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That ecological crises create economic crises is a fairly common theory. A great many socialists, social liberals and social democrats want this to be true. And vice versa: they want it to be true that being climate-smart must be economically advantageous. They want the economy to be in good condition when it does not harm nature. Green investment pays; it has to pay. What will otherwise happen to our earth?
When the humanist-liberal organisation Global Humanitarian Forum argues the world loses $125 billion every year due to climate change, they say implicitly that we would benefit from stopping global warming. Unfortunately, such a figure is only relevant if the world were a static and planned economic entity. In our world, that figure is more likely to conceal the fact that powerful corporations and states are still making huge profits by creating climate change.
The premise of the Brundtland Commission – that ecological problems can only be solved if we also eradicate global poverty – is absolutely relevant in many local places. With global warming, it is rather the other way around: the more poverty, the lower the contribution to climate change. The theory of the environmental Kuznets curve – that richer societies become more environmentally friendly – may lack scientific support, but it feels right. After all, money can buy everything, so why not a better environment?
Even in the financial sector, there are forces that argue that the fossil fuel industry and climate change will create major economic problems. In April 2019, the governors of the UK’s and France’s central banks and the head of the Network for Greening the Financial Services (a coalition of thirty-four central banks) warned of the gigantic financial costs caused by climate change. Individual companies that fail to adapt to the new world will lose massively, argued the CEOs, who were particularly concerned that a disorderly transition from fossil fuels to renewables would lead to what they called a “climate-driven Minsky moment” – by which they meant a “sudden collapse in asset prices”.
That problems related to nature create economic crises is a hypothesis with many variants and a long history. The English economist David Ricardo attributed the cause of the crises in the early nineteenth century to declining agricultural yields and rising grain prices (which led to higher wages and lower profits). For Thomas Malthus, a contemporary of Ricardo’s, economic development was limited by the carrying capacity of land.
Many years later, the Club of Rome’s Limits to Growth concluded that future shortages of resources such as energy, minerals and forests, which were either running out or becoming too expensive, would lead to world economic crisis. And, more recently, Jason W. Moore has argued that the fundamental problem of capitalism has been that capital’s demand for ‘cheap nature’ grows faster than its ability to secure it; thus production costs rise and accumulation begins to falter. A crisis then results.
Moore’s reasoning is extensive. ‘Cheap nature’ includes what he calls the cheap four: food, labour, energy and raw materials. To clarify the argument, we need to take the assertions apart and point to examples. For instance, Moore argues that it was the price of energy sources that led to the shift from hydroelectricity to fossil fuels, which historical studies have disproved. High oil prices have historically caused problems, such as in 1973 and 1979, which supports Moore’s hypothesis. In 2020, the problem for the US economy was, rather, that prices were too low as the price of crude oil was in negative territory and companies had to pay to store it. Capitalism seems to be able to survive problems linked to both high and low prices for both oil and labour. Concerning labour, Moore’s argument could work as a defence of the profit squeeze theory in the 1970s, but before 2008, excessively low wages were more of a problem for the economy.
Not unlike Moore, writers in the peak oil movement argued that the 2008 crisis erupted because of a reduced supply of oil. The theory of peak oil was inspired in part by Limits to Growth and was a hot potato until around 2012. The theory comes in different flavours but the core consists of a handful of assertions: because oil is a finite resource, at some point, global production will peak (which everyone agrees with), which will lead to a deep economic recession in oil-importing countries (which is unclear, but could definitely happen), and this peak has already been reached or will be reached very soon (which is demonstrably wrong).
The peak oil movement lost momentum after 2010 when new oil fields opened almost as fast as scientists published texts predicting the end of oil. Unconventional oil production boomed during the 2010s, not least with oil sands and fracking. The fact that oil production expanded radically in the 2010s while the economy was not flourishing supports neither the peak oil movement nor Moore’s hypotheses. The environmental activist and author George Monbiot wrote a 2012 column in The Guardian, aptly titled, ‘We Were Wrong on Peak Oil. There’s Enough to Fry Us All.’
The most interesting theorist defending the hypothesis that ecological crises create economic problems was the first-wave eco-Marxist James O’Connor. In 1987, the year before O’Connor launched his theory on the second contradiction, he published a book on economic crises, The Meaning of Crisis: A Theoretical Introduction. This may explain why he turned ecological analysis into a theory of crisis. While economic crises were necessary for capitalism to reproduce itself, the ecological crises were, according to O’Connor, primarily destructive in nature. This is an important conclusion that also underlies this book. O’Connor goes a step further: the destructive ecological crises – global warming, acid rain, salinisation of groundwater, toxic waste, soil erosion, new pesticides, perpetual urban renewal, etcetera – not only destroy people, places and other species, they destroy and undermine profit rates and damage the economy. It would cost so much to repair all the damage to nature – raising the costs of external conditions of production – that it would lead to reduced profits and a crisis for capitalism as a whole. Ecological crises create economic ones.
