Renewable Energy under Capitalism: Why It Won't Happen


Thomas Sullivan | Ecology & Sustainability | Analysis | February 13, 2019



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.