What Is 'Stakeholder Capitalism'? Part One

The concept of “stakeholder capitalism,” proposed by Klaus Schwab in his various books on the subject—in particular COVID 19: The Great Reset, co-authored with Thierry Malleret, and his latest foray in the field Stakeholder Capitalism, which faithfully reprises the points and principles of the earlier volume—is far more insidious than it sounds. From the perspective of the Left, the progressivist, the woke, “Capitalism” is, of course, a loaded word, but it remains the engine of the world’s most advanced economies, and its kinetics cannot be dispensed with. Market-dominated societies are perforce competitive and revenue-driven.

“Stakeholder,” however, is a detergent term, bleaching the semantic grime from its verbal companion, which is why it functions as a remedial descriptor. It comes across as friendly, compassionate and inviting. In its current usage, the word derives from the education industry, where it has become ubiquitous, highlighting the educators’ presumably favonian sympathies toward their students, fawningly regarded as “stakeholders.”

Originating in John Dewey’s child-centered, student-oriented educational theory, which he called “progressivist,” the idea has proliferated to the present day when students are empowered to issue demands, decide whom they want to be taught by and whom they want to be fired. It explains why we should be wary when it is used to qualify a social and economic program as vast and disruptive as the Great Reset.

Trust me, I'm German.

Placed under the loupe, stakeholder capitalism reveals itself as a sobriquet for international socialism. The corporate impetus is no longer exclusively directed toward profits but will be supervised, guided and restrained by government intervention. Or so we are led to believe.

In the wake of the pandemic, Schwab writes in The Great Reset, “Societies could be poised to become either more egalitarian or more authoritarian…[ E]conomies, when they recover, could take the path of more inclusivity and more attuned to the needs of our global commons.” Ironically, as history has proven time and again, in order to become more egalitarian, society will of necessity become more authoritarian. It’s a dynamic that approximates to a historical law. 

Schwab assesses the social and political impact of the pandemic in the five domains of Society, Economy, Environment, Technology and Geopolitics. This is what he calls the Macro Reset (of which the Micro Reset—industry and business—and the Individual Reset are specifications), a transformation which involves a “redefinition of the social contract” in the direction of “stakeholder capitalism and environmental, social and governance (ESG) considerations.”

The result will be a “better world,” portrayed as “more inclusive, more equitable, and more respectful of Mother Nature.” He envisions a tectonic shift from capital to labor, of wealth distribution from the affluent to the needy, and of greater government interventions in the functioning of the economic system, customary arrangements, social architectures and cultural dynamics in order to ensure “global sustainability.”

It's easy, too!

A proper management of the economy and social life will entail a number of salient factors. Companies, for example, will have to reconceive their “fundamental purpose” from unbridled financial profit to that of “serving all their stakeholders, not only those who hold shares.” Wages will be raised and substantial health benefits guaranteed, regardless of the bottom line. The massive expansion of stimulus funding will create “37 million nature-positive jobs” and a Green economy will be resolutely promoted to fight climate change, generating employment and profits along the way. There exists, plainly, not a shred of empirical evidence to justify Schwab’s prognostics.

It is hard to say whether Schwab’s arguments—or some of them—are cleverly devious or childishly naïve. For example, he urges us not to fear the dystopian fatality of entrenched tech-and-government surveillance following recovery, since it is “for those who govern and each of us personally to control and harness the benefits of technology without sacrificing our individual and collective values and freedom.” This analysis seems a colossal oxymoron. Surveillance will be pervasive but our values and freedoms can somehow be preserved.

When he argues that governments must do “whatever it takes and whatever it costs” to ensure our wellbeing, otherwise people afraid of the virus will not shop, travel or dine out, thus hindering economic recovery, he appears oblivious to the fact that it was intense government panic-mongering that led precisely to the adverse consequences he wishes to avoid—probably the greatest political error of a generation. Is Schwab deceiving us or deceiving himself? Such instances of double-think can be multiplied throughout his text.

