Libertarianism and Environmentalism

OK, libertarianism and environmentalism, here we go:

The whole point of this book I read (The Ecology of Commerce) by Paul Hawken was the idea that, if you look at the natural ecology, there is a remarkable efficiency to the way biological systems work. There is no waste whatsoever. It is the ultimate example of economic efficiency, applied to the problem of how to sustainably maintain a diverse biological environment healthily. The premise of Hawken's argument was if business could adapt to incorporate this natural, organic efficiency, it would be not only more efficient, but more sustainable: economic efficiency and environmental sustainability and reduced ecological impact should go hand in hand. Essentially, the business that incurs the least waste and least environmental costs should also be the one that can produce the least cost widget. So why doesn't capitalism work like this?

I can't find the quote now, but there is a quote in the book by some anti-globalization writer that puts it quite succinctly: "The problem with the free market is that we've never had one." This is precisely the problem: externalization of costs cannot occur without government interference in, and distortion of, the market. Corporations pollute the air because government will not - cannot - hold them accountable for the common problem they are creating (whether because of the principles of limited government or the effects of corporate influence on politics). Artificial limits on liability and legal ambiguity allow the corporations to continue polluting public resources like the land, air, and water because in most cases the public owns these assets. Of course, what that really means is that politicians control these properties - and these politicians have no stake in the future value of the properties.

Hawken proposes a system of green taxes to make environmentally harmful and inefficient production methods more expensive. For example, his argument is that organic milk SHOULD be less expensive than conventional milk because, if you factor in the externalized costs of conventional dairy farming methods vs. organic methods, organic milk represents a more efficient and more sustainable way of doing business. It is only because conventional (often corporate) farmers can dump their costs on future generations that they are able to produce less expensively. So the government should phase in taxes on these unenvironmental businesses and their products so that costs are paid up front, so businesses and consumers have a real picture of the expensiveness of doing business the old, wasteful way. He even suggests that all proceeds from green taxes be earmarked to reduce the public income tax liability, so nobody could use the money for political agendas.

On the surface, the green tax idea seems like a good idea, until you remember the downside: politicians are going to run it. And the more power you give politicians, the more you encourage the selling of that political power to the highest corporate bidder. I bet corporations would find a way to use green taxes to unjustly put competitors at a disadvantage. Not only that, I seriously doubt that the government would simply decrease your liability for income tax in the long run - they would simply find a way to reach the same equilibrium they are at now, which would mean raising the income tax liability to factor in the new taxes. The major problem is that, just like central planning in the Soviet Union, government has no possible way of accurately fixing costs on anything, let alone something as ambiguous as environmental sustainability and hazards. We should abandon once and for all the idea that government is an effective solution to this problem. It is too centralized, too self righteous, to manipulable, to money hungry, and too corruptible.

However, I think Hawken is definately on to something, and we should not chuck this baby out with the bathwater. If we can find a market mechanism for accounting for these costs, it is likely that business would be forced to pay them, which means consumers would be forced to pay for them, which means the same effect would occur. I believe the best method is to privatize everything to the maximum, so there is no public property. If all lands had a private owner, that owner would have a personal stake in the future value of that property. He would pursue any pollution of that property (air, land, or water) so that it would cost money to the polluter. Obviously, we would need more efficient, third party arbitration of this system. I'm sure if these property rights were enforced efficiently, we would find community centers that would pursue, say, air pollution claims. Businesses who pollute would be forced to account NOW for all pollution they dump on the public, PLUS they would be liabile for any future health or property damage. They would be accountable to somebody for their pollution instead of now being able to externalize these costs on the public. In this way, wastefulness would be less efficient, and the bottom line would push business in the right direction. Incidentally, it would also force consumers - and environmental nutcases - to put their money (not simply somebody else's tax dollars) on the line for the environment. We could finally have a genuine, public debate (without corporate manipulation) on what kind of environmental quality we want, and people would be able to see how costly it is to be such a wasteful, polluting society.

Personally, I think we need to rethink the corporation as an institution for doing business (I will write more on this later, as I feel passionately about it), as this focus on the bottom line has been part of the problem (as the corporations get bigger they tend to resemble government bureaucracies more and more, and the inefficiency and wastefulness that accompanies them). Getting them to account for the costs of their wastefulness and destructiveness, however, is one way to ensure that profitability and environmentalism go hand in hand. Ideally, this is somethig to which corporations should be accountable directly to the public without the corrupting influence of government murking up the waters. Hawken makes the argument that capitalism and free enterprise have been the driving force behing human progress since the 19th century, and that if long term change is going to occur, it must occur in the market. Indeed, the more we look at the picture, it turns out that an unholy alliance between business and government to offset costs onto our children have resulted in a dangerously distorted pricing mechanism that is creating a false dichotomy between economics and environmentalism that should not exist.

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Written on Thursday, June 03, 2004