Editor‘s note: This review from the book “Capitalism Won’t Save the Planet” talks about why the energy transition from fossil fuels to so-called renewable energy is slow and not that profitable. We at DGR believe it is not a transition – worldwide we see an increase in fossil fuel consumption. But the use of electricity from wind and solar power increases are just as strong, especially by digital companies like Amazon whose carbon emissions go up while powering with electricity. The public should get much more skeptical towards the “energy transition” and question the profit-making energy corporations.
Review of ‘The Price is Wrong: Why Capitalism Won’t Save the Planet’ by Brett Christophers.
Wind and solar power projects, that for so long needed state backing, can now provide electricity to wholesale markets so cheaply that they will compete fossil fuels out of the park. It’s the beginning of the end for coal and gas. Right? No: completely wrong.
The fallacy that ‘market forces’ can achieve a transition away from fossil fuels is demolished in The Price is Wrong: Why Capitalism Won’t Save the Planet, a highly readable polemic by Brett Christophers.
Prices in wholesale electricity markets, on which economists and analysts focus, are not really the point, Christophers argues: profits are. That’s what companies who invest in electricity generation care about, and these can more easily be made with coal and gas.
Zeitgeist
Christophers also unpicks claims that renewables projects are subsidy-free. Even with renewably-produced electricity increasingly holding its own competitively in wholesale markets, it’s state support that counts: look at China, which is building new renewables faster than the rest of the world put together.
The obsession with wholesale electricity prices, and costs of production – to the exclusion of other economic factors – emerged in the 1980s and 90s as part of the neoliberal zeitgeist, Christophers explains.
The damage done by fossil fuels to the natural world, including climate change, was priced at zero; all that needed correcting, ran the dominant discourse, was to include the cost of this ‘externality’ in prices.
This narrative became paramount against the background of neoliberal reforms: electricity companies were broken up into parts, typically for generation, transmission, distribution and supply; private ownership and competition in markets became the norm.
However prices do not and can not reflect all the economic factors that drive corporate decision-making.
Smooth
The measure that has become standard, the Levelised Cost of Electricity (LCOE), is the average cost of a unit of electricity produced by different methods. But for renewables, 80 percent-plus of this cost is upfront capital investment – and the fate of many renewables projects hinges on whether banks and other financial institutions are prepared to lend money to cover that cost. And on the rates at which they are prepared to lend.
The volatility of wholesale electricity markets does not help: project developers and bankers alike have to hedge against that. “We don’t like to absorb power price volatility”, one of the many financiers that Christophers interviewed for the book said. “We’ll take merchant price risk – right now we often don’t have a choice – but we’ll charge three times more for it. […] No bank in the world will take power price risk at low returns”.
Christophers writes in an exemplary, straightforward way about markets’ complexities. He details the hurdles any renewables project has to get over before it starts: as well as securing finance, it needs land and associated rights and licences, and – increasingly a problem in many countries including the UK – a timely connection to the electricity grid.
If we confront, confound and supercede capitalism a future in which electricity is used equitably and within bounds set collectively with a view to avoiding catastrophic climate change is surely plausible.
Corporate and financial decision-makers are concerned not so much with costs, compared to those of fossil fuel plants, as with “an acceptable rate of financial return”. Does the project meet or exceed that rate?
“The conventional transition model […] assumes an effortlessly smooth trade-off between fossil fuels and renewable electricity sources, just as stick-figure mainstream economics more widely assumes all manner of comparable smooth trade-offs, not least between present and future goods.
“But real-world processes of production and consumption involving real-world businesses do not come even close to approximating to such smooth trade-offs.”
Revival
The clearest illustration of the argument that profit is the main driver of investment, not price, is the big oil companies’ behaviour.
Christophers writes: “[T]he returns ordinarily associated with wind and solar power are much lower than those to which fossil fuel companies are accustomed in their core businesses.”
He adds: “The big new hydrocarbon projects still being initiated by the international oil majors in the 2020s, in the face of widespread public fury and dismay, promise significantly higher rates of return – and, of course, on a significantly greater absolute scale – than renewables ever do.”
So tiny renewables businesses are used solely to greenwash the companies’ continuing investment in fossil fuel production. Shell, which in 2020-22 dabbled in slightly larger renewables investments, found that the rate of return for shareholders was the lowest of all its businesses.
“Chastened by Wall Street’s savage indictment of his company’s erstwhile turn – effectively – away from profit, [Shell chief executive Wael] Sawan spent the first half of 2023 pivoting Shell back to oil and gas. Hence the horrific spectacle of a significant revival in upstream exploration activity on the part of the European majors, with Shell to the fore. […] At the same time, Shell and its peers were busily scrapping projects (including in wind) with ‘projections of weak returns’.”
Despite all this, renewable electricity generation is expanding. Christophers forensically dissects the economics, showing that ‘market forces’ have played little or no part in this.
Many renewables projects only go ahead when they have signed long-term sales agreements (power purchase agreements or PPAs), that shelter sellers from choppy markets and provide good PR (“green” credentials) for buyers.
In many countries, PPAs with utility companies that provide electricity to households are being superceded by those with corporate buyers of electricity, and above all big tech firms that wolf down electricity for data centres and, increasingly, artificial intelligence.
And then there is state support – not only overt subsidies such as the tax credits offered by the US Inflation Reduction Act, but also schemes such as feed-in tariffs and contracts for difference, market instruments that shelter projects’ income from volatility.
China’s new megaprojects are “about as far from being market-led developments as is imaginable”, Christophers writes. So too are those in Vietnam, mammoths given the total size of the economy, that soared with a special feed-in tariff in 2020, and slumped to zero in 2021 when it was withdrawn.
“That investment plummets when meaningful support for renewables investment is substantially or wholly removed demonstrates precisely how significant that support in fact, and also just how marginal – or even downright unappealing – revenue and profitability prospects, in the absence of such support, actually are.”
Pretences
Christophers concludes that the state has to champion rapid decarbonisation, and “extensive public ownership of renewable energy assets appears the most viable model”. But this should not be done in a fool’s paradise, where it is presented as a means for taking profits from renewable electricity generators (what profits?!) and returning them to the public purse.
