Economic Theory

Why “overthrowing capitalism” would not avert climate change

It didn’t take long until the first hammer-and-sickle flags were spotted at the climate change strikes. Given the woeful environmental track record of socialist economies, socialism and environmentalism should not be natural bedfellows. In practice, they usually are. The reason is that socialists and environmentalists often start from the same place: an intuitive, visceral dislike of capitalism, which they then seek to rationalise with post-hoc arguments.

This has given rise to the fashionable idea that climate change is a specifically capitalist problem, most famously expressed by Naomi Klein in her bestselling book This Changes Everything. Klein is particularly hostile to the idea that climate change can be averted by using relatively simple, market-compatible measures, such as carbon taxes or emissions trading schemes. To anti-capitalist climate activists, such measures represent a mere tinkering around the edges. They are doomed to fail, because all they do is change incentives within capitalism, when the root cause of the problem is capitalism itself.

Similarly, George Monbiot also dismisses pricing mechanisms as a distraction. Only wholesale system change will do. The other week, a video in which he claimed that “we have to go straight to the heart of capitalism, and overthrow it” went viral.

And in the New Statesman, the Marxist economist Grace Blakeley asserted:

“The only way to halt climate change is to challenge the logic of capitalism itself […]

Dealing with the existential threat humanity is facing requires the kind of radical state intervention that no liberal government would consider […]

This would mean […] democratic public ownership over most of the economy, dramatic increases in state spending, and […] controls on capital mobility”

Do those anti-capitalist environmentalists have a point? Is reducing emissions feasible within a capitalist economy? What is the best way to limit climate change – carbon pricing, or a socialist revolution?

How effective can e.g. a carbon tax be? The answer is very simple: it depends on the rate. A carbon tax of £1 per tonne of CO2 would have no discernible effect. A carbon tax of £10 per tonne of CO2 would have a noticeable effect. A carbon tax of £100 would have a huge effect. And a carbon tax of £1,000 would bring most carbon-based economic activity to a halt.

So effectiveness is not the issue. You can, in principle, reduce carbon emissions (or at least, those emissions over which we have control) by 100% with a carbon tax alone. But any reductions in carbon emissions come at a cost, namely, a reduction in living standards. That is not a reason not to do it, but the trade-off exists.

In contrast, what would happen to carbon emissions if people like Grace Blakeley got their way, and most of the economy was nationalised, turning us into the Democratic People’s Republic of Great Britain? The answer is: nothing. If you nationalise a private company with a carbon footprint of, say, 10 tons of CO2, then that company will still have a carbon footprint of 10 tons of CO2. Sure, you can now add “The People’s” to the company’s name, and a hammer and sickle to its logo. But on the ground, nothing has changed. It is still be the exact same company, using the exact same production methods and the exact same production facilities.

Of course, after nationalisation, those companies would be run by politicians and bureaucrats (or in socialist mythology, they’d be collectively run by The Working Class). Their goals and priorities will differ from those of entrepreneurs. They may, for example, decide to cut production in order to reduce emissions. But then, that could also have been achieved with a carbon tax, and without nationalisation. Or they could ramp up investment in energy efficiency, even if the cost of that investment exceeds the savings in energy costs, and raise their prices correspondingly. But, again, a carbon tax could also have pushed them to do that. Or they could switch to costlier, low-carbon energy sources, and raise their prices correspondingly. But, once again, this could also have been achieved with a carbon tax. It certainly does not require a government takeover.

Either way – the trade-offs are still exactly the same as before. Reducing carbon emissions requires reductions in living standards. That is true in a capitalist economy, it is true in a socialist economy, it is true in a mixed economy, and it is true in any other type of economy. “Smashing the system” changes nothing, in this respect.

Trendy Marxists see power relations and class struggles where there are really just old-fashioned economic trade-offs that are common to all economic systems. Climate change has not been caused by the “greed” of “the corporate elite”. The truth is much more mundane. Companies produce goods and services that people want, and carbon emissions are an unfortunate byproduct of that. We happily buy their goods and services, all the while condemning the companies supplying them for “destroying the planet” with their “greed”.

Climate change is something to be worried about, but it is not something to be angry about. Because there are no culprits, and there are no villains in this story. There are just trade-offs. The righteous rage of the climate protesters is entirely misplaced.

