Most observers of the current climate crisis argue that we need fundamental changes of our lifestyles and economic policies. There is less emphasis on whether and how we must change the fundamental institutional structures of our economic systems. But when thinking about agency in the technosphere, institutions are central. If the technosphere follows its partly autonomous dynamics, even shaped by physical laws (see the posts by Axel Kleidon and James Dyke), how can we regain our human agency? I think it is not enough just to call for moral and political engagement. In the first place, we need new institutions that create, establish and protect our human agency. It is like the progress of democratic and human rights in the past centuries. That was about establishing human agency in historically evolved social systems of rule, dominance and power. Now we need to establish our human rights vis à vis the technosphere. How can this be done?
Recently, together with a friend, a businessman, Stephan Bannas, I worked on a ‘Market Economy Manifesto’, a master plan for overthrowing capitalism. We think that the current malaise is indeed caused by capitalism, and that the solution lies in adopting a genuine market economy. Many readers will feel surprise here, as most people think that there is no fundamental difference between the two. But there is a fundamental one. The market economy is driven by human agency, whereas capitalism is driven by systemic forces subjugating human agency. And these forces work together with the mechanisms of technosphere evolution in creating our current tragedy. What is the core difference between capitalism and market economy?
Capitalism is a system that builds on two fundamental principles, based on a market economy with money as the central medium of exchange. These principles are not essential defining elements of a market economy, though.
The first is the principle of transforming as many objects, actions and social patterns into ‘assets’, i.e. making them tradable on markets, assigning monetary value to them and subjecting them to economic processes that aim at generating profits. That is Marx’s classical idea of ‘commodification’ and was elaborated in much detail by Karl Polanyi in his book ‘The Great Transformation’: Capitalism pursues the goal of subjecting more and more domains of society and nature to markets.
The second is that capitalist agents are institutionally enabled to limit their personal liability for their actions and hence protect their own assets as much as possible from any kind of claims that may result from taking excessive risks in profit-seeking. Capitalism builds systematically on the principle of externalization of risks to society.
Combining the two principles results in the expansionary nature of capitalism, since the risks of the first process, commodification, are partly externalized to society via limiting personal liability. Hence, a peculiar pattern of economic agency is established: The ‘capitalist’. These mechanisms have been masterfully analyzed in much detail by Katharina Pistor in her new book ‘The Code of Capital’. Capitalism is no natural phenomenon, it has been created by our legal institutions, gradually transforming the market economy into capitalism. This view of capitalism is not Marxist, because it does not focus on class and exploitation of labour but includes many other forms of capitalist exploitation of society and nature for making profit, such as natural resources or gendered family life (again, this is Polanyi). That is, the theoretical basis for understanding capitalism is not the labour theory of value, but the institutional analysis of the relationship between economy, society and nature. This suggests an entirely different form of revolutionizing capitalism. The alternative to capitalism is not socialism in the traditional meaning of the term. That was Marx’s error.
This other anti-capitalist revolution is very simple: Abolish all institutional forms that limit personal liability in the economy, unless there is a clear rationale in terms of public interest. We are always taught that limiting liability is in the public interest because it encourages risk taking, hence economic growth and technological progress. The most egregious forms of limiting personal liability have been invented in the recent decades, in the financial sector, with the same justification. The result was a series of financial disasters, and speeding up the commodification of everything on Earth, most recently data and information, including genetic.
Imagine an economy where full personal liability reigns. There would be no limited liability companies, no publicly listed firms, the financial sector would be downsized to managing monetary transactions and organizing the credit system as a relationship between savers and borrowers. You think that this is atavistic? Well, far into the 20th century even in the financial sector many banks had not yet adopted limited liability. In the 19th century, limited liability was only slowly advancing. Most entrepreneurs, all the time, had to act with full personal liability, and only later in their career turned to maximizing their wealth by exploiting all fancy legal devices to limit their liability and protect their assets from claims of others that may result from excessive risk taking. Everywhere, limited liability is the institutional means of creating market power, monopoly, and ruthless scrambling for profits. It takes many forms, beyond corporate governance, especially in designing financial instruments.
Considering the second force of commodification, this is also enabled by peculiar institutions. We often create property rights which do not exist ‘naturally’, the foremost example is the expansion of intellectual property rights. By ‘nature’, much knowledge is a public good. If you combine the artificial legal creation of assets with limited liability, you get modern capitalism: with the large public corporation in the lead, controlled by shareholders and managers who both enjoy full protection of their personal wealth, and which owns growing pools of assets that support monopolization of markets, such as patents or copyrights.
Capitalism and the rise of the technosphere in its current shape are two sides of the same coin, well recognized by critics such as Thorstein Veblen at the beginning of the 20th century or Lewis Mumford after WW II. It is extremely important to understand the relationship between technosphere evolution and human agency as shaped by economic institutions. By limiting liability and extending commodification, we subject ever larger parts of the technosphere (and the biosphere) to the expansion of the capitalist system. But capitalism is a social technology: Without being fully aware, we transformed the technosphere as expanding according to principles defined by economic institutions, and in this pattern the expansionary physical nature of the technosphere and the expansionary nature of capitalism mutually reinforce each other: That is the ‘Great Acceleration’ of the 20th century.
If we re-establish full personal liability and limit the institutional empowerment of commodification, we regain our human agency in the technosphere without claiming to be able to annul its physics. We change speed and direction of technosphere evolution, but not its fundamental physical principles. This is straightforward, because the expansionary forces of excessive risk taking in technological evolution would be contained, and their orientation towards monetary goals of profit.
This idea is not new. At the turn from 19th to 20th century, the emerging capitalism faced many critics, already highlighting its destructive forces on nature and society, from many perspectives, reaching from Christian conservatives to progressive socialists. For example, there were many cooperative movements promoting responsible forms of consumption, or youth movements praised environmental values. Many critics converged on the ideal that personal responsibility should be a core ethical principle in designing the economy. It is sobering to learn that much of our current troubles and controversies have a deep history. The political convulsions of the 20th century often disconnected these historical threads.
One of these threads is German Ordoliberalism in its original shape, a theory of the market economy created by German economists as an alternative to capitalism, emerging since the 1920s, and then laying the ground for the German ‘Social Market Economy’. But alas, Germany after WW II did not follow their advice in one most essential respect: Abolish all forms of limiting personal liability in the economy. The Ordoliberals were aware of the far-reaching consequences of this institution, including the shape of economic structure: with full personal liability, that would be dominated by small and medium scale companies, with a strong local orientation, and less destructive forces on the environment. This was an economics of the market economy that had learned the lessons of the early stage of capitalism. This lesson was forgotten. Germany created ‘welfare capitalism’, as addicted to growth as any other form of capitalism.
Full personal liability creates full responsibility for our actions. That is essential to make us human and is just other side of the precious coin of freedom. By means of designing ourselves as responsible human agents in the economy, we regain control of technosphere evolution without turning to illusionary ideas of planning and designing its course from the vantage point of an omniscient ‘climate dictatorship’ – which increasingly emerges as the default soiution to our current crisis.
2 Replies to “How to restore human agency in the technosphere”
This is an interesting argument, Carsten! I have a few quick thoughts.
1) Market choice is a kind of agency, but is it not a rather constrained version? What happens to other kinds of human agency, that are less ‘personal’, more collective, about the commons, and the good of the other? There seems no place for them in a world based solely on property rights and responsibility.
2) Your argument sounds very similar to those for free-market environmentalism (see eg https://en.wikipedia.org/wiki/Free-market_environmentalism). Am I right? Or is there a crucial difference?
3) Related to that – how is this an argument about the TECHNOSPHERE rather than about how to conserve environmental quality? I want you to say more about how it works as a new relation with technology in particular.
4) We all know that the technosphere is a large and complex system with unclear boundaries, and that there are emergent dynamics from its interconnectedness. That makes personal liability very difficult to attribute! See this paper of mine for an argument about that in relation to solar radiation management geoengineering (http://dx.doi.org/10.1068/a45649) – but some of the arguments transfer to other technologies.
Yes, market choice is a constrained form of agency! Capitalism is about expanding this form without limits. My argument is about containing and revolutionizing capitalism as the system that currently governs our economy. That is also the fundamental difference to free market environmentalism. I do not suggest that markets are the panacea to deal with our crisis, but that we have to accept that markets are an integral part of any type of economic system that can sustain our complex societies. Therefore, designing markets is of central significance, which includes the decision where and when they can work, and where and when they fail. Free market environmentalism is capitalist environmentalism, in my argument, and therefore is flawed in a principled way.
Your point 3: I explained elsewhere that I approach markets as a technology, hence as a crucial element of the technosphere. This follows the material turn in economic sociology. If we do not grasp this essential point, we cannot recognize how our human agency is usurped by technosphere mechanisms. Many contributions to the technosphere erroneously suggest that ‘economy’ and ‘technosphere’ are separate domains, because they define the latter only in terms of technological artefacts.
Finally, my point about personal liability is not about tort law in the first place. It is about institutional mechanisms that foster excessive risk taking in the economy, hence mainly about institutions of corporate governance and the financial sector, as elaborated in Pistor’s book. If you abolish limited liablity, you create countervailing forces to technosphere mechanisms of expansive growth. The economy becomes more human, as necessarily people will adopt a more holistic stance towards their desisions in the marketplace, which could affect their entire personal life. That’s not about assigning responsibility of complex unintended effects in the environment.