This is how the Labour Party is portraying its proposed state-owned renewable electricity generator, Great British Energy. Labour’s claims that GBE will benefit the state and taxpayers “betray a deep and perilous misunderstanding of the economics of renewable energy, and of the weak and uncertain profitability that actually plagues the sector”.
By way of contrast, Christophers points to the Build Public Renewables Act, passed by the US state of New York in 2021 in response to years of campaigning by climate action groups – which rests on the assumption that it is precisely the market’s failure to produce renewable energy projects on anything near to the timescale suggested by the climate emergency that necessitates state intervention.
All this prompts the question: don’t we need to challenge the whole idea of electricity being a commodity for sale, rather than a requirement of 21st-century living that should be provided as a public service?
Yes, we do, Christophers writes in his conclusions, with reference to Karl Polanyi’s idea of “fictitious commodities”, that under capitalism are bought and sold, but only in markets that are fashioned by “props, rules, regulations and norms”, and are therefore essentially pretences. The description fits the electricity markets ushered in by neoliberalism well.
Monopoly
The commodification of electricity, and other energy carriers, raises the prospect that, with a perspective of confronting and superceding capitalism, it should be decommodified.
Renewables technologies have opened up this issue anew, since they have hastened the trend away from centralised power stations and made it easier than ever for people – not only through the medium of the state but as households, community organisations or municipalities – to source electricity from the natural environment, without recourse to the corporations that control the market. How this potential can be torn from those corporations’ hands is a central issue.
The analysis by Christophers of the “props, rules, regulations and norms” used to bring renewables to neoliberal markets certainly convinced me. So too did his point that the returns from developing oil and gas, relatively higher historically, “are not ‘natural’ economic facts” either.
On the contrary, government economic support has always characterised the oil and gas business: in fact the line between state and business is often blurred.
In many countries they are “the selfsame entities, actively assembling monopolistic or oligopolistic constrol specifically in order to subdue volatility, stabilise profits and encourage investment”; indeed these “established institutional architectures of monopoly power” that scaffold oil and gas are a key distinction between it and renewables.
Corporate
We badly need a comparative analysis of state support for renewables and for fossil fuels – not just the bare numbers, which are available in many reports, but an understanding of the social dynamics that drive it, and that are deliberately obscured by oceans of greenwash manufactured by the political class everywhere.
Themes that Christophers touches on, such as governments’ failure to phase out fossil fuel plants, even as they make plans to expand renewables need to be developed. The appallingly slow progress of renewables and the weight of incumbency that favours fossil fuels can not be separated.
This understandable book, which brings dry capitalist realities to life so well – and is essential reading for anyone who wants to understand why the transition away from fossil fuels is so disastrously slow – raised some questions in my mind about electricity demand.
Take the steep increase in demand for renewably generated electricity from big tech. Amazon is the world’s biggest buyer of solar and wind power under corporate PPAs, and an even bigger promoter of its own “green” image. But its carbon footprint continues to grow, Christophers points out, especially that of its “energy-gorging cloud-computing Web services business”.
A big-tech-dominated fake energy transition? “It would be difficult to conceive of a more ironic statement on the warped political economy of contemporary green capitalism.”
Trashing
Which is reason to interrogate the way society uses electricity – and the way that capitalist social relations turn use – to fulfil needs, to make people’s lives good into demand – an economic category no less ideologically-inflected than other ‘market forces’.
Amazon and the rest are sharply increasing their electricity demand, which in the US and elsewhere has led to shutdowns of coal-fired power station being postponed – while hundreds of millions of people in the global south still have no electricity at all.
Furthermore: the “green transition” envisaged by most politicians will see the economic sectors in the global north that gulp down the greatest quantities of fossil fuels – road transport, the built environment, and industry – switching many processes to electricity. The classic example is the shift from petrol vehicles to electric vehicles. And this will increase electricity demand.
Christophers takes no view on these issues: “[R]ight or wrong, good or bad, electrification largely is what is happening and what will continue to happen”.
While I agree that, under capitalism, the dominant political forces take this for granted, I think that we should not. To stick with the example of road transport, none of the scenarios that assume swapping petrol vehicles one-for-one for electric vehicles can happen without trashing meaningful climate targets.
Catastrophic
The economic transformations that tackling climate change implies must include reshaping – for collective social benefit, and with a view to rapidly reducing emissions – the huge technological systems, like road transport, that account for the largest chunks of fossil fuel use. Simply electrifying them is not enough.
Moreover, with the current level of technology, including the prospects opened up by decentralised renewables, there is potential to establish completely new relationships between production and use – which are currently controlled by big capital, but need not be.
Hopes of energy conservation implied in the International Energy Agency’s latest net zero report “border on the Pollyannaish”, Christophers writes. Yes, granted – if the perspective is limited to one dominated by capital.
But insofar as it is possible to confront, confound and supercede capitalism, a future in which electricity is used less wastefully, more equitably, and within bounds set collectively with a view to avoiding catastrophic climate change, is surely plausible.
That is where hope lies – outside the matrix of profit-driven relationships that Christophers skewers so exquisitely.
Title photo by Matthew T Rader/Wikimedia Commons CC BY-SA 4.0
Simon Pirani is honorary professor at the University of Durham and writes a blog at peoplenature.org.
In 2016, Greenland’s then minister responsible for economic development, Vittus Qujaukitsoq, welcomed the appointment of Rex Tillerson, the former CEO of Exxon Mobil, as US secretary of state. Despite representing the centre-Left party Siumut (Forward) and being surrounded by some of the most visible consequences of the warming world, Qujaukitsoq and his colleagues saw the growing potential for mining and drilling brought by the melting glaciers on the world’s biggest island as an opportunity to bring in the cash which would allow the long-desired independence from Denmark.
They aren’t alone. While the melting of Arctic ice is causing the world’s oceans to overflow and disrupting its weather systems, it has also unleashed a whole new geopolitical race. Earlier this year, the US Geological Survey estimated that the region’s rocks contain 13% of the world’s undiscovered oil, and 30% of undiscovered gas – carbon sinks which have been greedily eyed up by states and oil companies alike. And many of these reserves lie in the seas west of Greenland – where there are an estimated 17.5 billion undiscovered barrels of oil, enough to supply the whole planet for six months, at current usage rates.
