Wage-led Climate Change Amelioration

Romar Correa (romarcorrea10@gmail.com) is a former Reserve Bank of India Professor of Economics at the University of Mumbai.
10 May 2022

A Marxian orientation towards ecology must support an increase in wages and employment and a fall in profits.  


A Marx approach to the theme is appealing because the vista is vast. No epochs of history are excluded. Karl Marx marshalled the best of scholarship in physics, chemistry, geography, and biology, but it is Friedrich Engels and other acclaimed scientists, contemporaneous and after, who form a mutual admiration and a learning society. The agenda is the exploration of the interpenetration of human and natural history by dialectic. Scholars expand on the characteristics of the Anthropocene era that began in the 1950s generated by the massive acceleration in the anthropogenic impacts on the environment. The class character of the destruction of nature is laid bare. The pursuit of profits is the rupture of ecological balance. The capitalist dynamic cannot endure more, and the application of science and rational controls must dictate a new mode of production and distribution. Unalienated labour would be a key constituent of this new dispensation. The working class in comradeship would plan production in harmony with the laws of nature.               

The concept of the ‘metabolic rift’ was fledgling in Marx and is being developed. Alongside the exploitation of labour by capital, Marx observed the unravelling of the healthy and nurturing relationship between labour and land caused by capital.  The obtrusive violation of the equilibrium between work and the environment had begun. Unequal ecological exchange is the expropriation of nature by capital embodied in use value and not just in exchange value. The work of Engels, embracing class analysis as in his book The Condition of the Working Class in England to Anti-Dühring, is being mined for the gold that continues to be excavated. In particular, the elaboration of themes on the subject relies heavily on an exegesis of Engels’s unfinished Dialectics of Nature (Blackledge 2021; Foster 2020; Kangal 2020). Engels sought to challenge all forms of reductionism and develop an emergentist conception of the relationship between human and natural histories. The concept of self-organisation called “autopoiesis” today saw an early and sophisticated treatment in the ruminations of Engels. It is through the complex interaction of people with nature that the understanding both of themselves and of nature evolves. He discerned very early the mastery of nature simultaneously with the impending ecological catastrophe that capitalism wrought. The contradiction pinpointed was the own-dialectic of science that is encapsulated in Francis Bacon’s dictum “nature is only overcome by obeying her” and the own-logic of capital accumulation. Given the extent of despoliation of the air and water and the rest, the call is out for what Marx called “universal beings” in the form of the proletariat being able to rise Phoenix-like from the ashes to undertake the gigantic task of reconstruction (Žižek 2021). The revolutionary weltanschauung must engulf all nations and include state control and planning of agriculture and industry, universal health care, democracy coupled with a strong executive capable of enforcing long-term commitments.     

Our modest plan is to formulate the conflict between capital and labour in the language of economics and the context of climate change. The macroeconomics of the next section is followed by the microeconomic evidence of worker collectivities and resistance in the third section. The final section concludes the paper.

Wages and Profits

The formal treatment of the subject in mainstream economics revolves around disputes concerning the social discount rate, the degree of (im)patience of the present generation concerning the utilities of future generations. There is a trade-off, it is claimed. Current social welfare is maximised through increasing activities that impact negatively on the environment. We can rely on the innovative dynamics of the market to provide signals, directing attention to hydrogen , fission, and so on, the development of which will ease the depletion of fossil fuels. However, the evidence of a cataclysmic tomorrow keeps receding less and less into the future. The social discount rate is constructed from individual discount rates and the application of general equilibrium theory to the task at hand is what John Maynard Keynes would have called exercises in “pretty, polite technique,” innocent of political economy and a sense of “what is to be done.” We ground our discussion in empirical national income identities. One breakup of Gross National Product, Y, is into wages, wL, and profits, Π, where w is the wage rate and L is the number of workers employed. Thus, YwL + Π. Dividing the expression by L, we get productivity of labour on the left-hand side. Environmental values have begun to be included in the accounts in a variety of meaningful ways. We confine ourselves to the traditional breakup after incorporating the historical fact that increasing fossil fuel consumption has gone in lockstep with the increase in labour productivity (Taylor et al 2021). If productivity is increasing and the increase in the wage rate is desultory (the first expression on the right-hand side), it must be the case that profit (the per unit of labour, the remainder on the right-hand side, is increasing. Even if manufacturing profits are recession-muted, we know that the denominator, the workforce employed, has been on a secular downturn; the ratio increases.). Dividing GNP by capital, K, matters are less clean. The left-hand side now is Y/K, the ‘productivity of capital’ or the output-capital ratio more familiarly. The right-hand side brings in variables that were pivotal to Marx, the (reciprocal of) organic composition of capital, K/L, and the rate of profit, Π/K. With wages flat or not increasing and a rising organic composition of capital, the contribution of the first term on the right-hand side is not major. The rate of profit is supposed to be the driver of capital accumulation. Long-term prospects anywhere are doleful for reasons not excluding the topic of this paper. Investment, I, has not been ebullient and being one component of the second division of national income into consumption, C, and investment, YC + I, (2),  accounts for the indifferent growth in countries all over the world. All that is unambiguous is the dire need for the rolling out of decent work at a decent social wage that meets the costs of housing, education, health, and old age. The discussion of climate change is linked with the goal of full employment. Labour inputs into essential activities like remediating the heat island effect in big cities and remediating wetlands will fall into the domain of the state because the private sector will find them unattractive.     