As to be expected, Schwab has bought wholesale into many contemporary shibboleths and intellectual sedatives. He enthusiastically accepts the dodgy hypothesis of "global warming" and is indifferent to both the uselessness and devastation wrought by the costly scam of Green energy as a replacement for reliable fossil fuels. “The climate risk is unfolding more slowly than the pandemic did, but it will have even more severe consequences”—a premise that has been robustly challenged by some of the most reputable and knowledgeable researchers in the field.

Money for nothing, and stuff for free.

In The Fourth Industrial Revolution, Schwab supports the accelerating “innovation in genetics, with synthetic biology now on the horizon,” involving “biotechnology techniques using RNA and DNA platforms… to develop vaccines faster than ever”—except that these substances are not vaccines but computer-like “operating systems” that alter “the unique mRNA sequence that codes for a protein,” and rely on pathogenic priming that can make people sicker than the disease would have.

In Stakeholder Capitalism, we learn that Schwab is all for “contact tracing” which “has an unequalled capacity and a quasi-essential place in the armoury needed to combat COVID-19”—the “quasi” is a bet hedger, just in case things go sideways. He is an avid supporter of Mark Zuckerberg, whose Facebook is a censuring giant, and regurgitates Zuckerberg’s deceptive and self-serving pitch that greater regulation is needed to hold companies accountable.

Schwab regards COVID-panic-stricken, shut-down countries like New Zealand as “trailblazers.” He is a Net-Zero Telamon for the United Nations Sustainable Development Goals (SDGs) and Agenda 2030 with their animus against individual property rights. He has proposed a scheme of “non-financial metrics” to chart a company’s progress toward virtue, and affirms that “such virtuous instincts can become a feature of our economic systems,” assuring us they will continue “creating prosperity for all their citizens and businesses.” John O’Sullivan correctly notes that “the hairshirt economic policy of Net Zero [is] a dystopian delusion.”

[Part two tomorrow]

 

When 'Inclusive' Capitalism Becomes Socialism

Capitalism is not the answer to human suffering. At the same time, it is the only economic system which allows individual freedom to flourish; it produces unrivalled prosperity; and, as Michael Novak perceptively says in the 1991 edition of The Spirit of Democratic Capitalism, “it is the most practical hope of the world’s poor: no magic wand, but the best hope.”

Not content, some very rich people, the Archbishop of Canterbury and the Pope, among others, want capitalism to do more. Enter “inclusive capitalism” and its more recent stablemate “stakeholder capitalism.”

It was May 2014. A conference called “Making Capitalism More Inclusive” was held in London. Inclusive capitalism is a concept developed in 2012 by the Henry Jackson Society - a British think tank of classical-liberal persuasion. It started well enough with the principal objective being to engender more ethical behaviour in business practices. The excesses surrounding the recession of 2009/10 were fresh in mind. Unfortunately, it has gone rapidly downhill since.

The aforementioned conference was opened by Prince Charles and featured Bill Clinton, Christine Lagarde, Mark Carney and Lawrence Summers. Hardly a conservative or classical liberal in sight. Three conferences have followed: in London in June 2015, in New York in October 2016 and back in London in March 2018. Presumably, Covid has prevented holding a more recent conference. No matter. Those behind inclusive capitalism co-opted the Pope to keep the pot simmering.

Money makes the world go 'round.

As the Union of Catholic Asian News (UCA News) puts it, Pope Francis has become the “moral guide to inclusive capitalism.” ‘The Council for Inclusive Capitalism (the Council), with the Vatican onboard, was launched on December 8 last year. Earlier in the year, in May, The Great Reset was unveiled at Davos. “Stakeholder capitalism” became the watchword; encompassing the same grand idea as inclusive capitalism.

So, to my theme: What’s it all about or, in other words, what do ‘they’ want; and why is the whole thing a crock or, more politely, misconceived?

