In defence of capitalism: How free markets can help us go green
For more than 20 years, researchers at Yale University have been publishing the Environmental Performance Index (EPI), which ranks countries according to their environmental health and ecosystem vitality. A comparison can be made between the EPI and the Heritage Foundation’s Index of Economic Freedom, which has been measuring economic freedom around the globe since 1995. The Index, which is also referred to by many as the capitalism index, analyses the level of economic freedom in 178 countries.
These countries are grouped into five categories: “Free”, “Mostly Free”, “Moderately Free”, “Mostly Unfree” and “Repressed.” The Heritage Foundation’s researchers compared the two indices and found that the countries with the highest levels of economic freedom also had the highest EPI scores. The “Mostly Unfree” and “Repressed” countries registered by far the worst environmental performance
The economist Daniel Fernández Méndez addressed the potential objection that countries with greater economic freedom are “exporting” their polluting industries to less free developing countries, while keeping their non-polluting industries. However, this is clearly not the case. “With the data analyzed, we can see that capitalism suits the environment. The greater the economic freedom, the better the environmental quality indexes. The ‘cleaner’ countries do not export their pollution by relocating companies”.
Nowhere has environmental degradation been as bad as in former socialist states. Is this a relevant argument? Yes, because if an economic order based on private property, competition, and freely set prices were the cause of environmental pollution, then, logically, there would have to be significantly less pollution in countries that do not have these characteristics – which is not the case.
Capitalist West Germany (the Federal Republic) and socialist East Germany (the GDR) make for a good comparison:
- In 1989, the GDR emitted more than three times as much CO2 for each unit of GDP than the Federal Republic.
- Air pollution – sulphur dioxide: In 1988, the GDR emitted 10 times as much sulphur dioxide per km2 as the Federal Republic (48.1 tons/km2 vs. 4.6 tons/ km2).
- Air pollution – airborne particles: The average load of 20.3 tons per square kilometre in the GDR was more than ten times higher than the Federal Republic (1.8 tons/km2).
- Coal-fired stoves: in private households, almost two-thirds of the apartments in the GDR were heated with solid fuels such as lignite briquettes at the time of reunification.
Having considered the facts, many people will concede that socialism is worse for the environment than capitalism, but they are still left with reasonable doubts: Isn’t economic growth in general bad for the environment? There is one argument in particular that seems logical, at least at first glance: Because the earth’s raw materials are finite, infinite growth is impossible. This leads many to conclude that, somehow, growth must be curtailed.
But based on numerous data series, the American scientist Andrew McAfee proves in his book More from Less that economic growth has decoupled itself from the consumption of raw materials. Data for the U.S. show that of 72 commodities, only six have not yet reached their consumption maximum. Although the U.S. economy has grown strongly in recent years, consumption of many commodities is declining.
Such developments are all due to the laws of much-maligned capitalism: companies are constantly looking for new ways to produce more efficiently, i.e. to get by with fewer raw materials. They do this, of course, not primarily to protect the environment, but to cut costs.
What’s more, innovation has promoted a trend we call miniaturisation or dematerialisation. One example of this trend is the smartphone. Just consider how many individual devices your smartphone contains and how many raw materials they used to consume. Many people today no longer have a fax or use printed road maps because they have everything at their fingertips in their smartphone, and some even do without a wristwatch. In the past you had four separate microphones in your telephone, audio cassette recorder, Dictaphone and video camera. Today, the single microphone in your smartphone has replaced all of these devices.
At no time in human history have planned economies been the solution to problems, but they have caused a host of problems, especially environmental problems. In contrast, capitalism with its manifold innovations has already solved so many problems, including and especially in the area of the environment. It is therefore absurd to assume that abolishing capitalism would solve the problems of climate change and environmental destruction.
Rainer Zitelmann is a historian and sociologist. His book In Defence of Capitalism has just been published. https://in-defence-of-capitalism.com/