The Environment is too important to be left to the Market

by Nicholas Hildyard

first published 31 May 1998

Summary

This presentation to Cranfield School of Management looks at whose interests the free market serves and whose environment is protected by market instruments such as labelling and property rights. It concludes that leaving the environment to the market is a recipe for social injustice, authoritarianism, neo-colonialism and ecological suicide.

Contents

Introduction

I want to start by quoting from an interview with Madonna.

Now the interesting thing about this interview is its history. It took place in Hungary, so all the questions were asked in Hungarian and translated into English so that Madonna could understand them. Her answers were then translated into Hungarian and the whole thing was then translated back into English.

Here is the result. I am not Peter Ustinov, so apologies for the accents:

Question from Mr. Blikk: "Madonna, Budapest says hello with arms that are spread-eagled. Are you in good odour?"

Madonna: "Stop with taking sensationalist photographs until I have removed my garments for all to see."

Blikk: "Let's cut towards the hunt. Are you a bold hussy woman that feasts on men who are tops?"

Madonna: "That is certainly something which brings to the surface my longings. In America, it is not considered to be mentally ill when a woman advances on her prey in a disco setting with hardy cocktails. And there is a more normal attitude towards leather play toys that also makes my day."

Blikk: "Is this how you met Carlos, your love servant who is reputed? Or were you dating many other people in your bed at the same time?"

Madonna: "As regards these questions, enough."

As so on. Gibberish.

Gibberish because the translator has taken a completely mechanical, technocratic approach to language. The words have simply been processed through a dictionary. They have been plucked out of their context. They have been rendered meaningless. Much of the content of the conversation has simply been lost in translation.

In this case, it doesn't really matter. Madonna may be a global icon but her pronouncements in a American teenager's "zine" are unlikely to shake the world.

The same cannot be said for the pronouncements and actions of economists.

Yet State planners and free marketeers alike have much in common with bad translators.

Like them, they have a mechanical view of the world. Only it is not words that get processed through their models but people, environments, whole societies and political systems.

And in the process, large sections of society, large swathes of the environment, the concerns of numerous peoples and the relationships of power that underwrite wealth and generate poverty, that ascribe value to one set of goods whilst denying it to others, can quite literally get "lost in translation". They become hidden from view, obscured, marginalised, expendable and surplus to the model.

Reality gives way to the "virtual reality" of the modeller. People cease to be people and become stereotypes and numbers, the more easily to be turned into bytes of information for chips to process and transmit through cyberspace to other modellers. The environment ceases to feature unless it can be transformed into a resource and given a weight or a volume or a price.

Now it is not my brief today to look at the violence done to people and the environment when such virtual realities dominate decision making in state bureaucracies. I could talk at length on this but I am not going to do so.

I want instead to look at the virtual reality in which corporate bureaucrats and their free market gurus appear to live. I want to ask whose interests the market serves? Whose environment will be protected by such market instruments as labelling and property rights? And I want to argue that leaving the environment to the market is a recipe for social injustice, authoritarianism, neo-colonialism and ecological suicide. And I want to do so from a perspective that is equally critical of unchecked state power.

I want to start by challenging four cannons of the free market theology.

The first is that all human behaviour can be reduced to economic behaviour. Or rather to self-interest. Yet I have yet to meet that stalwart perennial of economic text books -- Homo Economicus -- that obsessive rent-maximising archetype whose supposed universality economic theory takes for granted.

I have met people who write about him (yes him, not her, please note), who construct computer models about him, who would reconstruct entire societies on the basis of him. But I have yet to meet him.

The people I know don't spend their time weighing off scarce resources against supposedly unlimited needs. They make decisions, certainly, but those decisions reflect a plurality of values and concerns whose weight changes with context -- even with mood. Hangovers, likes and dislikes, obligations, ideals -- these are what make the difference.

The people I know don't live in economic models. They live in the real world. And because they live in the real world, they are constantly getting in the way of Homo Economicus.

And because they get in the way, you won't find their hangovers, their loves or their hates factored in to the computer models so beloved of economists.

