Table of Contents
Most environmentalists today focus on the damage done to the Earth’s ecosystem by humans and propose ways in which we might work collectively to ameliorate the most serious threats. They largely believe that these changes can be accomplished within the dominant global structure of capitalism. However, a small but growing group of researchers and activists is beginning to question whether such changes can in fact occur within the context of a global capitalist system.
The main question that is going to be answered in this paper is the following: can today’s most difficult environmental challenges be successfully overcome as long as the global economic system remains capitalistic? According to this question, the research has the following objectives: to describe modern environmental problems; to explain influence of the modern human activity on the environment; to explain whether this influence may be changed via changes in capitalism and how it can be made. Taking into account the main goal and mentioned objectives, the research is going to have the following structure: introduction, case analysis, and conclusions. The most interesting advantage of this research is that negative influence of capitalism on the natural environment is going to be analyzed on the example of a certain accident – the Deepwater Horizon oil spill in 2010.
Capitalism and the Global Environment
One of the most significant trends in the development of the modern world is severe climate changes. We are forced to talk about constant risks for the natural environment. As a result, we face natural disasters, global warming, and other dangerous natural phenomena. Alas, these risks are mainly associated with the mankind’s activity. Generally, this activity has a negative character and respectively negative influence on the natural environment. A lot of researchers claim that such activity and such attitude toward nature are created by the capitalist character of the modern society.
However, there are the different opinions. Some people even try to claim that there is no some significant and dangerous climate changes, or, at least, they are not provoked by human activity. Such discussions are quite typical nowadays. For example, such discussion is described in the film An Inconvenient Truth. The film describes Al Gore’s efforts to convince American and the world’s community that the climate changes are really dangerous for mankind and that something should be changed. As we know, Gore did not win. Probably, it means that the modern society is not interested in solving these problems. One of the tasks of this paper is to define why capitalist society is so reluctant to changes.
The question is what reasons of such an aggressive attitude toward the nature of capitalism are. The main reason can be found in the main goal of capitalism. This mission is getting profits at any cost. Seeking profits, companies are ready to exhaust natural resources and even destroy nature. Owners of a business do not think about their future and the future of their children since they are ruled by a momentary goal to get higher profits. The task of the modern society is to change such philosophy. We should believe that environmentally responsible capitalism is possible and we have to create it.
Negative character of capitalism can be analyzed on the example of the accident that has happened quite recently. The Deepwater Horizon oil spill in the Gulf of Mexico, which lasted for three months in 2010 and impressed the whole world, is, in fact, a great example of the consequences to which the financial capitalist worldview may lead us. It has impressed the world because of two reasons: the first one is the preconditions of the disaster that describe the character of modern capitalism and its attitude to the rest of the world; the second reason is the consequences of the disaster that are going to be felt probably even by our children.
The spill happened on April 20, 2010, because of the explosion on the Deepwater Horizon drilling rig that injured 17 workers and killed 11 men. The leak lasted for three months and was stopped on July 15. However, it had already released about 185 million gallons or 4.9 million barrels of crude oil by that moment. It means that it had been releasing about 53.000 barrels per day. That negative process was completely stopped on September 19. The Deepwater Horizon has become the largest oil spill in the U.S. history easily exceeding the 1989 Exxon Valdez tanker accident. Moreover, it is the second biggest oil spill in the world’s history.
This disaster has caused a lot of ecologic and economic negative consequences that are still felt. BP has been named responsible for all the problems. The company had to conduct all the cleanup processes and pay compensation to all suffered parties. In fact, BP admitted its fault and was ready to compensate the damages. However, as we are going to see below, it was not only the company responsible for the accident. In fact, this accident has become possible because of the combination of the company’s negligence, ineffective governmental regulations, and disadvantages of the financial capitalist worldview in general.
The Deepwater Horizon spill has raised a lot of questions about the energy and economic policy, environmental safety, etc. The accident has raised the question about the ethics of the modern capitalism and its attitude to environmental questions in the context of environmental responsibility. In this term paper, a lot of these questions are going to be analyzed on the example of the mentioned spill.
First of all, the reasons of the accident have to be defined. The foundations of the accident have been laid down with the growing popularity of the deepwater oil drilling. Such growth has become possible because of the following reasons: technological development, higher oil prices, and government incentives.
Technological development has provided more possibilities for the deepwater drilling. Companies have got instruments and techniques that help them to reach previously unreachable locations. In fact, they are even forced to do it because previous sources are constantly decreasing and they have to look for new locations of oil.
Higher oil prices have made this kind of drilling economically beneficial. Deepwater drilling may cost 10 times as much opposed to shallow-water drilling. However, increasing the price of crude oil makes drilling in deeper waters profitable. According to the experts, deepwater drilling is profitable as long as crude oil prices are above $45 per barrel. The current price of crude oil is about $90. Thus, there are no preconditions that this kind of drilling is going to become unprofitable in the nearest future.
