Saturday, March 19, 2011

Business: The Only Way Out?

Over the next ten to fifteen years, where will the majority of environmental solutions come from?  The three broad categories of problems (energy, climate change, and ecological destruction) all have similar causes at the most basic level: structural perversities in our economic and political systems. The three most glaring defects are rampant environmental externalities (who really thinks the price of oil truly reflects all the costs associated with it), state rationality vs. global rationality collective action problems (what's good for a state isn't necessarily good for the planet), and devaluing the future too heavily (high discount rates prohibit smart investment).

Government policy could theoretically do the most good by solving many of these structural problems--change the rules of the economic game and make the free market work for the environment, instead of against it. Steady-state, cradle-to-cradle, restorative, whatever you want to call it. But let's be honest, it's never going to happen, at least not completely. The politics are impossible.

The political sclerosis regarding environmental problems means that all the fascinating solutions developed by academia and policy thinkers over the past decades have little probability of being put into action anytime soon. Even if in the future popular support for radical environmentalist policies make drastic reforms politically possible, it will probably be too late to prevent major environmental changes. In all likelihood the world's environmental problems won't be prevented. Instead, adaptation will be the primary option for protecting quality of life.

The world of private action (business, NGOs, research organizations, etc.) on the whole is a highly resilient, dynamic system. Individual institutions may currently be adapted to a particular political, economic, and environmental context, but as things change so will the composition of successful organizations. For example, some U.S. cities (and businesses located there) will become less attractive under future environmental conditions (think Phoenix), while others will become more attractive (Fargo?). As energy prices terminally increase, local producers of goods will become more competitive with global supply chains.

Admittedly this situation is bleak, especially regarding the implications for inequality and access to choice. Richer people will be better able to adapt to environmental problems (by moving easily, or purchasing energy- or ecologically-intensive products) than poor people. That is a profoundly unjust scenario, but as much as we'd like to prevent it, our politics just won't allow it. If somebody wants to do the most good regarding environmental issues, it seems that there are two options: change our political system (good luck), or work to develop environmental adaptations that are cheap enough to be available to everybody. That means research, technology, investment, scale, and most importantly, trial-and-error. That means business.

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