Of capitalism, crisis, conversion & collapse: The Keynesian alternative

14 September 2007
The only feasible way out of the ecological crisis is a new, environmental Keynesianism, bringing together government, corporations and citizens. The problem is to convince politicians that ecological transformation and environmental practices can pay off politically, argues Susan George.


The International Forum on Globalisation and TNI’s sister Institute, the Institute for Policy Studies, along with the Global Project on Economic Transitions and the Progressive Student Union of George Washington University, organised a major Teach-In from 14-16 September 2007 in Washington D.C. Some 60 speakers confronted the ecologic crisis and climate change. Here is my contribution.
Susan George


>> watch the lecture on IFG website

Thank you for asking me to contribute to this extraordinary Teach-in. It’s a great privilege and an honour to be here.

As people become ever-more aware of climate change and ecological crisis, they are worried, anxious and looking for solutions. Forgive me if I'm a heretic and offend people right from the start, but I think the time has passed for telling them to change their behaviour, and their lightbulbs; explaining that if “We” all do this, then together “We” can save the planet. I’m sorry, but “We” can’t. I’m not suggesting that people shouldn’t change their behaviour and their lightbulbs—but even if the entire population of, say, Europe, where I live, changes its habits drastically—a most unlikely scenario--it is not going to be enough. I agree that proposals for localisation and scaling down and “powering down” are vital, but we have also got to scale up and power up in terms of challenging and changing governments and capitalist economic practice. We need to provoke and promote a quantitative and qualitative leap in the scale of environmental action, recognising that sometimes big can also be beautiful.

Since I believe that local solutions are necessary but insufficient, I will use my time to address the twin problems of governments and of the capitalist corporate production and financial system. The question I wrestle with is: Can we save the planet while international capitalism remains the dominant system, with its focus on profit, share-holder value, predatory resource capture worldwide and with no-holds-barred finance capital making more and more decisions world-wide? Can we save the planet when faced with a powerful caste that wants only one thing and that is everything. A wise man once described the situation: “All for ourselves and nothing for other people seems, in every age of the world, to have been the vile maxim of the masters of mankind”. That was not Karl Marx but Adam Smith and he knew a thing or two about capitalism.

Most days I answer : No: We cannot. We can’t reverse the ecological and climate crises under capitalism, but that is a despairing answer and if true, it means there is virtually no hope. No hope, because I do not see how even the most convinced, most determined people could replace, much less overthrow capitalism fast enough to carry out the necessary systemic change before a runaway climate effect takes hold.

First of all, there are not that many convinced and determined people prepared to act against the dominant economic system and there is nothing that resembles in the smallest degree an avant-garde revolutionary party that might lead them even if they existed. There is no one-size-fits all replacement solution for capitalism. Considering the historical record and role of such parties and such solutions, I consider this an unmistakably good thing. What is definitely not a good thing is the infection of the entire world with neo-liberal ideology. It has created a more conservative, predatory, profit- oriented world order that is allergic to the kind of fundamental change a New Ecological Economic Order requires.

Furthermore, nobody knows figuratively speaking who the Tsar is today that we would have to overthrow and nobody has a clue where to find the Winter Palace that we would have to storm. We know the Winter Palace isn’t on Wall Street which was up and running again a few days after September 11th and is just one of many world capitalist centres. The worlds of 1917 and of 2007 are utterly different so we must be to try to go beyond this impasse, this dead-end and find a new synthesis.

Let’s take first the slightly easier question “What about governments?” People are generally way ahead of their governments, certainly they are in countries like the United States. The political problem is not simply to "throw the rascals out" because they would be replaced by other rascals just as bad, just as beholden to the corporations, their lobbies and the financial markets. The problem is to convince politicians that ecological transformation and environmental practices can pay off politically.

Activists and experts have got to work with local, regional, state and national politicians and governments; help them to find like-minded partners and formulate ambitious projects they can undertake on the broadest possible scale. Activists and experts must furthermore help these politicians and governments to become shining ecological examples with the electorate by publicising their efforts and their successes. Couldn’t the sponsors of this Teach-In act as the nexus of a kind of best-standards/best practice ongoing forum, bringing together political decision makers, activists and experts to carry out the best public-sector initiatives, large initiatives, because best ecological practice is still too small scale and often closer to folklore than to believable political undertakings.

