Capitalism, greening and political economy

China and other countries in the global South are leading the way in the uptake of renewable energy and the pursuit of green growth

Hints that we maybe undergoing profound transformations in capitalism as it grapples with the unprecedented challenge of taking the fossil fuels out of the global economy are rapidly becoming clearer.  In our book Climate Capitalism, published only in 2010, Peter Newell and I sketched this, as it seemed to us at the time.

Then, carbon markets dominated the landscape.  Since then, the innovations aimed at such transformation are much more diverse and emerging in surprising places.  And our understanding of the details of what is driving them, and what could make them self-sustaining and durable, is also getting steadily more sophisticated.

One thing that is becoming increasingly clear, which for many is paradoxical at least, if not inexplicable, is that developing countries are becoming the leaders in the transformation process.  John Mathews shows this most clearly in the case of China in his new book on the Greening of Capitalism.  While China’s rapid industrialisation is still heavily based on coal-fired electrification, it is nevertheless also leading the world in the expansion of wind power, and is second only to Germany in installed capacity for solar electricity.  The rate of change in China in terms of the uptake of renewable energy is way beyond the level any industrialised country has been able to achieve.

Mathews alludes to this at times, but similar things could be said about other countries in the global South.  South Korea has itself become a recognised leader in ‘green growth’ strategies.  India is routinely recognised as a leading country in NGO evaluations of climate policy performance.  Chile and Mexico already have carbon taxes, while South Africa’s is due to come into effect in 2016; the growth in emissions trading systems is also now principally in the South.  Korea’s emissions trading system, the second biggest in the world, started in January 2015, and several pilots now exist in China (and a nationwide one is planned for around 2018), while Brazil, Vietnam and Thailand are all considering implementing them.  What’s more, innovation is not confined to rapidly industrialising countries – both Ethiopia and Rwanda, for example, have green growth plans that have gained a good deal of attention.

As Mathews points out, this is paradoxical for those used to thinking in terms of the obligations of the rich world to clean up the mess it has bequeathed the world as a whole, and developing countries have no obligations to limit their emissions.  This North-South narrative has long dominated international climate negotiations and is still the mainstay of the rhetoric of Southern countries, even those, like China, that are rapidly adopting ‘green growth’ strategies.

But there are many good reasons why they are taking the lead.  They don’t have such deep high-carbon infrastructure already in place, with its associated vested interests.  They have relatively high population densities, creating many other incentives (air pollution, space, etc.) to minimise fossil fuel use.  They benefit from technical innovation in ‘more advanced’ economies and the diffusion of technologies like wind and solar.

Mathews’s book demonstrates in exemplary fashion how focusing on these countries enables us to get really to the heart of the challenge of decarbonisation, making us realise much more sharply that it is fundamentally a question of the transformation of the organisation of capitalism.  Perhaps the most basic reason that it is easier in countries like China than, say, the US, is because China is already going through a fundamental transformation.  In such a context, incorporating ‘greening’ into that process more easily appears as obvious – it is not transforming something that already exists, but simply shaping the way that the transformation occurs.

Most fundamentally, focusing on the process of transformation brings into sharp relief the magical thinking of the free-market environmentalists who believe that all we need to do is to ‘get the carbon price right’ and the market will do the rest.  There is so much of economic life, especially in energy use, where demand is not that price-sensitive: think of the landlord-tenant problem, the natural monopoly in electricity distribution, the monopolistic or oligopolistic organisation of many energy industries, to mention just a few examples.

In other words, strategic intervention by the state is central to the transformation process. Even in the industrialised countries that are leading the process of GHG emissions reductions, like the UK, Germany and Sweden, this strategic role of the state is obvious: despite the pro-market neoliberal rhetoric, there is much more going on in terms of support for renewables, revised building codes and product standards, R&D investment, strategic partnerships with industry, and so on.  Some form of ‘climate Keynesianism’, or ‘climate developmental statism’, is the condition of possibility of successful decarbonisation strategies.

This properly political-economic way to understand climate change as a challenge is one of the most important developments of the last five years or so.  But starting with capitalism as the analytical device also raises the question of contradictions.  Here, Mathews is perhaps too silent.  While he rightly opens with Marx and Engels on capitalism’s extraordinary dynamism, he pays less attention to their focus on the contradictions and instabilities they also make integral.  The reasons perhaps become evident when he describes capitalism as having as its foundations ‘property rights, markets, and innovation’ (p.7) – leaving out the wage-labour relation that is central to Marx’s analysis precisely because it is, for him, both the source of the dynamism and the instability and contradictions.

From this point of view, it remains at best an open question whether capitalism can decarbonise successfully or not.  Most writers starting from this point would argue that one of capitalism’s contradictions is that it must continually expand its extractive capacities to reproduce itself.  I am not sure they are right, but Mathews is perhaps too sure they are wrong.  He does get quite quickly to conclusions that demonstrate it can decarbonise, as in how he interprets the growth of renewables in China as evidence of a transition away from fossil fuels: it is just as possible that they are simply expanding alongside coal (similar to Obama’s ‘all of the above’ energy strategy) and not really displacing it.  It is, of course, too soon to tell on that score.

What it is not too soon to suggest, however, is that the possibility of pursuing more ambitious climate strategies will be opened up further by this sort of attention to the ways in which states can incorporate low-carbon development into their economic strategies. They do so shaped by pre-existing institutional pathways and their global economic location.  This is a much more fruitful starting-point, both for analysing and pursuing climate policies, than conventional economics.