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Posts Tagged ‘privatisation’

The environment

January 20, 2012 6 comments

Among fears of a stateless society is concern for the environment. If we get rid of government, what will happen to the environment? We need to be sure we are not fooling ourselves into thinking government is doing something positive about it at the moment. What is happening to it now, under the auspices of democratic governments, that protects the environment? Why would a change necessarily be worse?

This post looks at the government’s role in harming the environment. Then, it provides solutions to environmental problems in the absence of government, touching on resources, pollution, endangered animals and land. It concludes with an opinion (of someone much more exxperienced that me) on so-called green jobs and environmentalist entrepreneurship. It goes through each briefly because it is partly a summary of information on subjects that is available elsewhere.

Sure, a government could fix the environment. Enough force could “solve” almost any problem (except the initiation of force, which is the biggest problem). Throwing anyone who drives a car, burns coal or eats beef in jail would clean up our air pretty quickly, notwithstanding any hamburger terrorist movements that might arise. But is a society that trusts all its freedom to an omnipotent clique one worth inhabiting? At the moment, we live somewhere in between the totalitarian state and the free society, and the results are not good for the environment.

Do I blame the government for the poor state of the environment? Is the government the cause of all problems everywhere? Of course not. But it does not help much. Let us be specific.

We cannot farm hemp. A crop with all kinds of benefits, that farmers could be farming, we cannot farm. More plants means cleaner air. But because it can, the government does not allow us to grow natural fibers. In fact, the police and associated paramilitary (like the DEA) burn hemp and marijuana crops they find. They also poison coca plants and poppies in South America and Afghanistan. People still do drugs, of course, so the government is not protecting our health in that way. It is merely adding to the toxins in the air.

The US government contributes to pollution by subsidising coal. Coal! How dirty can you get? And why coal? Because of the coal lobby. As usual, a lobby and a government go hand in hand to take your money and use it to make the world worse off.

Then there are the effects of war. In 1988, the Environmental Protection Agency (EPA) ordered the US federal government to clean up 17 weapons plants that were leaking radioactive and toxic chemicals—an estimated $100b—and nothing happened. No bureaucrat got fired, no government department was disbanded, and nothing got cleaned up. Depleted uranium leads to birth defects and cancers and has been fired all over Iraq, Kosovo and Afghanistan. The destruction of ecosystems, War on Drugs defoliation schemes, the effects of nuclear weapons testing, the increased cancer rates–all are products of an institution that wages a never-ending war on non-existent enemies and cannot be trusted to care for something as important as the planet.

It is important to remain skeptical that the government (aside, perhaps, from the toothless EPA) ever actually tries to protect nature. Thomas Sowell, in his book The Housing Boom and Bust, details how land use restrictions, often a bone thrown to environmental groups (even though more than 90% of the land in the US is not developed), did little more than inflate the housing bubble of the past decade. Other policies appear, on the surface, to protect the environment, but in fact have left it wide open to abuse. Aside from direct results of government malfeasance, indirect results need to be taken into account when considering whether to retain or reject government.

The main reason we have polluted air and water is what is called the tragedy of the commons. When something is commonly owned (in other words, unowned), no one has enough incentive to preserve it. If I do not use it for my own benefit, someone else will, so I might as well extract what benefits I can as fast as I can. But since everyone thinks that way, everyone might do so and might exhaust the resource. At the moment, much of the environment is the commons. Governments have done nothing to stop climate change and the pollution of the oceans, and little to prevent air pollution without businesses having voluntarily adopted measures. Likewise, no one owns most wild animals, and as a result, people can hunt them (with no regard to endangered animal laws) wherever they want for little cost. A government that does not allow private ownership of the air, water and fauna has allowed those things to remain common. So what is the anarcho-capitalist solution? Privatise them.

Economist Walter Block has done significant work on the privatisation of the commons. Privatisation has traditionally meant selling partial or whole stakes in government-run enterprises on the stock market. It has never meant a reduction of the government’s power over a section of society, but simply a transfer of the wealth generated by formerly state assets. I do not advocate this kind of rearrangement of power under the guise of freeing the market. Rather, this post is about why a stateless society could protect the environment far better than the government.

The private sector (not only business but free people) thinks more long term than politicians. A politician’s incentive is to survive until the next election. Voters cannot force otherwise. Most businesses try to survive to bring in revenue indefinitely. And it is well documented that businesses that think long term benefit their shareholders long term; and businesses that focus only on the short term crash and burn. Of course, they might get bailed out by the government; I guess that is the corruption democrats always work in vain to eliminate. Let us look at the economics of privately-run resources.