And because the Arctic is the fastest warming part of the planet, the ice shielding these prehistoric deposits from prying drills is thinning, and disappearing, at an alarming rate.
But if some see this as an opportunity, others understand the absurdity of using climate change as a means to extract more fossil fuels and further change the climate. And this, alongside broader questions about mining, have shaped politics in the country this year.
In the spring, the governing Siumut party split, and its liberal coalition partners, the Democrats, resigned from the government, triggering a snap election in May.
The winner was the eco-socialist party Inuit Ataqatigiit. And in June, the new government banned all future oil and gas exploration from Greenland’s territory.
“The price of oil extraction is too high. This is based upon economic calculations, but considerations of the impact on climate and the environment also play a central role in the decision,” the government stated in July.
It’s not just oil and gas drilling that are contentious. When Donald Trump notoriously inquired about purchasing the island in 2019, he’d just had a briefing on its deposits of a number of minerals, many of which are likely to play a crucial role in the geopolitics of the coming decades. Among these are large quantities of uranium, and what are thought to be the world’s second biggest reserves of rare earth minerals – demand for which has soared in recent years because of their use in batteries for electric cars, computer chips and other tools of the high tech, low carbon economy.
Seen that way, Trump’s statement was probably less a random outburst and more a crude expression of the reality of Greenland’s role in the future of global geopolitics.
Biden, as ever, works in more subtle ways. In February, in discussion with tech giants like Alphabet (Google) and Facebook, he signed an executive order instigating a review of the supply chain of rare earth metals due to a global shortage and China’s dominance of the market. It seems implausible that the review won’t have produced significant discussion in US intelligence circles about the world’s largest deposits outside China, just a few hundred miles from Maine.
In March, the Polar Research and Policy Initiative expressed concerns about “the security implications of China’s near monopoly of rare earths and other minerals for the UK and its North American, European and Pacific allies”, especially given their significance to “strategically important sectors such as defence and security, green energy and technology”. The think tank called on the ‘five eyes’ intelligence alliance between the US, UK, Australia, New Zealand and Canada to team up with Greenland as part of a strategic resources partnership.
Greenland, says the website Mining Technology, “could be vital for tipping the scales in a trade war between global superpowers”.
In the midst of this global gallop for Greenland, with the world’s major powers, billionaire investors and intelligence agencies getting in on the act, the country has had some coverage in the global media of late.
What is often left out of the conversation, however, is the fascinating domestic dynamics among this Arctic island’s 57,000 people. Greenlanders’ struggle for sovereignty in the context of global capitalism, extractivism and climate collapse is an inspiring example of 21st-century indigenous resistance.
A young socialist indigenous climate leader
“There are two issues that have been important in this election campaign: people’s living conditions is one. And then there is our health and the environment,” Inuit Ataqatigiit leader Múte Bourup Egede told the Greenlandic public broadcaster KNR following his election victory in April.
Egede, 34, is the youngest prime minister Greenland’s had since it achieved a degree of home rule in the 1970s, and has led the democratic socialist and pro-independence party since 2018.
In the recent election, the party, known as IA, centred its campaign on its opposition to an international mining project by Greenland Minerals, an Australian-based and Chinese-owned company that is seeking to extract uranium and neodymium from the Kvanefjeld mine in the south of the country. Neodymium is a crucial component of a broad range of technologies, from some kinds of wind turbine to electric cars, because it can be used to make small, lightweight, but powerful and permanent magnets, while uranium is used for both nuclear power and nuclear weapons.
“We must listen to the voters who are worried. We say no to uranium mining,” Egede told the KNR. His party also promised to ban all explorations of radioactive deposits, and, while it does not oppose the mining of rare earth minerals in principle, it insists it must be better regulated.
Egede and the IA won 37% of the vote, ending the tenure of Siumut, the party which had been in power for most of the time since 1979. Siumut was supportive of the Kvanefjeld mining project, assisting Greenland Minerals to gain preliminary approval and ending a previous zero tolerance policy for uranium mining.
There is now a bill being debated in the Greenland parliament to ban the uranium mining project and all mining that contains radioactive by-products.
According to Mark Nuttall, an anthropologist at the University of Alberta and the head of the Climate and Society research programme at the Greenland Climate Research Centre: “This [election] has sent shivers down the spine of many mining executives as to what kind of future mining would take place in Greenland.”
Under the direction of Egede, the IA-led government has also taken several significant steps in recent months to curb fossil fuel production.
Last week in Glasgow, Egede announced that Greenland will be joining the Paris Agreement. In 2016, under the leadership of Siumut, Greenland had invoked a territorial exemption to the climate agreement when Denmark joined.
Greenland, which is technically a self-governing territory of Denmark, claimed at the time that the country was dependent on its oil, gas and natural mineral reserves for its economy.
“The Arctic region is one of the areas on our planet where the effects of global warming are felt the most, and we believe that we must take responsibility collectively. That means that we, too, must contribute our share,” Egede said last week.
Egede’s government also pledged to develop its renewable energy capability, especially hydropower: “Greenland has hydropower resources that exceed our country’s needs. These large hydropower resources can be utilised in collaboration with national and international investors who need large amounts of cheap and renewable energy.”
The Northwest Passage
The rush for the rare earth minerals vital to so many low carbon technologies isn’t the only way that climate change is moving the country from the periphery of global geopolitics to its core. When the huge container ship the Ever Given blocked the Suez Canal in March, the world was reminded how much of its trade passes through its two major transcontinental waterways – Suez and Panama.
As much of the Arctic Ocean becomes ice-free for greater parts of the year, new potential trade routes open up, most significantly, the Northwest Passage across the top of North America, and the Northern Sea Route, above Eurasia.
The vast majority of Greenland’s settlements – including the capital, Nuuk – lie on the west coast of the country, along the Labrador Sea and Baffin Bay. When travelling from Asia or western North America to Europe or the east coast of North America through the Northwest Passage, this is the final stretch, positioning Nuuk as a potential hub on a future major shipping route.
The struggle for sovereignty
Nearly 90% of the population of Greenland are indigenous Inuit people, who have inhabited the island for thousands of years. Although they’ve been colonised for the last thousand years by Nordic powers, they have maintained their own language and culture.
Norsemen first settled on the island in the tenth century, and in 1261 Greenland formally became part of Norway. In 1814 Greenland became a Danish territory – and in 1953 the island became fully integrated into the Danish state. (During World War II, when Denmark was conquered by the Nazis, Greenland was de facto under US control.)
“The official Danish view was that Greenland was actually a dependency; it wasn’t a colony in the sense of its colonies in the West Indies and other places,” Nuttall explained. This, he said, was “because of this historic view that Greenland had long been part of this Nordic Commonwealth from the Norse settlements of the tenth century onwards”.
But the Inuit people don’t always see it that way. During the Black Lives Matter global movement in 2020, younger Greenlanders, including the 21-year-old hip hop artist Josef Tarrak-Petrussen, called for the removal of Danish colonial statues in Nuuk.
Denmark finally granted home rule in 1979. And in 2008 Greenland voted in favour of the Self-Government Act, which transferred more power to the island’s government – and effectively marked the beginning of state formation.
This self rule act recognises Greenland as a nation with the right to independence if it chooses it. Currently Greenland has nearly full sovereignty, with the exception of the areas of foreign policy and defence. The Arctic island currently receives an annual grant of around $585m from Denmark.
In recent years, questions around sovereignty have in many ways defined the political and environmental policies of the island. Many of the political parties support independence.
However, this financial dependence on Denmark makes the prospect of full independence quite difficult: the grant accounts for nearly 20% of the island’s income, while fishing makes up around 90% of its exports.
In order to gain full autonomy from Denmark, Greenland needs to develop a self-sufficient economy. However, this likely requires the development of lucrative extractive industries which will deepen the island’s dependence on (foreign) international capital.
“If we go back ten years, mining was seen as the major way to [become politically independent], and there was great excitement,” said Nuttall.
However in recent years this attitude towards mining has changed considerably due to a host of factors including a downturn in global commodity markets, a greater emphasis on renewable energy and attention given to the climate crisis.
“Mining is going to be one pillar of an economic development strategy that will include other things such as the development of tourism, expansion of the fishing industry… and expanding renewables,” Nuttall explained.
The current government is now focusing on investments in the island’s enormous hydropower potential, which has the potential to grow as glaciers melt and which will allow a reduction in petrol imports, one of the country’s main expenses. Kalistat Lund, the minister for agriculture, self-sufficiency, energy and environment, stated that the government is “working to attract new investments for the large hydropower potential that we cannot exploit ourselves”.
The island is also currently expanding its airports and promoting tourism. Currently the only flights available to Greenland are from Reykjavik or Copenhagen.
Greenland often appears in discussions about climate change – usually in the context of films of starving polar bears, adorable Arctic foxes and rutting muskox; or melting glaciers diverting the Gulf Stream and raising global sea levels, flooding cities across the planet. Ice cores from Greenland, like those of Antarctica, help us understand historic variations in the composition of our atmosphere and in our climate, and have been vital for scientists’ understanding of the science of climate change.
These things are all true, and each Arctic species being pushed to extinction by the warming of the world is a tragedy. But what’s also true is that Greenland is home to tens of thousands of people, with their own history and culture, politics and organisations; a people who, after a thousand years of colonisation, are starting to assert both their independence from Denmark and their sovereignty in the face of the global market. And, who, along with other indigenous communities around the world, are starting to lead a fightback against the industrial, extractive capitalism that’s killing the planet.
This post includes sections on: can capitalism be reformed, proposed reforms, do reforms protect capitalism, why reforms won’t work, and capitalism undoes reforms that benefit ordinary people.
This post is critical of reforms because they mostly protect capitalism in different ways and get in the way of building transformational mass movements. But I also do not completely discount them, as I think they might have a positive part to play in moving us towards ending capitalism.
The obvious answer is no. But its more complicated than that. It depends what you mean by reform and timescales. If the question means can capitalism be reformed long term to meet the needs of ordinary people, then no way. If you mean when capitalism gets out of control can it be reformed so things are a bit less unequal to quieten demands for system change, then quite possibly, such as the 1930s in the US and the post-war decades in the UK.
Twenty-first-century capitalism may be less profitable but the corporate elite are clearly securing massive profits. These could be redistributed in workers wages, or from tax increases to fund a welfare state to meet everyone’s needs, unlike the substandard social safety net we currently have. I do think redistributive reforms are possible but it will require pressure from mass movements, which do not currently exist.
The Tory response to Covid could be seen as a reform and it certainly shows what’s possible. It contradicts the neoliberal claims that if we leave things to the free market and everything will be fine. I more see this as crisis response, with the Tories needing to balance the demands of the public to meet their basic needs and capitalists demands to keep the economy running. Extending the job retention or furlough scheme in the Spring and Winter was due to pressure from unions and business leaders, but there has not been a strong demand from the left. The question now is how will the government deficit be paid for – tax rises or more austerity. We’ve still not recovered from the last round of austerity by the coalition government following the 2008 financial crisis. Austerity now would continue the process of rolling back postwar gains related to benefits, more NHS privatisation and the welfare support for the most vulnerable (see the final section of the post for more on this).
In the UK, Ed Miliband when he was the leader of the Labour Party (2010-2015) wanted to introduce a proper industrial strategy to introduce national and regional investment and to bring in controls over the excesses of corporate behaviour. The Corbyn project presented itself as democratic socialist but due to the limits of global neoliberalism, could have only moved us towards social democracy. The current Tory government are looking to copy past Labour Party policies with their ‘levelling up’ rhetoric, although it seems unlikely they will follow through.
Mostly yes. Many on the radical left argue that fighting for reforms maintains capitalism by making it more stable or profitable.
Nate Hawthorne has a more nuanced understanding. He describes in this post that reforms help capitalism function, he gives the example of extending credit to companies so they can operate. This could be broadened to include all the things that governments do that make the economy and business environment easier for companies to operate in and make profits.
Nate also describes the importance of the spreading of ‘capitalists class consciousness’ to ensure capitalist system stability. Capitalists will have ‘boss-consciousness’ related to their employees in their business but some will be more focused on increasing their personal wealth over the long term interests of the capitalists class. Reforms can limit the excesses of some self-serving capitalists. This is called the ‘corporate compromise’ by Young et al in Levers of Power: How the 1% Rules and What the 99% Can Do About It. The book describes how the creation of US legislation goes through a process of being generally agreeable to difference corporate interests to ensure the stability of capitalism [1]. It describes how Barak Obama worked very hard to keep the capitalist system stable so it worked for the business world as a whole [2]. And that Donald Trump violated the corporate compromise because he advanced certain business interests over others [3].
Reforms also prevent social unrest by doing just enough to stop it from boiling over. This relates to movements, campaigns, street protests, demonstrations and riots. Examples of this would be the US civil rights laws in the 1960s or the poll tax riots in 1990 in the UK.
Reforms have also saved capitalism from revolution by giving mass movements what they demand to quiet them down. The example here would be the New Deal in the US in the 1930s following a mass movements of trade unions, socialists and communists. [4]
As well as reforms protecting capitalism from itself, greedy capitalists or mass movements, reforms are also used to protect capitalisms profits in the form of anti-trade union laws. (for more information on this see a summary in the final section of this post).
Following the Wall Street Crash of 1929 and the Great Depression in the 1930s, several factors combined to saved capitalism: Keynesian economic theory; mass movements demanding state support and welfare reform; and the economic stimulation generated during the war and the rebuilding after. Richard Wolff asks an important question: has the systematic crushing of the left over the last forty years taken away one of the important mechanisms for protecting capitalism? [5]
Why reforms won’t work
There are several ways to think about this. First, if reforms are achieved that benefit ordinary people but you leave the capitalists in power, they will always undo or roll back any gains for ordinary people (see the next section for more details). The capitalists can’t help themselves. So reform is not enough and we need to end capitalism. [6]
Second, the mid-twentieth century reforms were achieved because of a combination of rebuilding after the war resulting in a high demand for labour, powerful working-class movements, the increasing profitability of capitalism with capitalist classes willing to share some of their profits, and British capital could not move abroad as it does now so had nowhere else to go. There is also an argument that the threat of communism from the Soviet Union put pressure on western elites and states. [7]
Third, currently, the left is so weak and corporate power so dominant that we’re not winning any reforms. This is the ‘structural power’ argument. [8]
Fourth, some on the left advocate a gradualist strategy through reforms to ending capitalism and creating a socialist society. There is a lot to unpack in future posts on this point but I do think that a rupture with capitalism will be required, a revolution.
Capitalism undoes reforms that benefit ordinary people
Since the 1980s the current form of capitalism, neoliberalism has been rolling back the gain that ordinary people made through the 20th century. Using the four categories from the previous post on these gains I will briefly describe how they have been undone.
Paul Foot in The Vote: How it was won and it was undermined, provides an excellent history of success of electoral reform up to the early 20th century. And then how it was undermined for the rest of the century. The continuing struggle for electoral reform is ongoing and important to weaken the Tories and open things up for the radical left.
The most recent reform of the welfare system was The Welfare Reform and Work Act 2016. A 2019 report by Frank Field MP, Heidi Allen MP and Feeding Britain called The ‘Other Britain’ and the failure of the welfare state, found that the welfare system is failing the most vulnerable. They list the key issues to be:
benefit freeze – claimants no longer get an annual increase in line with inflation so have less and less to live on
Universal Credit, issues include 5-week wait and advance payments, third party deductions and old social loans, sanctions, Work Capability Assessments
Medical assessments and Personal Independence Payments (PIP)
No recourse to public funds for migrants
Jobcentres are unsupportive and uncaring
The gig economy and the working poor cannot afford to cover their outgoing so need food banks
Problem Debt due to low pay force people into high-cost debt
The increasing use of food banks in the UK is another clear indication that the welfare state is failing: “In 2019/20 approximately 1.9 million people used a food bank in the United Kingdom, around 300 thousand more than the previous year.” [10]
creating competition so private companies provide services funded by taxpayers;
the reorganisation of the NHS so regional commissioning groups allow local NHS service contracts to be managed by private companies;
the Tory governments have reduced the level of funding, which could make people think a publicly owned NHS isn’t working and so the private sector might be seen as a solution.
Endnotes
Levers of Power: How the 1% Rules and What the 99% Can Do About It, Kevin A. Young, Tarun Banerjee and Michael Schwartz, 2020, chapter 2
This post will look at the long-term cycles of the geographical centre of the capitalist economy (during capitalisms existence over the last 600 years), capitalism’s economic waves and cycles and the 10-year capitalist business cycle.
Understanding capitalism’s cycles and waves are important to understanding capitalism better to be able to beat it. Also, there looks to be a relationship between capitalism’s cycles and waves, and cycles of worker and social movement expansion, and also related to the gains and concessions these movements get from capitalists.
Long-term cycles of the geographic centre of the capitalist economy
This builds on the phases of capitalism described in a previous post: Mercantile Capitalism, 14th-18th centuries; Classical/Industrial Capitalism, 19th century; Keynesianism or New Deal Capitalism, 20th century; and Finance Capitalism/Neoliberalism, late 20th century.
These ideas were likely first developed by Fernand Braudel, who described the movement of centres of capitalism, initially cities then nation-states. Braudel described them starting in Venice from 1250-1510, then Antwerp from 1500-1569, Genoa from 1557-1627, Amsterdam from 1627-1733, and London/England 1733-1896.
Giovanni Arrighi identifies four ‘systemic cycles of accumulation’ in his book The Long Twentieth Century. He describes a ‘structuralist model’ of capitalist world-system development over the last 600 years of four ‘long centuries’, with a different economic centre. Arrighi’s systemic cycles of accumulation were centred around: the Italian city-states in the 16th century, the Netherlands in the 17th century, Britain in the 19th century and the United States after 1945. [1] It looks like the centre is moving Eastwards in the twenty-first century. [2]
George Modelski identified long cycles that connect war cycles, economic dominance, and the political aspects of world leadership, in his 1987 book Long Cycles in World Politics. He argues that war and other destabilising events are a normal part of long cycles. Modelski describes several long cycles since 1500, each lasting from 87 to 122 years: starting with Portugal in the 16th century, the Netherlands in the 17th century, Britain in the 18th and 19th century and the US since 1945.
