Economists Propose Path Beyond Capitalism to Address Climate Crisis
In a stark critique of the current economic system, leading economists Jason Hickel and Yanis Varoufakis assert that capitalism shows as little concern for humanity's future as a wolf does for a lamb. They argue that democratising the economy is essential to avert ecological disaster and build a better world.
We face an urgent responsibility, as our existing economic framework is fundamentally incapable of tackling the social and ecological crises of the 21st century. A striking paradox exists: while we possess advanced technologies and the capacity to produce abundant food and goods, millions endure severe deprivation. This contradiction, according to Hickel and Varoufakis, stems from capitalism—not merely markets or trade, but a system dominated by a tiny minority controlling capital, such as major banks, corporations, and the wealthiest 1%.
The Capitalist Law of Value and Its Consequences
Under capitalism, production is driven not by human needs, social progress, or ecological goals, but by the imperative to maximise and accumulate profit. This capitalist law of value demands perpetual growth, leading to irrational outcomes. For instance, highly profitable items like SUVs, mansions, and fast fashion are overproduced, while essential but less profitable goods, such as affordable housing and public transit, suffer chronic underproduction.
Similarly, in the energy sector, renewables are cheaper than fossil fuels, yet fossil fuels remain up to three times more profitable. Capitalists influence governments to link electricity prices to expensive liquefied natural gas rather than affordable solar energy. They also push for subsidies on fossil fuels and road building, despite environmental costs, because motorways are more lucrative for private contractors than modern public railways.
Global Implications and the Need for Change
The system perpetuates cycles of imperialist violence, as capital accumulation in advanced economies relies on cheap labour and resources from the global south. Tools like debt, sanctions, coups, and military invasions maintain this subordination. Since Donald Trump's election, many investment firms have abandoned climate commitments, prioritising profitability over the common good—a clear indication that capitalism prioritises profit above all else.
Human ingenuity has provided remarkable technologies, but capital, like a cruel divinity, prevents their use for collective benefit and instead directs them toward collective doom. The solution, Hickel and Varoufakis emphasise, is to overcome the capitalist law of value and democratise the economy, allowing production to align with social and ecological priorities.
Three Steps Towards a Democratic Economy
To transform the economy from a destructive dictatorship into a functioning, ecologically sound democracy, three conditions are necessary:
- A New Financial Architecture: This must penalise destructive private investments and enable public finance for public purposes. A new public investment bank, in association with central banks, should convert available liquidity into investments that promote sustainable prosperity.
- Extensive Use of Deliberative Democracy: Sectoral, regional, and national goals, such as growing or winding down specific outputs, should be decided through democratic processes, guiding the new public finance tools.
- A Great Corporate Reform Act: This would democratise corporations by promoting models where each employee has one share and one vote, ensuring fair representation in decision-making.
We currently inhabit a shadow of the world we could create—one where ecological collapse is averted, economic insecurity is abolished, and meaningful lives are led within planetary boundaries. This vision is not a distant dream but a tangible prospect, achievable through collective action and economic reform.
