Capitalism and the Climate Crisis
Rowley builds his article first by referencing two key models of capitalism: 1) shareholder capitalism, which is embraced by the West and prioritizes maximizing profits; and 2) state capitalism, in which governments have full control over the economy, a popular model in emerging markets, notably China.
From there, Rowley explains that a problem with shareholder capitalism is that it fails to effectively invest in domestic and international infrastructure, especially when it comes to climate change and "sustainability." Therefore, Rowley proposes a possible evolution of capitalism in a third model, calling it "semi-state," a sort of hybrid model in which governments finance climate-related development, including infrastructure, climate mitigation, and health.
Why This Matters
Crises like climate change, the COVID-19 pandemic, and growing inequality are highlighting the necessity for private firms and institutions to work with governments and official bodies like the UN.
At COP26, Chair of the Glasgow Financial Alliance for Net Zero Mark Carney indicated that "450 firms and financial institutions in 45 countries had committed to delivering more than US$130 trillion of financing for a transition to net-zero carbon dioxide emissions."
Rowley cites Carney's initiative as a "welcome and overdue" indication of capitalism's evolution. He states, "Here we have a clear indication of how institutional capitalism is being pressured to recognise its social obligations."
A Rough Transition
The evolution of capitalism, according to Rowley, will likely be challenging. Markets generally don't shift from overvalued and inflated areas into "relatively neglected longer-term areas of investment."
While there are some promising signs of a successful transition, such as the "Carney-led" commitment from the world's largest financial institutions, it's more likely that a finance bubble will burst in the process. "If it does not happen as a result of inflation and rising interest rates," he says, "then it will be because of the redeployment of money by alliance members into long-term investments."
The question, of course, is whether Rowley is imagining an evolution -- or a restoration of sorts. After all, to win World War II, the Cold War, or to build the interstate highway system, the government worked closely with the private sector to invest record amounts of capital in rapid industrialization that the private sector alone could not or would not manage. It makes one ask: is Rowley pondering something new -- or perhaps something newly rediscovered?