Capitalism’s economic waves and cycles
Several waves and cycles have been identified in the capitalist economy that relate to periods of economic growth and decline.
Kondratiev waves (also known as Kondratieff waves or K-waves) are 40 to 60-year cycles of capitalism’s economic growth and decline. This is a controversial theory and most academic economists do not recognise it. But then most academic economists think that capitalism is a good idea!
Kondratiev/Kondratieff identified the first wave starting with the factory system in Britain in the 1780s, ending about 1849. The second wave starts in 1849, connected to the global development of the telegraph, steamships and railways. The second waves’ downward phase starts about 1873 and ends in the 1890s. In the 1920s, he believed a third wave was taking place, that had already reached its peak and started its downswing between 1914 and 1920. He predicted a small recovery before a depression a few years later. This was an accurate prediction. [3]
Paul Mason in Postcapitalism: A Guide to Our Future describes the phases of the K-waves:
“The first, up, phase typically begins with a frenetic decade of expansion, accompanied by wars and revolutions, in which new technologies that were invented in the previous downturn are suddenly standardized and rolled out. Next, a slowdown begins, caused by the reduction of capital investment, the rise of savings and the hoarding of capital by banks and industry; it is made worse by the destructive impact of wars and the growth of non-productive military expenditure.
“However, this slowdown is still part of the up phase: recessions remain short and shallow, while growth periods are frequent and strong.
Finally, a down phase starts, in which commodity prices and interest rates on capital both fall. There is more capital accumulated than can be invested in productive industries, so it tends to get stored inside the finance sector, depressing interest rates because the ample supply of credit depresses the price of borrowing. Recessions get worse and become more frequent. Wages and prices collapse, and finally a depression sets in.
In all this, there is no claim as to the exact timing of events, and no claim that the waves are regular.” [4]
Mason describes his theory of a fourth wave starting in 1945 and peaking in 1973 when oil-exporting Arab countries introduced an oil embargo on the USA and reduced oil output. The global oil price quadrupled, resulting in several nations going into recession. Mason argues that the fourth wave did not end but was extended and is still ongoing. The downswing of the previous three cycles ended by capitalists innovating their way out of the crisis using technology. This was not the case in the current fourth cycle because the defeat of organised labour (trade unions) by neoliberal governments in the 1980s, has resulted in little or no wage growth and atomization of the working class. [5]
In On New Terrain: How Capital is Reshaping the Battleground of Class War Kim Moody used data from three sources (Mandel, Kelly, Shaikh) to identify his theory of a third (1893-1945), fourth (1945-1982) and fifth (1982-present) long waves. The third upswing from 1893-1914, then downswings from 1914-1940. The fourth upswing from 1945-1975, downswings from 1975-1982. The fifth upswing from 1982-2007, downswings from 2007-?. [6]
The Kuznets swing is a 15-25 year cycle related to infrastructure investment, construction, land and property values.
The Juglar cycle is a 7-11 year cycle related to the fluctuations in the investment in fixed capital. Fixed capital are real, physical things used in the production of goods, such as buildings or machinery.
The Kitchin cycle is a 3-5 year cycle caused by the delay it takes the management of businesses to decide to increase or decrease the production of goods based on information from the marketplaces where they sell their goods.
Business cycle
This is the roughly 10-year boom and slump cycle of the global capitalist economy. It is also known as the (economic cycle, boom-slump cycle, industrial cycle). Mainstream economics view shocks to the economy as random and therefore not cycles. There are several theories of what causes business cycles and economic crises that I will look at in a future post. Theories about the business cycle have been developed by Karl Marx, Clément Juglar, Knut Wicksell, Joseph Schumpeter, Michał Kalecki, John Maynard Keynes. Schumpeter identified four stages of the business cycle: expansion crisis, recession, recovery.
So what are the dates of the business cycle? I’ll go through the information on business cycles in the US and UK since 1945 and there is no clear agreement on the number. Something to come back to.
Howard J. Sherman in The Business Cycle Growth and Crisis under Capitalism argues that the best dates are those provided by the US National Bureau of Economic Research (NBER). He explains that they’re not ideal but the best available and they go back a long way. Since 1945, the US has had recession in the years 1949, 1954, 1958, 1961, 1970, 1975, 1980, 1982, 1991, 2001, 2009. That is ten business cycles, eleven if you include the one that started in the last ten years. The Economic Cycle Research Institute (ECRI) uses these dates as well.
Sam Williams at the blog Critique of Crisis Theory is critical of the NBER dates and argues that there have only been five business cycles since 1945. He measures them based on the point they peaked rather than a recession: 1948-1957, 1957-1968, 1982-1990, 1990-2000, 2000-2007. He describes the period from 1968-1982 as one long crisis. A sixth business cycle could be added from 2007-2020.
For the UK, I found three different sets of information of when the business cycles have been. Each indicates a different number of business cycles since 1945.
The Economic Cycle Research Institute (ECRI) identifies UK business cycles since 1945 to be: trough 1952; peak 1974, trough 1975; peak 1979, trough 1981; peak 1990, trough 1992; peak 2008, trough 2010. The ECRI chart does not list anything for the current crisis but I think it it’s safe to assume that 2020 was the peak. That is five business cycles from 1945-2020.
This article originally appeared in Climate & Capitalism.
Featured image: Harvesting grain in the 1400s
Editor’s note: We are no Marxists, but we find it important to look at history from the perspective of the usual people, the peasants, and the poor, since liberal historians tend to follow the narrative of endless progress and neglect all the violence and injustice this “progress” was and is based on. Garrett Hardin’s annoying but very influential essay “The Tragedy of the Commons” is a good example, and we are thankful to the author for debunking it.
“All progress in capitalist agriculture is a progress in the art, not only of robbing the worker, but of robbing the soil.” (Karl Marx)
To live, humans must eat, and more than 90% of our food comes directly or indirectly from soil. As philosopher Wendell Berry says, “The soil is the great connector of lives…. Without proper care for it we can have no community, because without proper care for it we can have no life.”[1]
Preventing soil degradation and preserving soil fertility ought to be a global priority, but it isn’t. According to the United Nations, a third of the world’s land is now severely degraded, and we lose 24 billion tonnes of fertile soil every year. More than 1.3 billion people depend on food from degraded or degrading agricultural land.[2] Even in the richest countries, almost all food production depends on massive applications of synthetic fertilizers and pesticides that further degrade the soil and poison the environment.
