The Political Economy of Capitalism
INET workshop w Simon Mair
27 August 2018
Titled Capital and Environmental Crisis: insights from Adam Smith, the paper sets out to explain two stylised facts of the modern economy: that the economy is becoming more energy efficient but economic growth is still tightly coupled to energy use, and that at a global scale different energy carriers are complements not substitutes. To this end, a framework based on a reading of Adam Smith’s The Wealth of Nations was developed. It is argued that in Smith’s conception capital is fundamentally about energy; capital accumulation generates growth by supplementing and substituting human energy with other energy flows, or by enabling more efficient use of existing energy flows. Moreover, Smith views labour as a form of capital, which is consistent with a view of the economy as an energy gathering system. A causal loop diagram of a simplified vision of Smith’s growth theory is construed, arguing that the stylised facts of increasing energy use, increasing energy efficiency and a complementary relationship between energy carriers follow naturally from the dynamic relationship between capital and markets in a Smithian growth framework. In a Smithian framework, the argument is, ongoing energy use is essential for growth and that renewables will not substitute for fossil fuels. Consequently, the only way to escape catastrophic climate change is through a fundamental shift in the social logic of capitalism.
Details about the event can be accessed on the INET website.