written 11 July, 2025
pubished 20 July, 2025
A structural limitation of capitalism is the silo effect, where one part can make a profit while degrading the larger company or even the whole economy. A poster child for this was Enron, which appeared to be a spectacular financial success in 2001, making the cover of Forbes magazine just a few weeks before going bankrupt, when off books losses were revealed. Reality is whole, and attempts to ignore that are doomed to eventual failure. Consequently, whole systems thinking makes sense in the long run.
After WW2, the British global empire was effectively over, and England had to chose between trying to revive that old order or recommit to being a democracy. It chose the latter. One of the policy changes was a universal health care system.
At the time, most homes were heated by burning coal, which was a relatively affordable domestic fossil fuel. Because the adverse health effects of coal burning cost the individual home owners, they weren't accounted in the heating costs. When the government began paying for health care costs, it became apparent that burning coal was a huge burden on the society. The government subsidized a program to change residential heating from coal to electricity, understanding that this one-time expense was much less than the ongoing health costs of the old system. Connecting the dots with whole system thinking showed the advantage of a targeted investment to get long term savings.
Today we are facing a similar problem. Ongoing combustion of fossil fuels has changed atmospheric chemistry, retaining more heat each decade. This increases extreme weather events, including fires and storms, with infrastructure destruction growing each year. The insurance industry evolved to spread financial risk over time, setting yearly payments at a level to cover yearly claims, plus a margin of profitability. As the cost of annual destruction has increased, companies are forced to raise rates or go bankrupt. When consumers complain, some states try to cap rate increases, which ignores reality, so companies stop writing new insurance policies, perhaps leaving the area completely. Even if rates aren't capped, the increases soon become unaffordable.
Whether unaffordable or unavailable, the lack of insurance threatens the real estate and banking industries, as well as the property tax structure for local and state governments. To avoid this fate, states create insurance funds of their own, such as the California FAIR plan, supported in part by payments from the insurance companies that still want to do any business within that state. While they try to fill an essential need, coverage is more limited and costs are higher than industry insurance. However, the fundamental problem of increasing climate caused destruction is completely unaddressed, risking not just collapse of an individual insurance company, but collapse of the entire state economy.
Fire is California's main problem, but storms are an even bigger problem in Florida, where insurance, if available, is four times more expensive, and some homeowners are facing annual insurance bills up to $16,000 for a modest home. Those with no mortgage can risk dropping insurance, however the next disaster could wipe them out.
But the insurance industry refuses to connect the dots, and invests heavily in fossil fuel companies, because they still seem to make money, just like Enron. Our current federal policy is climate denial, canceling any effort to make a change, and billions are being spent to accelerate the climate crisis with further fossil fuel development.
Until climate awareness is addressed head on, the erosion of the economy will only increase. Climate concern is not a liberal fad. It is not just about green jobs or polar bears. It is about the economic viability of our society, and anyone who stills denies this is fooling themselves.
Insurance is just the immediate bite, an economic impact that might get enough attention to begin making a change before bigger disasters arrive, although it might require a disaster to impact enough people. The Redwood Valley and Santa Rosa fire storms in 2017 changed local awareness. Everyone was related to someone, or knew someone, who was affected. The entire community organized to help.
But judging by the recent election, and the climate denial policies now in place, those fires weren't enough. Hurricane damage in the southeast wasn't enough. The recent flooding in Texas wasn't enough.
But rest assured, the disasters will grow until it is enough. The only question is timing.