Nor is it just the company I keep. Take that bastion of the free market -- the World Bank. If you think projects are approved and money lent by Homo Economici, taking objective decisions, forget it. Recently an internal task force revealed that 30 per cent of Bank projects are failures. It criticised the "pressure to lend" within the Bank, the "career culture" that turned project assessments into publicity documents intended to "sell" not only the project but the team manager that supervised it.

And I am sure that those of you work in the private sector will have found the same pressures within your own organisation. Just as you will have found out all about old boy networks that keep the successful in the loop and the unsuccessful on the outside. That keep the subsidies and tax breaks flowing. That oil the contracts.

Free Markets?

And just as I have yet to discover "Homo Economicus", so I have yet to discover the perfect market that features so vividly in economic text books.

Which brings me to the second myth of the market. The level playing field doesn't exist. And it never will.

Free trade is a fiction. I say that because -- trade is protectionist -- because all trade is governed by rules. And rules inevitably discriminate against one set of interests and protect another. The only point at issue is who gets to be protected. What we call "free trade" protects corporate interests. And what free traders call "protectionism" is often no more than rules that protect powerful state interests. As for trading rules that protect the citizen, well ...

Nor should we be surprised at this. For the real world is deeply political world. It is a world in which decisions reflect the unequal distribution of power; in which the information consumers receive depends less not on corporate honesty but on relative bargaining power; in which efficiency is largely a measure of one's ability to capture government largesse; in which project's get built because of political connections; in which cost-benefit analyses get massaged, bribes get paid, embarrassing research gets suppressed and in which truth is the commodity most frequently economised.

One thinks of the Pergau dam; of the lengths the asbestos industry went to prevent health warnings on its products; of the transfer pricing scams practised by mining giants.

And one begins to ask, "If the environment were left to the market, whose environment would be protected? And whose environment destroyed.

I ask that question because the degradation of earth, air, forests and water means different things to different people.

For people who depend directly on the environment -- the vast majority, those for whom the environment is more than their gardens on Sunday -- the environment is their livelihood. Protecting it is a matter of life and death.

In contrast, figures in government, business and international organisations, whose livelihoods do not depend directly on what is around them, the environment is not what is around their homes but what is around their economies.

Northern business people, for example, are preoccupied with how to keep a growing South from tapping resources and filling up waste sinks which the North has grown accustomed to using. And southern elites are preoccupied with extending the boundaries of their economies, by logging forests and so on.

So which of these "environments" would do best if left to the market? And let us be frank about what sort of market we are talking about. So let us get rid of the idea that the new wave of neoliberalism is about getting rid of subsidies or monopolies or regulation. It isn't. It is about favouring one type of subsidy over another and one form of centralisation over another.

Take the recent GATT negotiations on agriculture. US and European farmers continue to be subsidised -- albeit indirectly-- to the tune of billions, whilst Third World farmers find their subsidies removed and their markets undermined by dumped northern surpluses. The beneficiaries are the big farmers and the big grain merchants. The losers are small farmers around the world.

Poverty and the Environment

Ah, say the free marketeers, but the wealth generated by economic liberalisation will enable us to relieve poverty. And that should be good news for environmentalists because poverty is the great environmental destroyer.

But there are few grounds for blaming environmental destruction on poverty that are not far better grounds for blaming it on the operations of power and wealth.

It is modern wealth moving across frontiers which backs the wholesale destruction of forests, land and water by corporations and development agencies for the sake of distant markets, depriving ordinary people of livelihoods and independence, and pushing them to hitch their fortunes to an exploitative labour market.

Environmental degradation, rather than being the result of destitution, is often the means through which modern wealth creates poverty. To give just one example. There are now an estimated 20 million people living in slums in India as result of being uprooted from their lands to make way for dams.

Certainly wealth can also buy itself some "environmental quality". The elites of Mexico City or Manila can shut themselves inside air-conditioned Mercedez-Benzes while fumes choke their less fortunate compatriots. But a better quality of life for one person is generally only purchased at the expense of someone else's. The Mercedes, even if equipped with a catalytic converter, is hardly an environmental boon to those walking behind its exhaust pipe or living where the oil it needs is drilled.

