Sustainable Capitalism is Not That Simple

Gore and Blood (what a pair of names for a polite discussion of sustainability!) have written “A Manifesto for Sustainable Capitalism.” In it they define sustainable capitalism as “a framework that seeks to maximize long-term economic value by reforming markets to address real needs while integrating environmental, social and governance (ESG) metrics throughout the decision-making process.” This definition seems to presume governmental guidance to the market. Who else would produce a “framework”? Perhaps they are hoping that a framework will ’emerge’ from the complexity of personal choices and corporate interests. If one does, it is unlikely to look like what they wish for. Indeed, it already has in the version of capitalism that we already have.

Governmentality (a faith in the authority of elected officials and their civil service) also shows through in “Mandate integrated reporting”, “End the default practice of issuing quarterly earnings guidance”, Align compensation structures with long-term sustainable performance, and “Incentivize long-term investing with loyalty-driven securities.” These have not yet emerged – indeed what has emerged is current business practice – and likely will not without a push from government to “mandate” what the market cannot provide by iteself. Unsustainability is a market failure that government can correct. Even if we accept the former statement – which is not self-evident – it is doubtful that government can fix it appropriately. Philosopher kings might but Gore and Blood are not of that ilk.

This very conventional approach to sustainability is a reflection of simplistic, reductionist thinking. Do we really know what sustainability is? In my view it is a pathway not a goal, it is a tendency or direction not a specified outcome. As humans change their behaviors, their environment will change both from its own internal processes and our interaction with it. If this is so, humans will have to continually change their behaviors: no silver bullets exist – and likely never will.

What does it mean for humans to change their behaviors? This is about more than corporate governance or profit horizons. It is about how interactions between economy and society change who we are, what we want, and how we behave. Capitalism, as Marx knew, is not only about firms and markets. It is in the end about society and the people within it that society constructs.

Capitalism may become sustainable but in the end it is down to the mass of individuals (some of whom control the decisions of firms) to choose what is both good for them and for the planet. We are a long way from that.

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2 Responses to Sustainable Capitalism is Not That Simple

  1. Disaffected Youth says:

    Interesting post. You seem to doubt the ability of the general public to move with any cohesion towards indicating what sort of market opportunities businesses should pursue.

    But look at the Green movement.

    As public opinion has changed, many have been quick to jump into this expanding market, selling to greenies, hipsters, college kids, and liberals alike and seeing huge returns on their Green products (cars, lightbulbs, recyclable materials, Tom shoes, etc).

    Granted the Green movement has met with a lot of criticism with its capitalist influence, but this is the free market in action bringing us closer to environmental sustainability (much closer, arguably, than our government has yet been able to do).

    Many people’s goals in which they call for government action are legitimate, compassionate, and intelligent goals. The problem is the way in which you seek for the change to take place.

    I think we definitely should wait for the mass of individuals to decide for themselves what to purchase and what businesses to support (free from the coercion of government subsidies).

    Making it the decision of the general public, rather than a centralized government, will ensure that thousands of years into the future government officials will not still be pushing legislation upon we the people because it has deemed it to be the right decision (regardless of what millions of individuals believe).

    Government coercion is never a good option, we need to change the hearts and minds of the American people. Only then can true change be initiated.

    • Because the blog presumes a comlexity worldview, all comments are made through that lens. Thus, I expect system organization to emerge from the interactions among agents. Within this perspective, representative government is a strange beast that is supposed to reflect the dominant needs and wants of the voting agents and then implement policies to achieve that them.

      Voters often cannot through ‘democratic’ voting produce demands for government to enact that everyone will approve of. As Arrow noted, the consensus may not equal the preference of any single voter. Equally, the voice of the voters may be drowned by arguments among them.

      At the same time, the voters may demand competing benefits – both ‘guns and butter’ – that scarce resources cannot provide. This would seem to be roughly where we are now. To the extent that the Tea Party has a clear message it seems to be that they want to preserve Social Security, a strong military, and Medicare, and grow the economy and reduce the national debt. But they also want to pay much less in taxes. Most workers would like to work half the time for double the pay.

      Finally, from a complexity perspective, policy implementation is a further problem. Even if what the populace wants is clear, government may not be able to provide it because it often is not possible to predict how any policy will change individual behaviors and how the system will respond. Aside from practical implementation problems from government bureaucracy, what policy will guarantee security or end poverty or make all our children score above average on standardized tests?

      If the system emerges from the behavior of individuals, then capitalism will be sustainable when the great majority of agents make choices that are sustainable for them. Presume that everyone reduces their consumption of natural goods by 25%. The system will consume 25% less and be more sustainable. Why would individuals make that choice? Two possible reasons: they want to or they are forced to.

      It is possible that most of us want to reduce our consumption but need to be forced to. Dieting is more effective when an external force monitors our eating and exercise. Government may be needed to make that happen, to make capitalism sustainable in the long-term (what everyone should wish for, as long as we don’t suffer in the here and now).

      It would be infinitely better if each of us makes a sustainable choice to reduce our consumption because it is better for us, not because we are forced to. But the Green movements usually expect us to act altruistically, to act sustainably because it is good for the planet or for our grandchildren or to end poverty. Altruism is much less powerful than self-interest that is promoted by and reflected in capitalism.

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