 he traditional environmentalist movement has evolved into a worldwide network that integrates itself politically, socially, and economically in organizations throughout the world. Historically a player in socialist leaning parties around the world, environmentalists are often anti-free trade, pro government regulation, and anti-globalization. However, there is growing economic and scientific data that contradict the policies of the traditional socialist environmentalist. "Free Market Environmentalism" as it is known, is a growing movement that attempts to use the capitalist ideals of property rights, the rule of law, and economic growth as methods of curbing damage, especially in the developing world. Often, traditional environmentalists will decry globalization as an exploitation tool of the developed world to use the cheap labor and lax pollution regulation policies of underdeveloped countries to the advantage of the almighty bottom line. Refutations to these arguments are becoming increasingly more publicized, and some traditional environmentalists are dispelling the myths themselves. One example of this is former left wing environmentalist Bjorn Lomborg, who set out to affirm the work of traditional environmentalists, but ended up doing the exact opposite. In his book The Skeptical Environmentalist: Measuring the Real State of the World, Lomborg discovered that deforestation is not large-scale, and in fact, forest acreage increased from 40.24 million square kilometers in 1950 to 43.04 million square kilometers in 1994. Additionally, the myth that extinction rates average 40,000 species per year is actually about 1500 species per year, as some environmentalist groups estimate. Most of the extinctions occur in species of insects, bacteria and viruses, not mammals, amphibians and birds, as special interest environmentalist groups would have the public believe.
Free-market environmentalists, on the other hand, according to Terry Anderson of the Property and Environment Research Center (www.perc.org) contend that"wealthier is healthier" and incentives matter. In short, wealthier countries with developed production methods, high per capita income and a strong foundation of property rights have less pollution than those without, and positive incentives for keeping the environment clean give workers and owners alike the chance to increase the wealth and environmental quality of their country. In an interview with Stanford Review, Anderson explained that the main tenets of free market environmentalism rest on the notion"that markets generate the wealth that gives us the wherewithal to solve environmental problems. Although many people mistakenly think that markets can only generate consumerism and other gunk, in reality it is markets that produce wealth and thus help the environment." Second,"incentives matter" because"positive incentives can turn the environment from a liability to an asset for a resource owner. If we own our own water and land, we have the incentive to manage and conserve it properly."
Daniel T. Griswold, in the article"Trade, Labor and the Environment: How Blue and Green Sanctions Threaten Higher Standards" found that even though left-wing environmentalist groups claim globalization as a"race toward the bottom" it is actually the opposite. According to Griswold, instead of countries with loosely enforced environmental regulations and low wages attracting foreign investment, countries with high wages and the highest environmental standards attract significantly more FDI. Griswold reports that in 2000 the UN Conference on Trade and Development concluded that of the $1.1 trillion in global FDI flows, over 80% was invested in developed countries. In additon, the 2001 World Economic Forum's"2001 Environmental Sustainability Index" showed that countries with the highest environmental standards attracted the most FDI also. The differences between the developed and developing world are obvious, but what is less clear is why environmentalists, who claim to support strict standards and increased wealth for these countries, would not support free market methods to achieve their goals.
The Fraser Institute of Canada releases an annual Economic Freedom of the World report, in which countries are ranked based on the amount of economic freedoms citizens have, i.e. the abilities of "personal choice, voluntary exchange, freedom to compete, and protection of person and property." The top 5 countries on the list were: Hong Kong, Singapore, the USA, New Zealand and the UK, respectively. While each of these countries has an active environmentalist movement, they are nowhere near as dirty as areas in the developing world, pollution wise. Conversely, four of the five countries classified as the least economically free are in Africa. Guinea-Bisseau, Zimbabwe, the Democratic Republic of the Congo and Algeria rank are at the bottom of the Fraser Institute's list, and with leaders such as Robert Mugabe in power, it is safe to assume their political liberties are not much better.
