Creating principled capitalism for climate change

The implications of climate change are far-reaching and affect all life on Earth. Can a new method of climate change measurements change capitalism?

The use of fossil fuels has contributed to climate change, gradually increasing global temperatures over time. This has resulted in various environmental consequences, including frequent and severe storms, floods, fires, and biodiversity loss. The implications of climate change are far-reaching and affect all life on Earth. Despite the urgent need to address this issue and the potential economic and health benefits, progress has been slow.

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despite this urgency and the massive economic and health benefits of taking climate action, most countries, businesses, states and cities have yet to make the economic and societal shifts required to secure a better future

The World Resources Institute

Despite the urgent need to address this issue and the potential economic and health benefits of doing so, progress has been slow. Ignoring the issue or refusing to change our behaviours and investment policies will not solve the problem.

How did we get here?

Our current situation can be attributed to our reliance on fossil fuels. While finding alternative energy sources is underway, we must redouble our efforts and encourage governments to invest in these solutions. Although technical solutions are available, implementing them will inevitably cause disruptions. Building the necessary infrastructure and addressing issues such as energy storage and green hydrogen production remain key challenges that must be tackled.

Credit: Midjourney Generated

Trust in Liberal Capitalism

Our trust in liberal capitalism as the most effective economic system has been misplaced.  We have relied on Adam Smith’s invisible hand – the metaphor that individual self-interest and freedom of production and consumption will fulfil the best interest of society, as a whole. As Giles Fraser writes, ‘Personal greed could be seen as the driver of other people’s employment. We could worship the money god with a clean conscience’. 

Financial scandals, greed and pure self-interest, have eroded our behaviours towards one another and the natural world. However, it is also true that individuals are capable of incredible self-sacrifice for the common good. This is evident in the heroic actions of many individuals during the COVID-19 pandemic and in the bravery and resilience of the Ukrainian people in resisting the Russian invasion. How do we invoke a feeling of citizenship that will unite us for a common purpose? Our actions and thoughts need to change, which calls for global leadership. We have to renew our commitment to our sense of moral duty.

The moral duties of Citizens are Obligations

Capitalism depends on trading – the operation of the markets in a free market economy. Trading is an exchange of equivalents which carries an obligation on all parties to act in good faith and with a duty of care. An obligation is a binding promise, contract, or sense of duty. Good faith and goodwill are to act in accordance with our values of legitimate standards of trust, and honesty and upheld by the law. Tom Settle, the Canadian philosopher, has proposed that we replace liberal capitalism with principled capitalism. 

Moral principles should drive individual and collective decisions rather than utility and profit. Obligations, he observed, are an underived social relation – that is, an obligation cannot be analysed in terms of some other concepts more basic than it and from which it can be derived. He sees an obligation as a root reciprocal moral principle for any society of more than two autonomous rational beings. It is a principle in the ‘golden rule’ of all religions and expressed in the Bible as – ‘do unto others as you would have them do unto you’. 

Historically trading is the exchange of the Financial Exchange Worth (FEW) of part of the assets of one financial entity (the buyer/investor) for something desired to be supplied by another entity (the supplier). The objective of each entity is to increase its net worth by generating a net profit of income over expenditure through time. FEW is the relative state of being useful or important enough to be desired, valued in a trustworthy manner, and considered dependable and reliable by all entities in the system. For the most part, FEW is a form of money as currency (cash and non-cash), such as the £ or $, but theoretically, it could be any form of trustworthy barter.

Measure the Worth of the Obligation

There is an alternative view, such as the Worth of Obligation (TWO). Equivalents exchanged in trading could also be a value expressed as TWO such that TWO entails FEW. Although TWO is exchangeable, it should not be tradeable in the same way as FEW and there should be no market for TWO that is not FEW. That is because TWO is a ‘bigger idea’ than FEW with an importantly different moral stance from that of economic utility. Whereas the utility of FEW is the usefulness and degree of satisfaction of a consumer’s choice, TWO is centred on a set of obligations that a financial entity has to the natural world and to those aspects of our human and social world are beyond FEW. 

TWO obligations are not necessarily reciprocal. Although we human beings have obligations to nature – it has no obligation to us. Nature will do what it does regardless. Of course, there are ecosystem services to which we apply FEW, such as utility companies that collect, store, clean and distribute water to our taps. The water collected by the utility companies is free, but delivering potable water to our taps is not.

Obligs as new measures of Obligation

The new units of TWO obligations are obligs and directly analogous to the utils of FEW. The new unit of obligatory force is a carson, after the ecologist Rachel Carson. It is that force required to change the rate of change of a measured item within an obligation. For example, a measured item might be a set of specific acts like building a certain number of houses, repairing several potholes in a road network, or improving the number of biodiversity units in a hectare. The level of obliges to achieve those changes can be recorded on a balance sheet (See Figure 1).

Figure 1. A Balance sheet showing £ FEW and obligs TWO
Credit: Author

We could determine the level of obligs through a vote. In a representative democracy, we could require our elected and appointed representatives to attach TWO votes as obligs to all public decisions. 

When they publish their annual accounts, all public and private organisations could use these new measurements. The aim would be to highlight the degree to which the organisation is committed to delivering its moral obligations beyond money making and how they intend to deliver them. The declaration of obligs would run parallel with standard accounting practice. The next stage of development of the idea is to initiate a pilot project that investigates the issues around implementing a new type of balance sheet, including the difficulties of changing the mindsets of those involved.


Journal reference

Blockley, D. (2022). Measures of obligation. Cogent Business & Management9(1), 2154101. https://doi.org/10.1080/23311975.2022.2154101

Dr. David Blockley is an Emeritus Professor, an engineer, and an academic scientist. He was the Dean of Engineering and Head of the Department of Civil Engineering at the University of Bristol, UK for 9 years, and a Non-Executive Director of Bristol Water plc for 9 years as well. Dr. Blockley is a Fellow of the Royal Academy of Engineering, the Institution of Civil Engineers, and the Institution of Structural Engineers (where he served as President in 2001-02). He has won several technical awards, including the Telford Gold Medal of the Institution of Civil Engineers, and has authored 10 books and just under 200 technical papers.