Week 14: Wealth Explosion vs. Climate Implosion, The Tale of Two Extremes

Dear all,

Great Divergence. Resources. Energy. Growth. Profits. And a sustainable transition as a provincial periphery. There are many ways to describe what we are seeing happening across the world in the space of transition to a more sustainable future. I write “more sustainable” intentionally since the current mode of the economic system we operate under contradicts, at its core, any structural systemic shift. Yes, we have seen some marginal improvements over the last 10 years: the transition to fossil-free energy production, transportation, and a limited number of products and services we use in our daily life. "Not enough" is probably the most accurate way to describe the current status in relation to the state of transition. We have notably not seen a transformation of incentive structures, business models, and ownership structures.

The primacy of stakeholder capitalism, serving the interests of stakeholders as they are usually narrowly interpreted, means that all transition is mainly seen as the periphery of the core. The core being the economic growth engine, the periphery being externalities generated through that very core. As long as we only look at things from a short-term, surface perspective, capitalist society appears to still function smoothly (even if this apparent smoothness is increasingly threatened by factors like war, pandemics, inflation, and the like). As countries like China and Brazil, which had historically acted as the repository of displacement for the developed world, increasingly devote themselves to their own high-speed economic development, the available space on the planet to use as the convenient 'outside' for externalization and displacement shrinks to almost nothing.

It's logically impossible for all these countries to externalize the contradictions of their development at the same time. But the lack of an 'outside' constitutes a death blow to our externalization society. The reality is, as frontiers from which to extract cheap labor power and cheap raw materials disappear, profit rates drop, and the exploitation within Global North countries intensifies. At the same time, as the externalization and displacement of environmental burdens onto the Global South reach their limit, the contradictions of growth-based capitalism become a fact. Now, at this stage, you may wonder what the solution is. Are there any alternatives?

The commons may be thought of as the key to a third way that would represent an alternative to the opposing extremes symbolized by US-style neoliberalism and Soviet-style nationalization. It can be understood as a way to avoid commodifying necessities according to the principles of market fundamentalism, while stopping short of Soviet-style nationalization of properties. Common capital. The commons, as a third way between these extremes, aims to designate things like water, electricity, shelter, healthcare, and education as public goods and manage them democratically. We can also think about this using the concept of 'social common capital', as advanced by the economist Hirofumi Uzawa.

According to Uzawa, certain basic conditions must be satisfied for people to thrive in a 'rich society.' These conditions include aspects of the natural environment such as water and land, social infrastructure like electricity and public transportation, and social systems like healthcare and education. With the commons prioritizing shared management by citizens in a democratic, equal way, rather than leaving administration up to specialists, maybe this could be one of the options on the table. Maybe we need to explore other avenues beyond the circular economy and “green growth,” concepts that, despite their noble intent, do not address the core issue. 

Now, with all this said, the Great Divergence paired with recoupling rather than decoupling is becoming so obvious that even the most optimistic minds among us may start wobbling. Here are some examples of how the core works and what the Great Divergence looks like in reality: