Green social democracy can rescue capitalism from itself

A growing number of businesses recognise that their self-interest is best served by an economy that is not fatally undermined by climate change.

We are living through not one but two crises of capitalism. The first one – the economic crisis which has followed the financial crash of 2008 – everyone knows about. The second is less familiar. This is the crisis of the global environment.

A crisis of capitalism occurs when the dynamics and forces of the system build up costs and risks to such an extent that they end up undermining themselves, creating a self-perpetuating spiral which can only be escaped through state intervention – by governments effectively saving capitalism from itself. 

This is of course precisely what has happened in the economy since 2008. An unsustainable boom in lending and credit, driven by a huge expansion of the financial sector, led to an asset price bubble and subsequent collapse, followed by a retrenchment in spending, leading to loss of output and rising unemployment. The slump into which these events pushed the economy could only be escaped via massive state intervention – initially in bailing out the banks, and then in huge injections of demand, first fiscal (stimulus) then monetary (quantitative easing), a process which is still not complete in any of the major western economies. 

The environmental crisis is now of the same kind. This is most obviously the case in respect of climate change. It is now clear that the global economy cannot continue to burn fossil fuels as its main source of energy: the carbon embodied in them, if released into the atmosphere, will cause changes to the climate not seen since the last ice age. As the Stern Report showed, even leaving aside the human cost, the economic losses caused by such events would be equivalent in this century to the cost of the two world wars and Great Depression of the last. In its continued investment in fossil fuels, capitalism is undermining itself. 

But the crisis is wider than this. If we look at world food and energy prices over the last six years, in 2008 both spiked, then nosedived as the financial crisis took an axe to demand. But since then, while global economic growth has recovered only slowly, food prices have risen back above their 2008 peak, and oil prices are today above $100 a barrel. Why? Because supply cannot keep pace with demand. The environmental crisis now is not just one of excess pollution, but of inadequate supply of resources – the inability of the global environment under present economic conditions to provide enough energy, food and other commodities to meet demand at stable prices.  In the past, environmental costs were largely imposed on the economic periphery – air pollution in poor urban areas or the destruction of rainforests. No more. Now resource scarcity is affecting prices right at the heart of the global economy.

In this sense, the environmental crisis must now – finally – be regarded not merely as a crisis of ecosystems, or of human values, but as a crisis of capitalism, in the sense that the dynamics of capitalist growth are now undermining themselves.

In the face of this new reality, the left needs to enlarge its understanding of both capitalism and social democracy.

Modern social democracy came into being in the 20th century to manage a capitalism which was unable to manage itself. When the financial crisis of 1929 hit, capitalism fell into a slump and could not get out of it without state support – in the US through Roosevelt’s New Deal, in Europe through rearmament and ultimately war. After 1945, social democrats rescued this failing capitalist system from itself by creating welfare states, secondary and tertiary education and national health systems, through strong trade unions and Keynesian fiscal and monetary policy.

Once again it is only governments which can rescue capitalism from the slump into which it has fallen. But the traditional social democratic programme will now not be enough. Today we also need to manage the environmental impacts of a system rapidly destroying the foundations on which it rests. 

In the past this would not have been easy. Traditionally the left saw environmental protection as a luxury which could only be afforded once wealth had been generated.  Environmental policies which imposed costs on industry risked damaging growth and destroying jobs. Environmentalism was a minority middle class movement, with no economic interests underpinning its politics. 

But that is no longer true. Today the most powerful voices in favour of environmental protection are arguably not the traditional green NGOs but the major corporations in the rapidly growing green economy. The UK’s share of this market is the sixth largest in the world, at nearly 4 per cent. Now worth over £120bn, the UK sector is itself growing at around 4 per cent per annum – one of the few major sectors currently doing so. It already sustains just under a million jobs. 

This change in the economics of environmental protection is of vital importance to social democrats. For it changes the politics. 

When social democracy rescued 20th century capitalism from itself it did so through a powerful coalition of forces. At its base was the working class, organised through trade unions and social democratic and labour parties. But critical too was the support of a significant proportion of the business community, and the middle classes who worked in it.  The business class by no means universally supported social democratic parties and governments in the post-war period, but enough of them split apart from their ideologically backward-looking peers to create decisive support for the Keynesian programme and the creation of the welfare state. Yes, this involved giving a larger share of their profits to the workers and to the state in taxes; but the benefits in terms of the growth of demand for the goods and services they produced more than outweighed the cost.

Exactly the same phenomenon is happening now over environmental policy. The traditional business view can still be heard – such policy is bad for business, growth and jobs. But it is now matched by the voice of businesses who will benefit from it, and who understand that their self-interest is best served by an economy that is not fatally undermined by rising resource prices and the impacts of climate change.

So just as social democrats in the 20th century forged a cross-class, cross-industry coalition in favour of the welfare state, so social democrats today need to forge a comparable alliance in favour of the environmentally-based economy. Green politics is no longer simply about a middle class environmental movement: it is now joined by powerful economic interests. Social democrats have to learn from how they built the welfare state economy in the 20th century in order to do it again for the green economy of the 21st.

Michael Jacobs is visiting professor in the Department of Politics at University College London and author of The Green Economy: Environment, Sustainable Development and the Politics of the Future (Pluto Press)

A longer version of this piece appears in the current edition of Fabian Review

Drax power station in north Yorkshire, the largest coal-fired station in western Europe. Photograph: Getty Images.