Reverting to division (2) with our two-class typology, we can divide the first expression on the right-hand side into the consumption of essentials by the working class, CwL, and the consumption of luxuries by the capitalist class, CL. If the usual first-pass assumption is made that workers consume their entire incomes, the correspondence between this national income identity and the earlier is wL = CwL. Polish economist Michał Kalecki developed Marx’s departmental schema for the special attention of developing economies by conflating wage goods with agriculture, food being the quintessential Basic. Basics are commodities that circle back as inputs into the production process, Non-Basics are goods that are unnecessary for the production of commodities. A deliberative macroeconomic evaluation of the tasks to be undertaken would need to distinguish between “good” and “bad” investments, separating out the impacts on agriculture and industry (Krahé 2021). Since little can be said of the investment proclivities of the capitalist class and that the onus of our programme rests on government investment, we break up the investment term in the equation into private investment, I, and government investment, IG. It is the government that must invest in green employment apart from education and health and environmentally friendly physical infrastructure. If we now divide GNP loosely into a Basics part, YB, and a Non-Basics part, YNB, we have YB = CwL + IG. Our faces are turned resolutely against private investment and luxury consumption and profits with good reason. Pride of place in the production circuit is occupied by the so-called intellectual property rights (IPR: patent, copyright, trademark, brand) firms (Schwartz 2021). Profits have shifted to IPR firms and have a low propensity to invest and small labour headcounts. Consumption and investment drop on that account. The model must be distinguished from the Fordist model with vertically integrated production structures and dedicated machinery. Economies of scale were reaped. One aspect of the factory process was uninterrupted production because of which the labour headcount increased. The leverage afforded to the workers thereby gave birth to and nurtured the trade union movement. Increased income meant increased demand. It is well known that many developing countries leapfrogged into services from agriculture without fully completing their passage through manufacturing. The scope for expansion of a reinvigorated and ecologically kind public sector is huge.                  

We turn our attention to the elements of the right-hand side of our Basics expression. Agriculture still occupies pride of place in most developing economies, and a new mode and relations of production must form part of a government plan. The deep problem of unhealthy soils must be greeted with proactive policies (Magdoff 2021). The task is to encourage farming practices that respect the strength of undisturbed natural systems and encourage the growth of active and diverse soil organisms, availability of plant nutrients in time and sufficient quantity, soil structure for optimal root exploration, and water storage with minimal run-off of rainwater and erosion. Processes that increase soil organic matter should be encouraged. The French 4 per 1000 plan to increase soil organic matter by 0.4% per year is an example. Since profits to be earned from this large-scale enterprise are slight and the national plans are best interlocked in international grids, governments must be active in educating and being educated by farmer associations.          


Workers of the World, Unite

We first finesse the macroaggregates. Profits are the product of price and quantity. If economies are working subpar, globally the rise in “real” profits will match the growth in the gross domestic product. Importantly, financial profits have crowded out the “real” profits. However, prices are pre-set and the “degree of monopoly” has little correlation with inflation. Profit margins can rise in a situation of low demand, thereby directing income towards high-income individuals with a low propensity to consume lowering inflation. Simultaneously, the few monopolists that straddle the globe operate with entry-deterring low prices that can be sustained with billions of customers worldwide. Thus, there are “high” and “low” prices.  In short, the inflation bogey has been challenged. The prices of raw materials go up as the cost of services goes down. Indeed, some observers worry over the long-run prospect of deflation. The anti-inflationary policy can be anti-working class. A fine-grained scrutiny of how the Fed’s interest rate hikes control inflation settles on food and rent (Amarnath and Lewis 2022). The Rent Consumer Price Index(CPI) is strongly related to the growth in nominal labour income. In sum, wages and employment can increase with a fall in profits and an enhancement of Basics income.   