This is Mark Carney, the then Governor of the Bank of England, at the 2014 conference to which I referred: “Inclusive capitalism is fundamentally about delivering a basic social contract comprised of relative equality of outcomes, equality of opportunity, and fairness across generations.” Hard to believe coming from a central banker? He’s Canadian.

This is easier to believe. Justin Welby, participating in the 2015 conference, outlining his aspirations for capitalism: “A generosity of spirit that doesn’t always seek the greatest return…that meets the needs of the poor and the excluded and the suffering.”

To add waffle to waffle, the Council’s mission is to “harness the private sector to create a more inclusive, sustainable and trusted economic system.” Understandably, sustainability is featured. After all, the Pope urges us to listen to “the cry of the earth.” Hmm? Smacking too much of paganism? Perish the thought.

Klaus Schwab, Executive Chairman of the World Economic Forum, expanded on the term stakeholder capitalism in February this year. He identified two primary stakeholders. One is the planet (no, not kidding); the other is everyone, wherever they live. The respective wellbeing of both stakeholders is the objective. Though, Schwab notes, “people are social animals and their absolute well-being is less important than their relative well-being.” Got that. You and your neighbour each having ten dollars is better than him having fifteen and you only twelve.

How the idea of levelling down translates to those participating at Davos and at inclusive capitalism forums is beyond me. Note this description in UCA News of those calling the shots at inclusive capitalism: “a group of individuals and institutions with more than $10.5 trillion in assets and companies with a combined market capitalization of more than $2 trillion.” They are the woke big end of town. A race apart from the small and medium-sized businesses which make up the bulk of market economies. Their self-appointed mission: to rescue the world by reimagining capitalism.

They are discomforted by the prevailing state of affairs. They want a world within which all existing species survive and thrive, the oceans cease rising, the earth cools and each and every person everywhere enjoys a liveable income and state of the art medical attention.

Leaving aside a slight qualm I have about the earth cooling; the aims are fine. I sometimes daydream about winning a lottery. That fantasy is fine too. To take saving the poor and saving planet earth in turn.

Capitalism makes much of the world prosperous. Part of that is entrepreneurs and businesses striving to earn profits by vigorously competing with each other. Part is prices guiding resources into their best commercial use while informing and rationing demand. Part is not ensuring fair outcomes. Capitalism cannot be moulded into a generous outreach to the poor and disadvantaged. It simply won’t work. It is an idea contradictory at its core.

It's easy if you try. Scary, too.

As for lifting those in poor countries out of poverty, how about advising them to adopt Judeo-Christian institutions and values; the institutions and values that have underpinned economic progress in western countries and in other countries which have tried them. Call them what you like, of course, to make them universally palatable.

I will guess. That advice will never come out of Davos or the Council. Yet, when all is said and done, parliamentary democracy, the rule of law, property rights, free speech and freedom from fear, the absence of systematic nepotism, cronyism and corruption and, vitally, mutual trust, tell the tale of progress; not pie-in-the-sky reimagining of capitalism.

From the unattainable to the unachievable describes the segue from saving the poor to saving the planet. Here’s a thought. What is the ideal state of the planet? Roaming ruminants, sans people, perhaps. Short of that green-dream nirvana wouldn’t it be nice, for example, to get CO2 down to pre-industrial levels? Or would it?

A friend of mine, Ivan Kennedy, emeritus professor of agriculture at Sydney University, tells me that we are now effectively addicted to higher levels of CO2. He estimates that if CO2 were to return to pre-industrial levels it would reduce the photosynthesis of cereal crops by more than 20 percent. This would likely cause famine, malnutrition and death, particularly among the world’s poorest. Something on which the Pope and Archbishop might cogitate.

'Climate Change' Marxists, Come Out of the Closet

Putting aside the fact that the entire “climate change” discussion is based on a long-disproven set of data abandoned even by its author, that it is physically impossible to create the electrical systems and capacity demanded by the Warming hypothesis, and that no uncorrupted global temperature data set supports “climate change,” we are left with the fact that a great many policymakers and voters in the West believe in it.

