The Future of Environmental Policy: Free Market Environmentalism: an exclusive interview with Fred L. Smith Jr.

Published May 1, 1998

Fred L. Smith Jr. is the president and founder of the Competitive Enterprise Institute, a public interest group active in a wide range of economic and environmental public policy issues.

Located in Washington, DC, CEI works to educate and inform policy-makers, journalists, and other opinion leaders about market-based alternatives to regulatory initiatives and engages in public interest litigation to protect property rights and economic liberty.

Mr. Smith is a frequent guest on various radio and television programs, where he has debated free market approaches to vexing public problems. He has appeared on national news programs such as “MacNeil/Lehrer,” “Crossfire,” ABC’s “20/20,” and CNBC. His writings can be seen in leading newspapers such as The Wall Street Journal, the Washington Times, and numerous public policy journals. He wrote a chapter on energy and environment in Market Liberalism, a Paradigm for the 21st Century, and is the co-editor of the book, Environmental Politics: Public Costs, Private Rewards, which argues that much environmental regulation is driven by political considerations. He also wrote the epilogue to CEI’s critically acclaimed book, The True State of the Planet, a scientific guide to the environment written by some of the nation’s premier environmental scholars.

Before founding CEI, Mr. Smith served as the Director of Government Relations for the Council for a Competitive Economy, as a senior economist for the Association of American Railroads, and for five years as a senior policy analyst at the Environmental Protection Agency.

He was interviewed recently by Environment News managing editor Bonner Cohen about free market approaches to environmental issues.

Cohen: What is free market environmentalism?

Smith: Free market environmentalism posits that environmental values are best advanced by private property rights, competitive markets, and common law liability rules–not politically determined regulation and government ownership. Only such a decentralized institutional framework for expressing environmental values offers any hope of integrating our environmental values into our modern world. Only private ownership allows the rich system of voluntary exchange which would make possible environmental values to compete with other human values.

Free market environmentalism does represent a radical departure from the status quo in environmental policy, even though it is largely based upon the application of contemporary political economy and indebted to the work of Nobel Laureate economists F.A. Hayek, Ronald H. Coase, James Buchanan, and Milton Friedman.

Cohen: Opponents of free market environmentalism can be found in the regulatory bureaucracies, green organizations, foundations, left-of-center public interest groups, and their political allies. What motivates these people? What kind of a world do they want to impose on the rest of us?

Smith: It is first important to establish that environmentalism is not reducible to a definitive core: there are many shades of green. The political orientation of environmentalist groups range from the radically illiberal Earth First!–who regard man as a cancer on the earth–to the closet extremist Al Gore, to technocrats who believe that the right regulation will solve environmental problems.

Cultural theorist Aaron Wildavsky argued that the basic motivation of the more irrational environmental activist is radical egalitarianism. Egalitarians typically object to all societal asymmetries. This instinct adapts easily to the environmental policy arena. Egalitarian resentment of change welcomes the suggestion that cancer is caused by corporate malfeasance or that modern technology is responsible for declining public health.

Some environmentalists see themselves as acolytes of a secularized religion and follow such ritual worship as recycling (garbage washing), habitual prophesizing of doom, and enthusiasm for global proselytizing. The separation between church and state was critical to the cessation of earlier religious conflict . . . a creative way of preventing a religious orthodoxy must also be applied to this newest of religious beliefs.

Cohen: Shortly after taking over Congress, Republican lawmakers undertook a major effort to overhaul the way the federal government deals with environmental issues. That venture was largely unsuccessful. What do you think they did wrong? How should they approach this in the future?

Smith: The premature death of the modest environmental reform bills of the 104th Congress should be attributed to a failure to communicate the principles of the reform agenda to the public, not to any public policy over-reach.

I argue that the environmental debate is roughly where the welfare debate was in the early 1980s–that is, before scholars like Charles Murray and Milton Friedman established that the state hindered rather than helped the poor, and before Marvin Olasky demonstrated the superiority of private approaches to such problems. This framing change was a key factor in enabling real welfare reform.

In the environmental field, failure to move beyond the criticism of the existing political institutions, to positive private alternatives for environmental protection, left defenders of reform open to attack. Only now have CEI and PERC begun to remedy this by documenting cases of successful private conservation. Environmental reform must follow welfare policy’s lead by demonstrating that its defenders are advancing environmental values, not merely saving money.