Moreover, while money can buy remedies for local pollution here and there, no amount of new technology is going to bring back the things which have been annihilated by the North much vaunted "wealth creation machine". It will take more than money to restore fertility to the 17 per cent of European soils seriously damaged by mechanised farming. And however rich you are, you can never bring a species back from extinction.

Market Instruments

Of course, one can "internalise some costs", but who decides which costs to internalise? And who prices them? And can they be priced? Is it really acceptable, for example, to value a Chinese life 15 times lower than an American life -- as has been proposed for the purposes of "costing" climate change? Isn't this the economics of genocide? A way of simply ensuring that the rich can continue to use the atmosphere as a cheap dumping ground?

And whose environment will the market instruments now being introduced by governments, "protect"? Will they actually bring change? Or simply benefit the powerful at the expense of the poor and the environment?

Eco-Labelling

Consider Eco-Labelling and the institution of private property rights over commonly-owned resources - two market instruments much favoured by free marketeers as "solutions" to environmental problems.

Environment and consumer groups have long argued for better labeling of products. If goods contain health threatening chemicals or if their product is destructive of the environment, then people have a right to know. Indeed, we might well have still have a world-wide market for British beef if feed companies had been obliged to tell farmers that the feed they were buying contained cows, sheep, offal, brains, excrement and other delights.

So, as an environmentalist, I am favour of labels. In that respect, I share common ground with the free-marketeers. Where I differ is over who sets the sets the standards and whether labels should be mandatory or voluntary.

Neo-liberals see mandatory labelling, with government setting the standards, as "statist" and therefore bad. Not surprisingly, with the rise of neo-liberalism, the ecolabelling schemes that have been introduced in the last decades are voluntary. They are not regulations. They are simply agreements.

Not surprisingly too, the labels reflect the needs of industry. There are a number of reasons for this. The first is that industry representatives have the time and resources to attend the meetings at which the standards are set.

But more important still, the voluntary nature of the schemes gives industry enormous bargaining power. If they don't get their way, they can simply threaten to withdraw, rendering the entire scheme irrelevant since without industry's co-operation the labels would never make it onto products

As a result, eco-labelling schemes have degenerated into a means whereby the industry can set the environmental standards it likes. Instead of assessing the environmental impacts of a product from cradle to grave, the impacts considered are limited to those which industry finds least onerous to address.

To give a couple of illustrations:

  • The EU ecolabelling criteria for washing machines focus on the energy used. The impacts of extracting the raw materials to make the machines and the impacts of using them are ignored. As is the issue of disposal.
  • Industry has insisted that products in a given category should be "functionally equivalent". Compact fluorescent bulbs are thus in a separate category from standard incandescent bulbs. Consumers wishing to compare the relative impact on both bulbs cannot do so.

It is a scam. Certainly there have been some improvements, but these largely reflect changes that industry was going to make in any case. And it is a scam which the public has seen through: as a recent survey showed, few consumers actually believe what they read on the labels. Result: they don't buy the products.

Property Rights

If ecolabelling schemes have proved at best an extremely bunt market instrument for protecting the environment, the imposition of private property rights over commonly-held and managed resources is proving a means of accelerating it.

Land rights have long been a fundamental issue for the poor, not only in the South but also in many areas of the North -- witness the crofters in Scotland.

And there is no question that there is a direct connection between landlessness and environmental destruction. If peasants in Brazil are moving into the Amazon, for instance, it is because they are denied land outside the forest.

I say denied because their landlessness results not from overpopulation -- the usual explanation -- or from a lack of available land. It results from their dispossession. There is more than enough land in the South of Brazil for all those peasants who have moved into the Amazon. The problem is that the land is now owned and controlled by large industrial companies who farm it as giant estates on which there is simply no place for peasant farmers. Those companies are not there because they are more efficient or competitive: they are there because they have political muscle. Foreign transnationals alone now own more land than all the peasants in Brazil put together. And they are not about to give it up.

Not surprisingly, peasant movements in Brazil are calling for land reform. For them, the problem is not an absence of property rights but the skewering of land ownership.