Policymakers must be expected by voters to get serious, or to acknowledge that the entire argument is, as the U.N. has stated, just a process to destroy capitalism, the most anti-poverty, wealth-creation system ever created.

That "climate change" policies will annihilate the middle class that is responsible for all progress since the Industrial Revolution is a given – and an unacknowledged goal of Progressives. The refusal to acknowledge this by the establishment is childish. If they believe in Marxism, why hide it? Tell the people the goal, why it is a beneficial goal and how to achieve it. Tell them the results of previous attempts at implementing Marxism, as well, of course.

Look who's back.

Can a policy framework be created to address function rather than form, what is seen by those who insist the Warming Emperor has clothes, but who disagree on the cut (oil or gas), the color (drilling or fracking) and the pattern (fossil, hydro or nuclear) of those clothes to meet their commitments?

The signatories to the Paris Accords believe emissions must be reduced in order to “save the planet,” and that they will meet the goals to which they agreed. Why, otherwise, would they have signed up? Are the signatories incentivized to make the changes for which they volunteered? Given their dismal performance to-date, the answer is, “No.”

People complain about President Trump having pulled-out of the Paris Accords, but remain silent about the view of the U.N.: “America Is Already Cutting So Much Carbon It Doesn’t Need The Paris Climate Accord.” As shown below, we already are reducing greenhouse gas (GHG) output faster than any signatory country. Being a Paris signatory seems primary, meeting one’s goal, secondary. These priorities are backward.

Is the point being a signatory… or reducing greenhouse gases?

In a flight of fancy in which we pretend that, yes, we can correct the global climate that has been set awry by too many American SUVs, why not formulate a policy with teeth to deal with GHG? Can we use positive and negative incentives to alter behavior in the way demanded by those who believe they are more powerful than the sun?

Yes, we can.

Let us suppose a nation “A” that has met and exceeded its GHG commitment to the Paris Accords, and a nation “B” that has not. What incentives can be used to resolve the discrepancy between commitment and performance?

A suggestion: If nation “A” has met 105% of commitment, and nation “B,” 88%, a metric to create a “Paris Transfer Payment,” or “PTP,” could be created. Nation “B” would pay annually to nation “A” a PTP on its failure of 12%, and another 5% to reward the success of “A,” for a total of 17% of this base metric, thus incentivizing both nations to continue to work toward GHG reduction. (Alternately, the 12% “stick” could be paid to a fund to help the non-industrialized world progress without despoiling the environment, but the 5% “carrot” still paid to the above-goal country.)

A sensible metric could be a percentage of GDP of each country. If we were to use, for example, 0.01% of GDP of the smaller economy as this metric, the PTP could be calculated with complete transparency. In this instance, country “B” (88% of commitment; GDP $500B), would pay a PTP to country “A” (105% of commitment; GDP $1,500B) of 17 times 0.01% of its GDP, or $850M, as a “stick,” and “A” would gain that PTP as a “carrot” for acting in the best interests of the global community of nations. This example is illustrated in Table 1.

Table One.

Those nations not having set a target for GHG reduction would have the applicable percent calculated by averaging their per-capita GHG output against the goals of nations of similar size. China and India (without which any global GHG reduction is chimerical), would be compared to countries above 200 million population (United States, Indonesia, Pakistan, Brazil), and have their GHG reduction goals set for them, and the PTP applied by the WTO via tariffs.

A nation’s choice of hydro, fracking, nuclear, oil, gas, coal, solar, wind would be theirs. The results are what matters. Form will not reduce the ocean’s rise; function will.

European nations keep telling America how backward we are; obviously they can use IP we – not they – invented, and manufacturing and distribution and energy exploitation systems we – not they – created to achieve the results we – not they – have achieved.

(This same calculation can be used in reverse to warm the planet if, as most uncorrupted temperature data sets now show, the globe is cooling. A “snowball earth” is far more of an existential threat than more food and a slightly-warmer climate.)