In Karl Marx’s words, “a rational agriculture is incompatible with the capitalist system.”[3] To understand why that is, we need to understand how capitalist agriculture emerged from a very different system.
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For almost all of human history, almost all of us lived and worked on the land. Today, most of us live in cities.
It is hard to overstate how radical that change is, or how quickly it happened. Two hundred years ago, 90% of the world’s population was rural. Britain became the world’s first majority-urban country in 1851. As recently as 1960, two-thirds of the world’s people still lived in rural areas. Now it’s less than half, and only half of those are farmers.
Between the decline of feudalism and the rise of industrial capitalism, rural society was transformed by the complex of processes that are collectively known as enclosure. The separation of most people from the land, and the concentration of land ownership in the hands of a tiny minority, were revolutionary changes in the ways that humans lived and work. It happened in different ways and at different times in different parts of the world, and is still going on today.
Our starting point is England, where what Marx labelled “so-called primitive accumulation” first occurred.
Common Fields, Common Rights
In medieval and early-modern England, most people were poor, but they were also self-provisioning — they obtained their essential needs directly from the land, which was a common resource, not private property as we understand the concept.
No one actually knows when or how English common farming systems began. Most likely they were brought to England by Anglo-Saxon settlers after Roman rule ended. What we know for sure is that common field agriculture was widespread, in various forms, when English feudalism was at its peak in the twelfth and thirteenth centuries.
The land itself was held by landlords, directly or indirectly from the king. A minor gentry family might hold and live on just one manor — roughly equivalent to a township — while a top aristocrat, bishop or monastery could hold dozens. The people who actually worked the land, often including a mix of unfree serfs and free peasants, paid rent and other fees in labor, produce or (later) cash, and had, in addition to the use of arable land, a variety of legal and traditional rights to use the manor’s resources, such as grazing animals on common pasture, gathering firewood, berries and nuts in the manor forest, and collecting (gleaning) grain that remained in the fields after harvest.
“Common rights were managed, divided, and redivided by the communities. These rights were predicated on maintaining relations and activities that contributed to the collective reproduction. No feudal lord had rights to the land exclusive of such customary rights of the commoners. Nor did they have the right to seize or engross the common fields as their own domain.”[4]
Field systems varied a great deal, but usually a manor or township included both the landlord’s farm (demesne) and land that was farmed by tenants who had life-long rights to use it. Most accounts only discuss open field systems, in which each tenant cultivated multiple strips of land that were scattered through the arable fields so no one family had all the best soil, but there were other arrangements. In parts of southwestern England and Scotland, for example, farms on common arable land were often compact, not in strips, and were periodically redistributed among members of the commons community. This was called runrig; a similar arrangement in Ireland was called rundale.
Most manors also had shared pasture for feeding cattle, sheep and other animals, and in some cases forest, wetlands and waterways.
Though cooperative, these were not communities of equals. Originally, all of the holdings may have been about the same size but in time considerable economic differentiation took place.[5] A few well-to-do tenants held land that produced enough to sell in local markets; others (probably a majority in most villages) had enough land to sustain their families with a small surplus in good years; others with much less land probably worked part-time for their better-off neighbors or for the landlord. “We can see this stratification right across the English counties in Domesday Book of 1086, where at least one-third of the peasant population were smallholders. By the end of the thirteenth century this proportion, in parts of southeastern England, was over a half.”[6]
As Marxist historian Rodney Hilton explains, the economic differences among medieval peasants were not yet class differences. “Poor smallholders and richer peasants were, in spite of the differences in their incomes, still part of the same social group, with a similar style of life, and differed from one to the other in the abundance rather than the quality of their possessions.”[7] It wasn’t until after the dissolution of feudalism in the fifteenth century that a layer of capitalist farmers developed.
Self-Management
If we were to believe an influential article published in 1968, commons-based agriculture ought to have disappeared shortly after it was born. In “The Tragedy of the Commons,” Garrett Hardin argued that commoners would inevitably overuse resources, causing ecological collapse. In particular, in order to maximize his income, “each herdsman will try to keep as many cattle as possible on the commons,” until overgrazing destroys the pasture, and it supports no animals at all. “Freedom in a commons brings ruin to all.”[8]
Since its publication in 1968, Hardin’s account has been widely adopted by academics and policy makers, and used to justify stealing indigenous peoples’ lands, privatizing health care and other social services, giving corporations ‘tradable permits’ to pollute the air and water, and more. Remarkably, few of those who have accepted Hardin’s views as authoritative notice that he provided no evidence to support his sweeping conclusions. He claimed that “tragedy” was inevitable, but he didn’t show that it had happened even once.[9]
Scholars who have actually studied commons-based agriculture have drawn very different conclusions. “What existed in fact was not a ‘tragedy of the commons’ but rather a triumph: that for hundreds of years — and perhaps thousands, although written records do not exist to prove the longer era — land was managed successfully by communities.”[10]
The most important account of how common-field agriculture in England actually worked is Jeanette Neeson’s award-winning book, Commoners: Common Right, Enclosure and Social Change in England, 1700-1820. Her study of surviving manorial records from the 1700s showed that the common-field villagers, who met two or three times a year to decide matters of common interest, were fully aware of the need to regulate the metabolism between livestock, crops and soil.
