Friday, November 29, 2013
Are Corporations Evil?
Or are we neglecting our responsibility to make them account for externalities? Shouldn't we be making corporations pay for the harmful side-effects of what they do? When we carry out our responsibility as citizens, we will create rules that guide operation of industry to ensure that what is profitable is also what is good for society and the larger community of life. We make corporations the villains because they do bad things. But the bad acts they commit 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 to change the law. We should not blame corporations for their profit-seeking behavior any more than we would blame consumers for seeking the lowest price when shopping. Both corporations and consumers are economic entities. Seeking profit or seeking low prices is what they do. The problem we need to address is our own failure to make harmful acts costly to corporations. When putting pollution or depleting resources brings a substantial financial penalty to producers, then prices for things that are more harmful to the environment will be higher. Consumers will try to avoid buying those things because they are already inclined to avoid things with high prices. Corporations will try to avoid causing harmful environmental impacts in an effort to reduce costs of production and thereby increase profits. The most environmentally damaging industries will shrink or go out of business. 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 and do those things less, because doing them would no longer be so profitable. The penalty could be in the form of a fee or a requirement to buy from a limited number of permits sold at auction. The fee amount would be greater (or number of permits offered would be fewer) 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 or least costly. The role of citizens is to create the rules that businesses must follow. Those rules must include efficient and fair means of limiting overall environmental impacts to levels that most people feel are acceptable. When we see corporations as evildoers, we are less likely to see our own responsibility as citizens to create systems of governance that would require economic actors to account for externalities. Accounting for externalities will ensure that the cost of environmental impacts are reflected in prices for goods and services. If we assign fees to industries that extract carbon-laden material from the Earth, for example, in proportion to the amount of carbon it contains (and in proportion to the amount of environmental damage caused by the extraction process), then fossil fuel will cost more. We will all get an effective 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. By adjusting the fees charged, we could achieve whatever rate of reduction of carbon extraction is acceptable to at least 50% of citizens. (A system of random polls could reveal what limits to environmental impacts of various kinds are acceptable to most people.) 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 and services that they are able to provide by doing them. We have a responsibility as citizens to demand that corporations account for externalities. We must demand that industries pay some compensation to the people at large when they degrade the quality of the air or water, or when they take natural resources in pursuit of profit. When we do this, industries will learn to meet market demand in ways that create less pollution or no pollution. They will shift to manufacturing processes that rely more on recycled materials, with reduced inputs of raw materials. We will all 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 environmental impacts are accounted for, prices will more honestly reflect true costs. We will make different decisions about how to live. Why is there no connection drawn between the enormous environmental and climate stability 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 degradation and severe material deprivation--are related to our failure to share natural wealth equally. This 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. If we buy fuel, for example, we will be paying a higher price. The corporations selling fuel may use this additional income to pay emissions fees. Alternatively, higher fuel prices might fund research and investment in carbon-neutral fuels. Higher fuel prices will cause some people to adjust their lifestyle to reduce their need for fuel. In fact, everyone will do this to some degree. 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. Solutions 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 can fulfill our responsibilities to ensure an equal sharing of natural wealth, and to define appropriate limits to environmental impacts. 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 that fees are set at the right amount when random surveys tell us that most people feel that overall rates of putting pollution and taking resources are not excessive. When we fulfill our role as citizens, we will live in the kind of world that we want to live in. We will have a truly democratic society. 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