Who turned off the "warming"?

If meeting the Paris commitment is the goal of the signatories, how could this type of transparent, goal-oriented arrangement be rejected? A payment transfer system from those not meeting their commitments to the community of nations, to those who are is a win-win for the future and for countries taking the "climate change" issue seriously.

If nations agree to implement a carrot-and-stick PTP, we will know they are serious. If they are serious, and if they are correct in their anti-sun worship, we all will be better off.  If they don’t agree to an agreement with teeth, we will know they are not serious, and can be ignored.

Asking an Over-Burdened Capitalism to Save the World

My boss in my first job in journalism on the Daily Telegraph in London was a genius—a forgotten genius now, alas, because he was known in the trade as “the best editor the Daily Telegraph never had” and those kind of titles don’t pass down the generations. Colin Welch was both a clear-sighted anti-socialist with a sound grasp of economic theory and a wit perpetually fizzing with epigrams and ideas. In a debate in the magazine Encounter with Anthony Crosland, later Foreign Secretary but then Britain’s leading social democratic theoretician, Colin pointed out that the main intellectual flaw in moderate socialism was that it had far too much faith—indeed, unbounded faith—in capitalism.  

Whereas more orthodox leftists wanted to nationalize companies and plan their operations to make them more efficient and profitable, modern-minded social democrats like Crosland accepted that free market disciplines were simply better than state ownership at making companies efficient, profitable, and thus taxable.  

State-owned companies in Britain in the 1960s and 1970s had a distressing tendency to absorb more money in subsidies than they generated in profits and tax revenue. At one point it was estimated that the costs of subsidizing the UK’s coal, steel, and auto industries were equal to the total annual tax revenue from North Sea oil. That kind of thing discredited orthodox socialism and led to Margaret Thatcher’s program of mass privatization in the 1980s that was exported through the world. 

With the collapse of the Soviet Union in late 1991, socialists of all kind had to invent a new definition of socialism, and they came up with one like Crosland's that amounted in theory as well as practice to regulated capitalism.  

Nothing very dramatic there, you may think; capitalism has been regulated since the Victorians. But this kind of regulation went far beyond forbidding the emission of poisonous gases or punishing the man who watered the workers’ beer. Social democrats continued those regulations, of course; indeed, they generally made them heavier. But they also imposed novel regulations under two headings.  

The first were regulations designed to control every aspect of how industries would be allowed to operate—what forms of energy they could use, the composition of their workforce, the kind of finance they could raise, etc., etc.  The second regulations required companies to spend their own resources in achieving political objectives for which the government was reluctant to levy taxation.  I covered this use of regulations by governments more fully in my earlier piece Towards the Socialist Corporation.

As Welch had foreseen twenty years before, however, when socialists did this, they were taking for granted that companies would be able to factor in the costs of these impositions more or less indefinitely without collapsing or going bankrupt. They had infinite faith in capitalism and a belief that it would always deliver the goods for them. 

And now the bills are coming home to roost.   

In his consistently original, usually correct, and sometimes scary Wall Street advice column, "True Blue Will Never Stain," Martin Hutchinson looks at how the first set of regulations has obstructed the development of three large economic development projects—exactly the kind of project that are necessary if we are to keep our economy moving forward and delivering growth (even at today’s anemic rate of productivity.) 

He points out that the so-called Holy Roman Empire (i.e., broadly speaking, Germany before its unification in 1870) was about eighty years behind the Brits and the U.S. in developing its own industrial revolution because of two flaws: its feudal system of land tenure which was only one step up from serfdom, and its system of internal tariffs which obstructed trade and raised the prices of goods in all its subject principalities. There could be no creation of a large “single market” while these absurd economic institutions survived which they did until 1833, after which Germany began its successful catch-up. 

Charlemagne. King of the Franks and Emperor of the Romans.