Michael Jacobs is visiting professor in the Department of Political Science / School of Public Policy at UCL and at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. He is co-editor of the Political Quarterly

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Barb Jungr’s diary: Apart-hotels, scattered families and bringing the Liver Birds back to Liverpool

My Liver Birds reboot, set in the present day with new music and a new story, is coming to life at the Royal Court Theatre.

For the last three years I’ve been writing a musical. Based on Carla Lane and Myra Taylor’s Liver Birds characters Beryl and Sandra, but set in the present day with new music and a new story, it is coming to life at the Royal Court Theatre – in Liverpool, appropriately. Amazingly, the sun shines as the train ambles into Lime Street, where Ken Dodd’s statue has recently been customised with a feather duster tickling stick and some garlands of orange and lime green. Outside the station, composer Mike Lindup and I buy a Big Issue. We have a scene opening Act Two with a Big Issue seller and we are superstitious. We check into our “apart-hotel”. Apart-hotel is a new word and means a hotel room with a kitchen area you will never, ever use.

At the theatre everyone hugs as though their lives depend on it; we are all aware we are heading into a battle the outcome of which is unknown. There will be no more hugging after this point till opening night as stress levels increase day by day. I buy chocolate on the way back as there’s a fridge in my apart-hotel and I ought to use it for something.

Ships in the night

There’s no point in being in Liverpool without running by the river, so I leap up (in geriatric fashion) and head out into the rain. You’d think, since I grew up in the north-west and cannot ever remember experiencing any period of consecutive sunny days here, that I’d have brought a waterproof jacket with me. I didn’t. It springs from optimism. Misplaced in this case, as it happens. I return soaking but with a coconut latte. Every cloud.

We have been in the theatre for seven hours. Everything has been delayed. The cast are amusing themselves by singing old television themes. They have just made short shrift of Bonanza and have moved on to The Magic Roundabout. We may all be going very slightly mad.

As hours dwindle away with nothing being achieved, Mike and I pop to the theatre next door to enjoy someone else’s musical. In this case, Sting’s. It’s wonderfully palate-cleansing and I finally manage to go to sleep with different ear worms about ships and men, rather than our own, about Liverpool and women.

Wood for the trees

This morning “tech” begins (during which every single move of the cast and set, plus lighting, costume, prop and sound cues must be decided and logged on a computer). Problems loom around every piece of scenery. Our smiles and patience wear thin.

By the end of the 12-hour session we know we have the most patient, professional cast in the known cosmos. I, on the other hand, am a lost cause. I fret and eat, nervously, doubting every decision, every line, every lyric. Wondering how easy it would be to start over, in forestry perhaps? There is a drug deal going on across the road in the street outside the hotel. My apart-hotel kitchen remains as new.

First preview

I slept like a log. (All those years of working with Julian Clary make it impossible not to add, “I woke up in the fireplace”.) At the crack of dawn we’re cutting scenes in the Royal Court café like hairdressers on coke. Today is ladies’ day at Aintree, which feels apropos; tonight we open Liver Birds Flying Home, here.

The spirit of Carla Lane, who died in 2016, always dances around our consciousness when we are writing. She was very good to us when we began this project, and she was incredibly important to my teenage self, gazing out for role models across the cobblestones.

I grew up in Rochdale, a first-generation Brit. My parents had come here after the war, and what family we had was scattered to the four winds, some lost for ever and some found much later on, after the Velvet Revolution. I had a coterie of non-related “aunties” who felt sorry for us. Ladies with blue rinses, wearing mothball-smelling fur coats in cold houses with Our Lady of Fátima statues lit by votive candles in every conceivable alcove. To this day, the smell of incense brings it all back. Yet the northern matriarchy is a tough breed and I’m happy to carry some of that legacy with pride.

Seeing the theatre fill with people is terrifying and exciting in equal measure. We’ve had to accept that the finale isn’t in tonight’s show because of lack of technical time. I’m far from thrilled. The show, however, has a life of its own and the actors surf every change with aplomb. The audience cheers, even without the finale. Nonetheless, I slouch home in despair. Is it too late to change my name?

Matinee day

The fire alarm is going off. I know that because I’m awake and it’s 4am. As I stand in reception among the pyjama-clad flotsam and jetsam of the apart-hotel, I suspect I’m not the only one thinking: if only they’d had alarms this annoyingly loud in Grenfell. I don’t go back to sleep. I rewrite the last scene and discuss remaining changes for the morning production meeting with my co-writer, George.

The Saturday afternoon performance (which now includes the finale) receives a standing ovation in the circle. The ratio of women to men in the audience is roughly five to one. In the evening performance it is 50/50, so I’m curious to see how Beryl and Sandra’s story plays to the chaps who’ve been dragged out on a Saturday night with their wives. In the pub after the show a man tells Lesley, the actress playing present-day Beryl, how moved he had been by what he’d seen and heard.

A few years ago I stood behind Miriam Margolyes as we were about to go on stage at the Royal Festival Hall in a Christmas show. She turned to me, saying, “Why do we do this to ourselves?” We agreed: “Because we can’t do anything else!” I suspect forestry is out of the question at this juncture. 

“Liver Birds Flying Home” is at the Royal Court, Liverpool, until 12 May.

Barb Jungr is an English singer, songwriter, composer and writer.

This article first appeared in the 18 April 2018 issue of the New Statesman, Enoch Powell’s revenge