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Home , Culture of capitalism, Growth imperative

Reflections on the meta-practice of and its capacity for sustaining a low energy transformation

Paper for MILEN conference, Advancing the research and policy agendas on sustainable energy and the environment, 22 – 23 Nov, Oslo by

Harold Wilhite and Arve Hansen

University of Oslo, Centre for Development and the Environment

Introduction

We are aware that raising questions about capitalism at a conference on energy and environment borders on heresy. Aside from a steady stream of critique from Marxist and eco- socialist perspectives (e.g. Foster 2000; Smith 2010), the usual critique from the energy world has taken the meta-practice of capitalism for granted and searched for ways to convert and soften its aims from pure -generation towards an accounting of ecological and social goals. Eco-modernism (Spaargaren and Mol 1992) and its close cousin, green economics (Eckersley 1992 and 2011) are examples of inside-the-system critiques. Due to the failures of these critiques to make any substantive differences, at least measured in terms of the global economy’s energy input or carbon output, we contend that it is time for energy conferences like this one to entertain more radical critique. In this article we intend to position ourselves out of the box and to question whether it is possible to initiate and to sustain a transformation to a low-energy society within the framework of a capitalist system.

This radical system-thinking is justified by the energy record of the past 40 years. The rich countries of the world have managed to do no better than to slow growth in energy use over this period. OECD economies are considerably more energy efficient today than they were in the 1970s, but the historical record of energy shows a gradual but steady increase. Despite international and national goal setting; the establishment of carbon markets; the deployment of fiscal instruments such as taxes and fees; the in research on and diffusion of efficient technologies - the effects on energy consumption and carbon emissions have been marginal from a carbon reduction perspective. Projections from the International Energy Agency imply that the replacement of fossil fuels with alternative, non-fossil energy

1 sources in production will not happen fast enough to take a significant dent out of global carbon emissions over the coming decades (Wilhite 2012). This means that if severe climate change is to be avoided, energy consumption in OECD countries will have to be significantly reduced.

For the first few decades of its post-1970 history, the politics and policies of energy conservation have experimented with variations on market-based, neo-liberal theories of consumption and reduction. Social scientists from a number of academic disciplines and theoretical persuasions began launching critiques of this theoretical framework from the early 1980s. These critiques have not been taken seriously for a number of reasons. One is the argument among the proponents of market-driven solutions is that these experiments have not yet had time to come to fruition - if we are patient and continue to batter down market barriers, we will eventually get energy markets to work well enough, energy technologies efficient enough, to act green enough and people well enough informed about energy costs and environmental consequences; then, societal energy use will begin to decline rapidly. There has been a lack of zeal in pursuing alternative policy approaches that will require more than markets for take-off, such as sharing, downsizing and de-materialization. From within the capitalist frame, these are viewed as incompatible with the achievement of socio-economic goals such as ensuring industrial competitiveness and full , and thereby unrealistic subjects for researchers and un-fundable. In short, capitalist framings and market principles have been irrevocable in the development of new theoretical and policy platforms for reducing energy use. In research funding regimes such as that in Norway in which ‘commercial relevance’ has been holy grail, research that aims at radical critique and the exploration of systemic changes to the ways energy is produced, delivered and consumed have been unthinkable.

We argue that the half century history of failures of capitalistic-framed sustainable energy policies justify thinking the unthinkable and questioning whether a low energy transformation is possible within this framework. We will discuss and critically examine (1) The association in capitalist models of ‘more’ with ‘better’ in many types and levels of policies and practices relevant to energy use (2) The overestimation of the power of markets to foster rapid transformations (3) The paradox that increasing energy efficiency is seen by both the champions of economic expansion and of energy savings as an important goal. We will follow this critical analysis with some reflection on the capacity for new hybrid forms for capitalism

2 and other models to provide policy frames which are more amenable for encouraging the transition to low carbon societies.

Capitalism or ?