But when free marketeers talk about instituting property rights, they are talking about something very different. They are talking about establishing markets in property where those markets do not exist.

They look at deforestation and they conclude: the problem is that no-one owns the forest. They look at overfishing and they conclude: the problem is that no-one owns the fish. And the great quest is now on for ways to privatise the forests and the seas, the atmosphere and the land. The only way to secure the environment, they say, is to put a fence around it, police it and give it value through the market.

In defence of such views, free marketeers have played upon three related confusions. The first is that forests and coastal areas, to take just two examples, are not owned by anyone. In reality there are few forests or coastal fishing grounds over which some group does not exercise a traditional right of usufruct. In most cases, the resource is held in common as a commons.

Ah, say the free marketeers, no wonder they get degraded. And here they generally cite Garrett Hardin who famously argued that any commons (the example he used was a hypothetical rangeland) "remorselessly generates tragedy" since the individual gain to each user from overusing the commons will always outweigh the individual losses he or she has to bear due to its resulting degradation.

But Hardin was not describing a commons regime, in which the authority over the use of the resource rests with the community. He was describing an open access regime, in which authority rests nowhere.

Commons are emphatically not a free-for-all. Their use is strictly regulated. The tragedy occurs when they are enclosed. And, historically, their has been no more effective means of enclosure than imposing the market.

Through the market, anyone can take over rights to a fishing ground, a forest or a pasture. And unlike commoners with family ties and commitments to the commons, those who buy in can mine, log, overfish, degrade and abandon their holdings without suffering any personal loss. It is generally enclosers rather than commoners who benefit from bringing ruin to the commons. And it is generally commoners who are at the forefront of protecting their common resource -- not out of a love of trees or of animals, but because their livelihoods depend on it.

So whilst India's free marketeers want to open up coastal waters to international fleets, it local commons-based fishing communities who are resisting liberalisation.

Ditto in Malaysia where foreign trawlers have been burnt by local fishers.

And ditto in Europe as fishers in Cornwall seek to protect their mackerel against Spanish fleets, and Spanish fishers seek to protect their tuna against Cornwall's fleet.

And whilst local fishing communities around the world are calling for governments to limit the technology of fishing -- by restricting the size of boats and nets, for example -- free marketeers blame the problem on too many boats. Their solution is to cut the fleet and institute quotas, effectively letting the market decide who has the right to fish.

And the result is that the most powerful, the most rapacious actors are increasingly winning that right. Nor have fish stocks benefited. On the contrary, in New Zealand, where quotas have been introduced with a vengeance, the orange roughy fisheries have collapsed. Why? Catches have to be maximised to pay off the debts incurred by buying the quotas and to maintain profitability. These immediate incentives override any long-term concern for ecological stability. And why should the companies who have brought quotas care if orange roughy stocks fall. They simply buy quotas in other stocks. And, if things look too bad, they can always move out of New Zealand and into some other fishery. And when that's depleted, well there is always the EU and its generous grants for getting out of the industry.

Meanwhile, the local communities that once fished New Zealand's waters, Canada's water, India's waters and Britain's waters are increasingly denied access to the seas. Control has shifted over their resource. Powerful outside interests have appropriated what was formerly apportioned in a much more equitable manner.

Indeed the defining element of commons regimes lies not in the structure of their property rights, but in the fact that the power to manage is embedded in the local community. It is this that encourages a long term-term interest in the sustainable use of the resource, and that enables people to resolve problems of equity and conservation by talking to each other. Transferable quotas have the potential to close such dialogue by removing control over resources from the community and allocating it to an inaccessible investor some 3000 miles away who may have no long-term interest in protecting the resource.

And that really is what the free market has always been about. Transferring control to the few. And that is why it is no vehicle for protecting the environment.

The environment IS too important to be left to the market. Because leaving it to the market is to let one set of interests decide. It is to protect the environment of the powerful at the expense of the marginalised, those "externalities" who do not feature in the models of the powerful

But though the marginalised may be external to the interests of the powerful, they are still flesh and blood., They are real. Homo Economicus is not. And they know that the market is no substitute for regulation. And that their environment will only be protected when the imbalances of power which the market creates are exposed and addressed.