Climate Crisis or Economic Crisis?

Climate activists are a diverse group with a wide range of perspectives, but what economic system do they believe is best suited to address climate change?

We often think of the climate crisis in environmental terms: endangered species, vanishing glaciers, and extreme weather events. But beneath the surface lurks a silent threat, one that speaks the language of dollars and cents. The climate crisis is not just an environmental emergency, it's also an economic one, with far-reaching consequences for businesses, governments, and individuals alike.

In the wake of yesterday’s Supreme Court ruling in favour of Northland iwi leader Mike Smith’s (Ngāpuhi, Ngāti Kahu) climate case against Fonterra and six other big polluters, continuing to trial, Greenpeace Aotearoa Executive Director Russel Norman says, "Fonterra’s dirty dairy industry is New Zealand's biggest climate polluter, and successive Governments have failed to hold them to account.”

There is an intricate link between our warming planet and our financial well-being, and although Greenpeace acknowledge economic growth may have helped improve living standards, they see it as also driving the world toward climate catastrophe.

Greenpeace supports an economy based on “degrowth.”  According to one prominent definition by degrowth economist Jason Hickel, the concept envisions rich democratic countries shrinking their economies to bring them back into balance with the living world, while still reducing inequality and improving people’s wellbeing.

That doesn’t seem like a great idea for most of us but activists critique traditional capitalism for its inherent focus on maximising profit and growth, arguing it incentivises unsustainable practices and exacerbates inequality. They often advocate for alternative systems like degrowth, which prioritises living within ecological limits and reducing consumption, or circular economies, which focus on minimising waste and maximising resource reuse.

While there isn't a single favoured economic system, there are some common themes and potential economic approaches gaining traction within the climate movement.

Many activists emphasise the need for economic systems that prioritise environmental sustainability and social justice. This means tackling issues like inequality, resource depletion, and the disproportionate impact of climate change on marginalised communities.

Specific policy proposals are based on supporting specific policy proposals aimed at mitigating climate change and promoting sustainability within existing systems. These might include policies like carbon pricing schemes to incentivise polluters to reduce emissions; investments in renewable energy and green infrastructure; regulations to limit unsustainable practices like deforestation; and social safety nets to support workers transitioning to a green economy.

They favour decentralised and community-based solutions, empowering local communities to manage resources and develop sustainable practices tailored to their specific needs. This could involve initiatives like local food systems, renewable energy cooperatives, and community land trusts.

The debate within the climate movement also revolves around the level of change needed. Some activists advocate for radical systemic change, while others believe reforming existing systems can be effective.

Transitioning to a sustainable economy would inevitably involve reducing consumption and resource-intensive activities, potentially leading to slower economic growth and job losses. Shifting towards greater equity and addressing long-standing inequalities could be complex and potentially lead to social unrest or resistance from entrenched groups.

Implementing degrowth strategies may require significant lifestyle changes and would be met with resistance from individuals and businesses accustomed to high consumption patterns. High carbon prices would increase energy costs for businesses and consumers, potentially impacting low-income communities disproportionately.

Funding green initiatives would require diverting resources from other priorities, raising concerns about opportunity costs, and strict regulations would impose burdens on businesses and potentially stifle innovation.

Local solutions would struggle to address large-scale systemic issues like climate change without broader coordination and cooperation and smaller communities lack the resources and expertise to implement complex sustainable initiatives.

Regardless of this, both capitalism and socialism are deemed poor choices for humanity, by many, particularly in the younger generation. So, are there other economic systems that could replace them?

The argument is that capitalism is inherently unequal and leads to the concentration of wealth and power in the hands of a few. It is also argued that capitalism is responsible for environmental damage and climate change.

It has to be acknowledged that capitalism has created wealth and prosperity for many people and this writer believes that capitalism can be reformed to address these problems and can be adapted to be fairer and sustainable.

Others believe that neither capitalism nor socialism is the answer, and that we need to develop a new economic system altogether. They argue that both capitalism and socialism are based on outdated assumptions about human nature and the way the world works.

It is impossible to say with certainty what the future of economic systems will be. However, it is clear that there is a great deal of debate and uncertainty about the issue. There are many different competing visions of what the future holds, and it is difficult to say which, if any, of these visions will come to pass.

