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Standing on My Green Soapbox

by Mike Trapanese

It's official: Green is the most trendy color.

A movement that started on the fringes has officially hit the mainstream, with behemoths like GE and Starbucks looking to cash in on newfound commitments to the environment. In the financial world, the rise of Environmental, Social, Governance (ESG) investing amplifies the trend in parallel. Even Goldman Sachs has gone a little Green, getting its share of an investment niche approaching $3 trillion in the US alone.

Pleas to jump on the bandwagon now resonate from politicians, pundits, family members, shopkeepers; even soccer moms, pointing proudly to the "hybrid" labels on the tailgates of their Tahoes, are pro-Green. If the Green Movement has achieved nothing else thus far, it has at least raised awareness.

This has translated into two noteworthy (if temporary) accomplishments:

• A price premium for Green products and services
• An increase in investment capital for alternative energy firms

But despite the newfound predominance of the movement, change is still only moving along the fringes. Our economic system--one which requires gluttonous resource consumption to run smoothly--is still fully intact.

To simplify, there are two basic problems: the amount that we consume, and the methods of production that enable this consumption.

To simplify once again, there are two potential solutions: sacrifice (substitution, cutting back) and invention (new goods, markets, industrial organizations, methods of production and distribution, etc.).

The Green Movement puts the most emphasis on the former: take public transportation, use energy efficient appliances, avoid Styrofoam cups and plastic bags, stick to local produce, and so on. But these types of changes can only tackle the underlying problem at the margins, as sacrifices at home are more than offset by increasing production in the developing world. Furthermore, they stand to lose effectiveness when the Green trend loses luster (as most trends eventually do).

Sacrifice alone is not a viable solution to our environmental woes, neither in the near nor distant future. Invention will have to play a fundamental role.

Joseph Schumpeter popularized the notion of creative destruction: that process "that instantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one". He labels it "the essential fact of capitalism".

Any tenable solution must operate on this scale, by changing our patterns of consumption and production from within. Attacking global warming by driving hybrids is the equivalent to treating influenza with Dayquil; it makes you feel better in the meantime, but does nothing to address the root cause. The revolution that will truly deliver us from our environmental crisis will roll on the wheels of invention.

The tricky thing about invention, however, is that it happens through no clear recipe. Thus we reach an impasse. We cannot continue as we do, but we cannot yet see an alternate route. Likely, there is no way out because we have not yet created one.

To weigh once more on Schumpeter: "the problem that is usually being visualized is how capitalism administers existing structures, whereas the relevant problem is how it creates and destroys them". Only through education, incentives, and markets for ideas can we ensure that a tenable solution emerges in time. The Green Movement has brought the problem to our attention; the Green Revolution will deliver us from its grip.