Liberty, Economy and Ecology

Government must be the moderator, not the manager

By John A. Baden and Robert Ethie

Prosperity and Ecology

For years environmentalists ignored or discounted the strong correlation between economic prosperity and environmental concern. But when prosperity is at risk, people willingly trade environmental quality for economic gain. This occurs even in wealthy nations. In our political campaigns environmental themes are crowded out by economic issues. As Michael R. Deland, former chairman of the President’s Council on Environmental Quality, observed: "in a recession there is an increased sensitivity to the job side of the equation."

This is because wealth fosters both environmental concern and the capacity to exercise that concern in a concrete way, e.g., with sewage treatment plants. The 1992 World Bank World Development Report shows that less than two percent of sewage in Latin America is treated. Worldwide more than one billion people have no safe water. In China, two-thirds of rivers near large cities are too polluted for fish. These are problems that require capital, not promises and Green pretenses.

Given that wealth enhances environmental quality, environmental policy can be based upon three fundamental principles: (1) private property and markets create wealth; (2) government management responds to political pressures in ways that decrease environmental quality; and (3) government’s constructive role is to provide environmental monitoring. These principles can direct the environmental debate in a positive direction, avoiding wasteful efforts that advance only interest groups seeking political power and wealth transfers. These principles provide the basis for both an environmental vision and a sound policy direction.

International Trade Fosters Environmental Quality

The best way to spread free markets and create wealth in less developed nations is free trade. The U.S. has urged the removal of trade barriers in the Uruguay round of the General Agreement on Tariffs and Trade (GATT) talks. This has been opposed by some environmentalists who fear that trade, and its resultant economic growth, will bring degradation. They are misinformed. Environmental quality and prosperity are complementary. Evidence shows that wealthier is usually healthier; longevity is correlated with per capita income.

Free trade would increase global income levels while speeding the dissemination of pollution-control technologies. Research by Gene Grossman and Alan Krueger of Princeton indicates that economic growth also promotes a cleaner environment. For example, above a per capita income level of $4,000-$5,000, air quality improves. This is because wealth and efficiency go together– the U.S. emits almost 30 percent less CO2 per $1,000 of GNP than the world average. Improved efficiency and pollution control technologies, coupled with increased environmental awareness, allow production to rise while emissions fall.

Poor nations typically have low environmental standards and enforcement. Some environmentalists argue that free trade encourages the migration of polluting industries to these poor countries. However, a 1987 World Resources Institute study finds that environmental factors have not played a major role in determining international capital allocations. And as increased environmental concern, regulation, and enforcement in Mexico show, the prosperity accompanying trade speeds the adoption of shared higher standards among nations.

Senior economist Peter Emerson of the Environmental Defense Fund writes, "poverty and economic autocracy are the handmaidens of environmental degradation." Only by attacking poverty can we effectively address environmental destruction and promote long-term stewardship abroad. We must loosen the stranglehold of the command-and-control approach to regulation, introducing markets and private management as the solution to environment problems.

Ending Command and Control at Home

As the U.S. works to promote free markets in Eastern Europe, the costs of its own environmental autocracy are ignored or heavily discounted. Many of the government’s resource agencies, such as the Forest Service, the Bureau of Land Management, and the Bureau of Reclamation, operate in a perverse world in which they have incentives both to degrade the environment and to lose money.

Bureau of Land Management lands are among the most degraded and eroded in the west. Yet the agency continues to encourage, even require, overgrazing. Ranchers, who pay far below market rates for grazing rights, have little incentive to invest in soil conservation or water storage. If they attempt to rest an area through reduced use they are threatened with revocation of permits for underuse.

Many of the National Forests lose money while hurting the environment. They build roads whose costs are not covered by the revenues from the timber sales they facilitate, while the environmental costs are unaccounted for. Far more is invested in replanting than would be in a private forest, where natural revegetation is a realistic option. Budgets are maximized while the environment and the taxpayer suffer.

It is essential that environmental groups realize the negative effects of command-and-control policies on the environment. While politics may seem to be the cheapest route to environmental control, recent conflicts over preserving old growth timber for spotted owl habitat show that environmentalists cannot count on the political process. By replacing political-bureaucratic management with market forces, property rights, and private management, we promote conservation and economic progress.

Innovation for Biodiversity

Much of the current environmental debate centers on endangered species preservation and biodiversity. This conflict is reduced to "jobs versus the environment," an unholy trade-off. Many environmentalists feel that government must mandate species preservation. This approach has been both unsuccessful and has infringed upon private property rights.

Environmental and wildlife groups could buy conservation easements in the areas where disturbances might harm species listed as endangered. The North American Elk Foundation, Trout Unlimited, and Ducks Unlimited have each done this on private lands and waters with private funds. Such organizations could also pay "bounties" to land managers if an endangered species successfully breeds on their land. The Montana chapter of Defenders of Wildlife has recently announced such a program to facilitate wolf reintroduction.

A rancher in Dubois, Wyoming, has offered to pay the Forest Service $300,000 not to log a pristine canyon. This move was supported by many local citizens who value it as a recreation area. Some outfitters and guest ranches also benefit from its natural state because they use it for paying customers. But the Forest Service returned the $100,000 down payment to the rancher because it was not allowed to create "a de facto wilderness area," even though the sum was almost certainly greater than any income the Forest Service would have received from timber sales. Only in a world as perverse as that of the Forest Service bureaucracy would a decision be made to lose money while at the same time harm the environment.

Because wildlife and their habitat are "public goods," some believe there is a theoretical case for government involvement. But a system encouraging private initiative is likely to be far more efficient and effective than federal mandates for species recovery. Costs would become explicit, not unevenly imposed upon landowners by the Endangered Species Act. This also allows comparisons and trade-offs to be made among competing species and habitats in a way that is impossible under the current Act.

Preserving Property Rights

In terms of our future environment, it is important that property rights be protected. The current Endangered Species Act has resulted in an attenuation of property rights and begun to provoke a backlash fueling the "wise-use" movement. In contrast, land and ecological trusts are founded upon private property rights. They preserve species by using, not sabotaging, property rights.

With proper incentives we can expect private land owners to support the listing of new species. Under the Endangered Species Act, if a landowner improves habitat on his own property to encourage an endangered species, he could lose control of that property. For example, Dayton Hyde, a rancher in Eastern Oregon, created a lake out of wilderness and attracted a variety of species including the American bald eagle. He was then told by the Forest Service that he could no longer access his property by truck because he might disturb the eagles. This is a perversity of monumental proportions.

A sound economy fosters environmental protection. We must eschew conventional Green wisdom with its appeals to command- and-control mechanisms. Environmental quality will be enhanced via markets and secure property rights, an approach that is consistent with America’s intellectual heritage. Government must be the moderator, not the manager. In this way we can have both environmental quality and prosperity.