Why did they survive so long in the light of the fact that they were holding the statelets of the Holy Roman Empire back in a fast-developing world? Hutchinson argues that they were so stitched into the Empire’s legal system and so into the thinking of its people that reforming them seemed inconceivable. Hutchinson then delivers his blow; that in the U.S. today a similar duo is holding back the American economy. It is the combination of aggressive environmentalists and over-powerful lawyers who between them exploit the opportunities that the government’s over-regulation gives to them to halt economic development and to win large legal settlements.  

Hutchinson gives three recent examples:  

  1. "A recent Supreme Court decision allowed the Atlantic Coast pipeline to run under the Appalachian Trail, a lawsuit that had held up the pipeline for years. However, this decision was essentially nullified when Dominion Energy, one of two companies that had been developing the $8 billion project, gave up and sold its remaining natural gas assets to Warren Buffett. Apparently, even with Supreme Court approval, the remaining environmental harassments and legal delays were sufficient to make the project uneconomic.
  2. "In a second case, the $4 billion Dakota Access oil pipeline, which has been opened with oil passing through it quietly for three years, was suddenly blocked by a Washington district court, and prevented from further operation, because of some alleged defect in the pipeline’s paperwork before it was opened. By this decision of a lower court 1,500 miles from the pipeline, the operation of a $4 billion asset will be prevented for an indefinite period, at least 13 months.
  3. "In the third case the Keystone XL pipeline, a major international project which was held up arbitrarily for the entire eight years of the Obama administration, and had slowly been working its way through the paperwork since 2017, was held up by the Supreme Court for yet another environmental review, thus dooming it if Joe Biden should win the November election. "

As Hutchinson concludes, not only are huge costs added to these projects by such delays but they are almost never completed on time, sometimes the delays become cancellations, and some projects are never started because the obstacles to them deter investment in the first place. 

There are three villains in this account, however, not just Hutchinson's two. They are the close-minded, single-issue environmentalists; the aggressive lawyers—as George Gilder has written, “Entrepreneurial lawyers are the cancer of capitalism” -- and the government that makes and sustains the regulations that enable the first two to play their obstructive roles.

What makes the obstructive role of governments so hard to understand is that they are enabling the failure of their signal policies. Both political parties are loudly committed to large infrastructure spending to revive the U.S. economy. But unless they reform the regulations that allow the other two to flourish, they will be spending billions of taxpayers’ money mainly on legal fees, cost over-runs, and abandoned projects.  

It seems so lunatic that it couldn’t possibly be true. Before you say that, however, consider this disturbing fact: governments around the world have steadfastly refused to publish the cost estimates of their promise to move towards carbon neutrality by 2050. Everybody knows that this policy (if it’s ever implemented) would be enormously expensive as well as reducing the standard of living of their populations. Still, it’s telling that governments are nervous about putting an actual figure on it -- as if the voters are so distracted by word inflation that they won't notice words such as horrendous or terrifying unless they're backed up by a statistic.  

So we can understand the reluctance of governments when we learn that one government has done so with results that would alarm a drunken sailor into fiscal sobriety. As the Danish economist and head of the Copenhagen Consensus, Bjorn Lomborg, points out in a New York Post oped, adapted from his new book, False Alarm: How Climate Change Panic Costs Us Trillions, Hurts the Poor, and Fails to Fix the Planet:

Only New Zealand has asked for an independent assessment of the cost of its climate policy. It will cost 16 percent of its GDP each and every year by 2050, making it more costly than the entire New Zealand public expenditures for education, health, environment, police, defense, social protection, etc. (My italics.) 

Lomborg comments reasonably “We need smarter solutions.” For that, however, we would need smarter governments and smarter politicians. What we have are people who think you can pile ever-larger burdens on capitalism, progressively starve it of real investment and opportunities, and then ask it to save the world.

