via the mechanisms of the market.

(Over the past few years environmental and food activists have embraced phrases such as “the end of cheap food” and “the end of cheap oil” to capture this sentiment. While it’s true that in order to protect the environment we must start to internalize costs that our economic system has shoved onto nature, we can’t do so unless we also see “the end of cheap labor.” Otherwise ecological sanity will bring with it greater economic hardship for those most vulnerable.)

Natural capitalism does account for the inability of free-market forces on their own to bring about an eco-transformation. Consequently, the intervention of government forms a key aspect of the new green system. A guiding hand is necessary, many green capitalists maintain, but only so much. Once you get the cost/price integration mechanism in place, then the market should be able to operate on its own, with only minor checks along the way.

But is cost/price integration a realistic option? How would it be done? It too is a compelling idea because it gets people thinking about all the resources that lie behind the commodity form—and that is unquestionably valuable. But actually implementing true-cost pricing is problematic. If we were to assign the correct value to the things we use, they would become impossibly expensive. When calculating the environmental impact of a bag of potato chips, where does the accounting start? In the chip factory or the potato field? With the manufacturer that produces the farmer’s tractor, or in the battle fields that maintain U.S. dominance over global oil supplies? Who has the authority to establish and monitor such measurements? In addition to this is a geopolitical component to true-cost pricing. If politicians decided to integrate externalized ecological impacts in the U.S., but Russia and China didn’t, then American corporations would never go for it.

As a slight aside, it’s worth considering why natural capitalism has become so popular and captured the imagination of so many people. There are three elements that contribute to this in my estimation. One is that people do want to know what lies behind the commodity form, which is really impressive. Despite all the messages telling us not to think about it, people still want to know. This curiosity is irrepressible and I find that hopeful and inspiring. Second, eco-capitalism doesn’t challenge the fundamental political and economic system we have. Its nonthreatening nature makes it more palatable to some political and business leaders, not to mention many in the mainstream environmental movement. The third reason green capitalism has grabbed peoples’ imagination is the way the message is often delivered, which is in a kind of emotional, inspirational manner. If you’ve ever watched Paul Hawken or Van Jones speak, they’re both great at motivating the audience. They speak in a way that inspires hope about our ability to actualize our higher selves, to be just and honorable, and push our leaders to do the same. So there’s an emotional momentum to it that pulls people in and creates staying power.

Green capitalism’s bottom line is that it promises a growing economy that uses less from the biosphere. We don’t have to have a slow-growth or no-growth economy to save the planet. To prove this point, the authors of Natural Capitalism recount the success story of DuPont, the chemical company. In the late 1990s, DuPont voluntarily adopted the goals of the Kyoto Protocol, which meant they would cut their greenhouse gas emissions to less than half of 1991 levels. This led to a net savings of $6 for every ton of carbon dioxide that DuPont shed. Natural Capitalism uses this example to say, “Look, it works.” Hawken and the Lovinses go on to point out, “America could shed $300 billion a year from its energy bills using existing technology. The Earth’s climate can thus be protected, not at a cost, but at a profit.” This is the strand of thinking that others, including Thomas Friedman, have picked up on. It sounds really good to a lot of powerful people, powerful corporations, and powerful politicians beholden to those corporations.

But when you think it through—it’s not that complicated, I’m not an economist—what does DuPont do with the money they save? They put it right back into making more chemicals. They put it back into growing their business because that’s what you have to do in capitalism. That’s the logic of the market. You have to grow or you lose out to the competition. (So we get more chemicals—wonderful!) Other questions spring from this. If corporations have slightly greener methods of producing whatever it is they make, isn’t that better? It could be, except that these energy savings aren’t retired. Whatever energy Wal-Mart forgoes in its more efficient stores and delivery trucks nevertheless gets used by the company. That energy, and more, is consumed by the next Wal-Mart that’s built and the next.

Now I’m going to talk about how this applies to the research I’ve been doing. For my new book, Green Gone Wrong, I traveled around the world to explore how green capitalism is working on the ground. The book takes a broad look at the basic things we need to live, including food, shelter, and transportation. Today I’m going to cover organic farming and biofuels.

Green capitalism tells us that by serving not just profits, but also people and the planet—known as the “triple bottom line”—we’ll fix the market and thereby remedy the Earth’s ills. We’re told that we can use environmental realities to change how the market works, but what green capitalism seems to foster is a reshaping of environmental crisis to the market’s ends.

To look at organic farming, I went to upstate New York and spent some time on small farms. These growers are doing amazing work cultivating rich biological gene pools, outsmarting bugs and weeds without chemicals, fertilizing the soil using nutrients generated on the farm, not in some factory a thousand miles away. Most people would agree, this kind of small nonconventional farming is environmentally sound; the hitch is that it’s not economically sustainable.

