At the People’s Climate March in April of this year, one young woman held a particularly interesting, and unfortunately terribly inaccurate sign. It said: “List of things capitalism killed: F&*#%*@ everything.”
What this individual, and much of America and the world, fail to realize, is that capitalism’s benefits far outweigh its faults. Not only has capitalism lifted more people out of poverty than any system ever implemented in the history of civilization, but in so doing, it has done more to protect the environment than any socialist or communist initiative. If you want to protect the environment, you should love capitalism.
Capitalism increases living standards. When living standards increase, people care more about the environment, and are more able to do something to protect it.
According to the World Bank, world poverty rates have been declining in every region of the world over the last several decades.
The Economist and the American Enterprise Institute say the primary reason for this is free markets, which involves the opening up of trade between nations. This is a cornerstone of capitalism. As countries find more markets to sell their goods and services to, jobs, and the elimination of poverty, follows.
This is important, because as a nation creates more wealth, more individuals will inevitably want to give back to society. We would not have the national parks in America without wealthy individuals voluntarily giving away their wealth because they wanted to benefit society.
Look at what John D. Rockefeller, Jr. did, according to the National Park Service:
“The contributions of John D. Rockefeller, Jr., and his son Laurance S. Rockefeller to expand the national park system are especially remarkable. They gave more than $3 million for land and park roads at Acadia, more than $2 million to enlarge and improve Grand Teton National Park, more than $5 million for land to establish Great Smoky Mountains National Park, more than $2 million for the land comprising Virgin Islands National Park, more than $1.6 million to expand Yosemite, and lesser amounts for lands at Big Bend, Glacier, Grand Canyon, Haleakala, Lassen Volcanic, Olympic, Rocky Mountain, and Shenandoah national parks; Antietam, Big Hole, and Fort Donelson national battlefields; Capulin Volcano and George Washington Birthplace national monuments; Colonial National Historical Park; Ford’s Theatre National Historic Site; and the Blue Ridge Parkway.”
Many contributions from wealthy individuals happened before Congress had even created the National Park Service in 1916. The museums at Mesa Verde National Park, Yosemite, and Yavapai Observation StationöMuseum at Grand Canyon National Park all are in existence because of private philanthropy, and those are only a few examples.
Not only does more wealth provide greater opportunities for protecting the environment, but it also creates greater demand for it. According to Donald Boudreaux’s book Globalization, “Environmental quality is very much like leisure time: as people become wealthier they demand more of it, mostly because they can better afford it.”
John Tamny, contributor at Forbes, explains this concept well: “In the 1930s the number of trips Americans took to U.S. national parks and forests were negligible. By 1950 total visits were under 200 million. Today parks and forests average 1.4 billion visitors annually. Today’s citizens have the time to watch the trees grow and smell the roses.”
While of course there is poverty in the United States that we should all work towards reducing, over time, the overall quality of life of Americans has drastically improved. This means Americans need to spend less time doing tasks by hand that they can now afford to hire a business to do, or can now use technology to accomplish. Their minds are less focused on daily survival, and more on broader issues. This is a positive thing for protecting the environment. When you aren’t concerned about where or how to eat and get clean water or shelter, you care more about whether air is of good quality or if the nearby lake is protected from pollution.
But the evidence showing that capitalism helps improve environmental quality is not just clear from history, it is shines as clear as day in statistical data as well.
Yale University has a metric called the Environmental Performance Index, which takes statistics on environmental health and ecosystem vitality to rate a country’s environmental protection. James Roberts and Ryan Olson of the Heritage Foundation took this number and compared it to the Index of Economic Freedom, which measures how economically free through capitalism a nation is.
They found a strong trend in the data that “indicates that as countries move from economic repression to economic freedom, their environments improve as well.”
Olson and Roberts then looked at the state of private property rights in several countries, and compared that to Yale’s Environmental Performance Index. They found an incredibly strong correlation in this data, suggesting that as private property rights increase, so does environmental protection and quality.
The two researchers explain: “Because land values usually increase over time, owners have an incentive to maintain the quality of the land and its improvements in order to preserve its value. Owners of private property have no interest in destroying the value of the land or its environmental qualities, because they would not profit from such degradation.”