The Green capitalism vision aims to address environmental concerns by integrating sustainability principles into existing capitalist frameworks. This could involve carbon pricing, green technology investments, and stricter regulations on pollution.

Green capitalism, also known as eco-capitalism, seems to be the system most favoured by climate activists. It is a broad term encompassing the belief that environmental challenges can be addressed within the framework of a capitalist system. It relies on market forces to achieve environmental goals, and this can involve putting a price on carbon emissions to incentivise polluters to reduce them, investments specifically dedicated to environmentally friendly projects, and encouraging businesses to adopt eco-friendly practices and consumers to make responsible choices.

Green capitalism sees technological advancements as key to overcoming environmental challenges. This can include renewable energy sources, resource efficiency technologies, and clean production processes. The role of government is recognised in setting regulations and providing incentives for businesses and individuals to adopt sustainable practices.

The potential drawbacks involve companies "greenwashing" to appear environmentally friendly without making substantial changes to their practices, exacerbating existing inequalities, as those with more resources can afford to adopt sustainable practices while others are left behind, without addressing systemic issues like overconsumption or the inherent focus on growth within a capitalist framework.

Placing the onus on corporations to solve environmental problems might neglect the need for broader societal and cultural shifts. Overall, green capitalism is a complex and debated approach to sustainability. While it holds the potential to drive economic growth and innovation, it's crucial to address its potential drawbacks and ensure that environmental solutions are equitable and accessible to all.

Furthermore, it's important to consider diverse perspectives on green capitalism. Some view it as a viable path towards sustainability, while others believe it's fundamentally flawed and perpetuates harmful systems. Critical analysis and open discussion are necessary to determine its potential role in creating a more sustainable future.

Social capitalism, also known as the social market economy, presents another intriguing view on economic organisation. This option focuses on reducing inequality and fostering social mobility within a capitalist system. This could involve policies like expanded social safety nets, progressive taxation, and worker ownership schemes.

Social capitalism upholds private enterprise and market competition as essential drivers of economic activity, however, it emphasises the need for government intervention to address issues like inequality, poverty, and social mobility that could involve redistributing wealth through taxes to reduce inequality, while providing support for unemployed, sick, or elderly individuals.

It would also enhance opportunities and well-being for all citizens, and protect worker rights, addressing market failures to ensure a fair and competitive environment. Collaboration between government, businesses, and labour unions is encouraged to find solutions for economic and social issues.

The aim is to achieve economic growth while ensuring widespread benefit and reducing inequality. Investments in education and social safety nets would provide opportunities for individuals to improve their lives and social issues like poverty and inequality are hoped to contribute to a more stable and cohesive society.

The potential drawbacks are obvious. Government inefficiency, brought on by excessive government intervention are likely to stifle economic dynamism and create bureaucratic inefficiencies, and generous social safety nets might disincentivise individuals from seeking work or investing in themselves. Some argue that social capitalism doesn't go far enough in addressing wealth concentration and systemic inequalities but striking the right balance between market freedom and social intervention can be challenging.

Overall, social capitalism offers a nuanced approach to economic organisation, seeking to harness the strengths of capitalism while addressing its social shortcomings. Its effectiveness depends on careful implementation and ongoing adjustments to ensure its principles translate into tangible benefits for all.

Similar to green capitalism, it's crucial to consider diverse perspectives on social capitalism. Some see it as a pragmatic and sustainable model, while others argue it creates dependency on government and doesn't adequately address fundamental inequities. Examining its complexities and potential within the wider context of different economic visions is essential for informed discussions about the future of economic systems.

Platform cooperativism (platform coops) emerges as a unique alternative to the dominant platform capitalism model, offering a vision for online platforms owned and controlled by those who use them. Workers, users, or a combination thereof, democratically own and control the platform, fostering collective decision-making and fair distribution of profits.

Transparent and inclusive decision-making processes ensure accountability and empower stakeholders to shape the platform's direction. Platforms prioritise generating social and economic value for participants rather than maximising shareholder profits.

Many platform coops embrace open-source software and ethical business practices, promoting long-term sustainability and community benefit. This shifts power from investors and CEOs to users and workers, promoting fairness and transparency. Workers can gain ownership and decision-making power, improving working conditions and job security. It also eliminates the extractive model where user data and labour are harvested for profit without direct benefit to those generating it.