Approaching capitalism at a systemic level, at least outside of a strictly Marxist discourse, requires some clarifications. The first is the question of whether it makes sense at all to discuss capitalism as such, detached from its contextual manifestations. That capitalism looks different in different contexts is quite clear. This difference has been the main focus of the ‘varieties of capitalism’ school in political economy and . This field of research represents an important acknowledgement of the different shapes of capitalism, but we agree with the point raised by Pontusson (2005), Peck and Theodore (2007) and Streeck (2011), that there has been too much focus on varieties and too little on capitalism. We claim that alongside the varieties there are traits and principles that are at a systemic level similar for all varieties, and that it thus could be fruitful to talk about capitalism as being never the same, but always similar; always context-dependent, but always driven by the same overarching forces and logics. This is what economic geographers Peck and Theodore (2007: 733) call for in their concept of variegated capitalism, ‘advocating a shift away from the varieties-style reification and classification of economic-geographical difference, in favor of a more expansive concern with the combined and uneven development of ‘always embedded’ capitalism, and the polymorphic interdependence of its constitutive regimes’. Such systemic approaches to capitalism have been rare since the classical theorists of the likes of Smith, Marx, Schumpeter, Weber and Keynes. In his take on historical theories on and about capitalism, Ingham (2008: 2) reaches the conclusion that ‘no social scientist over the past half century has added anything that is fundamentally new to our understanding of the capitalist economic system’ (Ingham, 2008: 2, italics in original). In debates about energy sustainability and climate response, rather than discussing capitalism as such, criticism is often ‘deflected from the internal socio-economic relations at the center of the problem to the individuals, businesses and nations charged with not doing enough.’ (Cremin 2011:141).

Drawing on the work of Wolfgang Streeck (2011) and other analysts of capitalist principles, in the subsequent sections we discuss elements that are fundamental to all of the varieties of capitalism, focusing on the three characteristics listed above that we see as relevant to an analysis of the potential for a low-energy transformation under capitalism.

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An association in capitalist models of ‘more’ with ‘better’ in many types and levels of policies and practices relevant to energy use

Centeno and Cohen (2010:174) write that ‘The environmental challenge is a product of particular characteristics of capitalism’. Schnaiberg (2005) attributes the problem to what he calls “the treadmill of production”, of ever more and ever faster. These dynamic tendencies of capitalism represent one of its greatest strengths, but are also the cause of fundamental tensions and dilemmas. Without growth, any perceivable variety of capitalism stagnates or recesses. The consequence is that lose profits, workers lose wages and/or jobs, and politicians lose elections. Any commercial enterprise operating in a capitalist, is obliged to grow in order to secure profit generation. If not, it has no chance of surviving in a competitive market or of producing dividends for shareholders (Ingham, 2008). This is why capitalism is said to have an embedded ‘growth imperative’ and why it has historically fostered many fixes for expansion in order to sustain growth (Harvey, 2006), be they geographic expansion (colonialism, international trade, transnational corporatism) or temporal expansion (credit-based production and consumption). At the level of , as Smith writes, ‘ have no choice but to grow. It is not ‘subjective’. It is not just an ‘obsession’ or a ‘spell’ … shareholders are not looking for ‘stasis’… so they drive their CEO’s forward… Corporate CEOs do not have the freedom to choose not to grow or to subordinate profit-making to ecological concerns because they don’t own their firms even though they may own substantial shares (2010: 31).’

Smith proposes that steady state economists Daly, Jackson and Simms are all right when they pose that we need a ‘new macro-economic model that allows us to thrive without endless consumption. But they are wrong to think that this can be achieved in a capitalist economic model (Smith 2010:30). In an article entitled ‘Beyond growth or beyond capitalism’, Smith gives a convincing critique of the proponents of ‘steady-state’ or no-growth capitalism. He claims that even the anti-growth economists do not face up to capitalism’s growth imperative and that no-growth capitalism is actually a contradiction in terms. Smith (2010: 29 and 33) writes that

‘growth is an iron law of capitalist development, that capitalism cannot exist without constant revolutionizing of productive forces, without constantly

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expanding markets, without ever-growing consumption of resources …For more than 30 years, Herman Daly has chanted his mantra of ‘development without growth’ but he has yet to explain, in any concrete way, how an actual capitalist economy comprised of capitalists, , employees and consumers could carry on from day to day in ‘stasis’.