Africa is a striking example of the link between rule of law and environmental quality. Comprised of 54 countries, it ranks at the bottom worldwide in GNP per capita, economic growth, and per capita income. An essay titled" Why Africa Is So Poor" by George B.N. Ayittey in the book Sustainable Development: Promoting Progress or Perpetuating Poverty? explains how the common"externalist" view that colonialism, imperialism, racism and forces imposed on the continent by the rest of the world have resulted in the exploitation and oppression of the citizens is a false notion and that the problems of Africa can be corrected if the right steps are taken. It is the"internalist" perception of the problems, the author notes, that has a more likely chance of correcting the current situation. Internalists explain the lack of prosperity and development difficulties by saying that the corruption of government on all levels and lack of stable rule of law lead to exploitation of the natural, industrial, and human resources the continent has. In many of these countries, a career in politics is directly linked to vast wealth, and leaders are not held accountable while they impoverish their citizens, and allow the environment to be destroyed by poor agricultural methods, lack of positive incentives, and weak enforcement of property rights.
The importance of strong property rights in relation to environmental quality cannot be overstated. Aristotle accurately summarized this notion when he said "What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others." This is true in many cases, and it is especially important where the environment is concerned. Hernando de Soto elaborated on this concept in his book The Mystery of Capital. In relation to property rights, de Soto's idea was that the countries at bottom of the Fraser Institute's freedom index do not have the legal system in place to safeguard property owned, which leads to abuse, which leads to environmental neglect. The wealthy in developing countries create a system in which capital is kept inside the elite levels (the bell jar), and those with capital but outside the bell jar have to use their money in an extralegal system. While procedures to perpetuate entrepreneurship in these countries may exist on paper, they are often complicated, laden with red tape, and expensive. Using Haiti as an example, De Soto estimates the amount of untitled (extralegal) capital invested in rural and urban real estate, to be $5.2 billion. Quite a significant amount, considering it is 158 times the amount of foreign direct investment recorded in the country's history up until 1995. Additionally, the extralegal real estate assets are worth 9 times the total value of all government assets. However, in keeping with the free market environmentalist notions of poor countries having poor environmental conditions, the Sustainable Development Information Service summarized Haiti's environmental conditions by saying"few countries are more seriously threatened by environmental catastrophe than Haiti. Resources are overexploited and trends toward further environmental deterioration are apparent."
Why does this happen? At what point can a country with foreign investment and an abundance of extralegal capital turn their environmental and economic situation around to increase efficiency, wealth, and promote cleanliness? Economist Richard Stroup tackles these issues in the article Economic Freedom and Environmental Quality, where he asserts that the failure of the socialist environmentalist movement lay in the terms in which the problem is approached. Environmental problems are discussed and promoted by the left as a"market failure" but the market itself has little to do with environmental quality. In reality, what is termed market failure is actually a failure of the government to protect the property rights of individuals. And when those rights are not protected, damages to their property result. By centralizing responsibility with the government, the market is taken out of the equation. However, if the government fails to protect the property rights of its citizens, damages will likely occur.
Peter J. Hill's "article"Environmental Problems Under Socialism, published in the Cato Journal discusses perhaps the most prominent example of the failures in the socialist movement to keep the environment clean. The former Soviet Union and its satellite states are an example. Water pollution, air pollution, high levels of pollution-related illnesses in children, and the extinction of several species of fish were all problems uncovered after the fall of Communism. In Poland, Czechoslovakia, East Germany, Hungary and Bulgaria, among others, severe environmental problems were found. In East Germany, approximately 60% of citizens at one point or another suffered from respiratory ailments. In Telpice, Czechoslovakia, students are relocated to another area for 6 weeks a year due to poor air quality. In Hungary, drinking water contained dangerous levels of arsenic, and children in Upper Silesia, Poland had 5 times the level of lead in their blood than did their counterparts in Western Europe.
In a socialist system, the central planners are not exposed to the consequences of their actions, and citizens, who are affected by those decisions, have little incentive or opportunity to effect change, as the lack of property rights denies them the ability to profit from any improvements. Economist Arthur Pigou illustrated this occurrence, which can occur in many systems of government when he formulated the concept of an externality, the inevitable divergence between the social and private costs of decisions, and focused on the institutional barriers that prevent a mutually beneficial transaction, especially where it relates to relationships such as a landlord-tenant or government-citizen. Much of the modern day work in public policy focuses on externalities and how they can be eliminated, especially in the area of environmental policy. In the 1960s, economist Ronald Coase changed the framework under which externalities are discussed by emphasizing that if government can protect the property rights of its citizens, transaction costs between actors can be reduced to virtually zero, making exchanges between actors socially and commercially beneficial for each party. Additionally, if each actor is held liable for his or her actions under the rule of law, (Hill uses the example of"common law liability" in England), then transaction costs and externalities can be eliminated. Without these safeguards in place, citizens and planners alike have little incentive to care about their surroundings, and without the potential for profit from investment, aspirations of wealth are equally out of reach. Socialists in the west may attempt to support environmentalism using theories of government planning, regulation, and punishment, but clearly, the economic and political aspects of the issue do not support their big government policies.
