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Greed Is Green: How the Profit Motive Helps the Environment

Friday, April 19, 2013

The search for increased profitability has long delivered both economic and environmental improvements by promoting the evermore efficient use of material resources.

With Earth Day near (this Monday), we hear the usual annual litany of laments from environmentalists, urging us to mend the errors of our industrial ways. Greed and profits, we are told in no uncertain terms, inevitably result in unmanageable pollution problems, the depletion of non-renewable resources, habitat and species destruction, and a regulatory “race to the bottom” among competing jurisdictions.

Yet, as documented in several studies, our environment has paradoxically gotten cleaner and greener as we have become wealthier.  These counterintuitive results are typically conveyed through inverted U-shaped “environmental Kuznets curves” (EKCs) that document how emissions and/or concentrations associated with several pollutants first rise with economic development, but then fall as income exceeds a threshold level (Figure 1).

EKC-like results have traditionally been attributed to higher standards of living, which have allowed people to attach increasing value to environmental amenities, in turn resulting in more stringent environmental standards and stricter enforcement of environmental laws. Other long-standing (but comparatively unconvincing) explanations include an economy-wide structural change to service- and information-based economic activities that are less polluting than physical production, and the displacement of dirty industries from advanced to less developed economies.

Typically missing from this debate, however, is the notion that the search for increased profitability has long delivered both economic and environmental improvements by promoting the increasingly efficient use of material resources, or, in other words, the creation of ever more economic value while using ever less physical stuff. While this notion is obvious in an age where whole libraries can be stored on small electronic devices, perhaps the best statement on the subject still belongs to Jonathan Swift, who argued nearly three centuries ago in Gulliver’s Travels that whoever “could make two Ears of Corn, or two blades of Grass to grow upon a Spot of Ground where only one grew before, would deserve better of Mankind, and do more essential Service to his Country than the whole Race of Politicians put together.”


Less intuitively understood, however, is that competitive pressures have long promoted the transformation of industrial wastes into lucrative by-products. In a comment written a century and a half after Swift, in 1899, a prominent Philadelphia engineer observed that “without detracting from the credit deservedly given to the person who causes ‘two blades of grass to grow where one had thrived before’… prominent places among the benefactors of mankind may be claimed for those who utilize what is or what has been considered as waste.”  Doing so, he observed, often reduces both polluting emissions and pressures on environmental resources.

Countless such examples can be found in technical books and specialized magazines published at the time. For instance, synthetic dyes manufactured from coal tar – a thick black residual liquid produced during the manufacture of gas from coal – supplanted dyes previously extracted from plants, roots, berries, leaves, barks, and animals (mostly insects and shellfish). Plastics developed from once highly problematic petroleum residuals eventually displaced wood, ivory, bones, horns, leather, and vegetable fibers in the manufacture of countless objects. Cottonseed, once an unmitigated nuisance that fouled the air and water and attracted vermin, in time became cattle feed, fertilizer, table food, and a feedstock for a wide range of products (including mattresses, explosives, cosmetics, battery boxes, baseball filler, and cellophane).

Indeed, the profitable creation of wealth out of industrial waste was so widespread at the time that a scientific retrospective published in 1887 highlighted “the utilization of waste materials and by-products” as a “leading feature of the Victorian epoch.”  A year earlier, an encyclopedia entry had described how “in the earlier days” of many manufacturing branches, “certain portions of the materials used have been cast aside as ‘waste,’” but that over time “first in one branch and then in another, this ‘waste’ material has been experimented upon with a view to finding some profitable use for it; and in most instances the experiments have had more or less satisfactory results.”  One can also get a glimpse of the wide range of useful substances created from industrial residuals in a 1919 figure drawn by the prominent American animal ecologist Victor E. Shelford (Figure 2). As summarized by the journalist Frederick Talbot the following year, “To relate all the fortunes which have been amassed from the commercialization of what was once rejected and valueless would require a volume. Yet it is a story of fascinating romance and one difficult to parallel in the whole realm of human activity.”


According to most analysts, this process was primarily driven by the desire for increased profitability. As the business and technology journalist Peter Lund Simmonds, arguably the most knowledgeable person on the topic in the Victorian Age, observed in 1875, “as competition becomes sharper, manufacturers have to look more closely to those items which may make the slight difference between profit and loss, and convert useless products into those possessed of commercial value.”

The “greening” property of the profit motive was also considered obvious by Karl Marx, who observed that the “capitalist mode of production extends the utilisation of the excretions of production and consumption” and that “so-called waste plays an important role in almost every industry” because it “reduces the cost of the raw material to the extent to which it is again saleable” and thus ultimately “increases pro tanto the rate of profit.”

Despite much evidence to the contrary, the dominant view among sustainable development theorists and environmental activists is that ever-increasing polluting emissions have always been the price to be paid for increased economic expansion and employment. But while it is true that finding practical solutions to pressing problems often took some time and a significant environmental toll, a long-term perspective on the issue reveals that manufacturers have been practicing sustainable development for some time, without really aiming to do so.

In the end, the inherent compatibility of profit-making activities and environmental progress should not be surprising. After all, as the economic journalist Philip Wicksteed observed more than a century ago, if “economy” is widely understood to be “the administration of any kind of resources… in such a way as to secure their maximum efficiency for the purpose contemplated,” then efforts to minimize waste such as “destruction of resources by mere thoughtlessness or negligence” have always been mandatory. Indeed, Wicksteed added, if one was to combine “the current meaning of the word ‘economy’ (the avoiding of waste) upon its etymological meaning (the administration of a household),” economy as a practical subject should be described as “the administration of the affairs and resources of a household in such a manner as to avoid waste and secure efficiency.”

On this Earth Day, spare a thought for the profit motive, an unheralded but long-standing champion of the environment!

Pierre Desrochers is an associate professor of geography at the University of Toronto. He is the co-author of The Locavore’s Dilemma. In Praise of the 10,000-Mile Diet.

FURTHER READING: Desrochers also writes “Locavores or Loco-vores?” with Hiroko Shimizu. Steven F. Hayward discusses “Trying to Recapture That Old Earth Day Magic,” Karlyn Bowman, Andrew Rugg, and Jennifer K. Marsico note “Polls on the Environment, Energy, Global Warming, and Nuclear Power,” and James Pethokoukis observes “Climate May Be Less Sensitive to Greenhouse Gases Than Previously Thought.”


Image by Dianna Ingram / Bergman Group


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