In the 1990’s, Iceland actually began to experiment with property rights when it comes to fisheries. It was long thought that using private property rights on fish or areas of the ocean, since there is no way to stop fish from swimming to other parts, was impossible. But Iceland began using “Individual Transferable Quotas” which allowed fishermen to “harvest specific portions of the overall quota of marine fish.” If a fisherman was having less success meeting their part of the quota, they could sell their rights to other more efficient fishermen, thus creating an incentive to reward more efficient, successful fishermen. This helped limit over-fishing, and over time fish stocks improved, thus increasing environmental quality.
But what about the track record of communist countries? How do they do at protecting the environment?
Countries in the European Soviet bloc, as well as the USSR and Venezuela, do not just fare worse than capitalist countries at protecting the environment; they do such an awful job at protecting the environment that it inevitably becomes a humanitarian crisis.
According to a report from the Multinational Monitor in 1990, air pollution was a serious problem for the Soviet Union. 40% of citizens lived in areas where contaminants were three or four times the maximum safety levels. In addition, water quality was abysmal. “In Leningrad, nearly half of the children have intestinal disorders caused by drinking contaminated water from what was once Europe’s most pristine supply.”
44% of East German forests were heavily affected by acid rain that came from coal facilities that lacked the equipment necessary to scrub sulfur from emissions. East Germany had air pollution that was deemed to be as many as 12 times worse than that in capitalist West Germany.
Venezuela is in a deep crisis on almost every social level. Food and basic necessities such as toilet paper are becoming almost non-existent. Strong socialist policies have caused deep shortages. While the government was focused on depriving individuals of private property and growing its control over the economy, it ignored the issue of water supply.
As the financial crisis deepens and the recent drought continues, much of Venezuela is becoming ill with diarrhea, other stomach diseases, and skin conditions such as scabies, and folliculitis. Hospitals and households alike see limited water supply, and when there is water, it often comes out of faucets yellow or brown.
As a nation becomes wealthier through capitalism, it starts paying attention to environmental issues, because they no longer have to worry as much about simply surviving. If only Venezuela’s government had focused on growing economic freedom, perhaps then enough could have been done to prevent the water quality crisis happening today.
Whether you are a head of state or just a concerned citizen that wants to protect the environment, you should embrace economic freedom, free markets, capitalism, and private property rights. Your citizens will be lifted out of poverty, your air and water will become cleaner, and your people and neighbors will want to protect the environmental treasures your country offers because they don’t have to worry about what they are going to eat and drink that night.
History, statistical data, and countless real-life examples all agree: to protect the environment, embrace capitalism.
So is the proposition here that the more unregulated the economy is the better it does? That is easily falsified by basic economic theory. Markets don’t have perfect knowledge, they often fail to reflect the real costs of goods, especially when those costs are externalised to the transaction and borne by the public in the form of environmental damage or financial risks implicitly covered by the public. For a simple and obvious example where markets fail, look at the 2008 banking crisis. Markets were under regulated, markets acted with the implicit guarantee of protection from the government and so the markets and financial institutions crashed spectacularly. This would have been avoided if proper regulation of the market was in place. Indeed it was a belief that markets knew best that was the excuse for the progressive deregulation over the previous 20 years. The result was privatisation of profits and public liability for he losses.
So it is with markets and their action on the environment. Regulation acts to impose costs and limitations on private companies (whose sole motive is to make money) to properly account for the public costs and harms of their actions on the environment. Failure to properly regulate results in the tragedy of the commons where public goods are incrementally destroyed because no actor in the market has any individual benefit in maintaining them in the short term. This has been demonstrated to occur in businesses such as fishing, forestry and farming for decades and even centuries. This is why the Grand Banks have no cod an£ why the dust bowl occurred.
Regulation is what grown up societies do to protect public goods in the long term.
They secure long term prosperity. They are in no way in conflict with capitalism per se. They are only in conflict with slash-and-burn capitalism that is happy to cut off its nose to spite its face with short term profits and long term decline.