When I started writing my new book during the fall of 2019, my intention was to articulate a severe critique of O’Connor’s thesis. Then came the corona crisis. And what was that if not precisely an ecological crisis triggering an economic crisis? Was this the first real O’Connor crisis? At least I needed to be a bit more humble: we need to include in our analysis the fact that ecological crises can be triggers for economic ones. The pandemic did not fully cause the economic crisis (recession was already looming). It triggered it. And, as a main historical tendency, there is still much more that points in the opposite direction: that ecological crises have not been problems for capital. It does not matter how much people want ‘ecological’ to equal ‘profitable’. The most important lesson from the history of capitalism is that capital has profited handsomely from creating environmental damage and ecological crises.
Here, too, we must remind ourselves of the flexibility of capitalism. Nature can be destroyed regardless of whether there is a boom – when there is enormous pressure on the earth’s resources – or a crisis – when politicians blindly prioritise the economy over everything else in order to restore growth. Capitalism can destroy nature in all sorts of forms, from fascism to social democracy, from neoliberalism to kingships, and under the most diverse political regimes, from Nazi Germany to postwar Sweden, from present-day South Africa to tomorrow’s China.
Some profit from destroying nature concurrently as others profit from trying to save the planet through insurance, organic products, medicines and psychotropic drugs, waste management, face masks and much more. Capitalism is flexible enough to get out of economic crises, reshape itself and make money from both destroying and saving the planet – all at the same time.
One criticism of O’Connor is that capital can accumulate under virtually any ecological conditions, no matter how degraded, at least as long as there are humans still around. Another is that capital can always find its climate change shock doctrine. Where O’Connor argues that it would cost a lot to repair ecological destruction, his critics point out that capital in the world’s richest countries always seems to find ways to shift negative consequences to the Global South.
But we cannot ignore the possibility that O’Connor will be vindicated in the end. What a world that has warmed up three or four degrees looks like, we cannot know. Will the economic system break down when the last drop of oil is consumed, say in 2120? Breakdown theories are discussed elsewhere in Against the Crisis, so we will leave things here by saying that this is both impossible to predict and politically irrelevant at this point.
One question that is very much alive, however, is whether the capitalist class could continue to accumulate over two degrees of warming. Will capital – if it is not actively stopped – invest all the way into unchecked climate change? Will politicians accept investments that take us into the time of escalating feedback effects? Or perhaps there exist some moral barriers, or at least a self-preservation instinct on the part of capitalists and politicians, that will prevent this from happening?
Unfortunately, this is not a hypothetical question. Many investments that will take us into the age of uncontrollable feedback have already been made. In October 2019, Norway’s Equinor (formerly Statoil) opened the largest new oil field outside Norway since the 1980s. The field will produce crude oil for fifty years. From Mozambique to the Arctic, from Qatar and the Kingdom of Saudi Arabia to Canada, oil majors continue to invest as if climate science did not exist. In 2022 and 2023 – as climate change escalated and many had problems paying their energy bills – the big oil companies announced astonishing profits.
Nor does it seem difficult to find investors. Although the Governor of the Bank of England seems worried about a “climate Minsky moment”, there is no reason to doubt that financial investors will continue to invest as long as it is profitable, which it still very much is.
Listening to the young in the environmental movement, it may seem that the climate issue is a generational conflict, which it also is, as today’s youth have inherited a gigantic problem from previous generations. At the same time, there should be no doubt that there are sufficient future capitalists among today’s youth who will be ready to invest in the destruction of the planet, well into the age of mass extinction, and enough potential officials and politicians who will support them.
This article is an edited excerpt from Against the Crisis: Economy and Ecology in a Burning World, published in November 2024 by Verso Books. Buy a copy here.
Ståle Holgersen is a Senior Lecturer in Human Geography at Stockholm University, Sweden. He is a member of two research collectives: the Zetkin Collective (ecosocialist group working on political ecologies of the far right) published White Skin, Black Fuel on Verso in 2021 and Fundament (a housing research collective) published Kris i Bostadsfrågan on Daidalos in 2023.
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