Wednesday, May 28, 2014

The Price is Not Right. Prince Charles is correct: global capitalism needs to change

One of the best things I learned in law school is the myth of a black-and-white debate between "capitalism" and its opposite (socialism or communism or sometimes just government regulations). Life and our economy are much more complicated and nuanced than that.

With that context, I'm glad to see Prince Charles calling for a fundamental transformation of global capitalism in order to avoid global warming's catastrophes. In this Guardian article, Prince Charles said business must “account properly for carbon dioxide emissions, the use of water and fertiliser, the pollution we produce and the biodiversity we lose." Today, of course, no one pays for their pollution. So we're collectively binging on it. Hey, it's free! Dig in!

This is the fundamental transformation we have to figure out how to implement: getting the price right. Right now, buying a shirt made from renewable energy costs the same as buying a shirt made from polluting energy. There's no pollution tax. And there should be. There should be a pollution tax built into the price of everything we buy or sell, so that we'll buy less of the things that pollute and more of the things that don't. There is a huge cost to all that pollution. Someone has to pay it, and currently, the people who are making that pollution just aren't paying the bill, because we haven't figure out as a society how to invoice the polluters.

This is where the anti-government reflex of way too many Americans kicks in. It's not that people think it makes sense to keep pollution free. It's that they just don't want government 'involved'. They'd rather have a 'private sector' solution. And so any attempt to get the price right runs into the anti-government crowd.

There is no such thing as a free market without government regulation. Private property doesn't exist without a government full of police and courts to enforce it. Government regulation is baked into any market. It's a question of degree, not kind. It's still 'capitalism' to quit letting polluters freeload and instead start to charge them for the damage they cause through a fee or a tax.

If we can earn more hearts and minds and convince more Americans to understand that's how government and 'free markets' work - regulation is part of the structure of any market and making pollution free is as much 'socialism' as charging polluters something -- then we're closer to building a consensus that we should get the price right. 

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