Saturday, October 20, 2007

Capitalist Competition is Better for the Environment than State Managed Poverty

Prometheus 6's blog (all respect and no restraint):
Under the title, ‘The damn book pile is too high already...’, ‘Prometheus 6's blog (all respect and no restraint)’, quotes an excerpt (here) from a New York Times review of Robert B. Reich’sSupercapitalism: The transformation of Business, Democracy, and Everyday Life’, Borzoi Books (Knopf Inc.):

ADAM SMITH FIRST DESCRIBED CLEARLY, INDIVIDUALS WHO PURSUE ONLY THEIR OWN NARROW INTERESTS IN A COMPETITIVE SYSTEM OFTEN INADVERTENTLY CREATE WIDESPREAD SOCIAL GAINS. BUT NOT ALWAYS. UNLIKE MANY OF HIS MODERN DISCIPLES, SMITH WAS KEENLY AWARE OF THE INVISIBLE HAND’S LIMITATIONS. INDIVIDUAL AND SOCIAL INTERESTS OFTEN DIVERGE, HE REALIZED, AND IN SUCH CASES, GREATER COMPETITION MAKES MATTERS WORSE. IF A FIRM CAN CUT COSTS BY REMOVING THE FILTER FROM ITS SMOKESTACK, FOR EXAMPLE, IT WILL FEEL GREATER PRESSURE TO DO SO WHEN COMPETITION INTENSIFIES.

IF OUR SOCIAL ILLS ARE INDEED ROOTED IN INCREASED COMPETITION, OUR ONLY RECOURSE, REICH ARGUES, IS TO CHANGE THE RULES. DENOUNCING GREED IS SIMPLY WASTED ENERGY. IF WE WANT LESS INEQUALITY, WE MUST MAKE TAXES MORE PROGRESSIVE. IF WE WANT CLEANER AIR AND WATER, WE MUST ADOPT MORE STRINGENT ENVIRONMENTAL LAWS
.”

Comment
The reviewer, or the author, runs two ideas together: that self interest does not lead to social betterment except in special cases (the gist of my criticism of the widespread neoclassical notion that Adam Smith said that self interest always leads to social betterment, which he didn’t) and that this competition leads firms to ‘remove filters from smokestacks’.

This second idea is not entirely, nor mostly true. Smoke filters are not fitted in countries and in times where ignorance prevails and the laws against pollution are not operable. The firm that removes a smoke filter when the law prescribes that they shall be fitted is breaking the law and is subject to judicial process.

Adam Smith was always clear that justice is the main pillar of commercial society. Pollution is not left as an option (any more than child labour is) in modern capitalist societies. It may be in early capitalist societies such as India, China and some other Asian countries, but not in the richer countries.

The reviewer or the author, recognizes that Adam Smith was aware, and said so, 50 plus times in fact, that self interest and selfishness lead to social worsening and not social betterment, and correctly points out that ‘modern disciples’ (mostly self proclaimed) of Adam Smith assert to the contrary, though we can rest assured that they have never read Wealth Of Nations beyond a few second-hand quotations.

Competition is not the root of ‘social ills’; it is their cure. Non-competitive societies, which are usually dictatorships, are always awash with social ills. Russia, China and the socialist countries are the worst polluters and resource wasters. Poverty itself is the worst social ill.

Rich capitalist countries can afford ‘CLEANER AIR AND WATER’ and do ‘ADOPT MORE STRINGENT ENVIRONMENTAL LAWS’ than poor countries. Why Robert Reich turns the heat on the rich capitalist countries, adding yet more opprobrium on the solution to the environmental problem, not its cause, is typical of the genre.

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