Market liberalism is the philosophy that protects the freedom of the economy to figure out the best outcome on its own, independent of government intervention. While this may be the best way to maximize profits in an isolated economist’s office, there are glaring environmental and social issues with a 100% free market. That said, this article is not a call for state-controlled markets and enterprises but for moderation. 100% free markets kill the planet and must have some constraints.
The Tragedy of the Commons
The most clear-cut need for some government control of the market is the tragedy of the commons (this link leads to a very helpful TED video explaining the phenomenon). In essence, this happens when multiple individuals or, more commonly, companies are extracting renewable resources from the same source, such as fish from a lake. If left entirely to their own devices, as market liberalism promotes, everyone in this situation is incentivized to extract as much as possible because if they do not, they know someone else will catch that fish. Since everyone is incentivized to take as much as possible, the system will become overexploited and unable to continue renewing its resources. Eventually, the fish population will die out, and then no one will have anything to catch; the fish will be lost from the food chain in that lake, and the fisherpeople and the environment will suffer. Under market liberalism, the market does not find the optimal outcome.
The only way to keep the fisherpeople fed is for the government to employ caps on the amounts of fish caught, allowing them to repopulate at a rate equal to the rate at which they are being caught. While the catch on the first day might be less than under a completely market-liberal system, after multiple days, the fact that the fish population can recover from being caught means the people can continue to fish theoretically indefinitely. This repopulation has significant environmental benefits of preserving the biodiversity in the lake and continuing the fish’s role in the ecosystem.
The tragedy of the commons can be as small-scale as a local fish pond or as expansive as the entire atmosphere; while it is in everyone’s individual best interest to emit as much CO2 as they want to make their life as easy as possible, the fact that everyone is doing this makes everyone worse off. The problem with global-scale examples is that there is no global government to enforce restrictions on everyone. Luckily, for anything that takes place within the borders of one country, governments can cap, or incentivize reductions of, extraction to help save the planet from the tragedy of the commons.
You Want More
Anyone who has taken a class in economics has seen the supply and demand curve. The math shows that the market will find the optimal price, bringing the most benefit to society. This idea works well for items that people consistently need more of, such as food. But, what about a product such as clothes, where people can last much longer without buying anything new? In this case, producers are incentivized to try to make consumers think they want more than they actually do. This means they can sell more clothes for a higher price and make more money. Unfortunately, this also means a much greater strain on the planet. In the fashion example, textile production uses tons of water, releases toxins, creates microplastics, releases greenhouse gasses, and eventually ends in enormous amounts of waste in landfills or incinerators. But, the company producing the clothes isn’t the only one to feel the effects of their production; they are spread across the globe, so the company is incentivized to sell as much as possible and, therefore, to get the public to want to buy more.
But the demand for clothes is constant, right? Market capitalism works because people know what they want and cannot be influenced. Wrong. Industries have many ways to make people think they want more. The biggest is advertising, which promotes consumerism and subliminally tells the population they need to buy more. The fashion industry in the United States alone spends $650 billion on advertising annually. Stores also have specific layouts, price inflations and “sales”, and other psychological tricks to make you think you want more than you do in reality.
This leads everyone to buy more of everything than they need. This has drastic environmental impacts throughout the production process and leads to more waste, as people buy things they don’t actually need. How can this be stopped? Instead of leaving producers to take any actions they deem necessary to maximize their profits, governments must restrict consumerist advertising, impose production limits, and prevent the use of exploitative psychological tricks by companies.
Countries with struggling economies often get into debt trouble, so banks refuse to provide them with further loans. So, they are left to seek loans from international financial institutions (IFIs). The issue is these loans have interest rates just as high as those from a typical bank but also come with conditions of liberalizing the struggling nation’s economy. These conditions are applied because these funds come from IFIs dominated by countries such as the United States and Britain – countries which see market liberalism as the perfect solution to all economic troubles.
Liberalization of the economy usually includes a shift towards a globalist, export-focused economy, which maximizes the amount of money flowing into a country by accessing global markets. However, exportation has damaging impacts on the environment. Shipping goods worldwide comes with massive amounts of packaging and greenhouse gas emissions. Export-centrism often leads to overexploitation and degradation of long-term resources. Countries may reduce environmental regulations in order to attract producers to operate there, inciting a “race to the bottom” of environmental protection across the globe.
Given all of these environmental impacts, one would think that the economies of these developing nations profited from the changes. Unfortunately not, with most developing countries actually getting hurt by the changes, as was the case in Jamaica.
The End of Market Liberalism
If complete market liberalism continues to be the norm, problems such as the tragedy of the commons, consumerism, and overly-exporting economies will continue to plague the planet. Thankfully, controls of the market don’t need to be massive. They can be minute, altering the functioning of the economy wherever needed and letting it be where it is not killing the planet. Now, we wait to see if world governments can set aside their desired ideological purity to protect our only home.
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Dastgheib-Beheshti, Sayeh. “Figure 3: Supply and Demand Curve.” ResearchGate, www.researchgate.net/figure/Supply-and-Demand-Curve_fig4_326251392.
Desjardins, Jeff. “Interactive Map: The Flow of International Trade.” Visual Capitalist, 10 Mar. 2019, www.visualcapitalist.com/interactive-mapping-flow-international-trade/.
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Harris, Jonathan. Trade and the Environment a GDAE Teaching Module on Social and Environmental Issues in Economics. 2004, www.bu.edu/eci/files/2019/06/Trade_and_the_Environment.pdf.
Kincaid, Jamaica. “Life and Debt | a Film by Stephanie Black.” Lifeanddebt.org, 2011, www.lifeanddebt.org/.
“Market Liberalism.” Wikipedia, 9 Nov. 2022, en.wikipedia.org/wiki/Market_liberalism. Accessed 24 Apr. 2023.
“Can Capitalism Save Us from Climate Change?” Think, 25 July 2022, think.kera.org/2022/07/25/can-capitalism-save-us-from-climate-change/. Accessed 24 Apr. 2023.
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