Last week, Grant Tungay, a lawyer working at the Jesuit Institute South Africa, argued that free markets couldn’t ensure the health of the environment in our ongoing debate about Pope Francis’ eco-encyclical, Laudato Si’.
You can read the context leading up to this column here:
1. The eco-Pope: When the infallible fails by Ivo Vegter.
2. The fallibility of critique: A response to Ivo Vegter by Anthony Egan and Grant Tungay.
3. The eco-Pope: Critiquing a priestly critique of my critique by Ivo Vegter.
4. The true cost of the environmental destruction is impossible to measure by Grant Tungay.
With his most recent piece, Tungay set up a straw man to attack. My argument was not that the free market was some sort of panacea for all the world’s problems, or that all environmental impacts could easily be priced into the market.
My points were (a) that Pope Francis had adopted false and exaggerated rhetoric from the old-school, apocalyptic environmental movement, (b) that he made a basic error in his economic argument, (c) that it is unwise to base policy on such a flawed view of the world, (d) that a religious leader is welcome to speak to his flock, but not to insinuate himself into government policy-making, and (e) that the green movement resembles the Catholic religion in all but name, so the two kind of suit each other.
The claim that I made an exaggerated argument about free markets, opposing any and all regulation, is intended as misdirection from the points I made. I need not defend that straw man here, since it is irrelevant. I stand by the points I made about Pope Francis and Laudato Si’. Those arguments do not need more support than I have already provided.
However, in the interest of correcting any misgivings Tungay may have about the virtues of free market capitalism, I will address the substance of his opinion piece.
Tungay criticises my reference to the price mechanism as if I implied it is a perfect solution to every problem. I did not. I cited it to demonstrate the falsehood of the claim by Tungay and his former co-author, Anthony Egan, that there is a “lack of an internal mechanism in the market preventing unwise economic choices”.
Clearly, there is such a mechanism. Only its existence, and not its perfection, is necessary to prove Tungay and Egan wrong. It does not work perfectly in every situation, but when it is applied, it works very well.
He uses the classic emotive rhetoric of environmentalism: “… being nostalgic that the beach we used to visit isn’t so great to walk on anymore”.
Which beaches, specifically, is he talking about? So convinced is he of our “selfish lack of concern for the environment”, and our “superficial ecology which bolsters complacency and a cheerful recklessness”, that he fails to notice that the state of beaches – like much of the rest of nature – has been improving in the last 50 years. The major factor in improving beaches has not been the “mutual coercion” that he seems to admire, but the institutions of free market capitalism, like civil courts, as well as voluntary environmental programmes such as the Blue Flag Project.
I don’t know for which beaches Tungay is nostalgic, but today’s beaches are much cleaner than those I visited as a child. Awareness of ecological issues is also at an all-time high. Oil spills have been decreasing, both in number and severity. On most environmental criteria, matters are improving, not getting worse.
“Despite predictions of runaway ecological destruction, beginning in the 1970s, Americans [read: the rich] began to consume less and tread more lightly on the planet,” wrote Jesse Ausubel, director of the Programme for the Human Environment at The Rockefeller University, for the journal of the Breakthrough Institute. “Over the past several decades, through technological innovation, Americans now grow more food on less acres, eat more sources of meat that are less land-intrusive, and used water more efficiently so that water use is lower than in 1970. The result: lands that were once used for farms and logging operations are now returning as forests and grasslands, along with wildlife, such as the return of humpback whales off the shores of New York City.”
Ironically, our Jesuit correspondent frets over the inelasticity of demand for oil, to argue that the price mechanism cannot save us from scarcity. This suggests that he doesn’t believe we could achieve cleaner beaches either. Thankfully, he is as mistaken about the price mechanism and scarcity as he is about the beaches.
The recent history of oil discovery and extraction is an excellent example that the price mechanism works. A rising oil price motivated producers to improve techniques for extracting oil, making oil sands, tight sands and shales viable for production. This dramatically increased the potential supply of oil, upon which prices crashed to levels not seen in a decade. If all else fails, however, there’s always the option to convert vehicle fleets to natural gas, or switch to electric vehicles. Contrary to Tungay’s claim, there are alternatives, but the oil price isn’t (yet) high enough to make them economically viable.
The argument is often made that the rich world’s pollution is merely exported to the poor world, and there is some merit in that point. However, even in developing countries like China, the situation is changing, as more and more people are being lifted out of poverty by technology and trade. Slowly but surely, China is addressing pollution, as one would expect of a country of increasing prosperity. Certainly, as China becomes richer, it will pay more attention to environmental issues, because both its own citizens and customers in the rich world demand it.
Contrary to Tungay’s (and the Pope’s) lament, we’re getting more prosperous and we’re improving the environment through progress in ‘technoscience’ . That correlation is not one of chance, and it is this correlation that I’m pointing out. This is also the correlation that Pope Francis refuses to acknowledge, believing instead that prosperity leads to environmental destruction, and the planet can only be saved by coercive restraints on the production of our needs and wants.
