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No arguing with the profit motive

Extreme weather events throughout the world mark the impact of profit-driven capitalist growth on a changing climate brought about by burning fossil fuel. Wildfires are sweeping across swathes of Southern Europe and Canada, Turkey is hit by floods, and mid-summer torrential rain is lashing the UK.

Yet the logic that motivates capitalist producers abounds. As it shuts the only UK wind turbine facility, Danish manufacturer Vestas has issued dismissal notices to 11 of the workers occupying its Isle of Wight factory and is seeking a possession order today. Vestas prefers to concentrate on its cheap labour venture in China competing with local producers in a less regulated economy, while the New Labour government is totally deaf to pleas to nationalise the firm.

Meanwhile BP, the third largest private energy company in the world is forging ahead with its plans to extract more profit from more oil whilst riding out the global economic storms. With the price of oil down to $52 a barrel during the second quarter – less than a half of last year’s price, and a more than 50% drop in profits – BP actually increased production by 4%. No sign of any concessions to the green agenda there.

Between March and June, BP generated $6.8bn of operational cash flow. Against that it spent $5.2bn on capital expenditure and paid out $2.6bn in dividends. That totals a $7.8bn outflow. In other words, after excluding changes in working capital, BP spent $1bn more than it brought in.

With no sign of a recovery in demand, the global squeeze on profits makes the drive to cut costs all the more urgent. BP says it has already reduced its costs by $2bn in the first half compared with the equivalent period of 2008, and hopes to be more than $3bn lower for the year as a whole. How does it do it? 5,000 jobs have already gone and many more are certain to be lost. That’s how capitalism deals with a slump in demand.

Longer term consequences of the impact of oil extraction and the chase for profit can be found in Nigeria where, in the 1950s, BP became the first to bring the black gold to the surface. As one commentator puts it: Nigeria is now “a country whose electricity grid has totally collapsed, whose ruling elites are almost uniformly corrupt and heedless, whose citizens have often appeared to accept that it is their cursed fate to live in such wretchedness, and whose government, with some happy exceptions, is clueless and dysfunctional.”

So where does that leave us? We have BP pumping up production – it’s just won a new contract in Iraq – and slashing jobs, while renewable energy production in the shape of Vestas is shutting up shop on the Isle of Wight. There is a logic to all this – it’s the quest for profit, regardless of human and environmental costs. Arguing with the likes of BP and Vestas is a waste of time. Their primary obligations are to shareholders – not communities or the workforce. Replacing shareholders with forms of co-ownership has to become our obligation.

Gerry Gold
Economics editor
29 July 2009

PJ says:

Similar story at Shell. Profits have crashed, so Shell have cut its costs by 700m in the firtst half of this year and plans a further cut of capital spending of 3bn next year. The company told its shareholders that "substantial" further staff reductions were likely by the end of the year.

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