Wednesday, August 20, 2008

China's environment isn't a problem with markets; it's a problem with government

VBS.TV has a fascinating look at the most polluted city on Earth, Linfen. Linfen in in China, in the Shanxi province.

Much of the buzz surrounding the Olympics has turned Westerners on to some of the awful aspects of China, like the pollution. From one or two reports, suddenly everyone is an expert in Chinese energy and environmental policy. I've never been to China, so I'm just an interested observer, but I want to clarify a few errors I've noticed from talking heads and laypeople alike, mostly on the Left, but not exclusively, who cite China as an example of a free market and the horrible things that come from capitalism.

There exists in popular discourse a myth of economic development as an intrinsic source of pollution. Regardless of the economic system, centrally-planned, market, or otherwise, this is not true. A look at America and Europe as the most developed places on Earth demonstrate that this is not the case. If pollution unavoidably follows from development, then the United States and Europe would be far more polluted than China, and this simply isn't the case.

There are different theoretical approaches to curbing pollution. Environmental moralists of the Left like to look at potential environmental problems as errors of morality, preaching simplistically that if development causes pollution, development is wrong, so we should curb development. You also hear from the Left a call for government regulation of companies before they even pollute. Preemptive regulation is problematic because appropriate regulations can only arise after assessing an actual problem. Before any offense is committed and analyzed, a regulation would be either too strict so as to stifle innovation and trade, or not applicable to any actual problem, and therefore meaningless practically, while still legitimatizing the government's violation of property rights without cause.

Although there are certainly other theoretical bases to curb pollution, the best one, and probably one of the most difficult for people to grasp, is the enforcement of property rights. If property rights are enforced, then the government would prohibit a company from polluting onto any property that they do not own. If a factory creates poisonous clouds of pollution that seep into a neighborhood, then that factory is violating the property rights of those residents.

It's important to note that the polluting coal mines of Linfen are actually nationalized. The short documentary mentions that private mines are illegal, and the operators of private mines are fined and shut down. The private mines attempt to profit off the black market, which is an interesting case study all its own. China's mechanisms of development strays far from the myth promulgated by the American Left that China's environmental problems come from a policy of transitioning to a market economy.

That China's mines are nationalized are probably exacerbating their problems. It's the government that's doing the polluting, and blatantly generating nasty pollution, infringing on the property rights of all the property owners in the town. If property rights were actually protected by the Chinese government, there would be no nationalized mines, and a private mine that might pollute would be subject to prosecution from the property owners affected by that pollution. Right now, who can citizens turn to in order to file a suit against a nationalized company? The totalitarian government of China clearly lacks any incentive to punish itself, or prohibit itself from polluting.

Lastly, it's important to note, as always, that enforcement of property rights regarding pollution has to occur only up to the point where the marginal cost equals the marginal benefit. That point is difficult but possible to calculate, with cooperation from scientists and economists.

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