Wednesday, July 13, 2005

Growth harms environment

I am a big fan of books and want to be able to at least write good coherent essays at this point in life. So, looking for topic, I found this one and wrote something about it which I would like to share.

Anonymous Claim:
The fear is widespread among environmentalists that free trade increases economic growth and that growth harms the environment. That fear is misplaced. Growth enables governments to tax and to raise resources for a variety of objectives, including the abatement of pollution and the general protection of the environment. Without such revenues, little can be achieved, no matter how pure one's motives may be.

Gaurav: The fear of environmentalists is not misplaced. They see what is going on around them and base their decisions on partial data without considering the whole picture.

Since the early twentieth century there has been a debate about whether central planning and control of production is better or free markets and free trade is better for the society at large. One needs to only look at east and west to find out which model of economic organization has delivered the goods for the people. I, being from India, have seen it firsthand what controlled markets and central planning can do to the resources of the planet and how much effective this model of economy can be. Not only the "commanding heights" of such a government has failed in improving the quality of lives of her people, but at the same time the productivity of people and resources has been abysmally low. Contrast that to the regulated, yet free-er markets of the western countries. Not only the quality of lives has been improved dramatically but utilization of resources has been great.

When left to the government, the economic growth gets stifled making people extremely poor. When you don't have means to earn your next meal, environmental issues don't really matter much. Ask a beggar in the slums of mumbai whether he cares about the pollution more or the fact that he can earn by cleaning the automobiles on the road? Chances are that he will favour food over environment, survival of his own and his family's over sustenance of natural resources.

If free markets are left alone, however, they will deplete the earth of its resources and constantly harm the environment making major climate changes, the effect of which we are already seeing in global warming. One of the extreme examples is United States. Due to free markets and free trade with lots of its partners, the quality of life has improved but at the cost of making US of A the most polluting country in the world. So much so that it is now finding it prohibitively expensive to ratify the Kyoto protocol which was authored by US itself. Thus, due to this market failure, the world is suffering.

Thus, the environmentalists' fears are not un-founded, the solution however lies in co-operation between governments and free markets.