Home Living Today Commentary Is Capitalism Bad for the Environment? The Eighth Commandment Offers a Clue By E. Calvin Beisner

Is Capitalism Bad for the Environment? The Eighth Commandment Offers a Clue By E. Calvin Beisner

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A common charge by environmentalists is that capitalism is bad for the environment. Indeed, Christiana Figueres, former secretary-general of the United Nations Framework Convention on Climate Change, opined that climate negotiations in Paris in late 2014 offered the world its best opportunity to replace the reigning global economic order (capitalism, or free markets) with another (socialism, or government-planned economies).

But is capitalism really bad for the environment? One of the Ten Commandments actually provides a starting point for figuring that out. The Eighth Commandment says, “You shall not steal.” This presupposes that people have a right to private property and to use it as they please so long as they don’t harm others’ property, health, or life.

In a chapter in the recently published Counting the Cost: Christian Perspectives on Capitalism, I presented compelling evidence that lack of private property rights is one of the chief reasons why the greatest environmental disasters (some of which I describe) have been in socialist and communist countries, not capitalist (free-market) countries. This article adapts one small part of that chapter.

An absence of property rights diminishes incentives to take care of land, air, and water—resulting in overconsumption (faster than nature renews) and under-protection (polluting excessively) of resources. When a resource is owned in common, everyone has an incentive to use it rapidly, for whatever he doesn’t use someone else does. When it is privately owned, the owner has an incentive to maintain it for long-term income.

Nonetheless, some environmentalists claim capitalism unjustly imposes costs on others. One British official, Nicholas Stern, primary author of a major report on global warming, called climate change “a result of the greatest market failure the world has seen.”

But Stern’s complaint rests on a concept economists call “externalities.” An externality exists when those undertaking an action don’t bear all its costs (negative) or reap all its benefits (positive), but impose some costs or bestow some benefits on others. Pollution is a “negative externality.” It is a cost of production, but, at least until some sort of government action, a cost not borne by either the business or its customers—it’s borne involuntarily by others. Capitalist businesses, so the environmentalist charge goes, fail to “internalize the externalities” and so must be forced to.

I agree wholeheartedly that businesses should have to internalize (pay for) their negative externalities—as when a solid waste incinerator installs a smokestack scrubber to reduce soot emissions. I have no objection to government’s forcing them if they don’t do it voluntarily. Businesses should bear the costs of pollution, not impose them on others. This means they will pass those costs on to their customers in the price of their products, which is only fair; the businesses wouldn’t make the products if no customers bought them.

But is it really capitalism—the free market—that encourages businesses not to internalize negative externalities? … That is, are externalities really a case of market failure? Or might something else be failing? … [Continue reading on the Cornwall Alliance blog.]

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