What if growth and climate protection are incompatible? What if even the largest conceivable number of wind turbines and solar panels fall short of providing what we need? We have to embrace not “green growth” but “green shrinkage”, argues Ulrike Herrmann. And with it, the end of capitalism.

Capitalism was invented in England. From around the year 1760, British textile manufacturers had an idea that had never occurred to anyone before: to replace human workers systematically with machines. Those industrialists simply wanted to maximise their individual profits, but they changed the world forever. They began the wave of industrialisation.

We have all benefited from the resulting prosperity. To give just one example: in the 18th century, the average life expectancy in England was just 38 years. Today, British men live 78.6 years on average, and women can expect to live 82.6 years.

But it has only been possible to attain and maintain this prosperity by burning coal, gas and oil. Without energy, machines would simply be dead capital. Chemical factories, heating systems, computers, cars, planes – none of these could continue to function if we were forced to do without energy. Our vast technological complex would be nothing but an empty shell.

The energy density of fossil fuels is extremely high – discovering them was like winning the jackpot for humankind. From the standpoint of material prosperity, they have made the world richer by far. There is just one problem: burning those fuels releases huge amounts of carbon dioxide, which is heating up the Earth and threatening our future existence.

We must turn away from oil, gas, and coal, and exploit green energy sources instead. That’s easily said but, as I argue in my recent book, it would mean the end of capitalism.

The need for “green shrinkage”

Green energy will remain scarce and expensive rather than becoming abundant and cheap, even if we install the largest conceivable number of wind turbines and solar panels. Simply put, there will not be enough green energy to power all the machines capitalism relies on.

Even if we install the largest conceivable number of wind turbines and solar panels… there will not be enough green energy to power all the machines capitalism relies on

At first glance, it may seem surprising that green energy will continue to be expensive. After all, the Sun radiates more energy towards the Earth than could ever be used by humankind. Proponents of solar power like to point out that “the Sun sends no bills”. However, warm air alone is not much use to us. We have to concentrate the Sun’s energy and convert it into electricity so that it can power our technology. And that’s not easy to do.

Germany is a prime example of the complexities involved in that transition, despite there being no lack of political will to do so. Germany introduced a Renewable Energies Act as early as 2000, which earmarked billions of euros in funding for solar panels and wind turbines. But the results have been rather meagre. In 2023, only 6.2 per cent of the energy consumed in Germany came from wind power, with solar power providing only half that amount, at 3.1 per cent.

Germany is not the only country that is failing. In 2023, around 11 per cent of Britain’s primary energy needs were filled by wind power, and only 1.9 per cent came from solar. The corresponding figures for the US are 4.0 and 2.0 per cent, respectively. For Canada, they are 2.1 and 0.3 percent, and for Australia, 5.0 and 9.0 per cent.

In The End of Capitalism, I argue that this failure is built into the system: that capitalism and climate protection are mutually incompatible. When you look at the numbers, “green growth” is revealed as an illusion.

Insufficient production of green energy is not the only problem – it also needs to be stored which proves to be very costly. For the energy transition, it is unfortunate that the Sun does not shine at night and that the wind does not always blow. Batteries can bridge a few hours of darkness or slack but they are of no help for protracted periods. Bill Gates recently calculated how much storage capacity would be needed to supply Tokyo with energy for just three days: “The answer is more than 14 million batteries. That’s more storage capacity than the world produces in seven years. Purchase price: $400 billion… And that’s just the capital cost of batteries; it doesn’t include other expenses like installation and maintenance.”

From a purely technological point of view, a solution is already on the horizon: “green hydrogen”. So far, these are still projects for the future but what is clear already is that the costs would be enormous.

What we need, I conclude, is “green shrinkage”: economic output must fall if we are to survive on just green energy.

Towards a private, democratic and planned economy

But how can we quit capitalism? Once again, a look at the history of the United Kingdom is instructive. The British not only invented capitalism, but they also provided a possible way to organise its end. They faced having to shrink their civil production levels radically during World War II. In order to defend itself against the aggressions of Hitler, Britain had to free up huge capacities in its factories to produce urgently needed military hardware. The British did not starve, but everyday consumer goods became scarce. In short, they invented a new economic system, which we can learn from today: a private, democratic, planned economy.

The British not only invented capitalism – they also provided a possible way to organise its end

Companies remained in private ownership, but the state stipulated what was produced – and organised the distribution of scarce goods. Rationing was introduced and these quantity and price controls were tremendously popular in Britain. As the British government noted as early as 1941, the rationing programme was “one of the greatest successes on the home front”. The state-imposed egalitarianism turned out to be a blessing: ironically, the lower strata of society were better supplied during the war than ever before. Rationing was so popular in Britain because everyone had the same entitlement.

At the same time, consumption fell by a third – and in a very short space of time. That huge reduction and restructuring makes Britain’s war economy a fascinating model for modern times, since consumption in the Western world needs to fall equally drastically if the climate is to be saved. According to conventional economic thinking, this would imply a disastrous fall in in living standards. But stepping beyond the mindset of materialism – where (perpetual) growth is sacrosanct – is precisely what is needed if we are to move forward sustainably.

What’s more, no one need fear to be as poor as the British were in 1939. The Western economies have grown enormously over the past 70 years. Even if only half of that enormous increase in prosperity remained, we would still be as well off as we were around 1990. But we would live in a circular economy that would be far more equal than today’s. The rich would have to give up their sumptuous lifestyles. Just one example: flights and private planes would be ruled out because there is no viable alternative to fossil kerosene that does not squander too much of the scarce green energy.

The rich would have to give up their sumptuous lifestyles. Just one example: flights and private planes would be ruled out because there is no viable alternative to fossil kerosene that does not squander too much of the scarce green energy

It goes without saying that a radical restructuring of our economies would require immense courage, sacrifice and overcoming a great number of obstacles. But it is time to reflect seriously on how Britain invented a private and democratic command economy that was far removed from the dysfunctional socialism of the Soviet Union – a model, I believe, that can save our future.

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The End of Capitalism, published by Scribe Publications, is out now.

All articles posted on this blog give the views of the author(s). They do not represent the position of LSE Inequalities, nor of the London School of Economics and Political Science.

Image credits: green energy image by bombermoon, emissions image by Travis182 and abandoned warehouse image by Stefan Schierle, all via Shutterstock.