A free-market energy blog
Random header image... Refresh for more!

How Capitalism Makes Catastrophes Non-Catastrophic (Key data point for energy/climate debate)

One of the greatest and most unheralded successes of industrial capitalism is making our climate eminently livable.

The mass-production of sturdy, weather-proof buildings … the universal availability of heating and air conditioning … the ability to flee the most vicious storms through modern transportation … the protection from drought through modern irrigation … the protection from disease through modern sanitation–all of these have led to a 99 percent reduction in the number of climate-related deaths over the last century.

Given how obsessed America is about climate change (or some intellectuals/politicians want us to be), these facts should be well-known and incorporated into every discussion of industrial policy. Those who claim to care about a livable climate for the future should strive to understand the mechanisms by which industrial capitalism has already created the most livable climate in history.

If they did so, they would learn from such thinkers as Ayn Rand and Ludwig Von Mises how capitalism, by permitting only voluntary associations among men, unleashes the individual human mind–and that millions of such minds, free to associate and trade however they choose, will engage in stupendously intricate, collaborative planning for everything from how to make sure they can always get groceries to how to account for nearly any conceivable weather contingency.

Armed with an understanding of individual freedom and individual planning, the climate-concerned would suspect that any preventable problem in dealing with weather–such as widespread vulnerability to flooding–is caused by government interference in voluntary trade, such as taxpayer-financed flood insurance that encourages people to live in high-flooding areas.

Center for American Regress?

Unfortunately, an understanding of capitalism and climate is sorely lacking at the Center for America Progress, the hottest left-wing think-tank today. On its blog, ThinkProgress, the Center recently ran a piece by Christian Parenti entitled Climate Action Opponents Are Ensuring the Outcome They Claim to Oppose: Big Government.

A little translation is in order. From an individualistic perspective, “climate action” refers to the actions that free citizens take to make their climate as livable as possible–the kinds of actions that decreased climate vulnerability 99% in the last century.

But from the collectivist, statist perspective of CAP, “Climate Action” refers to dramatic caps on energy generated from hydrocarbons–the energy source that runs the industrial capitalist system that has increased our life expectancy from 30 to 80 years.

How will banning the vast majority of modern energy production help us oppose “Big Government”? Because otherwise we would face so many catastrophic storms, the article argues, that the government would necessarily become a disaster-recovery Leviathan.

After all, Mr. Parenti takes as given, government is the only entity that can adapt to storms: “To adapt to climate change will mean coming together on a large scale and mobilizing society’s full range of resources. In other words, Big Storms require Big Government.”

Big Storms Require Limited Government

In fact, the larger-scale a problem, the more freedom is essential. As economist George Reisman brilliantly explains in his landmark essay on global warming economics,

Even if global warming is a fact, the free citizens of an industrial civilization will have no great difficulty in coping with it—that is, of course, if their ability to use energy and to produce is not crippled by the environmental movement and by government controls otherwise inspired. The seeming difficulties of coping with global warming, or any other large-scale change, arise only when the problem is viewed from the perspective of government central planners.

It would be too great a problem for government bureaucrats to handle (as is the production even of an adequate supply of wheat or nails, as the experience of the whole socialist world has so eloquently shown). But it would certainly not be too great a problem for tens and hundreds of millions of free, thinking individuals living under capitalism to solve. It would be solved by means of each individual being free to decide how best to cope with the particular aspects of global warming that affected him.

Individuals would decide, on the basis of profit-and-loss calculations, what changes they needed to make in their businesses and in their personal lives, in order best to adjust to the situation. They would decide where it was now relatively more desirable to own land, locate farms and businesses, and live and work, and where it was relatively less desirable, and what new comparative advantages each location had for the production of which goods. Factories, stores, and houses all need replacement sooner or later. In the face of a change in the relative desirability of different locations, the pattern of replacement would be different. Perhaps some replacements would have to be made sooner than otherwise. To be sure, some land values would fall and others would rise. Whatever happened, individuals would respond in a way that minimized their losses and maximized their possible gains. The essential thing they would require is the freedom to serve their self-interests by buying land and moving their businesses to the areas rendered relatively more attractive, and the freedom to seek employment and buy or rent housing in those areas.

Given this freedom, the totality of the problem would be overcome. This is because, under capitalism, the actions of the individuals, and the thinking and planning behind those actions, are coordinated and harmonized by the price system (as many former central planners of Eastern Europe and the former Soviet Union have come to learn). As a result, the problem would be solved in exactly the same way that tens and hundreds of millions of free individuals have solved greater problems than global warming, such as redesigning the economic system to deal with the replacement of the horse by the automobile, the settlement of the American West, and the release of the far greater part of the labor of the economic system from agriculture to industry.