Design for Living, Badly

Since the end of the Cold War, the world’s governments have been engaged in a vast collective enterprise under the aegis of the United Nations and with the guidance of the Intergovernmental Panel on Climate Change to reduce the rise in global temperature, aka global warming, aka climate change. That reduction has changed over time. Until 2010 the aim was to cut the rise to 2.0 degrees above . . . well, above what?  

The answer is an odd one: the target was to hold the rise to 2.0 degrees above the global temperatures prevailing before the world began to industrialize.  

But as Rupert Darwall points out in his new monograph, The Climate Noose: Business, Net Zero, and the IPCC’s Anti-Capitalism (Global Warming Policy Foundation, London), there didn’t seem to be any solid scientific foundation for choosing that target: early 20th-Century warming between 1910 and 1945 had occurred before anthropogenic carbon emissions could have had a major impact on global temperature. So why choose that starting point? 

Darwall concludes that the 2.0 degree target was prompted by what he calls “the foundational tenet of environmentalist ideology: that the Industrial Revolution constitutes the original sin of modern civilization.” And that suspicion is supported by other oddities that he uncovers during his summary of how global warming policy has developed since 1989.  

For instance, the UN Framework on Climate Change was signed in 1992 with the aim of reducing carbon emissions. In the twenty-two years from then to 2016, carbon emissions (from fossil fuel burning and cement manufacture) actually rose faster than before—namely, by 61 per cent compared to 50 per cent in the period 1970 to 1992.  Was this because the capitalist West was pumping out greenhouse gases? Everyone from the UN Secretary-General to the Pope would like you to think so. But that’s not remotely the case. Darwall is fond of unveiling inconvenient facts and here is one of his best: 

1981 was the last year when the West’s carbon dioxide emissions exceeded those of the rest of the world. By 1989 and the fall of the Berlin Wall, the West’s emissions were 46% of global emissions. Before the pandemic struck, they accounted for around 25%.

Developing countries now emit three times the emissions of the advanced West.  

Sky's the limit.

That shouldn’t surprise us too much because it’s a firm principle of climatist ideology, not to mention a firm policy commitment of Third World governments, that developing countries should not agree to be bound by any limits on their industrial development and use of carbon-based energies. When attempts were made to get the developing world to accept such limits at the 2010 Copenhagen conference, China, India, Brazil and others rebelled and the conference ended in obvious failure.  

The response of the IPCC, the European Union, and the Obama administration was to relaunch the international climate policy process in a way typical of global bodies. They adopted a far tougher target for carbon emissions reduction—namely, one of a 1.5 degree rise in temperature since industrialization—but left the task of meeting the targets to national governments while proposing a raft of  reforms to make it possible. The 2018 IPCC report described these reforms as “very ambitious, internationally cooperative policy environments that transform both supply and demand" or, more succinctly, as “intentional societal transformation.”  

And, of course, they reveal the dirty little secret of UN environmentalism—it's a program for economic redistribution from the West to the developing world almost as much as for climate change mitigation. Since foreign aid has been intellectually discredited in recent years, the climate change process now has to take up the slack. But the economic consequences of imposing these reforms—as coyly hinted at in the dead bureaucratic language of the IPCC reports—are so savage in their impact on the poor that no amount of capital transfers from the West would compensate for them.  

There were some very large and gaping loopholes in this strategy, as there always have been in IPCC reports, to enable governments to evade, postpone, and “forget” the commitments they accept in such agreements. Realistically, such loopholes have to be there—or the entire U.N. Framework would collapse. The developing world has never accepted that the 1.5 percent restraints apply to itself in the first place; the U.S. under Trump has rejected them (while actually achieving larger emissions cuts than any other country because it has permitted fracking); and the EU and most of its member states outside Central Europe have adopted them hypocritically in the knowledge that they can’t possibly be achieved without a global recession worse than any in history (including what might emerge from the coronavirus pandemic.)

Incredibly, some Western governments—notably, U.K. governments under Gordon Brown, David Cameron, Theresa May, and now Boris Johnson—have gone beyond the IPCC recommendations and committed themselves to net-zero emissions by 2050. Barring some amazing technological breakthrough that target cannot be achieved, but it can cause enormous economic damage in the course of failing and being abandoned.  

