First published at How to be Profitable and Moral: A Rational Egoist Approach to Business and posted here with the kind permission of the author.
Recently, 130 environmentalist groups gathered in an UN-backed event in Venezuela to gather more civilian support to combat climate change, reports the Daily Caller. A number of them signed the Margarita Declaration (pdf) which calls for an end to the “hegemonic capitalist system” as the only solution to human-caused climate change. The environmentalists argued that measures such as carbon capture and trade and conservation efforts are not sufficient to prevent the environmental disasters they are predicting; instead, they demanded a radical system change. Although they did not spell out what their ideal social system would be, we can assume they want the opposite of capitalism—some form of socialism. The environmentalists’ demands for money and technology from rich countries to poor countries suggest that also.
Reading about this environmentalist gathering and their declaration immediately raised some questions: What planet are they living on—where is there “hegemonic capitalism”? And even if there was a capitalist system somewhere in the world, why do they believe that is the cause for the environmental disasters such as “dangerous climate disruption, and fueling severe drought, wildfires, heat waves and superstorms” that the Sierra Club director Michael Brune is predicting.
The environmentalists are making two false claims that need to be clarified: 1) Our present “hegemonic” system is not capitalism but a mixed economy, so capitalism cannot be responsible for the climate phenomena about which Sierra Club and other environmental groups are alarmed, and 2) capitalism is not a cause of problems affecting human well-being but a solution for them. So let’s look at them in turn.
The environmentalist calling for an end to capitalism clearly do not know—or don’t care to know— what capitalism is. In Ayn Rand’s definition, capitalism is “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.” Clearly, in the prevailing, “hegemonic” mixed economy, individual rights are not fully recognized, nor is all property privately owned. In a mixed economy, government violates individual rights when bureaucrats or politicians claim that “public interest” so warrants. For example, government violates property rights by collecting income tax—by force—to equalize income and distribute it from those who produce more to those who produce less.
In a mixed economy, government also owns property, such as mineral rights (like the petroleum reserves in many provinces of Canada) and land (like crown forests in Canada). Government ownership creates legitimate environmental problems, in the form of the “tragedy of the commons.” It is in the property owners’ interest to take care of their property and their resources. When the property is owned by the government, people do not have an incentive to take care of it by husbanding the resources and keeping it clean, for example. Therefore the phenomenon of overgrazing in common pastures (the tragedy of the commons) and the worst toxic dumping in regimes without private property and property rights, such as the former Soviet Bloc countries. Private property (and the protection of property rights) acts as an incentive to look after one’s own property—and not to damage someone else’s, as they have a re-course through the government to make you pay, and clean up. It is not capitalism but the lack of it—the lack of private property and property rights—that causes pollution problems.
Capitalism is not a cause of environmental problems —contrary to the environmentalists’ claims—but it is the only social system that can prevent such problems and maximize human well-being. Not only does capitalism help prevent pollution and husband resources through private ownership and protection of property rights, it also facilitates innovative solutions to the problems of pollution and resource scarcity. Capitalism is a system of competition where profit-seeking companies are trying to create value for both their customers and shareholders. It is the competition to create the most value that propels companies to come up with new, better, less expensive products and services, such as solutions to (real) pollution problems and new materials to replace those that might be scarce.
As Lawrence Solomon in a recent column so clearly showed, it is human ingenuity, made possible by freedom and driven by competition and profit-seeking—a capitalist system—that helps us survive, thrive, and avert the apocalyptic future that the environmentalists are envisioning. What the environmentalists are advocating—ending freedom via a socialist dictatorship—is a sure path to environmental disasters and human misery.
August 3, 2014
Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada. Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.