Martin Wolf has presented a provocative diagnosis of the current flaws found in capitalism, and suggested some cures. At the same time, the World Economic Forum is preparing for its meeting in Davos, under the slogan ‘The Great Transformation – shaping new models’. The problem is that neither Mr Wolf nor the Davos organizer, Klaus Schwab, has anything to say about the biggest issue of all – how to transform capitalism so that it does not proceed along its ‘business as usual’ lines to destroy the planet.

We have to start with some common ground, and that is surely that capitalism is an amazing human invention. It started in some small city states in Europe. It then became turbo-charged with the Industrial Revolution, lifting hundreds of millions of people in North America, Europe and then Japan out of poverty. And then it became global, and now it promises to lift many billions of people – in China, India and successor countries – out of poverty as well. The Great Divergence, where the West powered ahead of the East, has been followed by the Great Convergence, with China et al catching up with the advanced countries, and even leaping ahead.

And here the common ground ends – because the western model of capitalism conveniently assumed that nature was an infinite source of resources and an infinite sink for wastes, and that the whole shebang would be powered by fossil fuels forever. As soon as China and India et al venture to replicate this model, they come immediately up against the problem that the resources are dwindling (think peak oil) and becoming scarcer and more expensive, not to say geopolitically explosive. China is seeking to avoid this inconvenient truth by developing its own ‘green development’ model – where as fast as it builds coal-fired power stations it also builds the world’s biggest fleet of wind farms and solar farms and exports green technology all around the world. And this is not even to mention carbon emissions, where China et al are scolded by the West for adding their contribution after everyone else has done so. China’s strategy will deal with carbon emissions as well – no wonder Hu Angang argues that green development is ‘an inevitable choice’ for China.

So the next ‘great transformation’ (to borrow Polanyi’s wonderful formulation) is surely going to be the greening of the system that has brought so much wealth and promises so much – if only it can be aligned with natural cycles and mimic life. China is showing the way, presenting the developing world with a model that breaks away from fossil fuel and excessive resource dependence, and from a finance system that promotes such biases. Here then are seven ways to fix the system and make it sustainable – as an alternative to what Mr Wolf proposes.

1. Maintain corporations earn their ‘limited liability’ by subjecting them to eco-audits (impacting on their share price);
2. Make renewable energies the default option – with tax penalties imposed on every other source – and public procurement the driver of their accelerated uptake;
3. Make resource circulation the default option, attaching penalties to securing ‘virgin’ resources and creating wastes that cannot be used by anyone else (China’s Circular economy);
4. Promote eco-finance by linking financial flows to their end-products and subjecting them to the test of ecological sustainability, via differential interest rates;
5. Stop taxing capital and labour and instead tax resource throughput and carbon build-up;
6. Treat finance as a utility, and regulate it accordingly;
7. Allow a stabilized green sector to grow, underpinned by green finance, setting standards for the rest of the system to meet.

Yes, this a radical diagnosis – in the sense of getting at the roots of the system – but we can agree with Mr Wolf that the system is already in crisis and begging for a new direction and new wave of sustainable investment. The program embodied in these seven points is designed to move the system towards a new pattern of alignment with the living planet, rather than being at war with the planet. It’s not meant as a blueprint or end-state. And it doesn’t need a ‘Kyoto Accord’ because it will have to be implemented country by country, region by region, city by city. The greening of capitalism will be the next great transformation, exactly what the doctor ordered.