Anthropologist Richard Robbins (2005) writes how a half century of life in the USA and Europe under capitalism has created what he refers to as ‘the of capitalism’. This culture has embedded the association of more with better at many societal levels: The culture of capitalism is devoted to encouraging the production and sale of commodities. For capitalists, the culture encourages the accumulation of profit; for laborers, it encourages the accumulation of wages; for consumes it encourages the accumulation of goods. In other words, capitalism defines sets of people who, behaving according to a set of learned rules, act as they must act.

These ‘people’ that Robbins refers to encompass marketing specialists, advertisers, government agents, corporate public relations specialists, journalists and families, all of whom conform to a vision of the world designed to maximize production and consumption of goods. From a culture premiering frugality and durability in the 19th and 20th century, the capitalist culture of the past half century has premiered a treadmill of consumption encouraged by governments, producers and advertisers. The performance of consumption has moved from background to foreground in social life. Today, people consume changing models, fashions and styles in order to get ahead of, or at least stay abreast of their peers (Wilhite and Lutzenhiser 1998; Wilhite 2008). In other words, the meta-practices of capitalism embed into everyday practices a set of predispositions for a never-ending treadmill of expansive consumption practices, whether they be measured in terms of , goods or resource inputs.

An overestimation of the power of markets to foster rapid transformations

Market exchange represents one of the very basic elements of capitalism, and modern capitalism is the first economic system in history where market exchange is the main means of coordination (Ingham, 2008). This does not mean, however, that markets represent the only defining element of capitalism, nor that markets are necessarily “free” in capitalism. As Ingham (2008: 93) points out, the market is one of several basic parts of the capitalist system, and a range of non-market elements, based on relations of power and authority, have vital influence on the coordination of capitalist economies. The level of reliance on markets has also differed significantly depending on the capitalist variety. The Anglo-American variety of

5 recent decades places markets in a particularly central position, and this has seen a global diffusion during the period of neo-liberal since the late 1970s. The neo-liberal extreme belief in markets, what Stiglitz (2002) has called “”, calls for structuring national economies after abstract economic theories of perfect with and marketization as main tools. This is behind Streeck’s (2011) argument that can be seen as a “purer” form of capitalism, since market expansion is a fundamental characteristic of capitalist development. In Streeck’s (2011: 154-155) own words, this is a process of “gradual or periodic expansion of the system of contracts – or, in other words, of market relations – as the privileged mode of social and economic intercourse: of competitive contracting at prices that fluctuate with changes in ”. This division between the economic and social is close to Polanyi’s (2001 [1944]) analysis of the capitalist system and his concept of the “double movement”. Polanyi saw a constant struggle between market expansion and societal response to this expansion, where the responses (different forms of social protectionism) in turn would be worn out by new attempts to push them aside by market forces. Importantly, in Polanyi’s analysis the nation-state plays a central part in the market society, so that even laissez-faire capitalism is in a way state-planned capitalism. The result of the increasing control of the economic system by the market is that society is run as an adjunct to the market; “Instead of economy being embedded in social relations, social relations are embedded in the economic system” (Polanyi, (2001 [1944]): 60).

