Are Economic & Environmental Disasters an Unfortunate Aspect of Capitalism?

From Thinking Outside the Boxe’s Sydney Correspondent
In the wake of the Global Financial Crisis a lot of blame and anger was focused on people who work in finance. Others took a broader approach and believe that capitalism itself is to blame. Naomi Klein’s book The Shock Doctrine: The Rise of Disaster Capitalism is often cited by those critical of capitalism and neoliberalism in particular. Klein sees neoliberalism as an ‘evil’ economic approach that has no regard at all for the environment. Climate change is the area that critics mostly focus on. However if we in the western world, and those in developing countries, want to enjoy modern luxuries and future technological and medical advances provided by capitalism should we accept economic and environmental disasters as an unfortunate aspect of capitalism that we just have to live with?

In the introduction I mentioned the term neoliberalism. This is an economic ideology that became popular in the west in the 70’s and the 80’s and one which still dominates many Government policy making decisions. A useful definition of neoliberalism is provided in a journal article by Lynda Cheshire and Geoffrey Lawrence. Their definition says that neoliberalism is, “..a range of ideas, practices, and approaches to the conduct of government that are associated with a normative preference for small states and a reliance on market mechanisms to determine economic outcomes”. A simpler description is that the market, or more accurately businesses, should be able to operate in a way that allows business to make the most profit. Different Governments choose to regulate the ‘market’ to varying extents. Regulation, or the lack thereof, is something that greatly concerns Klein and will be discussed in more detail. In Shock Doctrine, Naomi Klein argues that politicians have been using natural disasters as an opportunity to further deregulate the market. She has published an email sent by Paul Teller in the wake of Hurricane Katrina, which she argues supports her argument. In the emails there are calls for the Government to repeal or waive restrictive environmental regulations that hamper rebuilding as well as streamlining environmental hurdles to build new oil refineries in order to address high gas prices. Are these really ‘bad’ things though? The former recommendation does use the term ‘waive’ after all, and another suggestion in the document recommends eliminating regulatory barriers and other disincentives that block charitable organisations from carrying out their work in aiding the reconstruction process. Klein is cherry picking to support her agenda. I am sure she would not like to see consumers burdened with perpetually high gas prices, and unnecessary suffering placed upon victims of natural disasters. The subject of oil drilling brings us to the example of an environmental disaster, that is the BP Deepwater Horizon oil spill. This was one of the worst oil spills in history and cost 11 people their lives.As of the 30th of April 2013 BP had paid out around $25 billion in damages caused by the oil spill. Was the oil spill caused by greed and/or cost cutting as some believe? It would make no economic sense for a company to cut corners in a way that could risk so much bad publicity and cost the company so much money. The fact is that consumers demand oil in order to maintain their standard of living. Companies such as BP are operating in a way that allows them to meet this demand and make a profit at the same time. BP paid a record corporate fine of $4.5 billion in a plea deal with the US Department of Justice in the wake of their disaster. The International Business Times also reports that the EPA placed a temporary block on BP from forging new contracts with the U.S Government. So to suggest that capitalism tramples over environmental concerns is not always the case, even in the U.S which is more neoliberal than many other developed countries. Many critics of capitalism also blame it for a lack of political action on climate change. They argue that the actions taken by businesses to continue to generate higher and higher profits will always be incompatible with the need to prevent climate change. As we all know the use of fossil fuels is probably the main contributor to climate change. Capitalism has allowed businesses to take actions that have contributed to climate change in order to pursue a profit. However it is also obvious that one of the best ways to address the problem of climate change is to reduce our collective carbon footprint. There are many ways this can be done. The use of ‘green’ technologies is clearly a necessary part of this process. It is obvious that if businesses can make money from green technologies then they will use them instead of supporting carbon intensive industries. But the only way this can be achieved is if change is demanded by consumers. This fact is something that critics of neoliberalism often ignore. With regards to financial disasters such as the Global Financial Crisis there is no doubt a certain amount of greed on the part of some of those who work in finance and this contributed to the crisis. However shareholders and others are very happy to receive profits when share prices and other investments are providing high returns. It is also baffling to consider that individuals took out mortgages (part of the subprime mortgage crisis) when they must have known they had no chance of paying off the mortgage. How can an unemployed person ever believe that they would be able to do this. It is true that mortgage brokers and lenders should never have offered these people mortgages in the first place but at some point people need to take responsibility for their own actions and exercise common sense. Unfortunately there is limited space in this article which has prevented a more thorough discussion of some of the more detailed arguments in this debate. However one thing that is obvious is that it is very easy for people to condemn neoliberal capitalism and paint this approach as an environmental and financial ‘bogeyman’. But the simple fact is that business responds to consumer demand. If people are concerned about the way in which some businesses make money then they should change the way in which they spend their money. This is a choice and a difference we can all make. References and Further Reading

Cheshire, L. & Lawrence, G. (2005). Neoliberalism, Individualisation and Community: Regional Restructuring in Australia, Social Identities: Journal for the Study of Race, Nation and Culture, 11:5, 435-445

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