Why the free market and the environment are not at odds with one another

There can be no doubt that environmental issues are hardwired into the consciousness these days. Children are taught the ‘three R’s’ in schools and recycling is now a major part of waste collection: 43.9% of British household waste in 2015 was recycled, which is up from 17% in 2003/2004[1]. There could be numerous factors at play, regardless of government involvement in waste collection. It seems likely that there are two main ones: people, as aforementioned, are generally more aware of their ‘carbon footprint’ than before, and companies have adjusted their production habits to suit this. For example, Unilever, a major household brand owner, has committed to having 100% recyclable plastic packaging by 2025[2], and IKEA now sources 100% of its cotton from farms that meet the Better Cotton standards[3]. This in turn makes their brand more appealing to the new environmentally minded consumer and the two factors have a relationship that works in favour of a cleaner environment: businesses must value reputation in order to make profits, and this is where the incentive comes from. The mood of the consumer speaks, and companies listen, essentially embedding environmental responsibility into everyday shopping.

It is for this reason that the present government’s plan to outlaw the production of any non- electric/hybrid car by 2040 is unnecessary, as the producer/consumer relationship in this sector already shows an upwards trajectory. At present, electric cars account for 1% of all car sales, but despite this low percentage are at a record high. Chargemaster[4] suggest that there will be 1 million electric cars on the road by 2022, accounting for 10% of sales, with registrations of such vehicles then accounting for 30% by 2027. The numbers, then, are suggestive of a consumer move to hybrid cars regardless of the government directive.

This directive, as is the trend with coercive government assertions, could do more harm than good. Mike Hawes, Chief Executive of The Society of Motor Manufacturers and Traders, has expressed his concerns about how ‘outright bans risk undermining the current market for new cars and our sector, which supports over 800,000 jobs in the UK’[5]. There must be a conversation surrounding the way these jobs are transferred to the electric/hybrid market led by the manufacturers themselves, not the state. Besides, the state doesn’t have a good track record in this area: it’s not too long ago that Tony Blair’s Labour government set the taxman on motorists to encourage the purchase of diesel cars, only to find a big increase in nitrogen dioxide in parts of the country. Of course, the taxman will be set to this task once again from now through to 2040: the figure touted this time round is something to the tune of £2.7 billion – and we still haven’t found that money tree…

Another common gripe surrounding the free market and the environment is concern about depletion of resources and corporate ‘greed’. This can be refuted by identifying a similar relationship to the one we identified earlier between producer and consumer and the resultant need for businesses to be concerned with environmental preservation. This other relationship is the time and resource relationship, again incentivised by profit. A company that owns a resource will not deplete them hastily and all at once, because of the need for the future good/profit that preserved resources will imply. The selling price of a resource and its stock shares is based around a forecast future income, and the company would therefore lose value if it were to extract raw materials hastily and then disappear from a site. It is actually when government distorts private property rights that harsh and reckless depletion of resources occurs: in his defining work For A New Liberty¸ Murray Rothbard gives an explanation of this: ‘In the American West and Canada, most of the forests are owned, not by private owners but by the federal (or provincial) government. The government then leases their use to private companies. In short, private property is permitted only in the annual use of the resource, but not in the forest, the resource, itself. In this situation, the private timber company does not own the capital value, and therefore does not have to worry about depletion of the resource itself’.[6] It is here that we can see one blatant negative effect of a muddy mixed economy where the government only leaves the market to be semi-free; the need to preserve forests as a future capital good is lost when renting a resource on a yearly basis, de-incentivising conservation.

Scarcity in raw materials is another free market proofing against a heavy loss of resources, as a higher scarcity will be reflected by a higher market price. They will either be bought in lower volumes, or substituted for synthetic materials or other resources that are less scarce.

Too often businesses are considered to be dismissive of environmental issues, which is antithetical to the reality that businesses are incentivised to hold environmental issues at the core of their operation by consumer opinion and future goods. Businesses move with the times because it is in their best interests to do so, or else they fall to the bottom of the market: no amount of force or coercion can substitute this simple praxeological truth.

[1] https://en.wikipedia.org/wiki/Recycling_in_the_United_Kingdom

[2] https://www.unilever.com/news/press-releases/2017/Unilever-commits-to-100-percent-recyclable-plastic.html

[3] http://www.ikea.com/gb/en/this-is-ikea/people-planet/energy-resources/cotton/

[4] https://www.whatcar.com/news/petrol-diesel-uk-car-ban-2040/

[5] Ibid.

[6] For A New Liberty by– Copyright 1973, 1978 by Murray N Rothbard and 2006, The Ludwig Von Mises Institute.

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