Accordingly, the reports of the organisation of workers in the Silicon Valley were greeted with exultation. The fledgling attempts were quashed with weak-kneed and knee-jerk reactions from the highest echelons of the capital. The protests were sparked pre-pandemic and had nothing to do with the new-found strength following the pandemic and everything to do with the classical expropriation of surplus value and exploitation of an atomised working class. Reports of the groups of workers collecting in disparate parts of the world filter in, and in many instances, they are forged from recoil at the desecration of nature at the hands of the capital. With communication technology at everybody’s fingertips, it would not be difficult to channelise this discontent into universal, constructive solutions for climate change. Local solutions have long existed. Post-pandemic in the United States (US) and elsewhere, the labour market is upbeat with new entrants. ‘Stick’ with or ‘quit’ a job is a choice open to workers. A via media is ‘on-the-job-search’ for better alternatives. Hiring is on the rise. However, celebrations of the evidence would be premature. Corporate profits are skyrocketing and reversing decades of labour market fragmentation will take time and effort. We celebrate the return of the weapon of the strike, but it has to be sustained and contagious. A dangerous subversion of the necessity of labour-led programmes is the creation of false antimonies between jobs and the environment. Capital–labour conflict is enmeshed in a network of institutions. Thus, the wealth of coal companies in Virginia and Kentucky in the US was connected with the schooling there. The decline of the industry has deleteriously impacted the school budgets. It is not exclusively a matter of fossil-fuel workers making the transition to clean-energy work. Teachers and nurses are at the frontline of the climate crisis, their value having risen immeasurably during the pandemic. They would be the vanguard of the transition.          

Climate change will be swallowed up by capitalism, and profits will be extracted from renewables, solar, and wind power (Aronoff 2021). The debates about climate change policy have not included the conditions of the working class. The left has supported tools like carbon capture, storage, and sequestration. Carbon sequestration should be regarded as a public utility. Solar and wind power can constitute pro-worker industries. However, climate change modelling at the universally-accepted watershed of 1.50 Celsius has not been conducted. Beyond that number is Armageddon. The development of solar and wind industries is recent and has occurred during a historic low point in worker organisation. Consequently, the working conditions and benefits are poor. The direct capture of air or DAC is for the purpose of utilisation, not sequestration since only the former commands exchange value (Malm and Cartin 2021). Only the state can steer the DAC in another direction by mobilising the required resources, setting up the necessary infrastructure, and supporting the basic research and development. Finally, because of the scale and costs entailed in being sensitive to thermodynamic parameters, only governments can make commodities from DAC crowd out those using fossil fuels. One strongly interventionist step that could be taken is the nationalization of fossil fuel industries and their refitting as vehicles for capture and storage. Workers would transit to new jobs in the same workplaces.     

Green investments do not mean that brown investments vanish. Both are constituents of international financial portfolios. Flows into and out of positions will depend on the projected returns. Indeed, an important explanation for higher energy prices is speculation in oil, gas, and coal futures markets. Shadow banking has given way to shadowy financing (The Economist 2022). Greenwashing and whitewashing are rife. Polluting assets are being lapped up by private equity firms that slink under the radar of accountability. Operating oil wells and coal mines continue to be profitable. In any event, the transition away from these markets will be slow and painful, and some green investments will be blind alleys. We are disbelieving of the current state of play that consists of supporting private enterprise and financing the objective of mitigating greenhouse gas emissions (Mackenzie 2021). Both are geared to the market, and profits and portfolios will be rebalanced in the direction away from green technologies and towards the existing polluting techniques at the slightest sign of returns being disappointing to clients. Governments would be different in committing to the irreversibility of the technological paradigm, accepting and learning from the failures. A private bond can be liquidated; a government bond is a perpetuity. The first is marked to market on a continuous basis. The positive present value calculations of the government bond do not exclude periods when the net returns are negative. Our model of income and growth dichotomises between Basics and Non-Basics and between the virtuous and potentially vicious spheres of activity.                   


Our purpose is to highlight the conflict between capital and labour untrammelled by notions like public–private partnership and worker-capitalist modus vivendi. All compromises indicated by the latter are “too little, too late” and non-credible. Since the date for salvific action for the planet has passed, nothing short of a working-class movement will deliver. We salute the accounts of worker associations being cobbled together, resisting the drain of profits from the environment in different parts of the world and look forward to a proletarian internationalist schedule of steps to be taken.


Romar Correa (romarcorrea10@gmail.com) is a former Reserve Bank of India Professor of Economics at the University of Mumbai.
10 May 2022