Capitalism, Right Libertarianism and the problem of "externalities?"

by Gary Elkin

Right libertarians have great difficulty in dealing with the problem of
"externalities":  that is, harmful environmental effects (e.g. pollution,
global warming, ozone depletion, destruction of wildlife habitat) not
counted as "costs of production" in standard methods of accounting.  Such
costs must be born by everyone in the society who is affected by them, and
not only by the capitalists who produce them; hence it is possible for
capitalist to ignore such effects when planning future production.   But
this means that such effects *will* be ignored, since competition forces
firms to cut as many costs as possible and concentrate on short-term
profits.

Right libertarians typically address the problem of externalities by
calling for public education which will raise people's awareness of
ecological problems to the point where there will be enough demand for
environment-friendly technologies and products that they will be
profitable.

This argument, however, ignores two crucially important facts:  (1) that
environment-friendly technologies and products *by themselves* are not
enough to avert ecological disaster so long as capitalism retains its need
for high growth rates (which it will retain because this need is inherent
in the system); and (2) that in a right-libertarian world in which private
property is protected by a "night-watchman State" or private security
forces, a wealthy capitalist elite will still control education, as it does
now -- and this because education is an essential indoctrination tool of
the capitalist elite, needed to promote capitalist values and train a large
population of future wage-slaves in proper habits of obedience to
authority.  For this reason, capitalists cannot afford to lose control of
the educational system, no matter how much it costs them to maintain
competitive schools.  And this means that such schools will not teach
students what is really necessary to avoid ecological disaster:  namely,
the dismantling of capitalism itself.

Another ecological problem that right libertarians cannot deal with
satisfactorily is that capitalist firms *must* be committed to short-term
profitability rather than long-term environmental responsibility in order
to survive economically in the competitive market .

Here's an example:  Suppose there are 3 automobile companies, X, Y, and Z,
which are competitive (not conspiring to fix prices) and which exist in a
right-libertarian society where there is no democratic community control
over the economy.  Then suppose that company X invests in the project of
developing a non-polluting car within ten years.  At the same time its
competitors, Y and Z, will be putting their resources into increasing
profits and market share in the coming days and months and over the next
year.  During that period, company X will be out of luck, for it will not
be able to attract enough capital from investors to carry out its plans,
since investment will flock to the companies that are most immediately
profitable.

The right libertarian may respond by arguing that business leaders are as
able to see long-term negative environmental effects as the rest of us.
But this is to misunderstand the nature of the objection.  It is not that
business leaders *as individuals* are any less able to see what's happening
to the environment.  It is that if they want to keep their jobs they have
to do what the system requires, which is to concentrate on what is most
profitable in the short term.  Thus if the president of company X  has a
mystical experience of oneness with nature and starts diverting profits
into pollution control while the presidents of Y and Z continue with
business as usual, the stockholders of company X will get a new president
who is willing to focus on short-term profits like Y and Z.

In general, then, if one company tries to devote resources to develop
products or processes that will save the environment, they will simply be
undercut by other companies which are not doing so, and hence they won't be
competitive in the market.  In other words, capitalism has a built-in bias
toward short-term gain, and this bias -- along with a built-in need for
rapid growth --  means the planet will continue its free-fall toward
ecological disaster so long as capitalism remains in place.