The point here is to place the current high reliance on markets in energy policy in the context of capitalist development. The neo-liberal view of a can be traced back to Hayek’s (1945) work on imperfect information and governmental inefficiency, and has at its core the belief that markets will always deliver more efficient results than state-driven policies. The hegemonic position of neo-liberal economic reasoning and its “performative” text-book theories (Ingham, 2008; MacKenzie, 2006) has proved very powerful in shaping national and global economies. In time, this increasing marketization reached hegemonic status in both delivery of energy and policies geared towards more sustainable energy production and consumption, and we are expected to put our faith in markets to deliver the necessary sustainable transformation of our economic system. This raises the question: How do markets lead to transformations? The simplest explanation can be found in Schumpeter’s theories. Schumpeter placed the entrepreneur at the center of capitalist development, of the process he called “industrial mutation”. This mutation, that “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”

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(Schumpeter, 2008 [1942]: 83, italics in original) is what Schumpeter referred to in his famous concept of . In a competitive market, the drive for profits and economic survival leads to the development of new and more efficient technology and solutions. But this happens for the sake of maintaining profitability, not for any larger societal or environmental concerns. The aim in contemporary energy policy is thus to let economic actors’ self-interested drive for profits lead to more efficient use of energy (decrease in costly energy use can lead to increased profits) as well as more energy efficient solutions leading to creative destruction of older energy intensive solutions. Simultaneously it should lead to the development of renewable energy systems, since these are seen as a potentially very profitable future markets. But this encounters a range of problems, such as the immense power and profitability of both state-capitalist and private corporations involved non- renewable energy production.

With what we know about the rebound effect (see next section), it is difficult to fathom how a drive for profit and expansion can simultaneously drive the needed low-energy transformation. Still, the assumption that this is possible seems to be at the core of the recent emphasis on “green economy” - the new buzzword in mainstream environmental discourses. The idea is that it is possible to transform markets to internalize the environmental costs of production and consumption, basically meaning putting a price tag on environmental destruction. In turn this is supposed to solve what is seen as a global triple crisis of economy (recession), environment (degradation) and society (increasing stratification), mainly through the commodification of the environment leading to new opportunities for . This is of course not very new, but seems to rather represent a continuation of the logics behind the carbon trading system that so far has possibly led to economic growth, but can demonstrate few environmental gains. The most convenient side of these market-based solutions is, however that they create a distraction from much-needed changes in human behavior, infrastructure, and (Spash, 2010), creating an illusion that slight modifications of -as-usual are sufficient to resolve global environmental crises.

The efficiency paradox

One of the principle conditions for economic growth is increasing the efficiency of production and consumption. Stimulating energy efficiency makes economic sense in a capitalistic,

7 growth-oriented economic system because it provides fodder for continued growth. Paradoxically, energy savings policies over the past 40 years have had the same goal of stimulating energy efficiency. This leads to confusion and debate on the efficacy of efficiency in sustainable energy discourses.

In production, cutting the cost of inputs, seeking cheaper sources of raw materials and labor and bringing in energy-efficient technologies are strategies used to increase profits and to expand the scale of production (Foster et al., 2010). In consumption, from the producer/provisioner point of view, the goal is to promote growth in the volume of sales of its product. There are in fact profitable markets for the more environmentally concerned consumers, even though these are niche markets, as the vast majority of consumers usually would aim for the cheapest alternatives (at least if we believe economic theory?). Increasing the size of these markets for energy efficient products has been one of the principle goals of energy savings policies, relying mainly on information, efficiency standards and . There are examples of successful energy regulatory schemes that have resulted in the development of industrial ‘energy efficiency services’ with documented results of generating energy savings in certain sectors such as residential and commercial buildings for example. If the commodity sold is a ‘green’ product which saves energy, it is feasible that product efficiency might offset the growth in the number and size of these green products that are sold and taken into use. But experience has shown that in the majority of cases the ever expanding volume of products like heat pumps, fuel efficient vehicles, and refrigerators has offset the efficiency gains. This brings us to the heart of the efficiency paradox, formulated by Wilhite and Norgard (2004) as the ‘efficiency delusion’. The delusion was first formulated as a paradox by Jevons 150 years ago (1866). He wrote that in a capitalist growth economy, money saved as a result of reducing direct energy costs of energy-using technologies and equipment will be invested by the consumer in other energy using products or practices, the net result of which will likely be an increase in overall energy use. This is no longer a hypothetical contention but has been confirmed in numerous empirical studies (Brannlund et al. 2007; Frondell et al. 2008; Sorrell et al. 2008; Turner 2009). In residential consumption, money freed up by an investment in an energy efficiency project or technology is used by householders to increase comfort or convenience in ways that leads to in other forms for energy using activities. There seems to be no bounds on the expansion of house size, numbers of automobiles, sizes and numbers of household appliances, increases in heating and