Conclusion

We should be thankful that previous generations were not governed by the “ThinkProgress” philosophy of regarding government coercion as the solution to future changes, whether economic or environmental. Had they followed the near religious state-worship of Center for American Progress, we would have had the equivalent of Barack Obama or Christian Parenti dictating to millions of Americans when, how, or if they could transition to automobiles or go West or leave their farms. If we do indeed face worse weather ahead, then nothing is more important in preparing than more industry and more freedom.

————————-

Alex Epstein is a Principal at MasterResource and Founder of the Center for Industrial Progress.

16 comments

1 rbradley { 02.10.12 at 7:40 am }

Building upon Alex, I try to make the point that future weather/climate could be ‘worse’ in a technical sense but less so in an economic-societal sense because of human progress. So market adaptation in place of government mitigation in response to climate change, natural or anthropogenic….

Would climate scientists such as James Hansen be more believable if they said we need capitalism because there are really climate-change problems ahead?

2 jberk { 02.10.12 at 8:40 am }

I agree 100% with your thesis. Many wannabe intellectuals and politicians are trying to poison us with their thinking about global warming and its impact. Big political fails such as ban on the construction of the Keystone pipeline are directly influencing Canadian and US economies. Mineral and Metal resources in Canada talks about mining impacts on our economy. We are currently blackmailed by environmentalist movements but on the other hand the same people are using all the resources free market and capitalism produces. Progress always saved us from the shortage of resources (whale grease as one of the examples) and mankind moved forward. Progress is not religion, it is a fact that comes hand in hand with capitalism. I hope people will realize it before we switch to some kind of “green tyranny”.

3 kenneth cole { 02.10.12 at 1:44 pm }

To refute the first statement that was made, I feel that too much of something good will lead to something bad. Our progress thus far in industrialization has been incremental but now everything has exceeded the earth’s limits. Half a century ago small changes could have been made and they would have had huge impacts for today. Since our society has not been environmentally conscience until recently, we will pay for the damages that are uncorrectable for a long while. It will take more time and money than we have to spare.

4 Rami Tawfiq Schoenthaler { 02.10.12 at 1:46 pm }

It would appear that the very basis of your argument is riddled with misconceptions about the state of human affairs and freedom within our wonderful country.
You speak of government coercion as a potential threat to our freedoms and efficient capitalistic market functionality.
I do not believe that more freedom and more industry is what this country needs.
Historically as there have been rises in capitalistic freedom and less intervention on the part of the government, the government eventually becomes run by the corporations they are supposed to manage.
The very essence of capitalism is to maximize profit, and to seek maximizing profits only leads individuals to engage in immoral behavior, to cut corners, and to mistreat individuals.
People become objects, consumers. Corporations nowadays have more legal rights than the fine and upstanding citizens of this great nation.
I cannot offer any ideas on an alternative market structure, but to look at the short comings of the one we currently abide by and say “eh, good enough” just isn’t good enough.
I believe that there is a happy medium for government control and free market capitalism, however currently we have gone over the deep end with regards to seeking freedoms that will potentially make this country worse off.

5 Followers of Prof. Pelky { 02.10.12 at 1:47 pm }

It appears that the argument put forth concentrates an awful lot on the difference between a capitalistic and socialistic society, but in fact the world is not as black and white as such discussion seems. The world is in fact gray and the capitalistic system, while the most efficient, is not perfect. In economics the role of government is to provide the proper institutions to enforce proper and fair “rules of the game,” which in turn promote maximum utility for society.

The difficulty here is dealing with economic costs of wasting natural resources now and borrowing from our future. If we stay on the path of an unsustainable resource wasting consumption curve, we will not have a world for our grandchildren. However, the capitalistic system can be used effectively to combat this problem. Tax incentives for energy uses that are sustainable may be used to promote better long term resource use. Also collecting funding via tax penalties on unsustainable resource use may be used in the future to deal with damages done by wasteful consumption today. Such a system promotes protection of the environment by use of the market system.

6 Lionell Griffith { 02.10.12 at 1:59 pm }

Before we switch? Haven’t we already switched to a rather disastrous kind of “green tyranny”?

The default option is “if you are doing it without permission: STOP!” If you continue anyway, you will be charged with a crime. The seriousness of the charge is considered sufficient proof of guilt. Actual evidence of guilt is not required – only charges and baseless claims. If you ask permission and what you ask for is not politically correct then permission will not be granted. If you haven’t “paid your dues” to the political elite, it is a crime if you do something and a crime if you don’t. If you have paid your dues, anything you do or don’t do is acceptable. Nearly the only freedom of thought and action we have is the result of the incompetency and inefficiency of the political process.

How is this not tyranny of the most malignant shade of any color you choose?

7 aepstein { 02.10.12 at 3:21 pm }

Rob, I’m curious what is the the reference point for a climate being “worse” in a “technical” sense. Climate, like environment, is a relational term–it’s the climate of something. The human climate today, on net, is way better than it has ever been. Going forward, if we have lots more science and technology with a byproduct of a higher global mean temperature anomaly, it will be better, still.