Aligning values with practices encourages ethical and environmentally responsible development, however, establishing and scaling platform coops can be challenging, competing against established, well-funded giants. Balancing diverse stakeholder interests and navigating collective decision-making processes can be intricate. Consumers may require education and awareness to choose platform coops over well-established platforms.

There are examples of platform coops: Fairmondo is an online marketplace for ethical and sustainable products, owned by its co-op members. Som Energia is a renewable energy cooperative with over 80,000 members in Spain. And Wikimedia Foundation is a non-profit that operates Wikipedia and other collaboratively edited projects, funded by donations.

Overall, platform cooperativism presents a compelling vision for a more equitable and democratic digital landscape. While challenges exist, its potential to disrupt current power structures and empower communities makes it a significant movement worth exploring and supporting.

Other emerging concepts include a Universal Basic Income (UBI). This policy provides every citizen with a regular unconditional payment, potentially freeing individuals from dependence on wage labour and fostering innovation and entrepreneurship. And Decentralised Autonomous Organisations (DAOs), blockchain-based structures enabling collective decision-making and resource management without centralised authorities, potentially creating new forms of economic cooperation.

DAOs are a rapidly evolving space. As the technology matures and regulations adapt, their potential to reshape various industries and aspects of our society will continue to unfold. Staying informed and engaging in informed discussions are crucial for navigating their potential benefits and drawbacks, and ultimately shaping their role in the future.

Universal Basic Income (UBI) is a policy proposal that raises a lot of debate, with both potential benefits and drawbacks. Implementing UBI on a universal scale would be very expensive. Depending on the design and level of income provided, it could require significant tax increases or cuts to other government programs. This could lead to higher inflation and potential economic instability.

Some argue that receiving a guaranteed income would reduce people's motivation to work, leading to labour shortages and decreased productivity. However, evidence from pilot programs is mixed, and some studies suggest UBI could actually encourage entrepreneurship and career changes.

Critics argue that UBI simply spreads resources thinly across the population, potentially neglecting those who need the most support, while targeted welfare programmes might be more effective in addressing specific needs like poverty and homelessness. A sudden influx of money into the economy could lead to inflation, eroding the purchasing power of the UBI itself and potentially hurting low-income individuals the most.

Some fear UBI could create a culture of dependency and entitlement, potentially impacting social cohesion and individual motivation. However, proponents argue that UBI could offer people more freedom and security, leading to increased happiness and well-being. Designing and implementing a UBI program would be complex, requiring careful consideration of eligibility, funding mechanisms, and potential unintended consequences. Additionally, gaining political consensus for such a major policy shift could be difficult.

While pilot programmes offer initial insights, large-scale implementation of UBI is still lacking, making it difficult to predict its long-term effects with certainty.

It's important to note that these are just some of the potential drawbacks, and the specific impacts of UBI would depend on its design and implementation. It's also important to consider the potential benefits, such as reduced poverty, increased economic security, and greater individual freedom. Whether or not the drawbacks outweigh the benefits is a complex question that requires careful consideration and ongoing research.

Of course, all these decisions may be made for us. While the World Economic Forum (WEF) in Davos didn't propose a single, set-in-stone economic future, this meeting of elites focused on rethinking growth itself and moving away from the traditional GDP-centric approach. The Future of Growth Report 2024 proposes a new framework that assesses growth beyond just speed, looking at the four key dimensions of innovation, inclusivity, sustainability, and resilience.

This reflects a growing consensus that traditional measures like GDP don't capture the full picture of an economy's health and its impact on people and the planet. The report predicts a slowdown in global economic growth, potentially reaching its lowest point in three decades by 2030, due to various economic and geopolitical challenges.

Climate change, inequality, and social unrest are seen as major risks that need urgent attention alongside economic goals, and proposed solutions and directions include promoting inclusivity by ensuring equitable access to opportunities and closing the gap between rich and poor, and investing in innovation that drives sustainable solutions and tackles pressing challenges like climate change.

Wherever you sit on the economic spectrum, it's important to be aware of the different viewpoints being discussed. It’s your future they’re talking about.