What then will happen? One of the academic architects of the 1.5 target initially said it was “incompatible with democracy” -- i.e., that the voters would never stand for it. His judgment is confirmed by the fact that whenever the voters in the U.S. or Australia have been given the chance to vote down carbon taxes, they have taken it enthusiastically. The sceptic was persuaded to amend his judgment to say that implementing the target would merely be “very hard” after a discussion with the headmaster, but his first thoughts were correct. Exactly how “hard” it would be to sell the IPCC formula is somewhat speculative because, tellingly, both the IPCC and sympathetic Western governments refuse to conduct cost-benefit analyses of the commitment.  

Mr. Darwall’s own attempts to construct one from the scattered information in the reports is devastating. Whatever the assumptions, it seems, the costs vastly outweigh the benefits, and the impact on everyone, especially the poor, will be to increase their energy and food costs, to reduce their standard of living overall, and to destroy any prospect of improvement in their lives 

Poor, but Green.

And because governments cannot promise credibly to deliver either the 1.5 or net zero targets if the voters stop them, the UN and Green campaigners have turned to another partner: namely business. Indeed, the recruitment of Wall Street and industry to the cause of promoting a carbon-free economy is the central and the most novel part of his argument. He shows how leading figures in Wall Street and central banks, such as Michael Bloomberg and Mark Carney, have suddenly discovered that capitalist corporations should abandon shareholder sovereignty and profitability as the main engines of their activity and instead seek wider social objectives, above all "saving the planet," in partnership with a wider range of stakeholders. Nor do they merely make this argument, they are designing financial incentives to penalize companies engaged in lawful and socially necessary activities such as mining or oil and gas exploration by obstructing their access to capital investment. And they seek changes in the law to encourage corporate giving to “Green” causes irrespective of its impact on shareholder value. 

I’ve written on this theme myself on The Pipeline here and here. It is becoming a cause for concern more broadly. Andrew Stuttaford, an old friend, recently wrote powerfully on the dangers of this misnamed corporate social responsibility on NRO. In effect, it gives corporate managers the power to tax their shareholders to spend that revenue on political causes of which the shareholders themselves might not approve.  

Taxing is rightly regarded as a government monopoly in democratic regimes, and we call those rulers who divert public money into their own bank accounts “kleptocrats.” We should be very wary of the idea that Michael Bloomberg is gifted with special insight into what the voters want, given that he recently spent half a billion dollars of his own money to get nothing whatever in the Democratic primaries. Who knows what he might not achieve with ours? Kleptocracies are not improved by being private rather than public.  

Unless the spread of corpocrats buying virtue with our cheque books is restrained, the victims will not only be their shareholders and people whose security rests on pensions invested with them. They will include capitalism itself. For, as Darwall argues brilliantly, in seeking to transform capitalist companies into charities that may also make a profit (with luck), the new green capitalists would unconsciously ensure that companies (and entrepreneurs) would no longer be moved by the constant incentive of profitability to innovate and compete. Indeed, it is that very incentive to innovate that the IPCC and the principal ideologists of environmentalism dislike so much. They want a stable, even a declining, world that consumes less and less. Their plans honestly include a series of restraints and obstacles to enterprise, innovation, and growth.

If they were also able to replace the animal spirits of capitalism with the protective mentality of the bureaucrat, they would make companies into agents of economic and social stagnation and in time decay. In short, what the Bloombergs, Carneys, and corporate responsibility hucksters want would lead to a result they almost certainly don’t want. They want capitalism to commit suicide in order to save the world from the growing pains of prosperity.  But we know that the world before capitalism, like the world outside capitalism before 1989, was one of stagnation, decay, poverty, tyrannies, limited horizons, zero net hope.  

The international implications of that I’ll return to next week.  Meanwhile, read on:

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