I spent time on a farm that sells greens for $40 a pound—I’m not exaggerating— and a dozen eggs go for $14. The farmer earns about $7 an hour. He couldn’t afford to buy the very produce he grows and sells. A big problem is that his fixed costs are high. The farm is located about sixty-five miles from New York City. The land has become so valuable and his property taxes have gone up so much that he can’t keep up. Local farmers get no special status when their property value is assessed; they’re liable for the same fees as developers who carve the countryside into parcels and install McMansions. Unconventional farmers lack institutional infrastructure and support for their work. Despite the heroic image of the local organic grower selling produce at the farmer’s market, these people struggle hard to do their work, and not all organic farms survive.

In terms of locally grown food being a remedy to environmental troubles, other important questions need to be answered. Can you really feed a city of 8 million people through local farms? There are some romanticized notions of using local farming to overtake agribusiness that need to be interrogated. For now, I’m looking at it from this economic framework.

Then I went to South America to look at globally produced organic foods, particularly those grown in the Global South for export to the United States. This has been happening as smaller organic food companies have been bought up and consolidated by large corporations, including Kraft, General Mills, and Heinz. The big processors need supplies year round and they need a lot of them, so they purchase inputs from outside of the U.S.— Chile, China, and Paraguay, to name a few. I went to Paraguay, to one of the largest organic sugar plantations and mills on the planet. It produces one-third of the organic sugar consumed in the United States, supplying General Mills for Cascadian Farm and its other organic brands, and Silk soymilk sold by Dean Foods.

At this plantation I found that the company is clearing native forests for organic cropland because the organic market is increasing at such a rapid clip and the firm wants to cash in while shoppers are buying. Since margins are higher on organic foods, unconventionally raised goods present a great opportunity to ratchet up profits. Instead of growing the sugarcane in a way that protects biodiversity, the plantation is essentially a large monocrop. It also uses factory farm poultry manure as fertilizer—from the kind of place that administers antibiotics to keep infections from spreading inside tightly packed houses, and arsenic to encourage rapid growth (the birds’ legs can easily snap beneath all the weight). The plantation is fundamentally relying on industrial farming methods to make organics work.

Even more disturbing is that they supplement their supply by buying cane from small campesino farmers. Despite being registered organic and fair trade, the farmers I talked to don’t always get the higher price because if the mill isn’t buying (because it’s gotten enough from other farmers or its own fields) then they can’t sell at the higher premium. Even though they’re registered organic and fair trade, there’s no guarantee that the mill will buy their cane. Nonetheless, the mill gets to stamp its packages with “fair trade” and “organic.” According to the Fair Trade Labeling Organization, of all fair trade production globally, only 20 percent is actually sold as fair trade. The producers are only able to sell 20 percent of what they grow at fair-trade prices. “Trust marks” such as “organic” and “fair trade” create the idea that we’re doing the right thing, but these practices are really complicated on the ground. These farmers can’t afford to pay for fair trade or organic certification so they have to rely on the mill to pay for it—and if they don’t sell to that mill then the campesinos don’t get the higher income. Since the certification doesn’t belong to the farmers, the power dynamics that created an unfair and ecologically taxing system are not remade. If you’re not dealing with the structural workings of the system, you’re just rearranging the deck chairs on the Titanic.

In terms of biofuels, I went to Borneo in the rainforest and, as many of you may have heard, there is a food crisis there and a lot of deforestation going on. Indonesia is the world’s third-largest carbon dioxide emitter largely because of deforestation. A lot of what’s driving the deforestation is the growing of palm oil tree plantations and the palm oil growers are really driving the deforestation with the help of the government. Indonesia doesn’t have factories or a financial market, it has plantations—that’s the motor of their economy. What I found in indigenous villages in the rainforest is that the palm oil companies are coming in and taking advantage of unclear land ownership, as happens the world over. Although communities have lived there for hundreds of years, they have no title deeds so palm oil plantations can move in more easily, clear-cutting and burning the rainforest as they go. It’s bitterly ironic that companies are destroying some of the biggest carbon stores in the name of making the green fuel mostly for Western markets.

And as a lot of us know, corn-based ethanol is a total disaster. We have to ask, why do we have these biofuels? Biofuels made from used cooking grease is a great idea, but when you deploy that in the context of the market you get speculation, food crises, and greater pressure on the environment. One of the Borneo plantations I went to—where we actually caught an illegal chainsaw crew in the act—sells its palm oil to Wilmar, which is partially owned by Archer Daniels Midland (ADM). This all links back to the biggest, most powerful corporate interests. Cargill also has substantial plantations in Borneo and is an increasingly influential player in biodiesel. The biofuels system we’re currently building up allows companies such as ADM and Cargill to maintain their political and economic position so they like it.

As these examples, and others in the book, flesh out, the market has a distinct inability to solve environmental crises because it can’t adequately value nature. That doesn’t mean great methods and technologies for balancing out the trauma of the biosphere don’t exist—they do. We don’t see more of the solutions that work, including superefficient architecture and transportation systems, as well as biomimicry and service leasing, because as yet these options aren’t profitable enough. Instead of our greater environmental consciousness transforming the way business is done, what we more often see is the market contorting ecological problems so they fit into some sort of profitable framework. To bring about change we must experience ourselves as political actors and not simply shoppers who are supposed to vote with our wallets.


Issue #85

September 2012

Election 2012

Who will serve the 1%?
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