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Material World: Capitalism - Blind and Deaf to the Natural World

Material World

One of the advantages of the market ‘mechanism’ – so we are told – is its ability to adjust economic activity to changes in the situation in which it takes place. In particular, investment capital is supposed to flow away from geographical areas where the risks of economic activity are rising into areas where the risks are lower.

Things do often work this way for risks associated with social conditions. Turbulent labour relations, armed conflict, political upheaval and extortion by corrupt government officials are among the risks routinely factored into the expert assessments of ‘business climate’ that guide investment decisions.

However, it is by no means routine for such assessments to take account of risks coming from the natural environment – earthquakes, tsunamis, hurricanes and other natural disasters, and changes caused by global heating.

Earthquakes – no lasting impact?

For example, there is no sign of large-scale capital flight from southern California or the Greater Tokyo Region, both of which are virtually certain to be hit by powerful earthquakes in the not too distant future.

In one chapter of The Coming Tokyo Earthquake (Tuttle Publishing, 1995), Peter Hadfield analyzes how different Japanese companies will be affected. Some will bear much greater losses than others; building firms based outside the danger zone will make a good profit from post-quake reconstruction.

Now, the fund where I had my retirement savings at the time when I read this book invested in Japanese companies, so I wrote to the director of the fund to draw his attention to Hadfield’s analysis and ask whether their portfolio managers took these differential effects into account. I received a courteous reply, assuring me that what I was suggesting was quite unnecessary because earthquakes, though tragic from a humanitarian viewpoint, have no lasting economic impact of any significance.

Water: ‘a good thing in real estate’      

Nor is the rising sea level deterring investment in low-lying coastal areas. In Washington, DC the SunCal company is promoting ‘a new upscale housing development and retail center’ along the River Potomac, right at sea level. Eddie Byrne, SunCal’s vice president of project management, is quoted as saying that the name of the development – Potomac Shores – ‘invokes water, a good thing in real estate’ (The Washington Post, 28 March 2013). And this after Hurricanes Katrina and Sandy and all the other storms that have been battering the Atlantic and Gulf coasts of the US!

Recently I was looking at some internet ads for seaside properties in Florida, built right on the beach and selling for upward of a million dollars. The realtor who placed the ads offered to answer questions about the state of the market, so I took up the offer. No, he told me, house prices are not falling in anticipation of the rising sea level. On the contrary, they are rising. Clearly buyers are not worried about the sea level. I asked how difficult it was to get these beach houses insured. Also no problem, he assured me.      

Carbon bubble?

In August 2012 the Carbon Tracker Initiative (CTI), a project of Investor Watch, issued a report by Jeremy Leggett and Mark Campanale entitled Unburnable Carbon: Are the World’s Financial Markets Carrying a Carbon Bubble? (www.carbontracker.org). The authors argue that the financial markets overvalue hydrocarbon companies – in February 2011 the combined value of the top 100 coal companies and top 100 oil and gas companies was $7.42 trillion. This is vastly inflated because it ignores the risk that environmentally responsible governments will force companies to curtail operations and leave much of the remaining coal, oil and gas in the ground. When this happens the ‘carbon bubble’ will burst, triggering a financial crisis.

In a response to the report, The Economist (4 May, 2013) notes that in 2012 the top 200 companies spent $674 billion developing new reserves and suggests that they are betting on governments not taking effective action to restrict hydrocarbon extraction. That, after all, has been the situation up to now. In that case the ‘markets’ (i.e., investors) are not mistaken in their expectations and there is no carbon bubble.    

What is the CTI really about? The key person behind it, Jeremy Leggett, has long been committed to environmental causes – in the 1990s he was a prominent figure in Greenpeace International – and also to relying on market mechanisms to solve environmental problems. His real concern is not helping investors maximise their returns or even maintaining financial stability but saving the planet.

How does he hope to achieve this worthy goal? By manipulating the market – i.e., persuading investors, most of whom know little about the environment and care less, that disinvestment from hydrocarbons is not just good for the planet but in their financial interest. It will be marvellous if the subterfuge works! But that’s a rather big ‘if’.

Psychological block

Isn’t it in the interests of the capitalists themselves to preserve the ecosystem? Don’t they depend on it like everyone else?

Of course. The trouble is that they are incapable of rationally assessing their interests. Their money-making obsession creates a psychological block against any idea that they sense may threaten their pursuit of profit. They repel the voice of nature from the very threshold of consciousness, so the question of factoring it into the equation can never even arise. 

At some level the capitalists rightly fear that the natural world demands an end to the system they embody. They blind and deafen themselves to nature so that they cannot see they are harming it or hear it screaming in its death agony.