Renewable Energy under Capitalism: Why It Won't Happen

By Thomas Sullivan

Renewable energy is usually agreed to be the way forward. Nuclear, solar, wind, tidal, geothermal; all can revolutionize the way we generate power and prevent the dangerous warming our planet is experiencing. However, we haven't adopted these sources of energy in any systematic, widespread way. To examine why, this paper will explore a Marxist interpretation of why such technologies would not be adopted.

In his third volume concerning Capital, Karl Marx discussed what will cause the end of Capitalism. He theorized that over time, the profitability of a capitalistic economy would fall. Eventually, the system would become untenable and collapse into a new system (Marx, n.d., pp. 153-164). To understand the mechanism of this demise, we will need to explore the basic foundation of Marxism.

The Marxist worldview holds one key point as fundamental to production; nature, and by extension labor, is the source of all value. But a pile of wood, while of nature, will remain such, unless labor is applied to make something useful from it. Likewise, no one will purchase that pile of wood as a chair unless some work is done to make it a chair. In the capitalist system, the wood, as means of production, is separated from the labor. Workers who would perform labor do not own the wood or the chair they produce. (Marx, Critique of the Gotha Programme, 1970)

The capitalist owns and profits from the chair, while the worker is paid a set wage. We can understand this wage as the embodiment of the value being added to the basic components through labor power. The average time the average means of doing this required work is important to determining how much this wage value is adding to the final value. This average is called the socially necessary labor time. The capitalist then needs to buy other items for production, the wood, the polish, the nails, the factory. All the components and other fixed costs can be viewed as the non-labor aspect of a products value. From this, the product is brought to market and sold for a value higher than the wages and non-labor value put together, called the exchange value. The difference between the exchange value and the other two values is called surplus-value. As the labor power purchased by the capitalist has already been paid for, the worker gains no value from any of this process. All together this process represents a very high concept view of Marx's labor theory of value. (Sekine, 1997, pp. 3-6)

From this theory, we gain two insights into what motivates the actions of capitalists. The increase of the surplus-value by way of negotiating a higher exchange value and by decreasing the necessary labor time value. Internally, a capitalist company would only be able to do this in the short-term by marketing, for higher exchange value, and by controlling the price of labor value, the wages of workers.

Marx uses the theory of value to predict how technology will allow for greater automation and result in a fall in rates of profit over time. This represents the greatest achievement within the theory in the view of the capitalist, the elimination of wages as an expense. There is a short-term advantage with the adoption of automation. However, Marx's fundamental point of labor being what gives a product value shines through. The initial boon is generated by the labor that was used to install the automation. Over time, there is no labor input and no value generated by the production besides occasional maintenance. The necessary labor time to produce more from the existing automation becomes zero. This eliminates the value that would be added by labor. As such, the exchange value of the products drops as well. The capitalist would need to increase production in order to recover costs, only to find no-one able to afford their products. With workers having been replaced by automation, they have no income of which to afford the products.

As an example, we can look at the agriculture industry in the United States. Upwards of 40% of produce are left unharvested or otherwise uncollected for sale. The stated reason of cosmetics (dents on bananas, spots on apples, etc.) can be seen as an artificial attempt to limit the availability of these products, inflating the exchange value of them. (Johnson, et al., 2018) The value of these products has been falling and requires this manipulation due to the decrease in the necessary labor time for their production. Parallel to this, the number of Americans involved in agriculture has decreased from 11.77 million in 1910 to 2.05 million on 2015 (Herrendorf, Rogerson, & Valentinyi, 2014). Automation and advanced machinery have made the labor required to farm and harvest miniscule compared to the amount being produced. The lack of scarcity destroys all value for the capitalist and requires the waste of edible products to limit supply. As this type of automation and value loss spreads up the production chain, more industries will become as such. They will have little labor required, the scarcity of their products eliminated, and massive waste required to maintain profitability.

This can also be explained using common capitalist economic understanding. Let's say that demand for corn is at 100 bushels. We can chart this as a line graph from the demand of 1 bushel at $100 and 100 bushels at $1, descending from the top left of a chart to the bottom right. We can then chart all possible supply amounts in the inverse, trending from the bottom left to top right; 1 bushel for $1 and 100 bushels for $100. Where this demand and supply line meet would be the equilibrium of the market, the price and supply the producer should set. When there is an increase is the quantity available, there is a corresponding shift to the right for the supply line. With the wider availability of the goods, demand normally shifts to the right with the quantity increase. The market is then able to readjust, allowing the producers who are providing the higher quantity the ability to sell more products at a lower rate. They can outbid the competition for the existing demand and capture the market. However, there comes a point where demand cannot increase anymore; the consumer can only eat so much corn. A producer will introduce a new technology or process that increases the quantity in an attempt to undermine competitors, but the market cannot accommodate the extra quantity. As such, the supply line shifts right, the demand line stays the same, and the price drops. The price drop does not correspond with an increase in sales, reducing the overall profitability of the market. (Free, 2010, pp. 69-78)

So how does this apply to renewable means of energy production? Understanding the tendency for rate of profits to fall can show us why a new green revolution would be avoided by capitalists. The current system of relying on coal, oil, and natural gas offers a limited supply, and therefore scarcity, that can be exploited for the maximum profit. Renewable energy offers unlimited sources and is not capable of being exploited in the same manner. While solar panels may require labor to produce and install, that initial value is all that would sustain solar power production from then on out. The automation of solar energy production is built into the system and therefore very little necessary labor time when compared to oil. The exchange value for this energy production would be too low to cover a company's costs, let alone create profit. This greatly affects the necessary labor time of any part of the subsequent supply chain, energy storage, transportation, and sale. Meanwhile, the massive amount of labor required to locate, extract, process, transport, and eventually sell traditional energy products makes the exchange value something capitalists can easily extract surplus-value from.

Likewise, supply and demand can be applied in a way similar to agriculture. With the quantity of crude oil/natural gas limited, there is already a system of controlling the supply. The limited and specific locations of the quantity means the producers are able to extract exact amounts for supply to maximize equilibrium within the market. This wouldn't be the case for renewable energy. With numerous sources of the quantity in question and the inexhaustible nature of those sources, producers would not have the same level of control over supply. If renewables were to be implemented in a systematic way, energy supply would quickly outpace demand. Some manipulation on the part of the producer would be required to maintain marketability.

With this understanding, we can see why the profit-driven motivations found in capitalism will not result in any reduction in the use of fossil fuels until the market for them literally dries up. Renewable energy offers only lower profits and the requirement of new methods of market manipulation for energy producers. If it is in our nature to do what is in our best interest, then those with the means to choose our energy production are of a nature that would resist this change wholeheartedly.

References

Free, R. C. (2010). 21st Century Economics: A Reference Handbook. London: SAGE Publications, Inc.

Herrendorf, B., Rogerson, R., & Valentinyi, A. (2014). Growth and Structural Transformation. In P. Aghion, & S. N. Durlauf, Handbook of Economic Growth (pp. 855-941). Amsterdam: Elsevier B.V.

Johnson, L. K., Dunning, R. D., Bloom, J. D., Gunter, C. C., Boyette, M. D., & Creamer, N. G. (2018). Estimating on-farm food loss at the field level: A methodology and case study on a North Carolina Farm. Recources, Conservation & Recycling, 243-250.

Marx, K. (1970). Critique of the Gotha Programme. Moscow: Progress Publishers.

Marx, K. (n.d.). Capital Volume III, The Process of Capitalist Production as a Whole. New York: International Publishers.

Sekine, T. T. (1997). An Outline of the Dialectic of Capital, Vol. 2. Ipswich: Ipswich Book Company.

