Capitalism is Saving the Planet Part 1: Wealth Makes Health, Eventually

We are often told that capitalism is destroying the planet, and that the only way we can repent from causing environmental degradation is to switch from a capitalist system to a socialist system. This thought process, however, could not be more wrong.

Today we are going to talk about a phenomenon which is often referred to as the Environmental Kuznets Curve. The theory behind this idea can be summed up in these three steps:

1. When an economy is primarily pre-industrial and agrarian, the environment is usually clean and untouched by pollutants from industrial economic activities.

2. As the economy shifts towards development and industrialization, the environment is at a higher risk of being harmed by pollution and depletion of natural resources.

3. The curve then returns to a cleaner environment when economic growth continues, and people choose to spend their incomes on improving the environment by cleaning water and improving air quality. People become more aware of the benefits to the environment.

The graph below shows the Kuznets Curve in action. As countries become wealthier and people are no longer concerned about basic survival, they are willing to pay more for goods and services if it means living in a cleaner environment. This is exactly why advocating for a a pro-economic growth framework will result in a cleaner, not a dirtier, environment.

This theory has some critics, many of them prefer more socialistic forms of government, but several studies show that specific environmental issues do follow the Kuznets Curve. These include air and water pollutants such as quantities of sulfur dioxide, suspended particulate matter, and fecal coliform.

We can see the Kuznets Curve in action in the U.S. in the graph below. The economy has grown by 165 percent since 1980 while air pollution is 67 percent lower than it was the year Ronald Reagan was elected. We drive more miles, feed more people, use more electricity today, but we pollute far less than we did 39 years ago.

Some left-leaning environmental activists will almost certainly claim that it was government regulation, and not the wealth generated by capitalism, that led to the successful cleaning of our nation’s air. There is no question that government regulations played an important role in cleaning up the air, but it is also important to remember that the former Soviet Union had government regulations on air pollution, but their economy produced much more pollution than the American economy.

Tune in tomorrow for that history lesson.