Wheat exists because there is demand for it. The government does not need to supply wheat or ensure a certain quantity of bread is being made. If we all decided to stop eating wheat, we would stop growing it and it would disappear. The same is true for fish, trees and whatever else. (See more here.) Maybe we should start eating tigers. (More on endangered animals later.)

A rise in prices means that more exploration will take place, and supply might even go up. That is what has been happening since the 1968 book “The Population Bomb” and the 1972 book “Limits to Growth”. Another possibility, some might say inevitability, is that alternatives to expensive materials will be found, hence the current push for research into alternatives to oil. And the research does not need to be subisidised because the potential for profit is huge. Just imagine if you discovered or produced a viable substitute for oil or copper or iron. You would get investors lining up around the block and become a millionaire. So what does the state need to protect?

An owner of a copper mine needs to balance expectations of future prices with concerns about current ones. If he completely strips an area of copper, the supply will be higher in the present, which implies lower prices, and he will have nothing for the future, when prices might be higher. Likewise, the owner of an acre of forest who wants to profit from that forest might strip it bare for now but will probably only cut down some of the trees, then reseed, to ensure the land’s viability as a source of revenue for the future. That is long-term thinking, and that is leadership. Leadership that only thinks four or fewer years in advance is not leadership.

In fact, when it protects resources against “greedy capitalist exploitation”, government does not actually destroy the market for those resources; it does one of two things. If there are already producers of a resource, prices go up and their profits go up. Then, they become an interest group with a stake in the status quo. If no one is producing the resource, but there is still demand for, government protection still drives the price up and drives the production underground. Hence the lucrative trade in endangered animals, for instance. Governments have done nothing to protect the elephant. How could they? Could they get police to follow elephants around the bush all the time to make sure no one hunts them? Some have called for worldwide bans on ivory. But a worldwide ban on drugs has not done much to the drug trade—quite the contrary. Drugs and ivory are still both big business. A government solution is not a solution. It’s just violence.

Am I saying we should not protect endangered animals? Not at all. Let’s protect them through private ownership. NGOs, communities or even individuals could own and protect land. Of course, we could force everyone to pay for it through government action; though sometimes even then governments sell off land to businesses. If you really want to protect it, buy it. It’s yours. You can preserve it however you like. Banning the elephant trade depleted their numbers; privatising the elephant helped them flourish. The main reason we are running out of things that people want, like seals, is that their hunting takes place in the commons. Everyone can do it (well, they need a license, but that doesn’t have to stop anyone), and so overhunting is likely. But if people own the land or sea where the hunting is taking place, they will breed the animals more conservatively, for the long term, because they can make money off it.

Let us make barnyards out of oceans. Farms protect animals—when was the last time anyone said we had to save endangered cows? So let us own sections of ocean and the whales within them. It is possible that the new owner would kill all the whales in his part of the ocean and sell them, but there is nothing to­­ stop anyone doing that right now. Well, except Greenpeace. Let Greenpeace buy up the ocean too. Because of the different incentives at play, it is illogical to think that private owners would not protect the environment and the government would. Take these things out of the commons, let someone own them and they might flourish like the elephant.

Is privatising the environment purely theoretical? A publicly-traded company named Earth Sanctuaries, Ltd. saved several species from extinction and brought many back to their pre-colonial levels by owning about 90,000 hectares of land in Australia. Unfortunately, this company went bankrupt. Nonetheless, it did its job while it existed. Like other failed ventures, it provides a model for what not to do. One failure does not mean it could never work: it means another try might get it right. (Find more examples of free-market conservationism here.) Same goes for such practices as fish farming. Privatising oyster beds has brought oysters back from the brink of extinction. Fish farming is a potential solution to both the extinction of fish stocks and the satisfaction of our cravings for fish. Some fish farming is unsustainable, but again, if we keep trying, we can get it right. We’re a smart bunch that way.

Privatisation of land and waste disposal would likely reflect the true costs of dumping garbage. Let’s say you want to dump your plastic bags somewhere. If they are very bad for the soil, the people on whose land you dump them will expect you to pay a proportionally high price for dumping them, because that land would not be useful for a long time to come. The waste disposal companies would pass those costs onto the people who use and buy plastic bags, who would thus consume fewer in favour of less environmentally-damaging alternatives such as paper. (Walter Block on the subject here.) Another free-market solution to an environmental problem.