Tungay is concerned that we cannot place a price on some of nature’s treasures. This can indeed be difficult. However, if we make exaggerated claims of harm, as the Pope did, we will inevitably arrive at too high a price, or even an infinite one. The example of the 2,000 m² patch on which the Chapman’s Peak tollgate was built is telling. Tungay says that the vegetation on this tiny postage-stamp of land would be “irreplaceable”. This is, of course, a trivial truism: when you pave a small section of fynbos, you lose a small section of fynbos. But this does not imply an infinitely high price, as Tungay seems to imply.
Placing an exaggeratedly high price on any impact on nature means that we can never touch our environment again, no matter what we need it for, because none of our needs could command a higher value. This is a dangerously absurd, anti-progressive position to take, and one that will condemn the world’s poorest billion to perpetual poverty. Mother Teresa would have been pleased, but poverty does not please me.
Given the small size of the plot in question, could it be that Tungay is simply using the environmental argument to fight a self-interested battle against the toll road itself? Surely a priest, lawyer and environmentalist would not be that underhanded.
Of course, we shouldn’t act as if everything is hunky-dory. There is no call for being stupid or reckless. We ought to go to some effort to minimise the impact we have on the environment and avoid harmful actions that are easily avoidable. But we do go to such efforts, and the more prosperous and technically advanced we get, the better we get at protecting the environment.
We have plenty regulations that impose some sort of value on environmental resources, or on the impact some activity has on others. No management programme can prevent all accidents, or all malfeasance, but even when they do happen, regulations have a way to punish those responsible, and demand remediation. Larger companies go to extraordinary lengths to ensure compliance with health, safety and environmental protection laws, employing thousands of people just for this purpose. Their fears are both regulatory and market-driven. Consumer boycotts are common and dangerous. Suggesting that we suffer from “complacency and cheerful recklessness”, as the Pope does, is a generalisation that is patently untrue.
The real problem with environmental services and assets that are hard to price is how to make a reasonable estimate, and how to attribute ownership. We need to maximise the utility of nature to serve our needs and wants, while minimising harm or disruption to that asset.
In some cases, that is difficult. Tungay rightly cites carbon emission permits and tradeable carbon credits, both of which failed in their stated purpose, and are widely viewed not as markets, but as giant financial swindles.
In a commons, the price mechanism is not applied. Instead, an authority of some sort regulates access. That is why common resources are not priced into the market cost, and why common resources are often over-exploited. It isn’t that those who use the commons do not value the resource, or, as Tungay writes, are “unable to realise the real cost of the damage that [they] are doing to our common resources”. They do. But they have no incentive to limit that damage, and every incentive to be the first to raid the commons. It is this failure of incentives that causes the “tragedy of the commons”.
Tungay mistakes the need for regulating the commons, by enabling property rights and a market structure for it, with the need to regulate the rest of the market.
In fisheries, for example, a successful way to impose a market structure on what used to be a commons is to implement individually tradeable quotas. This establishes limited property rights over fish, which protects fish stocks in a way similar to how farmers look after their farms. Fishers, like farmers, now have an ownership interest in the resource, and need it to remain productive. It is not a perfect solution, and still requires some regulatory effort to determine a total allowable catch in particular species, but it is a big step forward in efficient fisheries management.
The Property and Environment Research Center has a good store of case studies of free market solutions that address environmental problems. It certainly is possible, and it takes little effort or coercion to expand such environmental management techniques to other problem areas.
Tungay accuses me of placing too much faith in the market, but he appears to place no faith in it at all. There are excellent reasons to believe that the price mechanism is an effective regulator of the market, contrary to his claim that markets have no internal mechanism to regulate them. There is plenty evidence that free people, as they become more prosperous, also care more for the people and environment around them.
The world is not perfect, of course. A free market can only help improve it; it won’t guarantee success. However, the Pope’s alarmism is not a helpful contribution to solving our problems, because it overstates or misstates them. Environmental problems do not get worse as people get wealthier. Poverty is decreasing under capitalism, contrary to his claims. Such exaggerations and falsehoods are counter-productive. They only serve to misprioritise the efforts and resources we are able to devote to solving the challenges we face.
This doesn’t help the poor, which is what Pope Francis claims to want to do. It does, however, help to dismantle capitalism, and that is his real goal. He calls capitalism the “dung of the devil” and “idolatry”. In Laudato Si’, he explicitly rejects property rights, which is the foundation stone of free market capitalism.
Inasmuch as the fall of capitalism will cause poverty, rather than relieve it, this is a purpose with which I cannot agree. I can only suppose that the Pope knows no better – as his economic errors suggest. It would surely be too cynical to believe that the Church for the Poor, which is how Francis is trying to rebrand the Catholic Church, might actually want to ensure that its billion poor adherents stay poor. DM