The Social Economy of Rojava: A Primer on the Co-op Model

By Thomas Sullivan

Since the 2011 liberation of the northern Syrian region commonly known as Rojava, the de facto leadership of the Democratic Federation of Northern Syria has begun a program of ground-up direct democracy, women's liberation, and socially-owned means of production (Knapp 2016, 52). This article will examine the economic conditions of Rojava, by way co-operative ownership, so that an evaluation with historical context may be available.

Background on Rojava

After the liberation, the people of Rojava were faced with a post-colonial, monoculture economy with little industry available for refined goods. The Ba'athist regime had limited agriculture in the three cantons to only a single crop and allowed for no means of processing these crops. Around 80% of farm land was held by the government, the rest held by private businesses (Knapp 2016, 192).

With the intent of establishing a social economy, the land was handed over to local, municipal units called communes for distribution for co-operative ownership by workers. 2,500 hectares have been distributed to the co-ops as of 2015, with 1-4 being reserved for individual use. No large land-owners have been allowed access to the seized land (Knapp 2016, 199).

Beyond land and agriculture, co-operatives focused on simple industries have been organized in cities to increase the self-sufficiency of Rojava. These include bread-baking, textiles, clothes production, dairy production, and selling cleaning supplies (Knapp 2016, 200).

Historical Context

To best examine how the co-operatives of Rojava may thrive, we would need to look at past examples as a basis for future predictions. One of the most cited examples of a successful cooperative is the Spanish Mondragon Co-operative Corporation. The organization, which dates to 1956, was founded from several co-operative organizations that joined together in 1991 to form the international corporation it is today. The co-ops showed remarkable staying power, with most of the 100 original co-ops surviving to form the united corporation. Employing upwards of 3% of the Basque region's workforce over multiple industries, the co-operatives showed that alternative corporate models could be successful when they were previously untested on a large scale (Harding 1998, 61).

However, the Mondragon example also points to a critical failing of co-ops. Mondragon has shed many of its original ideals to remain competitive with other international businesses as the globalized, capitalist economy has developed. This includes creating non-co-op subsidiaries abroad and decreasing the number of co-operative employees to 29.5% as of 2007 (Bretos 2017, 155). This example of the most well-known and well-studied co-operative falling back into a more capitalistic model would suggest that the co-op model is not sustainable in the long term.

Mondragon's change did not occur in a vacuum of some static economy. The co-operative began to require modification after the fall of the fascist Franco government, the liberalization of Spain's economy, and the opening of European free trade by way of the European Common Market and later the European Union (Harding 1998, 62). We can see from this mix of pro-capitalist institutional changes that external stress on co-operatives would result in failures or the need for structural changes.

The Rojava Difference

The situation in Rojava currently precludes such stressors. Only 20% of arable land is held by private owners, with a moratorium on any new private landowners (Knapp 2016, 199). There was little to no pre-existing industry, with most small business owners having fled when the revolution began. As such, most of all business is co-operative and directly supported by the local governments. The pressure is on private businesses to offer co-operative grade work or lose the ability to function to co-ops. Moreover, the embargo in place on Rojava by neighboring Turkey and South Kurdistan limits the possibility of inclusion with free-trade economics (Knapp 2016, 196).

Co-operatives within the Rojava system are inextricably tied to the commune system of self-governance. They are specifically forbidden by law from becoming independent private businesses. As such, local communes elect the co-ops' leadership; the economic commissions throughout the administration supports the co-ops' production. In exchange, the needs of the greater society and local commune are served by the co-ops (Knapp 2016, 205).

Local co-ops alone are obviously insufficient to meet every commune's need. They therefore pass their needs on to economic committees at the federal level. Surplus production from other regions is allocated to communes lacking in some areas, while surplus production is likewise given for distribution outside of the native commune (Knapp 2016, 206).

