Capitalist conundrum.

Can free markets safely manage and regulate our environment and natural resources?

As a society we are pretty solidly sold on the idea that capitalism is the most – or even the only – viable and fair system under which we can organize our affairs. This idea is defended tooth and nail, and has become so entrenched as to be unlikely to change in the foreseeable future. Naomi Klein points out that this fact may well be the single most salient success of capitalism: to convince us that it is the only way. This despite the fact that the system in practice is far from its foundational ideals, and has yielded a mixed bag of benefits and drawbacks depending on what perspective you measure from.

The fact remains that whether we subscribe or not to the idea that this is the best system ever, it is here to stay and will likely govern the way we trade, mine for materials, innovate and build for the foreseeable future. Laissez-faire or Free Market capitalism pushes the notion that markets are ideally self regulating because of laws such as supply and demand, free competition and equilibrium. Because these laws are inviolate and universal, we can trust that the free market is the very best way to ensure benefits, and that justice and wealth will be fairly distributed among all hardworking people.

But before we are to trust our quality of life and well-being to this theory (as if we had a real choice at the moment), there needs to be some serious accounting. I can’t pretend to even begin to point out the holes and inconsistencies that separate our current system from a Perfect Market where price accurately reflects Value and everyone receives their just desserts. But the particular issue I think needs to be addressed quickly if we are to continue on our current path without facing a complete ecological apocalypse is the lack of accountability for the value of Nature, and more specifically begin paying the cost of its destruction in economic terms.

Although one can’t but applaud recent efforts to create a carbon tax and to quantify the value of carbon sequestering forests and ecosystems, this does not begin to scratch the surface of the actual worth of healthy biomes that provide us with air, water, food, shelter, habitat, and many other tangible and intangible services that are essential to our health, identity and existence as humans on earth.

A toothpick company that purchases softwood lumber from a clearcut operation in south Asia; but does not pay the cost of the losses in terms of animal habitat, human displacement and loss of ecosystem services in the devastated area; has to be considered a vulture operation doomed to eventual failure. Similarly, if this company were to pay for the cost of these losses when purchasing its raw material it would not be able to compete in the toothpick business, and would be forced to find a more cost effective and sustainable material to use – therefore potentially sparring the endangered forests of southern Asia from the saw.

It is not merely a matter of ethics, it is sound economics – as long as we are able to carry projections forward for a period of more than a handful of years, which is precisely the challenge most modern capitalists face: How can they possibly include long term planning and projections into their accounting when they operate in a cut throat system that demands the highest immediate returns, placing value on short term cash flow above all other factors?

As a generalized ecological malaise begins to influence our consumer decisions, companies eager to tap into our psychological drivers take on the trappings of sustainability and put forward ideas about 7 generation planning, carbon neutral production, and other feel good messages. The hard truth, however, is that all of these businesses rely on supply chains and infrastructure that is not paying the actual environmental costs of the cheap fuel, cheap labor and cheap materials that allow them to compete with each other in a race to the bottom.

If we are to embrace free market capitalist theory, we must believe that at some point these environmental costs will figure into the bottom line and the system will be brought to equilibrium. Unfortunately, this phenomenon is either too subtle or too slow to be apparent, and in the meantime is costing us 60% of the earth’s species (over a million according to the The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services), as well as the majority of forests and ocean ecosystems, and very likely the eventual viability of life on earth as we know it.

We must find a more efficient way to bring about equilibrium. Opaque factors must be taken out of the picture and our system must be adjusted to be come truly allocativelly and productively efficient. Capitalism must evolve at a faster rate that the current extinction phenomenon by addressing the natural wealth being lost by not doing so. We must address the proverbial elephant – before it is no longer in the room.