The environmentalist movements has turned relational, *human* concepts into static *religious* concepts–e.g., a “good” climate, in their religion, is one that is unaltered by man. A “good” ocean is one that has lots of natural seeps of oil, but is “bad” if human beings accidentally spill oil once in awhile in their pursuit of progress.

8 mlewis { 02.10.12 at 5:59 pm }

Great post, Alex. I read Reissman’s essay years ago and from time to time recall bits and pieces. You update and deploy his pioneering insight against the blowhards of our time. Thank you!

9 fredericb { 02.10.12 at 7:44 pm }

Rami,

You said “Historically as there have been rises in capitalistic freedom …the government eventually becomes run by the corporations they are supposed to manage.”

The capitalistic freedom Alex is advocating exists to the extent a government prevents any people or corporations from coercing others by any means (including using the government to promote their ends).

If the historical situations you’re looking at trended in the direction you say, then there was no gain in freedom; some corporations gained unchecked political pull at the expense of everyone’s freedom. Can we call such a thing a “rise in freedom” for anyone?

It seems upon closer inspection that this is another problem (in addition to bigger catastrophes) that arises to the degree that we don’t have the individual freedoms that Alex is advocating we increase.

10 Michael { 02.11.12 at 11:00 am }

Corporations nowadays have more legal rights than the fine and upstanding citizens of this great nation.

Corporations are groups of citizens and the rights of a corporation stem from the rights of those citizens. Don’t see why a group of citizens suddenly lose their rights because they want to transact collectively.

I cannot offer any ideas on an alternative market structure, but to look at the short comings of the one we currently abide by and say “eh, good enough” just isn’t good enough.

I believe that there is a happy medium for government control and free market capitalism, however currently we have gone over the deep end with regards to seeking freedoms that will potentially make this country worse off.

the only happy medium is for government protection of individual rights and nothing else.

11 Michael { 02.11.12 at 11:06 am }

“Historically as there have been rises in capitalistic freedom …the government eventually becomes run by the corporations they are supposed to manage.”

Government isn’t supposed to manage anyone, but this points to the broader problem of micromanaging the economy and the natural consequence of politicized markets and regulatory capture. This is fundamentally an issue with government involvement and not capitalism

12 Lionell Griffith { 02.11.12 at 2:30 pm }

Michael,

Yes!

13 Hugh Akston { 02.11.12 at 3:10 pm }

@Rami. If I proposed an investment opportunity to you, where my business plan included the desire “to engage in immoral behavior, to cut corners, and to mistreat individuals,” would you invest? If not, is it because you don’t think it would be profitable?

If you DO think such a venture could be profitable, what business have you ever patronized that you knew was immoral, cutting corners, and mistreating its customers?

I think the profit motive is a good thing and not at odds with acting morally, not cutting corners, and treating individuals well.

14 Jonathan Moll { 02.27.12 at 4:37 pm }

I’m always intrigued when people reference Ayn Rand regarding capitalism without bothering to cite her directly:

“Since my purpose is the presentation of an ideal man, I had to define and present the conditions which make him possible and which his existence requires. Since man’s character is the product of his premises, I had to define and present the kinds of premises and values that create the character of an ideal man and motivate his actions; which means that I had to define and present a rational code of ethics. Since man acts among and deals with other men, I had to present the kind of social system that makes it possible for ideal men to exist and function — a free, productive, rational system which demands and rewards the best in every man, and which is, obviously, laissez-faire capitalism.”

Unfortunately, I rarely see ideal men, especially in domestic energy production, where profit motives trump safety motives. “Demanding the best” in men does not include favoring cost-cutting measures over oil rig safety or allowing the poisoning of local water supplies for the sake of fracking profits. I’m a huge fan of capitalism and a huge fan of industry. It’s unfortunate that the very-far-from-ideal men at the heads of industry force the need for government oversight by their unwillingness to seek the higher ideals the Rand illustrated. If they did, we’d live in a very different country and have a much smaller government.

Incidentally, hydrocarbons weren’t the factor that allowed life expectancy to rise from 30 to 80. Public health measure are cited as the cause, and include epidemiology, biostatistics and health services (yes, government helped). Proper sanitation, clean water, vaccinations, and antibiotics are owed a much greater debt than hydrocarbons.

15 What the “Skeptics” of Climate Catastrophe are Skeptical Of: Nordhaus Reconsidered | Nat-n-Bio { 03.20.12 at 2:13 pm }

[...] the earth that despite the proven climate adaptability of hydrocarbon-powered civilization (see “How Capitalism Makes Catastrophes Non-Catastrophic”), populations the world over would experience impoverishment, mass suffering, and [...]

16 Government Causes Catastrophes: Ordinary People Solve Them. « American Elephants { 03.25.12 at 9:44 pm }

[...] who claim to care about a livable climate for the future,”says Master Resource, “should strive to understand the mechanisms by which industrial [...]

Leave a Comment