The Movement for a Democratic Society is one of the overlapping organizations that guides the development of co-operatives and other aspects of the emerging social economy. Their Economic Committee issues a pamphlet concerning how these co-ops are to be run (The Movement for a Democratic Society 2016). Of interest is the division of profits. Twenty percent is given over to the commune to handle any needs of the commune, 30% reserved by the co-op to purchase more goods, machines, and other capital, and 50% to shareholders. Workers received a monthly salary as well as their share of the profits yearly or when a major goal is completed.

Those who work in the co-op are considered shareholders and receive the highest allocations from net profits. Members can also contribute capital of some sort to the co-op to receive a payout, but to a lesser extent than workers.

People over Profits

Understanding the difference between this social economy and the ubiquitous capitalist economy will require a recap of labor theory and surplus-value. Karl Marx explains that the value of commodities sold on the market can be separated between the use-value of the item and the surplus-value of it. The surplus is the source of worker exploitation, where the worker is not receiving the whole possible value of their work. Allowing workers to keep the full value of their work eliminates this exploitation. Methods by which the workers can retain surplus value are varied, with no single answer for the best possible way.

For Rojava's co-operative economy, an initial glance would suggest that worker exploitation remains. The co-op pays the workers a wage and sells their production for a value higher than their combined salaries and the cost of production. As Thomas Sekine enumerates in his work, value theory can be formulated in with a simple c + v + s = end value (Sekine 1997, 129). The value c would represent any constant capital, as in the actual means of production, v would represent variable capital, as in labor-power purchased, and s would be surplus value. Sekine explains that only in the application of labor-power, by way of production, does this end value result. Surplus value alone does not contribute to the end value but is a separate part of the value added by labor-power retained by a capitalist or in this case the co-op (Sekine 1997, 130). As such, there is a part of the workers' labor-power being removed that would otherwise represent a degree of exploitation under a capitalist system.

But the Rojava system distributes the profits in a way that favors the worker over non-working members. The workers are paid the highest portion relative to the non-working capital contributors (The Movement for a Democratic Society 2016). As such, surplus value is redistributed back to the workers through yearly payouts and amounts given over to the commune used to improve the workers conditions through improving the commune collectively.

The Future of Rojava and the Co-ops

Understanding the function of the co-ops within Rojava is one step in understanding the complex interaction of municipal direct democracy, the social economy, and libertarian-socialist ideals. Historical context suggests that given a stable and supportive political economy within Northern Syria, the co-ops will prove as beneficial and successful as any capitalist model would be able.

Unfortunately, the situation surrounding this experiment may not allow for this. The Ba'athist regime still holds most of Syria, the rebels are hostile to Rojava's continuation, other Kurdish groups are unsupportive of their efforts, and Turkey has recently begun a campaign of conquest in the most western canton with threats of future invasion. Should Rojava weather this storm, they may face more external pressure from American and European economic imperialism or from neighboring powers such as Iran or Saudi Arabia.

References

Bretos, I., & Errasti, A. (2017). Challenges and opportunities for the regerneation of multinational worker cooperatives: Lessons from the Mondragon Corporation - a case study of the Fagor Ederlan Group. Organization, Vol. 24(2) 154-173.

Harding, S. (1998). The Decline of the Mondragon Cooperatives. Australian Journal of Social Issues, Vol. 33 No. 1 59-76.

Knapp, M., Flach, A., & Ayboga, E. (2016). Revolution in Rojava : Democratic Autonomy and Women's Liberation in Syrian Kurdistan. London: Pluto Press.

Marx, K. (1995, 1999). Capital, Volume One. Marx/Engels Internet Archive (marxists.org).

Sekine, T. (1997). An Outline of the Dialect of Capital, Volume One. London: Palgrave Macmillan

The Movement for a Democratic Society. (2016, February 15). The Experience of Co-operative Societies in Rojava. Retrieved from The Hampton Institute: http://www.hamptoninstitution.org/cooperatives-in-rojava.html