Macroscope | Climate change is driving capitalism’s need to change to survive

The world can no longer afford stock markets having a free ride while governments do the heavy lifting of financing essential needs

Circumstances emerging around the world make it likely that capitalism will evolve into something closer to China’s brand of state capitalism

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An electronic screen showing the Hang Seng Index outside a bank in Central on September 20. Photo: Dickson Lee

Published: 3:30am, 3 Jan 2022

Karl Marx believed that capitalism was destined to collapse once the proletariat class overthrew the bourgeoisie, but capitalism has proved remarkably resilient. The system faces fundamental challenges now, however, if it is to survive potentially massive demand for new investments.

The particular brand of shareholder capitalism that has existed in recent decades in the world’s biggest market economies has outlived its usefulness. It seems likely to go out “not with a bang but a whimper”, to borrow from the poet T.S. Eliot, via a spectacular stock market collapse.

Market economies look increasingly like dogs chasing their own tails. They have binged on short-term investment, especially in the tech sectors, creating stretched asset valuations and stock bubbles while neglecting the need for huge investment in long-term socioeconomic areas.

This means governments are struggling to fill a huge financing gap in fighting climate change, battling to overcome infrastructure deficiencies and trying to meet pandemic-related and other spending needs. They have borrowed heavily to do this but are close to the limit of what they can do.

Stock markets have in effect received a free ride while governments do the heavy lifting. But it is becoming increasingly obvious that there must be more burden-sharing between public and private finance if market capitalism is to survive. The next stage of evolution is overdue.

There are already indications of how this will come about. The most tangible sign came from Mark Carney, former Bank of England governor and now UN special envoy for climate action, during the global climate summit in Glasgow. Speaking as chair of the Glasgow Financial Alliance for Net Zero, Carney said some 450 firms and financial institutions in 45 countries had committed to delivering more than US$130 trillion of financing for a transition to net zero carbon dioxide emissions.

.css-1m2rp1p{color:#34b8b5;}Macroscope | Climate change is driving capitalism’s need to change to survive

Macroscope | Climate change is driving capitalism’s need to change to survive