Government incentives also encourage deepwater drilling. The U.S. government has done a lot in the institutional and legal environment to encourage the deepwater drilling. This opinion can be proven with the following statement:
The Deepwater Royalty Relief Act of 1995 allowed for reduced royalty rates for deepwater leases. Although the Act officially expired in 2000, lowered royalty rates have continued to be set for deepwater development. Proponents of lower rates view them as compensation for the extra risk and expense associated with deepwater drilling but opponents argue that the policy encourages risky drilling (Roach, Harris, and Williamson, 2010).
In fact, it is not surprising because everybody knows that very often authorities represent interests of some particular business groups. Oil business is among the most influential businesses in the world and it has a possibility of lobbying its interests in the U.S. government. All the above mentioned factors have led to the spread of deepwater drilling. The growth of its popularity is characterized with the tremendous rate.
An increasing share of offshore oil in the U.S. comes from deepwater sources. In the mid-1990s only about 20% of oil production in the Gulf of Mexico came from deepwater wells. Now the percentage of Gulf of Mexico oil from deepwater wells is about 70%, and this percentage is likely to grow in the coming years (Roach, Harris, and Williamson, 2010).
However, this kind of drilling is associated with a lot of economic and environmental risks. The analyzed accident has only proven this fact. These were the foundations of the accident while the particular reasons were a little bit different. Before the accident, the company had a great reputation. For example, the company had better safety records than the industry running on the average for six years. That is why, nobody expected such problems from this particular company.
In 2005, an explosion at a BP oil refinery in Texas killed 15 people and wounded 170. Once again, the company’s safety policy was investigated by respective bodies, which have found a lot of problems. It can be proven by the words of the representative of the agency that conducted such an analysis. The Telos Group, a consulting firm tasked to examine conditions at the refinery before the explosion, noted “We have never seen a site where the notion ‘I could die today’ was so real” (Roach, Harris, and Williamson, 2010).
Thus, there have always been some holes in the company’s safety policy. Moreover, these reasons should have been noticed by the company before the accident. The supposable direct reason for the accident can be described using the above mentioned statements.
Thus, BP is of course responsible for the accident. However, the ineffective policy of the U.S. government should not be forgotten in this context. As a result, the accident has become a combination of different factors, among which the following can be differentiated: regulatory violations, inadequate mechanical parts, removal of the drilling mud from the well, inactive blowout preventers and batteries, governmental regulatory exemptions granted to BP, and economical procedures that would lead to bigger profits.
Thus, we are able to see some irresponsibility and even negligence of BP in this context. The company was able to predict and prevent the accident, but they ignored safety alarms and decided not to lose money related to the break of drilling and needed works. However, because of such negligence the company was forced to pay much more money in the form of compensations in the end.
Under pressure from the Obama administration, BP set up a $20 billion compensation fund to be paid out to those adversely impacted by the spill. According to BP, by late August nearly $400 million had been paid to claimants. BP also undertook a $50 million advertising campaign to indicate that they will take full responsibility for the spill and “make things right (Roach, Harris, and Williamson, 2010).
The last element is very important for the company. Because of the accident, the company has damaged its corporate image and lost some share of the consumers’ loyalty. That is why, it is going to take a lot of time and money to bring back previous positions. The problem is strengthened by the fact that the modern society is really concerned with environmental problems taking into account severe climate changes of the recent years.
It can be concluded that the accident and all the further negative consequences for the nature and society are the result of a capitalistic worldview. This accident has become a vivid example of the financial capitalism worldview that is the most popular concept nowadays. Moreover, the accident has shown all the negative sides of this worldview. First of all, we have to define the essence and main features of this worldview.
This kind of worldview was invented in the XIXth century. This philosophy was created by the adepts of the so-called classic economics. Among them, we may differentiate Adam Smith, David Ricardo and others. Main principles of capitalism in general and financial capitalism in particular are the following:
- Economic freedom – everything in the market economy should be based on the principles of market freedom. Business must have a free choice what to produce; consumers must have a free choice what to buy. However, such economic freedom provides economic responsibility for the actions taken by the mentioned agents;
- Any market has an ability to rebalance itself and to reach equilibrium because of the adjustments of the demand and supply and the flexibility of prices;
- A government should not interfere with the performance of the market economy. Such interference may decrease the flexibility of prices and respectively the stability of the whole system. In fact, the proponents of the liberal approach tend to consider the government’s interference into the market economy as the main reason of different crises;
- Every agent of the market economy tends to maximize its own utility. Doing this, the whole system is able to reach the most beneficial state;
- According to the laws of the market economy, some agents should always be prosperous while others should suffer. However, it is a necessary price of the overall stability and prosperity.
The above mentioned principles have been dominant for many years and have determined economic policies of many countries of the world. First of all, these are the United States of America and England that have been the leaders of the global economy.
The Great Depression has harmed these principles. Unregulated economic freedom had led to voluntarism in the financial system. As a result, this system experienced collapse and classic economic principles lost their previous positions. They were replaced with other principles developed by a famous English economist John Meynard Keynes. Other historical conditions that gave rise to Keynesianism were: the World War I, monopolization of the market structures, and active performance of trade unions.