Now for the more difficult and crucial issue of the economic system as a whole. In his book Collapse, Jared Diamond examines several cases of previous societal extinctions due to over-exploitation of the environment and identifies several common characteristics. One of these is the isolation of the elites, giving them the capacity to keep on consuming way above the ecologically sustainable level long after the crisis has already struck the poorer, more vulnerable members of society. That is where we are now globally, not just in isolated places like Easter Island or Greenland. Our global financial, corporate and political elites are all busy grabbing what they can today and too bad about tomorrow—look at the oil and coal companies, or the brisk sales of private jets or the 946 Forbes billionaires who taken together have as much wealth as two-thirds of humanity. The motto remains Apres moi le deluge.

How can we realistically combat the ecological footprints of these dinosaur elites, recognising that we don’t have the option of shouting “Off with their heads” in some imagined world-wide revolution. Nor can we force them to change both themselves and the system that has served them so well, whereas we know that we must change that system because it is raping the planet and its inherent logic is to keep on doing so.

I will surely be accused by some of outlining a way to give capitalism a new lease on life. But I am going to recommend as one “ingredient of systemic change” the coming together of business and government in a new incarnation of the Keynesian war economy. I was born in 1934 and I remember very well when the US switched massively to a war economy, converting all the rubber plants in my native city [Akron, Ohio] to production not for private cars and trucks but for the military. There was huge citizen involvement and support. Thousands of factories, research labs, housing projects, military bases, day care centres, and schools were built or expanded during the war. Public transport was improved and worked overtime to move millions of men and women to Army bases or new defence jobs.

Yes, there were still worker-management conflicts and yes, big corporations rather than small business got most of the government contracts but on the whole the workers were well paid, African-Americans and women began making a few modest gains and the whole war effort finally pulled the United States out of the Depression—it was Keynesianism on a huge scale. There was also an elite group of businessmen called “Dollar-a-Year Men” on loan from their companies to the government, who were charged with making sure that military production and quality targets were met. They had enormous prestige--I remember that I used to brag to my little school friends that my godfather was a Dollar-a-Year Man.

Why am I going back over this ancient history? Because I think we have a similar opportunity today. The US economy seems to be heading for a genuine recession triggered by the subprime affair, but which goes deeper than that, and the fallout for ordinary people in terms of jobs, housing, consumption and future welfare is going to be serious. If I am right, if the economic problems in this country and therefore in the world are going to fester and get worse, if the United States is sliding into recession, then some new economic tools will have to be used to combat it, simply because the old ones have already been pushed to their limits and have little or nothing left to give.

For example, the dollar is extremely weak—this has made US exports cheaper but it can be devalued further only at great risk. Deficit spending is already beyond belief and the country is hugely indebted, as are households. The housing bubble is collapsing if not already burst. The Federal Reserve says it will reduce interest rates if the economy gets worse, but there too there are limits.

If these traditional tools won’t work, then the only new tool I can think of to pull the United States out of the economic doldrums is a new Keynesianism, not military this time, but environmental; a push for massive investment in conversion and eco-friendly industry, in alternative energies, in the manufacture of lightweight materials for use in new vehicles and airplaines; in clean, efficient public transport; in the green construction industry and retrofitting and so on.

How could one finance such an effort which would involve targeted government spending in the traditional Keynesian sense? By levying carbon taxes, plus taxes on movements of finance capital and purchases of shares; taxes on the profits of transnational corporations and—in order to encourage more local consumption—taxes on the miles travelled by the food that we eat and the clothes we wear. In the South, the best measure would be total debt cancellation so long as it was accompanied by the condition that a given portion of the savings would be spent on environmental transformation. We also need safeguards to prevent delocalising all the ecological activity once more to China and other low-wage countries. In other words, we need some form of protectionism--but let the Indians invest in Indiana and the Chinese in Chicago if they want to pay American level wages and respect American laws and standards. They too should be allowed to “site here to sell here”.

All these new, eco-friendly industries and products would have huge export value and could quickly become the world standard. I am trying to describe a scenario that can be sold to the elites because I don’t think they will embrace genuine environmental values and conversion if there’s nothing in it for them. But this approach is not merely a cynical attempt to get the elites to move in their own interests. There are also plenty of advantages in such an economy for working people. A huge ecological conversion is a job for a high-tech, high-skills, high-productivity, high-employment society. It would be supported, I believe, by the entire population because it would mean not just a better, cleaner, more climate-friendly environment, but also full employment, better wages, and new skills, as well as a humanitarian purpose and an ethical justification—just like World War II.

