Friday, November 29, 2013
Are Corporations Evil? Or are we neglecting our responsibility as citizens to make them account for externalities?
When we carry out our responsibility as citizens, the rules that guide operation of industry will ensure that what is profitable is also good for society and the environment. We make corporations the villains because they do bad acts. But the bad acts they do are not expressions of intrinsic evil intent. They do things to meet the needs of their customers in the most profitable way. It is our responsibility as citizens to create the rules governing society. If harmful acts are profitable, we need not blame corporations for their profit-seeking behavior. They are economic entities. That is what they do. The error is in our own failure to make harmful acts costly to corporations. If corporations (if economic actors generally) were required by law to pay substantial penalties any time that they put pollution or take natural resources in pursuit of profit, then they would change their behavior because doing those things would no longer be profitable. The penalty could be in the form of a fee or of a requirement to buy a limited number of permits at auction. The fee amount would be greater (or number of permits offered would be less) if more people polled in a random survey wanted industries to try harder to reduce environmental impacts. The role of corporations in society is to meet consumer demand in the way that they calculate as most profitable. The role of citizen is to create the rules that corporations operate within. Those rules must include efficient and fair means of limiting overall environment impacts to levels that most people feel are acceptable. The narrative of corporation as evil actor draws attention away from the responsibility of citizens to create systems of governance that would require economic actors to account for externalities. Accounting for externalities will ensure that environmental impacts are accurately reflected in the price structure. If we assign fees to industries that extract carbon-based fuels from the Earth, in proportion to the amount of carbon contained in the fuel (and in proportion to the amount of environmental damage caused by the extraction process), then the fuel will cost more. We will all get a signal (the higher price of fuel) that will tell us to burn less fuel. The industries that take carbon from the ground will shrink because they will not be able to sell as much fuel at the higher price. The threat to climate stability will be reduced. Why is there no connection drawn between the enormous environmental challenges that we face on the one hand and the assault on human dignity and the serious threats to social stability and cohesion posed by extreme poverty and disparity of wealth on the other hand? These two problems--environmental problems and threats to social justice--are related to our failure to share natural wealth equally. That failure points us back to the citizens' responsibility to create systems of governance that ensure that environmental impacts are accounted for AND that benefits of natural wealth are enjoyed by all. The problem of financing the change to a sustainable society will be resolved when the proceeds from the sale of environmental impact permits are shared among all the world's people. With fee proceeds going to all the people in the world, the money to finance the change will be in the hands of the people. When they (when we) buy fuel, we will be paying a higher price. The corporations selling fuel will use this additional income to either pay emissions fees OR to finance investment in carbon-neutral fuels. Some people will adjust their lifestyle to reduce their need for fuel. Everyone will do this to some degree, in fact. For some, it will be easier to move to live closer to their work. Others may switch to public transit or invest in a fuel-efficient automobile. Each person will make the changes most suitable to their own situation. We should recognize that corporations do not have any intrinsic desire to foul the air and water and deplete resources. They do these things only because we buy the products that they are able to make by doing them. When we fulfill our responsibility as citizens and demand accounting for externalities, they will learn to meet market demands without causing such large impacts on the environment. We will learn to not buy so much of that which is harmful to the environment. We only buy as much fuel as we do today because it is deceptively cheap to do so. When externalities are accounted for, prices will tell us the truth about real costs. We will make different decisions about how to live. We must recognize that the solution to our problems can be found in our willingness as citizens to change the nature and character of government. Our government is an instrument through which we fulfill our responsibilities to ensure an equal sharing of natural wealth, and to define appropriate limits to environmental impacts. Then we will see that the solution to our environmental problems is also the solution to our poverty and disparity problems: Charge fees to industries that pollute and extract resources; give the fee proceeds to all the people, to each an equal amount. We will know when fees are set at the right amount when random surveys show that most people feel that overall rates of putting pollution and taking resources are not excessive. We will live in the world that we want to live in. A sustainable and just civilization requires that we use our moral sense Systemic flaws are not reported Equal sharing of Natural Resources promotes Justice and Sustainability