Anti-capitalist environmentalists see themselves as the brave nonconformists, who tell us some extremely uncomfortable, inconvenient truth that most of us are too afraid to face. Nothing could be further from the truth. It is incredibly easy to blame “the corporations”, or “the system” in the abstract. It is incredibly easy to talk about “overthrowing capitalism” or “public ownership over most of the economy”, thus obscuring the existence of trade-offs. The truth is that we all want “more action” on climate change, but we don’t want it to cost us anything. The only reason why environmental taxes and quasi-taxes are not higher than they are now is that they are unpopular (remember the hated Fuel Duty Escalator?).

And so we all cheer on the student protesters, the green activists and the fashionable “radicals”, but not the politician who wants to hike our fuel and energy costs. “Let’s smash capitalism!” guarantees rapturous applause, and countless invitations to speak on panels alongside the great and the good. “I’ll quadruple your bills” – less so.

“Inconvenient” truths have never been so convenient.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

10 thoughts on “Why “overthrowing capitalism” would not avert climate change”

  1. Posted 02/05/2019 at 13:55 | Permalink

    Good to hear your articulate arguments. Can I take issue with the idea that companies sell people ‘what they want’? The idea that desire is not manipulated by an onslaught of branding and advertising is disingenuous. I want clean air, a temperate climate a future for all children including mine

  2. Posted 02/05/2019 at 14:31 | Permalink

    Miliband was at it on Newsnight last night. When asked if people should be asked to forgo foreign holidays and so on, he replied that we did not need to ask such things of individuals. What we needed was systemic change, as if this could reduce greenhouse gas emissions without any cost to idividuals. It is nauseating to behold people peddling economic fantasy while posing as righteous crusaders.

  3. Posted 07/05/2019 at 23:47 | Permalink

    CO2 follows temperature not the other way around. We are at 400ppm. It’s been 4000 ppm in an ice age. Further, most CO2 has been emitted post 1940 and between 1940-78 the temperature of the earth fell to the point where the “consensus” said we were about to enter an ice age. During the Medieval Warm Period temperature was higher than today and “nasty capitalism” wasn’t around. Proponents of anthropogenic warning have a hypothesis that doesn’t equate with geological facts. So the attitude seems to be, let’s just change the facts.

  4. Posted 09/05/2019 at 16:22 | Permalink

    There’s a very good YouTube video entitled, “The Great Global Warming Swindle” which is very informative. Everyone should watch.

  5. Posted 28/05/2019 at 17:52 | Permalink

    I enjoy this counter argument, however, you offer no solutions which ultimately means you also are capitalising on the same base. At least the students offer a desire for change, and maybe that change needs to be a new framework of our capitalist system built for the industrial revolution.

  6. Posted 25/06/2019 at 13:58 | Permalink

    Well. changing the climate seems like a pretty tall order. I suppose if you tax enough from the people you will get a change in the climate and it won’t be pretty???

  7. Posted 10/10/2019 at 21:48 | Permalink

    We have greener energy sources now. Why not use them ?
    It seems so retarded to me that people continue to pollute the planet. Regardless of whether climate change is true or false. We are still driving species to extinction whilst also messing up our own health. How many kids do we need on the spectrum to make that point clear.
    Why put such an argument into claiming that climate change isn’t due to capitalism when you could actually highlight some ways we could be aiming for a cleaner less polluted future.. If this is what your think tank comes up with then it’s a total waste and should be binned !

  8. Posted 16/01/2020 at 23:45 | Permalink

    If we’re really looking at ‘extinction’ if we don’t change our ways, then we should (as intelligent greens, like James Lovelock tell us) be building lots of new ‘zero-carbon’ nuclear power plants (and developing better ones). But of course the very people bleating about the environment oppose any such move, because reasons. This simply demonstrates Kristian’s point -Extinction Rebellion and their fellow travellers don’t want to save the planet, they want to smash the system.

  9. Posted 14/03/2023 at 22:37 | Permalink

    How does a bigot like Niemietz who is clearly an expert at crafting meretricious falsehoods and misrepresenting poorly founded speculation as fact to become a senior figure at a think tank? Clearly standards in political science are not what they ough to be.

  10. Posted 29/10/2023 at 03:57 | Permalink

    It’s rather blasé and sloppy of you to just write off renewables as being costlier when they are now substantially cheaper than non-renewables.

Leave a Reply

Your email address will not be published. Required fields are marked *