Air pollution is the kind of challenging question that some economists love to search for solutions to. Milton Friedman finds that there are usually free-market solutions that do not require government intervention, and pollution is one. Murray Rothbard provides an elaborate theory on the subject, based on private law. Stefan Molyneux has some practical ideas; and if you do not like them, as he says, “no problem – in the free market, there are as many solutions as there are interested parties!”

Oil spills often upset indigenous people because oil companies do not care about those people. The oil companies move in, protected by the government, and anything they leave, they do not bother to clean up. Property rights—nothing more than people protecting the land they live on—would enable the people of those areas to decide if they want the companies to enter or not, and hold them to account for everything they do. They would have contracts, regulated by dispute-resolution organisations. And the people would no longer be called terrorists for wanting to protect their holy land.

One way to deal with such corporations is the boycott. More and more corporations, either in reaction to consumer pressure or proactively, are pursuing green strategies. And before you say “that’s just greenwashing”, bear in mind that if you can recognise a company that is harming the environment, you can recognise when its actions are only superficial. Companies know you know, and that’s why so many are going beyond the superficial to real attempts to make their businesses sustainable. (Learn more here.) Unfortunately, consumer boycotts work far less well on corporations that produce for the government, because the chance of their being punished by their customers is almost zero.

The entrepreneurs who developed most of the “green technologies” we have today were not funded or directed by governments. Julian Morris gives the examples of the transistor, which enabled the mass production of high-tech electronics; the integrated circuit, which enabled mass production of personal computers, and the automation of all kinds of things; the fiber optic cable, which revolutionised high speed telecommunications and enabled the internet. “Why do I give these three examples?” he asks. “These are green technologies. They weren’t developed as green technologies, though. And this is important. No government official started a programme in the 1920s saying, ‘We’ve gotta develop some green technologies, let’s invest in green jobs. I’m going to invest in the transistor, the integrated circuit and low-loss fiber optic cable.’ This is not how innovation takes place.”

Innovation relies on local, independent knowledge, specific understanding of the gizmo. The innovators did not know when they started what problem they would end up solving. Through innovations, products have become more efficient, which might mean smaller, using fewer resources to make and dispose of; consuming less energy for greater output; or simply costing less, which aids wealth creation. Morris also points out that cars are lighter, cheaper, safer and pollute less than they did 20 years ago; pop cans have much less than half the metal they had in the 1970s thanks to aiming to reduce costs and raise profits. And when you raise profits, you raise productivity, making innovation possible, growing the economy and reducing poverty. When the economy grows, we have more wealth to spend to reduce environmental damage further. Some venture capitalists  and angel investors are always on the prowl for new green technologies, and if you can show you can make them money, you can get funding.

The state’s record of environmental stewardship is not encouraging. The free market, on the other hand, the truly fair and accountable system, has potential for sustainability that the world under centralised authority does not.

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Roads

November 13, 2011 5 comments

“What about the roads??” they ask desperately. Statists seem to think that, because the government has always built the roads, at least most of the time in recent memory, that only the government could ever build roads. I find the assumption behind this question quite ironic. The roads are a striking example of a utility that should logically be privatised. What roads should the government pay to build and maintain? The roads to a residential neighbourhood? Why should people from the entire city or country pay for these roads? Let the residents pay. How about the road to an office, shopping district or mall? Let the business owners pay, perhaps through a local business association. Getting the government to do it means forcing everyone to subsidise the businesses who benefit.

So the problem is unresolvable? Think about it. How could we get roads built without the state? I bet you can come up with some ideas. There are all kinds of ways to make roads profitable, from electronic or cash tolls, GPS charges, roads maintained by the businesses they lead to, communal organisations that own the roads, and so on. “And if none of those work?” asks Stefan Molyneux. “Why, then personal flying machines will hit the market!”

Besides, it is already happening. Private contractors who build roads do so far more efficiently than governments (believe it or not). A private road in Paris saves commuters time and the company that built it clears the road quickly when there is an obstruction. A company added two lanes to a highway in California, making them toll roads, thus giving people the option to go faster for a fee. Companies have implemented electronic tolls, obviating the slow and inefficient toll booth. But surely, citizens could never be expected to just build and maintain their own roads, could they? Oh wait, that’s already happening too.

