On Capitalism

In Caitalism Overview

On the face of it, global heating is down to buring too much fossil fuel. This is true, as far as it goes. It is incomplete in that it ignores change of land use and the side effects of industrial agriculture, but it turns out that fossil fuels make by far the biggest contribution to CO21. Clearly, that being the case, all we need to do is replace fossil fuel sources with renewables and all will be well. Yes?

Well, no. Firstly, that's really unlikely to be achieved technically in the short time that seems to be available. Secondly, there is a huge pressure to keep drilling and digging. This pressure largely derives from the way we structure business (and economics), so we need to explore that to understand the connections and gain some insight on what might be done.

Businesses globally operate under capitalism. That is to say, they borrow money to invest, they make and sell products derived from that investment, and they use the money from sales to pay running costs, materials and labour, to pay off debts and to reward shareholders with dividends. We add to that the presence of competition. That is, there is generally more than one business providing a given commodity or comoditised product and each business has to balance its market prices against its competitors, thus ensuring that the offered price is as low as possible given running costs (manufacturing costs, materials and labour). Each busines has an incentive then to reduce running costs below its competitors. Materials costs might be expected to be more or less fixed for a given product quality, so manufacturing costs and labour need to be looked at. It turns out that labour is both the largest cost and the most difficult aspect of the process to manage, so businesses seek to look firstly for ways to replace labour by machines and secondly to locate somewhere they have access to a cheap and disciplined workforce.

In the early days of the industrial revolution, say, around about the early 19th century, cotton mill owners in Lancashire used newly invented machinery to replace skilled spinners and weavers, and used water power to drive these machines. Water power was cheap, but inflexible. The mill had to go to the power source and mill owners had to build small towns to house the workers. Labour discipline was, from an owner's perspective, a problem, largely because many of the workers cam from a rural background. The steam engine changed all this. Even though coal was expensive, powering a mill by steam allowed the owner to site the mill where he pleased, and towns (becoming cities) in the valleys provided a disciplined and experienced workforce. Steam also ran all day and every day, which water did not.

So fossil fuels began to embed themselves in the market economy from about that time: coal because it was there, and oil because it came in a pipe. These fuels had one other advantage, over and above flexibility and controlability. They decoupled economic growth from the limitations of the land surface. The fuels are energy dense, and, largely, come from beneath the surface. This is in contrast to the fixed catchment area of water, or the productivity limitations of biofuels. The discovery of coal as a source of mechanical power in mid 19th century freed business to grow as rapidly as the market would allow.

Fast forward to the 21st century and we still have much the same constraints, addressed still by fossil fuels.

  1. Global Carbon Project (2018) Carbon budget and trends 2018. published on 5 December 2018, 

  2. Andreas Malm: Fossil Capital, Verso Books ISBN-13: 978-1-78478-132-3