Environment Again a Policy Issue

Time magazine has made it official: The environment is back on the agenda as a major policy issue. The return of the environment to the front burner was, of course, inevitable. Given the exponential growth of population and industrial output in a finite world, sooner or later environmental constraints are bound to become the central problem of economics and perhaps of politics.

During the 1980s, however, we have had other things on our minds, and most of us have chosen to forget about the threatened environment (just as most of us have chosen to forget about the risks of another energy crisis--but that’s a subject for another column). Now we’ve been forcibly reminded of the ultimately overriding importance of the environment by polluted beaches, greenhouse warnings and the burning of rain forests. The question is whether we will be able to respond effectively.

Thinking about the environment isn’t easy--not because the subject is complicated, because in a broad sense it’s actually fairly simple, but because it is uncomfortable. Environmental issues refuse to fit into neat ideological categories such as conservative versus liberal, socialist versus capitalist, North versus South. There aren’t any real villains (or, anyway, not many).

The point is that the environmental issue isn’t a morality play. It is a practical problem. How can we arrange matters so that we can live on a limited planet without choking or poisoning ourselves?

Here are five basic truths about the environmental problem:

1. Saving the environment means a more intrusive government: The 1980s have been a decade in which the conservative view that government should get out of people’s lives has been triumphant in much of the world. In order to deal with environmental problems, however, government has to get involved in much more of everyone’s life.

My decision to drive a bigger car or to use a pesticide on my lawn has an adverse effect on the lives of billions of other people. These people cannot directly prevent me from doing these things, nor can they offer a bargain in which we mutually agree to act in a way that is environmentally responsible. So voluntary agreements among individuals do not work.

That means that the government has to get involved in some way in many details of my life--from the way I heat my home to the kind of bags I use to carry groceries. It may be best if the government does this through broad incentives rather than through detailed regulation, but the scope of government responsibilities will have to grow in any case.

The conservative dream has been of a minimal government, which keeps the peace, enforces contracts and otherwise stays out of the way. The environmental problem will push us even further away from this fantasy.

We should not imagine, however, that the environmental issue is going to produce a resurgence of faith in big government. Only governments can solve the problem, but that does not mean that they are necessarily the good guys. In fact:

2. Governments are often worse environmental citizens than individuals: Some of the biggest environmental disasters have been governmental in origin, rather than private. Outside the Amazon, the most severe environmental degradation now in progress is probably in socialist Eastern Europe. In the United States, the environmental sins of officially run nuclear plants turn out to dwarf those of private plants.

Even where environmental harm is largely the work of individuals, as in Brazil’s rain forest, one can point to irresponsible government policies that laid the groundwork.

Why have governments acted so badly? Primarily because “governments” don’t make decisions: Individual officials do and these officials are as prone to disregard the public interest as anyone else. In democratic societies, public oversight and popular protest can curb irresponsible policies--that’s why the environmental sins of Eastern Europe are so much worse than those of the West--but the process is highly imperfect.

3. The worst governments are in the Third World: The world’s rich countries do environmental damage out of all proportion to their population, precisely because they are rich. This observation sometimes leads, however, to a romanticization of the poorer nations.

The fact is that the willingness and ability of Third World governments to act responsibly toward the environment is actually much less than that of advanced nations. This is partly because these countries are so much less well-organized at all levels--that is one of the reasons that they are poor--and partly because poverty breeds short time-horizons and makes officials especially subject to corruption.

Since some of the most pressing threats are in the Third World, we need to think about how to enforce conservation when the local governments are often weak and/or corrupt.

An example makes the point: There has been considerable enthusiasm in the press over so-called debt-for-nature swaps in which part of a country’s debt is forgiven in return for setting aside areas for conservation. Among debt practitioners, however, these swaps are regarded with amused cynicism.

Governments of countries whose debt sells at huge discounts typically have at best a tenuous control over wilderness areas of their nations; the debt negotiator of one country, when asked about the effective authority of his government over an area that had just been “swapped,” replied that they didn’t even know if anyone lives there.

In other words, promises from these governments mean little, even if they are sincerely meant; conservation requires an enforcement mechanism.

4. The best way to protect the environment is to enlist selfishness: One of the remarkable and distressing things about the wave of environmental action in the 1970s was that almost nobody took the advice of economists, which was to use prices rather than detailed regulation to discourage pollution.

There is an overwhelming case for restricting pollutants either by taxing them or by establishing a market in pollution rights, rather than by specifying in detail what firms and individuals are allowed to do. By putting a price on pollution, rather than regulating directly the kind of equipment that must be installed, we would allow a flexible response--and provide the private sector with an incentive to find creative solutions. Yet this solution has been prevented by an unholy coalition between the left, which abhors the idea of explicitly condoning any pollution, and the right, which fears that pollution taxes or auctions of pollution rights will give big government too much revenue.

We can no longer afford this kind of ideological posturing. In a complex world economy, trying to protect the environment with detailed controls is not going to work. Only by providing broad incentives, which lead to a flexible response, can we hope to get anywhere.

For starters, we need to think about imposing taxes on emission of carbon dioxide (a gasoline tax would be a step in the right direction, although ultimately too narrow). Almost all thinking about this issue is too modest: For example, simply to raise U.S. gasoline prices to the levels prevalent in the rest of the industrial world would require a gasoline tax increase of $1 per gallon; this is a minimum estimate of what we will eventually have to do.

5. National sovereignty will have to be limited: The environmental issues of the 1990s differ in an important respect from those of 20 years ago. In 1970, the most urgent issues concerned the quality of urban air and river water. These were issues that could be approached at a national level, with relatively few spillovers between countries, and in fact we did fairly well in dealing with these issues.

The environmental issues of the 1990s, however, are global in scope: the greenhouse effect, the ozone layer, the oceans. These mean that Japan’s carbon dioxide emissions are America’s business and vice versa. We are going to have to become accustomed to a world in which governments assume a right to poke into each others’ affairs to an unprecedented degree.

All of this is going to be a rude awakening from the mood of the 1980s, with its emphasis on deregulation, assertive nationalism and reduced taxes. There is a strong possibility that after a cool summer with not too many syringes on the beaches we will try to forget about the environment for another decade. Sooner or later, though, the environment is going to be the issue of economic policy.