In other words, it’s a Public Relations dream. Whichever political party understands this can win on such a programme. We ought to initiate such a new ecological economy in Europe but I’m afraid we won’t, so I’m giving you the idea for what it’s worth because in the US you contribute even more than we do in Europe to the current crisis and because you also just might be able to do something about it, without having to bring down the entire capitalist system as a prior condition for saving the world.

Before you tell me that none of this will work, that my solution is worse than a pipe-dream, that you don’t want to save capitalism anyway and I’ve been wasting your time, please let me make one more point. The economic solution can come from a massive Keynesian-type commitment bringing together government, corporations and citizens but such an effort would also have vital role in creating renewed social cohesion.

By this I mean it would bring many constituencies together in a common cause. Politically speaking, today no single interest group can solve the problem that concerns it most; that is, alone, ecologists can't save the environment; farmers alone can’t save family farms; trade unions alone can’t save good jobs in industry, and so on. Broad alliances are the only way to go, the only strategy that pays. We have begun to be successful in working democratically and making alliance partners of people who come from different constituencies but are basically on the same wavelength. The various Social Forums have contributed enormously to this process, so have the IFG and other Non-Governmental Organisations. Now we must go beyond this stage and try to forge alliances also with people we don't necessarily agree with on quite major questions—for example, with business. This can only be accomplished by recognising that disagreement, even conflict, can be positive so long as the areas where it is possible to agree are sought out, identified and built upon. We must find where the circles of our concerns overlap. At least one of those overlaps ought to be saving the planet. I don't see any other way of generating citizen enthusiasm, involvement and the qualitative and quantitative leap in scale that is now required.

One could also develop the need to extend these alliances to the South and the need for a complete overhaul of the present international financial and trade institutions which are by nature anti-environmental. There isn’t time to do this, nor can I elaborate here on the content and the financing of necessary environmental investments. What I can do is you that the conversion to an ecological economy is technically feasible. The schemes for new taxes have been thought through; the industrial prototypes already exist; the machinery is ready to hum into action the moment people can make their politicians accept the challenge.

Capitalism is not sane in the sense that most people understand sanity—we humans normally think about our future, that of our children and the future of our country and the world. The market, on the contrary, operates in the eternal present which, by definition, cannot even entertain the notion of the future and therefore excludes safeguards against future, looming destruction unless these safeguards are imposed upon it by law.

We need law, for sure, and political forces with the backbone to propose and to vote the law into existence, but we also need to think about human motivation. Remember the prestige of the Dollar-a-Year Men of the 1940s and imagine what might happen if we could transpose it into the world of 21st century capitalism. A significant number of contemporary captains of capitalism, all of them with bloated, unimaginable salaries, might come to believe that money is all very well—but is there nothing more? Why not found an extremely exclusive Order of the Earth Defenders, or the Environmental Knights or the Carbon Conquerors who alone, in recognition of their special contributions to the national and international environmental conversion effort, would have the right to display a highly visible emblem—on a banner in front of their homes; on their cars, on a golden rosette in their buttonholes like the French Legion d’Honneur; like a Congressional Medal of Ecological Honour, the sign of belonging to the small assembly of the anointed; those who have decided to save the earth. It would also appeal to their competitive spirit.

Finally, myth has always been the driving force of every great human achievement, from Greek democracy to the Renaissance to the Enlightenment and the American and French Revolutions. So it must be in the coming age of Ecological Stewardship. To save the planet, we must change--and change quickly and profoundly-- the way the majority thinks and feels and acts, and we must start with the social forces we have right here and right now, and no others. It’s no use wishing they were different ones and we must play the hand history deals us. For such a change, we will need six “Ms”, starting with Money, Management and Media. But even more important than these three “Ms”, we must try to create a new sense of Mission and and Motivation and Myth at the noblest level. “Myth” in this sense has nothing to do with story-telling or lies. It is the grand narrative that empowers us to believe that we can accomplish what we must accomplish. It speaks to the deepest motivations of human behaviour and inspires the desire for honour and for a life’s work which transcends death. The elites already have Money, Management, Media. On our side, we have Mission, Motivation and Myth. If we can bring together all these, the future will take care of itself.

Thank you.