There was “a flaw” in the theory: this is the famous admission by Alan Greenspan, former chair of the Federal Reserve, to a congressional inquiry into the 2008 financial crisis. His belief that the self-interest of the lending institutions would lead automatically to the correction of financial markets had proved wrong.
Now, in the midst of the environmental crisis, we await a similar admission. We may be waiting some time.
For, as in Greenspan’s theory of the financial system, there cannot be a problem. The market is meant to be self-correcting: that’s what the theory says. As Milton Friedman, one of the architects of neoliberal ideology, put it, “Ecological values can find their natural space in the market, like any other consumer demand”. As long as environmental goods are correctly priced, neither planning nor regulation are required. Any attempt by governments or citizens to change the likely course of events is unwarranted and misguided.
But there’s a flaw. Hurricanes do not respond to market signals. The plastic fibres in our oceans, food and drinking water do not respond to market signals. Nor does the collapse of insect populations, or coral reefs, or the extirpation of orangutans from Borneo. The unregulated market is as powerless in the face of these forces as the people in Florida who resolved to fight Hurricane Irma by shooting it. It is the wrong tool, the wrong approach, the wrong system.
There are two inherent problems with the pricing of the living world and its destruction. The first is that it depends on attaching a financial value to items – such as human life, species and ecosystems – that cannot be redeemed for money. The second is that it seeks to quantify events and processes that cannot be reliably predicted.
Environmental collapse does not progress by neat increments. You can estimate the money you might make from building an airport: this is likely to be linear and fairly predictable. But you cannot reasonably estimate the environmental cost the airport might incur. Climate breakdown will behave like a tectonic plate in an earthquake zone: periods of comparative stasis followed by sudden jolts. Any attempt to compare economic benefit with economic cost in such cases is an exercise in false precision.
Even to discuss such flaws is a kind of blasphemy, because the theory allows no role for political thought and action. The system is supposed to operate not through deliberate human agency, but through the automatic writing of the invisible hand. Our choice is confined to deciding which goods and services to buy. But even this is illusory. A system that depends on growth can survive only if we progressively lose our ability to make reasoned decisions. After our needs, then strong desires, then faint desires have been met, we must keep buying goods and services we neither need nor want, induced by marketing to abandon our discriminating faculties and succumb instead to impulse.
You can now buy a selfie toaster, that burns an image of your own face onto your bread – the Turin Shroud of toast. You can buy beer for dogs and wine for cats; a toilet roll holder that sends a message to your phone when the paper is running out; a $30 branded brick; a hairbrush that informs you whether or not you are brushing your hair correctly. Panasonic intends to produce a mobile fridge that, in response to a voice command, will deliver beers to your chair.
Urge, splurge, purge: we are sucked into a cycle of compulsion followed by consumption, followed by the periodic detoxing of ourselves or our homes, like Romans making themselves sick after eating, so that we can cram more in. Continued economic growth depends on continued disposal: unless we rapidly junk the goods we buy, it fails. The growth economy and the throwaway society cannot be separated. Environmental destruction is not a by-product of this system. It is a necessary element.
The environmental crisis is an inevitable result not just of neoliberalism – the most extreme variety of capitalism – but of capitalism itself. Even the social democratic (Keynesian) kind depends on perpetual growth on a finite planet: a formula for eventual collapse. But the peculiar contribution of neoliberalism is to deny that action is necessary; to insist that the system, like Greenspan’s financial markets, is inherently self-regulating. The myth of the self-regulating market accelerates the destruction of the self-regulating Earth.
What cannot be admitted must be denied. Ten years ago this week, Matt Ridley, as chair of Northern Rock, helped to cause the first run on a British bank since 1878. This triggered the financial crisis in the UK. Now, in his new incarnation as a Times columnist, he continues to demonstrate his unerring ability to assess risk, by insisting that we needn’t worry about hurricanes: as long as there’s enough money to keep bailing us out, we’ll be fine.
Ridley, who helped to destroy the hopes of millions, is one of the faces of the “New Optimism”, which claims that life is becoming inexorably better. This vision relies on downplaying or dismissing the predictions of environmental scientists. We cannot buy our way out of a process that could, through a combination of heat stress, aridity, sea level rise and crop failure, render large parts of the habited world hostile to human life, and that, through sudden jolts, could translate environmental crisis into financial crisis.
In April, Bloomberg News, drawing on a report by the US federal mortgage corporation, Freddie Mac, investigated the possibility that climate breakdown could cause a collapse in real estate prices in Florida. It looked only at the impact of sea level rise – hurricanes were not considered. It warned that a bursting of the coastal property bubble “could spread through banks, insurers and other industries. And, unlike the recession, there’s no hope of a bounce back in property values.” The sigh of relief from insurers and financiers when Hurricane Irma, whose intensity is likely to have been enhanced by global heating, changed course at the last minute could be heard around the world.
This year, for the first time, three of the five global risks with the greatest potential impact listed by the World Economic Forum were environmental. A fourth (water crises) has a strong environmental component. If an economic crisis is caused by the environmental crisis, it will be the second crash in which Matt Ridley will have played a part.
They bailed out the banks. But as the storms keep rolling in, you’ll have to bail out your own flooded home. There is no environmental rescue plan: to admit the need for one would be to admit that the economic system is based on a series of delusions. The environmental crisis demands a new ethics, politics and economics. A few of us are groping towards it, but it cannot be left to the scattered efforts of independent thinkers: this should now be humanity’s central project. At least the first step is clear: to recognise that the current system is flawed.