“The effective regulation of common pasture was as significant for productivity levels as the introduction of fodder crops and the turning of tilled land back to pasture, perhaps more significant. Careful control allowed livestock numbers to grow, and, with them, the production of manure. … Field orders make it very clear that common-field villagers tried both to maintain the value of common of pasture and also to feed the land.”[11]
Village meetings selected “juries” of experienced farmers to investigate problems, and introduce permanent or temporary by-laws. Particular attention was paid to “stints” — limits on the number of animals allowed on the pasture, waste, and other common land. “Introducing a stint protected the common by ensuring that it remained large enough to accommodate the number of beasts the tenants were entitled to. It also protected lesser commoners from the commercial activities of graziers and butchers.”[12]
Juries also set rules for moving sheep around to ensure even distribution of manure, and organized the planting of turnips and other fodder plants in fallow fields, so that more animals could be fed and more manure produced. The jury in one of the manors that Neeson studied allowed tenants to pasture additional sheep if they sowed clover on their arable land — long before scientists discovered nitrogen and nitrogen-fixing, these farmers knew that clover enriched the soil.[13]
And, given present-day concerns about the spread of disease in large animal feeding facilities, it is instructive to learn that eighteenth century commoners adopted regulations to isolate sick animals, stop hogs from fouling horse ponds, and prevent outside horses and cows from mixing with the villagers’ herds. There were also strict controls on when bulls and rams could enter the commons for breeding, and juries “carefully regulated or forbade entry to the commons of inferior animals capable of inseminating sheep, cows or horses.”[14]
Neeson concludes, “the common-field system was an effective, flexible and proven way to organize village agriculture. The common pastures were well governed, the value of a common right was well maintained.”[15]
Commons-based agriculture survived for centuries precisely because it was organized and managed democratically by people who were intimately involved with the land, the crops and the community. Although it was not an egalitarian society, in some ways it prefigured what Karl Marx, referring to a socialist future, described as “the associated producers, govern[ing] the human metabolism with nature in a rational way.”[16]
Class Struggles
That’s not to say that agrarian society was tension free. There were almost constant struggles over how the wealth that peasants produced was distributed in the social hierarchy. The nobility and other landlords sought higher rents, lower taxes and limits on the king’s powers, while peasants resisted landlord encroachments on their rights, and fought for lower rents. Most such conflicts were resolved by negotiation or appeals to courts, but some led to pitched battles, as they did in 1215 when the barons forced King John to sign Magna Carta, and in 1381 when thousands of peasants marched on London to demand an end to serfdom and the execution of unpopular officials.
Historians have long debated the causes of feudalism’s decline: I won’t attempt to resolve or even summarize those complex discussions here.[17] Suffice it to say that by the early 1400s in England, the feudal aristocracy was much weakened. Peasant resistance had effectively ended hereditary serfdom and forced landlords to replace labor-service with fixed rents, while leaving common field agriculture and many common rights in place. Marx described the 1400s and early 1500s, when peasants in England were winning greater freedom and lower rents, as “a golden age for labor in the process of becoming emancipated.”[18]
But that was also a period when longstanding economic divisions within the peasantry were increasing. W.G. Hoskins described the process in his classic history of life in a Midland village.
“During the fifteenth and sixteenth centuries there emerged at Wigston what may be called a peasant aristocracy, or, if this is too strong a phrase as yet, a class of capitalist peasants who owned substantially larger farms and capital resources than the general run of village farmers. This process was going on all over the Midlands during these years …”[19]
Capitalist peasants were a small minority. Agricultural historian Mark Overton estimates that “in the early sixteenth century, around 80 per cent of farmers were only growing enough food for the needs of their family household.” Of the remaining 20%, only a few were actual capitalists who employed laborers and accumulated ever more land and wealth. Nevertheless, by the 1500s two very different approaches to the land co-existed in many commons communities.
“The attitudes and behavior of farmers producing exclusively for their own needs were very different from those farmers trying to make a profit. They valued their produce in terms of what use it was to them rather than for its value for exchange in the market. … Larger, profit orientated, farmers were still constrained by soils and climate, and by local customs and traditions, but also had an eye to the market as to which crop and livestock combinations would make them most money.”[20]
As we’ll see, that division eventually led to the overthrow of the commons.
Primitive Accumulation
For Marx, the key to understanding the long transition from agrarian feudalism to industrial capitalism was “the process which divorces the worker from the ownership of the conditions of his own labor,” which itself involved “two transformations … the social means of subsistence and production are turned into capital, and the immediate producers are turned into wage-laborers.”[21]
“Nature does not produce on the one hand owners of money or commodities, and on the other hand men possessing nothing but their own labor-power. This relation has no basis in natural history, nor does it have a social basis common to all periods of human history. It is clearly the result of a past historical development, the product of many economic revolutions, of the extinction of a whole series of older formations of social production.”[22]
A decade before Capital was published, Marx summarized that historical development in an early draft.
“It is … precisely in the development of landed property that the gradual victory and formation of capital can be studied. … The history of landed property, which would demonstrate the gradual transformation of the feudal landlord into the landowner, of the hereditary, semi-tributary and often unfree tenant for life into the modern farmer, and of the resident serfs, bondsmen and villeins who belonged to the property into agricultural day laborers, would indeed be the history of the formation of modern capital.”[23]
In Section VIII of Capital Volume 1, titled “The So-Called Primitive Accumulation of Capital,” he expanded that paragraph into a powerful and moving account of the historical process by which the dispossession of peasants created the working class, while the land they had worked for millennia became the capitalist wealth that exploited them. It is the most explicitly historical part of Capital, and by far the most readable. No one before Marx had researched the subject so thoroughly — Harry Magdoff once commented that on re-reading it, he was immediately impressed by the depth of Marx’s scholarship, by “the amount of sheer digging, hard work, and enormous energy in the accumulated facts that show up in his sentences.”[24]
Since Marx wrote Capital, historians have published a vast amount of research on the history of English agriculture and land tenure — so much that a few decades ago, it was fashionable for academic historians to claim that Marx got it all wrong, that the privatization of common land was a beneficial process for all concerned. That view has little support today. Of course it would be very surprising if subsequent research didn’t contradict Marx in some ways, but while his account requires some modification, especially in regard to regional differences and the tempo of change, Marx’s history and analysis of the commons remains essential reading.[25]
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The next installments in this series will discuss how, in two great waves of social change, landlords and capitalist farmers “conquered the field for capitalist agriculture, incorporated the soil into capital, and created for the urban industries the necessary supplies of free and rightless proletarians.”[26]
[25] “The So-Called Primitive Accumulation” — Chapters 26 through 33 of Capital Volume 1 — can be read on the Marxist Internet Archive, beginning here. The somewhat better translation by Ben Fowkes occupies pages 873 to 940 of the Penguin edition.
