Government 1B: Lesson 40
Save the Trees or Save the Oceans
The market and the environment have been hot topics for decades, and it is once again affecting our daily lives though not in a way you might have expected. Paper bags or plastic bags? Save the trees or save the ocean? This is the environmental question that the government is now having the public answer and making them choose whether to save the trees or the ocean every time they go into the grocery store and the cashier asks which bags to pack the groceries in.
I am most familiar with the thin green or white plastic grocery bags which tear at the seam when you pack a bunch of bananas in with a heavy jug of apple juice. But, my parents remember when they packed up their groceries in paper bags which tear when the ice cream makes the paper wet and are hard to carry multiple at once. Despite these facts, nobody has ever cared or given a second thought to the bags their groceries are packed up in. They were just glad they could pay 5 cents for a few bags to put their groceries in and carry out of the store.
Forty years ago, when paper bags were the common bags used, the government suddenly decided to intervene on behalf of the environment and have stores replace them with plastic bags. Slogans like “Save the Trees!” and “Stop Cutting Down our Forests!” were put on posters in grocery stores and printed in newspapers, and the public was slowly taught to no longer use thin paper bags. Fair enough. I do not like to see all the beautiful trees and forests cut down, and using a plastic bag is hardly a big difference, so I will gladly oblige this once. Now fast forward forty years and suddenly posters of sea turtles and otters tangled up in plastic bags are being put up in store windows and slogans like “Save the Turtles!” and “Stop Polluting the Oceans!” are appearing in large font on websites and video advertisements. The public is once again being asked to switch to a different grocery bag on behalf of the environment, and plastic bags are being replaced with paper bags. Wait. WHAT? What happened to save the trees?! I agree that it is awful to see turtles and cute little otters tangled up in plastic garbage, but what happens in another forty years when all our newly grown forests are chopped down again? I am tired of being guilted into switching bags because the government slaps a poster on the wall making me feel like a horrible person. And why should I trust the government to fix this environmental problem when it creates another one at the same time? It seems the government has realized this error and is now pushing grocery stores to get rid of providing bags for customers completely! Well, this is just getting ridiculous.
What is the solution? How do we get out of this vicious merry-go-round of paper to plastic to no bags at all? The government needs to step out of the environmental issue and back to where it belongs: protecting private property and carrying out civil justice. The intervention of the government in all areas of life, including the free market, has reduced private property and people’s responsibility to take care of their property and the environment.
The main objection to this solution is that if the government does not fix this issue, then nobody will. The public forgets that the free market has a way of balancing everything out. If the government steps out of the environmental arena, that does not mean the world will suddenly chop down all the trees and the oceans will drown in plastic bags. Increasing private property and letting the people decide which bags they want to use will not only fix this environmental issue but will get rid of the vicious paper vs. plastic cycle completely.
What if all the trucks and dumpsites were owned privately? The majority of garbage dumps and recycling plants today are government-owned, and the public rarely thinks about how much they are filling up the dumpsites because they don’t have to. The government just takes care of it. But if dumpsites were private, it would be in the company’s best interest to charge fees to compensate for the amount of plastic that fills up the site and does not decompose as quickly as paper. The disposal of plastic bags would then cost the consumer, who now has an incentive to avoid it, but is not forced to use it or not use it. The free market is about free choices, and this example of the government stepping back and letting garbage sites be privately owned is the price system in action.
Paper to Plastic – Boom to Bust
Let’s look at the effects of government intervention on an even broader scale. The business cycle is sometimes referred to as the boom-bust cycle. We’ve seen how government intervention in one small area of public life created a paper-to-plastic-and-back-again cycle, so it will be no surprise that intervention in the economy creates an even more monstrous cycle.
The boom-bust business cycle is where the market creates a booming economy with everyone becoming richer and richer until suddenly multiple business firms make errors at the same time and the economy falls. The question then asked is why do they all make errors at the same time? Carl Marx believed the problem is inherent capitalism, and that is what the general public has been taught to think as well. But if we now look at this problem like we did with the paper vs. plastic issue, we can see how this cycle might be changed or solved.
The business cycle where the government does not intervene and meddle around is called the Austrian theory. The two main concepts to understand in this theory are the Structure of Production and Interest rates.
Under normal free market conditions, the business cycle starts when the public begins to save more and buy less. When this occurs the structure of production is altered and the market adjusts for the changes. If less is bought by the public then less has to be produced by the business firms. The market sees that less is being produced for immediate consumption and businesses have more resources free to use elsewhere. Although the public is saving right now, they clearly will be spending in the future, so business firms have an opportunity to begin long-term projects that are aimed at producing more in the future.
Interest rates are affected by the public saving more, and rates begin to fall as banks store more of the public money. Business firms can take advantage of the low-interest rates and the public saving more and buying less to start long-term projects with the assurance that they will be able to complete them. When the public begins to spend money again, the business firms will be ready to meet the demands of the public with more goods and services. An example of a perfect business cycle with smooth coordination of production and consumption, as long as interest rates are allowed to do their job.
However, the government does not like to let the interest rates fall naturally but has the central banks push the interest rates down to artificial levels, even though the public is not saving money. This sends a distorted signal to the rest of the market as resources are not being released from lower-order industries for use in long-term projects by businesses. The economy has been lured into an incorrect configuration and business firms miss read the market and begin long-term projects which they may not be able to complete. The lack of coordination and misallocated labour and physical resources result in a bust and an economic recession or depression.
In conclusion, the result of government intervention in smaller issues, like paper or plastic grocery bags, and much broader issues, like the economy and business cycles, always results in vicious merry-go-rounds where markets rise and crash at astronomical levels and problems are created faster than they are solved. The public would be much richer if they were able to make free choices, the market would be more steady if left to balance out itself, and the environment would look a lot nicer if the government stepped back and focused on its role of protecting private property and enforcing civil justice.