Professor Habib Ahmed, Sharjah Chair in Islamic Law and Finance, outlines the conflicting proposals on to how we can create a more sustainable economic system.
Realising the adverse impacts that capitalist modes of production have on the climate and environment, there are various suggestions proposed to move towards more sustainable economic systems. An obvious way to resolve the problem would be to provide solutions within the market-based framework. This perspective views the adverse impact of climate change as the “greatest market failure the world has ever seen” and suggests market-based solutions to mitigate the destructive impacts of market failures. Policy recommendations include “pricing of carbon, implemented through tax, trading or regulation”, supporting “innovation and the deployment of low-carbon technologies”, removing barriers to energy efficiency and “to inform, educate and persuade individuals about what they can do to respond to climate change”.
One suggestion to deal with climate and environmental crises is to transform from ‘linear’ to ‘circular’ economies within the capitalist framework. The circular economic strategies have gained importance during recent times and are deemed as an effective approach to reduce greenhouse gas emissions, combat climate change and enhance sustainability. Circular economy is considered as “a regenerative system in which resource input and waste, emission, and energy leakage are minimised by slowing, closing, and narrowing material and energy loops”. The methods used in a circular economy include: rethink, refuse, reduce, reuse, repair, remanufacture, refurbish, repurpose, recycle, recover, eliminate waste and having long-lasting design.
The approaches used in a circular economy essentially relate to changed business models and innovative technologies that transform the way in which products are made and used. The objective is to turn “goods that are at the end of their service life into resources for others, closing loops in industrial ecosystems and minimising waste”. While circular economy aims to protect the planet while ensuring economic prosperity, a key issue is that it attempts to restructure the production processes and consumption patterns within the capitalist system that relies on the markets and profit seeking.
Another approach to deal with the destructive impact of economic growth on environment is ‘eco-capitalism’ that calls for ‘degrowth’. The Degrowth Declaration Barcelona 2010 recognises that the current debt-fuelled growth that compels the economy to grow continuously to repay debt “will end in social disaster, passing on economic and ecological debts to future generations and to the poor”. Degrowth perspective argues that the Earth’s limited resources can’t sustain the unlimited growth implied in capitalist economic systems, and reverses the grow-or-die capitalist framework by voluntarily reducing the size of the GDP. However, it’s difficult to conceive how a capitalist economy can exist with economic contraction. Since profit-maximising corporations aren’t likely to voluntarily reduce their production levels and adversely impact their profits, one way to implement ‘eco-capitalism’ in a social democracy would be through regulations and fiscal measures.
The ‘eco-socialists’ assert that degrowth isn’t possible under capitalist structures, as the system can’t survive without growth. Their radical view argues that the eco-capitalist degrowth perspectives fail to tackle the key features of capital and its accumulation. The eco-socialist camp contends that “degrowth requires the social appropriation of the main means of (re)production and democratic, participatory and ecological planning”. They maintain that “ensuring equitable wellbeing for all does not require economic growth but rather radically changing how we organise the economy and distribute social wealth”.
Some eco-socialists, however, recognise that even socialist growth can’t be ecologically sustainable. One argument is that degrowth would need distinguishing between ‘use values’ and ‘exchange values.’ While use values relate to real human needs, exchange value is what’s counted in GDP and its growth. This perspective posits that there’s enough to meet the needs of everybody to lead a decent life if the wealth is shared more evenly.
Given the limitations of narrow, profit-seeking capitalism to address the challenges of global warming and environmental degradation, there are proposals of envisioning a new form of ‘stakeholder capitalism’. A key distinguishing feature of stakeholder capitalism is to go beyond maximising shareholders’ value and consider the interests of other stakeholders. The stakeholders include not only customers, employees, partners, the community and society, but also ecology and environment. Key features of stakeholder capitalism have been identified as purpose and profits; stakeholders and shareholders; business as a societal and market institution; people as fully human and economic; and combining business and ethics. The stakeholders model integrates ethics in economic decision making and moves from the narrow goal of profit-maximisation to incorporating triple objectives of profit, people and planet in production processes.