According to Keynes, the market system has no automatic mechanism that would ensure full employment of resources. Recession may move in a prolonged depression that can last many years. A balance of total expenditure and GDP can be achieved far from its full employment level.
Keynes’ recommendations were used by leading world’s economies. In fact, they were those instruments that helped to overcome the crisis and its direct consequences. However, starting from the second half of the XXth century, classic principles have been modified and have returned their previous popularity. As a result, the global economy has returned its unregulated freedom.
Modern global economy can be characterized as a system where big international corporations define the rules, thus sometimes even influencing the life of whole countries. The representatives of these corporations have seats in the governments of the countries and in international organizations.
Economic processes, especially in the financial sphere, are almost unregulated. Financial assets do not adequately represent their material values. In fact, it can be even said about the separation of real and financial sides of the economy. For the purpose of getting profit, companies and people are ready to sell even air. It explains the fact of the creation of many strange financial assets, for example, weather futures etc.
As we can see, capitalism in its classic view has made the global economic system really unstable and unregulated. The recent global financial crisis is a vivid example of it. The credit pyramid that had been built thanks to the capitalism principles collapsed and the mankind experienced one of the most severe economic cataclysms in its history. The consequences of this crisis are going to be felt in the next decades.
The financial capitalistic worldview is also important in other contexts. First of all, it changes the overall worldview of people. Second, its principles are not adjacent with the principles of environmental sustainability.
These ideas should be explained in more detail. The principles of financial capitalism have replaced the traditional principles of the humanity. Nowadays, a desire to get some benefits and to earn money is stronger than a desire to have a happy family or to serve the mankind and nature. As a result, such moral values as loyalty, family, community, and nation are not really popular today. They have been replaced by a desire to earn money, to be wealthy and influential, and to build a successful career.
More and more people are following these principles. As a result, the level of the so-called competition is only increasing. That is why, people are ready to do anything to reach success.
Moreover, capitalism has evoked a great pressure on the natural environment. The mankind has exhausted natural resources and has spoiled the flora and fauna. There is no need to look for the evidences of it because everyone is able to feel severe climate changes of the recent years. The most significant and dangerous trend of the recent years is, of course, global warming that may threaten even the existence of the mankind. At least, our children are going to feel its negative consequences.
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Following the principles of capitalism, among which the most important is the principle of maximizing utility and getting profits, is going to lead to the total depletion of natural resources and respectively to natural disasters and climate changes.
The main reason for it is that the number of people on the Earth is only growing while the quantity of natural resources is decreasing. As a result, the mankind has two options: to stop the current extensive and aggressive strategy and save the planet or to continue this fight for profits and just die.
The Deepwater Horizon oil spill is a vivid example of two features of the modern capitalism – a desire to get profits despite the cost and incompatibility with environmental safety principles.
Despite the fact that the company was aware about the possible accident and its consequences, it has not done anything to prevent the cataclysm. The reason is really banal – unwillingness to lose money because of the break in the production.
The U.S. government is also guilty. In the recent years, it has significantly simplified the process of deepwater drilling. The government also defended particular business interests. It has already been mentioned about the great influence of international corporations on governments.
The consequences of this accident are going to be felt in the following decades. Moreover, some of them cannot even be defined nowadays. That is why, the following question arises whether the current strategy and principles should be given up if they are not compatible with the principles of safe environment and if their consequences cannot be definitely predicted.
Generally, it can be said that environmental problems should be solved, in the end. However, there are two opposite opinions. Some researchers claim that these problems may be solved within a capitalist structure. Among them the following ones may be pointed out: Hardin, Hawkin, Homer-Dixon, Werbach. These authors believe that capitalism is the most appropriate philosophy that responds to a human’s nature. That is why it simply cannot be eliminated, since it provides the most effective allocation of resources. They believe that the task is to change capitalism a bit. For example, environmental responsibility should be an integral strategy of any company. For example, Hawken in the article Natural Capitalism claims the following.
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“Conventional economic theories will not guide our future for a simple reason: They have never placed "natural capital" on the balance sheet. When it is included, not as a free amenity or as a putative infinite supply, but as an integral and valuable part of the production process, everything changes. Prices, costs, and what is and isn't economically sound change dramatically” (Hawken).
Their proponents consider that in order to change environmental situation capitalist structure should be reformed or even eliminated, such authors are Beder, Magdoff, Foster, Williams, Wallis, Butler, etc. For example, Butler in his article The Ecological Rift: A Radical Response to Capitalism's War on the Planet claims the following.
“Capitalism, a grow-or-die system, must ignore the planet's boundaries. But we cannot afford to not if we are to secure a safe planet that can sustain human civilisation. As Foster, Clark and York conclude: "No solution to the world's ecological problem can be arrived at that does not take the surmounting of capitalism, as an imperialist world system, as its object. It is time to take the planet back for sustainable human development” (Butler).
Beder, Magdoff and Williams also support this opinion. They believe that the main goal of capitalism – seeking for profits – cannot be realized with maintaining of stable and supportive environmental situation. They claim that governmental institutions and NGO should control business more toughly in order to force them to be environmentally and socially responsible.