Economist Walter Block has written extensively on the privatisation of roads. To those who believe a competitive road system makes no sense, think again. There is nothing about roads that requires a monopoly. After all, the first roads in the US were private; and no, the government did not take them over because the public demanded it or they knew they could do so more efficiently. In fact, like many libertarians, Block has some very good ideas for how to make competition in formerly public services work. Governments rarely innovate, except in methods of killing. But private-sector solutions, such as airbags and snow chains, have saved lives. If there were competition among roads, people would be able to choose which one they drove on. They might have the choice to drive on the road with the heater underneath it to melt the ice, making it safer; the highway with the rubber dividers that are safer in a crash; and the routes with the lower death rate. We do not know what great life-saving innovations could come from people with an incentive to think of them. Release something into the private sphere and see what happens.

Is the logic of privatising all roads and highways becoming clearer? Zachary Slayback has more to say.

Privatization would ensure that the project would be finished in a timely manner, would remove the moral hazard of building a possibly unnecessary highway with public funds, and would not force every individual to fund the project, whether they wish to use it or not….

Should a company decide that any highway is a viable venture for their ownership and stockholders, then it would be on that company to build a product that consumers would wish to use. If several companies wished to build a highway, then whichever company offered the best product (i.e., the best-maintained, cheapest, fastest highway) would be chosen by consumers to deliver that product via the price system.…

In a free-market system, the signals sent via the price mechanism allow the market to adjust to any changes much more quickly and efficiently than the current centrally planned model under which we operate.

Knowledge is not something that can be aggregated and centrally planned by a Department of Transportation. Knowledge is something that must be acquired in small bits throughout the market. Risks must be taken to acquire knowledge; and no one man, nor any group of men for that matter, can possess the knowledge necessary to perfectly plan any specific endeavor.

So why leave this, what Friedrich Hayek, the Austrian economist and Nobel laureate, called the ‘knowledge problem’, to a group of individuals who are insulated from the signs and information of price signals? Major investments — especially those that require a large amount of information to properly operate, such as highways — should be left to the system that best responds to market signals and the price mechanism: the free market.

Moreover, there is a major moral issue at play when building any public-works project, but especially highways: Who pays for the highway and with what money? Under the current system, public-works projects are paid for by ‘the public.’ But what gives central planners the moral authority to determine that all taxpayers in a given population should be forced to pay for the planners’ project?…

[O]ne thing is for sure: the free market would not force consumers who do not wish to use the product to pay for it.

Roads could be owned by the people who live or work around them. Perhaps electronic tolls (which already exist) could charge people on roads one-tenth of a penny to pass by each person’s house or business (Walter Block’s idea again) without slowing them down. Highways can be profitable for their owners through tolls, billboards and other things clever businesspeople can think of that I have not. Free market highways would reflect the true costs of building them. Their being built by government tends to result in millions of dollars in waste. Roads could be owned by one man who charges you for driving on them, and you could build your own roads or go round if you did not want to pay. People always find alternatives when there is an incentive to do so. It is fatuous to say it is wrong that we should have to pay for roads when we already do through taxation. And it is unfair to argue that it could not work just because you have not thought of an alternative.

Why do we believe that, if there must be a monopoly (and that is probably never the case), it must be a government monopoly? Do we not know better than to trust the government with anything as important as a monopoly? Milton Friedman called a situation which seems like it needs to be a monopoly, such as of plumbing or power lines, a technical monopoly. There are three ways to deal with a monopoly: private monopoly, government monopoly and government regulation. Friedman argued that, in a world of rapid technological change, a private monopoly was preferable. If government has a monopoly, there is no chance for competition and its benefits (lower prices, greater efficiency, wealth creation, innovation). If one business has a monopoly, there may be some way around it, and another firm might be able to find a solution. Contrary to popular myth, free markets abhor monopolies.

But what if someone built a road around your property and said you could not get out unless you paid him a million dollars? Well, my initial impulse might be to shoot him, but there is almost always a peaceful, preventive solution. Perhaps when buying the house, along with fire insurance, one could also purchase access insurance, to insure against such possibilities. Or perhaps one would buy the stretch of road outside one’s own house. One would probably let other people in the neighbourhood through free of charge, in the name of maintaining friendly relations; otherwise, their property values would drop and the shaming and ostracism that could result would be devastating. The sovereign community will need no government roads when it saves money with better ones.