8 cooling thermostat settings, number and length of showers, and number and length of air trips, at least when the economy is performing as it should, i.e., expanding.

From cart to horse: the necessity for a radical reduction in energy use opens for a radically new socio-economic framing

The bottom line is that from an economic point of view it is not in the nature of capitalism to reduce the production or consumption of anything for the sake of reduction, including energy or resource use. Could it be possible for a moral commitment to environmental amelioration to counteract or compensate for this conundrum? Not according to Streeck (2011) who argues that morality will never override expansive economic incentives when nature is , and the environment is regarded as an . The effect of discounting nature and internalizing environmental costs is reduced profits. In his words (2011: 147): “Indeed the fact that capitalist actors may be willing to destroy the commons on which they depend and deplete moral resources without which they cannot exist even though they cannot restore them, is a point that has often been made, from to Fred Hirsch”. This ontological irony has its epistemological counterpart, formulated in the now famous words of Kenneth Boulding (quoted in Smith 2010: 30): ‘Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist’.

There are indeed many varieties of capitalism, but none that escape the overriding principles we have outlined. The hybrid capitalist varieties, or “market ”, of countries such as China and Vietnam open for forms of long-term strategic state planning that are more difficult in its more liberal counterparts. This is what allows China to make big investments in renewable energy, since this is seen as a vital market in the future. There could be a potential there for interesting Western capitalists, since a developmental state deciding to invest heavily in green energy could make global impacts. But again China is at least as geared towards growth as any other capitalist economy, and as a developing country will naturally not be interested in discussing reduction of energy use. Rather, China is investing in order to ensure sufficient access to energy and capital to continue its growth trajectory. This development just makes it more crucial than ever for the affluent countries to take energy seriously and stand out as role models, as the potential impact of 1.3 billion Chinese consuming at the per-capita level of the OECD-countries would be nothing short of devastating.

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The fundamental problem from the perspective of achieving a political economy of low energy is the lack of viable alternatives. The capacity of capitalism to deliver higher living standards, along with the negative track-record of state-socialism in terms of both human and environmental impacts, has led to the total discredit of any non-capitalist approaches to development. Still, a range of different visions exist, both with and without overriding capitalist principles, but none that have risen to represent realistic sustainable alternatives. We need to continue to question our conceptualizations of progress, of the good life, of modernity, and of nature. At the same time, however, there is a dire need to come up with more pragmatic alternatives to current practices.

It would be pompous to conclude with final answers. The complexities of a transformation to societies that need significantly lower amounts of energy yet retain the potential for full- employment, promote social equality and resolve issues of material well-being are enormous. However, it is important to raise these meta-questions in an interdisciplinary context such as the MILEN conference in order to encourage attention to the broader economic framing of energy, to generate a sense of urgency on energy reducing action and to draw attention to the need for new interdisciplinary perspectives on the political economy of energy. It is incumbent that we question fundamental concepts such as growth, markets, profit and shareholder ownership and that we explore the potential of collective ownership of production (profit sharing), sharing initiatives in consumption (i.e. car sharing, leasing), and innovative which encourages both. Shifts such as these could be steps towards a metamorphosis from energy as support for capitalist practices to a political economy which aims for a low energy input. The inevitable restructuring of production and consumption would be painful for some but would create opportunities for others. Both the reframing and the realignment of benefits needs to be explored. We call for future interdisciplinary research aimed at raising these uncomfortable questions and sketching out a new vision for the political economy of energy production and consumption.

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