All Else Being Equal, Capitalism Will Suffocate the Planet

June 7, 2021


The District Sentinel
Jun 7



For all the claims about communism only working in theory, capitalist thought is built on thoroughly asinine assumptions. The idea that markets efficiently allocate resources hinges on the assumptions that individuals are purely rational beings and that information about commodities flows freely. The idea that markets are competitive is built on the assumption that business owners will not act on their class interests by colluding with one another over time, not even implicitly. The idea that a higher minimum wage causes unemployment is built on the assumption that one must analyze the impact of higher wages on demand for labor in a vacuum, ignoring the fact that poor people with more money will spend most of it, thereby stimulating economic output. With a few simple assumptions, alchemy becomes chemistry.

Recently, we saw an incredible iteration of this type of narrow-minded thinking on display during a hearing held by the Senate Banking Committee. The top Republican on the panel, Pat Toomey (R-Pa.), blasted the Federal Reserve for its meager approach to addressing the impact of climate change on the financial industry by making an incredibly facile assumption.

“Put simply, neither the warming of the earth’s temperature nor severe weather events are a threat to the stability of the financial system,” Toomey, a former derivatives trader, said on May 25. “Experience bears this out. In the last 11 years—a time period that included four of the five costliest hurricanes in U.S. history—we haven’t found one bank failure caused by any weather event.”


Sen. Pat Toomey (R-Pa.). Photo from toomey.senate.gov.

“In fact,” he added, “we’re not aware of any bank failure in the modern era due to weather.” In other words, climate change hasn't caused any bank failures to date, therefore one can assume that climate change will never cause a bank failure.

It's maddening enough that Toomey's analysis comes with the steady rise of the oceans threatening coastal communities across the world. On top of this, the Western U.S. is currently dealing with debilitating droughts with the hottest months of summer yet to come. Farmers in New Mexico are being told to refrain from planting crops this year. Ranchers in Washington are selling their cattle and applying for emergency aid, as grass for grazing has withered. The Governor of Utah, Spencer Cox, urged his state's residents to pray for rain this past weekend, with soil moisture at record lows.

In North Dakota, at the start of May, wildfires had already burned six times as many acres in the state as they do in the average year. And 130 houseboats have been forced off of a receding Lake Oroville in California, which provides drinking water to 27 million people and water to 4-5 million acres of farmland. Yet Senator Toomey wants us to believe that regulators overseeing the financial industry, which exists to manage risk, should be indifferent to these calamities, which are increasingly becoming predictable, annual events. Even if oceans weren't rising, the parching of the Western United States would be enough to cause panic among those tasked with ensuring economic stability.

Fortunately for Toomey, despite his tantrum, the Fed's plans to address climate change don't amount to much. The central bank has merely been pressing big banks to reveal how their balance sheets could be adversely impacted by the effects of climate change—something that many banks have already been doing, in part, because European regulators have been subjecting global banks to climate-related stress tests. The Fed's aim, as Reuters reported on May 13, is simply “to identify risk.”

But we already know what risks are increasing to the financial sector and the entire planet thanks, in part, to banks' support of dirty energy ventures. A coalition of groups--led by 350.org, Sierra Club, Public Citizen, Americans for Financial Reform, and Rainforest Action Network--has therefore called on the Fed to implement “capital requirements to reflect climate risk,” and to use its authorities to limit “the financing of emissions.” The Fed has declined to go this route. But with disclosure requirements, the central bank can at least pretend that it's trying to do something.

The biggest banks in the country are also taking action of a similar kind, pledging PR-friendly moves that cast a pall over the planet's future. Goldman Sachs, Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, and Morgan Stanley have all recently set themselves targets of financing ventures with net-zero emissions by 2050. In the short-term, however, they will continue to finance dirty energy projects, despite pleas from scientists for governments to cease the establishment of new fossil fuel infrastructure to meet the goals set by the same governments under the Paris Climate Accord—limiting the warming of the planet from pre-industrial levels to 1.5 degrees Celsius, thereby avoiding the point at which the catastrophic impact of warming becomes irreversible.

This call to keep oil and gas in the ground was recently echoed by the International Energy Agency, long an industry-friendly organization. But the capitalists who run the world, who put hundreds of billions of dollars into fossil fuel ventures annually, are operating under a different set of non-scientific assumptions.

“It's not just about banks stopping financing,” JP Morgan CEO Jamie Dimon told the Senate Banking Committee, when pressed about climate change the day after Toomey blasted the Fed. “We're gonna need oil and gas for a long time.”