FME advocates support the notion "wealthier is healthier" in relation to reducing environmental damage through the findings of the Environmental Kuznets Curve. The Curve gained prominence in the early 1990s when it showed the relationship between increased income level and increased environmental quality standards were not mutually exclusive. The EKC, as it is abbreviated, is a version of the Kuznets curve, presented by Simon Kuznets in 1954, which showed that the relationship between per capita income and income inequality can be represented by a bell curve. In short, the income inequalities experienced by developing nations eventually reach a turning point once per capita income reaches a certain level, after which the economy of the country is developed and inequalities decrease. In 1991, economists began using this idea to represent the environmental problems experienced in the developing world. By comparing certain factors that lead to environmental decay (such as sulfur dioxide emissions) in countries with their per capita income levels, the Environmental Kuznets Curve was introduced.
The PERC authors also analyzed a study by Hettige, Lucas and Wheeler, who analyzed the effects of free trade policies in developing countries as it related to environmental improvements. Using a production toxic intensity index for 37 industrial sectors (mainly the manufacturing sector) in 80 countries between 1960 and 1988, the study concluded that when governments impose tariffs and non-tariff trade barriers on the chemical manufacturing sector, toxic intensity increases. When countries were closed to international trade, even in countries with high government standards for toxic intensity pollution was a problem. These findings call into question the environmentalist notions of"pollution havens," a term used to describe developing nations whose sources of cheap land, inexpensive labor and loose regulations concerning pollution allow multinational corporations to build in the country and damage the environment without punishment.
If international free trade increases wealth, thereby decreasing environmental damage, then the pollution haven theory is rendered invalid. However, it seems that every time there is a WTO meeting, protests abound with demonstrators screaming about problems like the pollution haven theory and sweatshop labor. In the article"Is Free Trade Good for the Environment?" author Daniel K. Benjamin analyzes a study done by Werner Antweiler, Brian Copeland and M. Scott Taylor in which the authors concluded that the expansion of free trade leads to per capita income increases, and that for each per capita income increase of 1%, pollution is reduced by 1.25-1.5%. When free trade is brought into developing countries, three environmentally related effects are generally felt: 1) changes in where goods are produced; 2) changes in the scale of economic activity; and 3) changes in the production techniques used. Benjamin articulates that while the anti-free traders argue that the first and second effects mentioned lead to environmental damage, and that free trade is the cause of the resulting increase in pollution, once an increase in activity is sufficient enough to lead to increases in per capita income, the third effect, changes in the methods of production, is realized. Once the technology is updated and production is more efficient, pollution is decreased and most of the damages sustained in the developing period are reversed. This argument is limited by the fact that the authors of the study only analyzed sulfur dioxide as a pollutant, and they did not fully explore the role of government in their analysis. However, the evidence is compelling in that it shows a link between free trade and pollution that the environmentalist left chooses to ignore.
Traditional arguments of the environmentalism movement do not hold up when tested against the innovations and improvements offered by developing a solid and fairly adjudicated capitalist system. Ensuring property rights and equal treatment under law gives citizens the protection and the incentive to take care of their belongings. Once property rights and the rule of law are established, investment can occur, and in time, the development that results from investment will lead to wealth. Environmentalists who criticize foreign investment and development as the reasons for pollution, deforestation, and poverty do not see the big picture of third world development, especially in the case of the benefits foreign investment can have. If the proper safeguards are in place, and the government can work with business instead of against it, the environmental rights of citizens can be protected, just as their property rights are. The cases of the former Soviet republics are compelling in that they demonstrate government regulations can be in place, but unless a solid system of enforcement, incentives and punishment exist, those rules are useless. In the case of capitalism, the rights protections, incentives, punishments, and rules have clear methods of enforcement. Free market environmentalism has demonstrated the ability to take developing countries and increase their standards of living while decreasing environmental abuse. Foreign investment, economic development, increased wealth and a better environment are all possibilities for the third world, if their growth is handled within a system that protects property rights, has a strong rule of law, and allows the market to grow without unnecessary regulations and bureaucratic red tape. |