The ubiquity of health- and environment-related media scare stories demonstrate that the public’s environmental sensibilities are volatile. A thoughtful communications message is vital for the success of environmental reform; the wrong packaging can provoke public suspicion, which green groups can use to their advantage. This is effectively what happened in the 104th Congress.

Cohen: Given the current political stalemate in Washington, many people are starting to look towards the states to lead the way out of the federal command-and-control system. How much can we expect from the states in the way of long-lasting reform?

There is wide public support for transferring power away from Washington to the state and local level. A study conducted by the Polling Company for CEI found that 65 percent of respondents believed that state and local governments would do better at protecting the environment than the federal government. Seventy-two believed that the state and local governments should determine air pollution control measures.

The states offer a far more productive stage for the development and institution of environmental policy. Those closest to a problem are the most likely to invest the greatest energy in its solution. The EPA is a centralized and distant bureaucracy and thus cannot match the flexibility of state and local government. The “laboratory of the states” is far more likely to yield productive results than cloistered bureaucrats more concerned with environmental rules than environmental results.

Decentralizing regulatory control allows policies to accord with diversity of environmental problems and values; local management is more compatible with the heterogeneity of our pluralistic nation.

Cohen: You spent two weeks at the Kyoto global warming conference in December. What was it like being in the midst of people so determined to place restrictions on how people the world over use energy . . . in other words, how they spend their lives?

Smith: The Kyoto conference was a fitting tribute for the 200th anniversary of the Reverend Thomas Malthus’ pessimistic tome “Essay on Human Population,” which predicted that population growth would outpace food supply to produce mass starvation. Although the Kyoto conference was ostensibly about protecting the Earth’s climate, Malthus’ ideas dominated the broader agenda. Attendees were subjected to sermons on family planning, sustainable development, and the evils of automobiles and the multi-national corporation. Kyoto resembled a children’s crusade–a surfeit of naive idealism that inevitably leads to tragic results.

The sole glimpse of hope for the world’s economic future was the intransigence of a handful of developing countries. An eloquent Chinese delegate captured the imperialistic dynamic of the conference with a tale of top-hatted man asking a starving Chinese to put out his fire, which he was using to cook a meager meal, to prevent global warming.

Still, too many developing countries endorsed a stringent energy diet for the rich. This reflected the fact that the vast majority of representatives were from environmental ministries, overwhelming those representing economic concerns.

Kyoto was also farcical; Greenpeace’s solar-powered coffee stand stood vigil outside the conference center throughout the negotiations, but overcast skies meant that they never quite managed to deliver on the promise of green espresso.

Cohen: You have made many trips abroad, encouraging Europeans, Asians, Latin Americans, and others to turn away from government and toward market-based solutions as a way to create a wealthier, healthier and freer society. How is the rest of the world doing?

Smith: Unfortunately, the rest of the world has followed America’s lead in adopting command-and-control environmental regulation.

There are some exceptions. New Zealand has been the most active nation in adopting free market environmental policies. In the 1980s, forests and fisheries were privatized. Those reforms have gained widespread popular support in New Zealand, even from radical groups like Greenpeace.

Elsewhere, a vote at the Convention on International Trade in Endangered Species (CITES) relaxed the ivory trade ban, which is a step in the right direction. Traditional societies also provide excellent models. Japanese communities still use customary property arrangements to privately manage their fisheries, coordinating and maximizing economic and environmental interests. Independent and locally driven experimentation remain the best path to global environmental protection.

Cohen: Are advocates of free market environmentalism in the U.S. making the kind of case they should be making in the court of public opinion?

Smith: Free market environmentalism is not monolithic. During its twenty-year development, the movement has splintered into several camps. Some are pro-market, but they focus their energies on “good government” and efficiency maximization strategies, placing little emphasis on economic liberty.

I argue that we should focus our resources on spurring the emergence of institutions that allow environmental values to compete with other values. We should devote less time to making government ownership less onerous and seeking instead ways to encourage people to protect the environment in the absence of private property rights. Making a bad thing more efficient is hardly a desirable strategy.

The proponents of free market environmentalism have some excellent ideas; we need not dilute them to make them more palatable to people who are committed to the status quo.

Cohen: The Competitive Enterprise Institute recently established the Center for Private Conservation (CPC). What are the CPC’s goals?

Smith: The CPC seeks to expand the knowledge and information base surrounding the ability to advance environmental objectives privately, absent government control or influence. The Center researches and documents successful private efforts to conserve resources and ecologically sensitive lands, and analyzes how various legal and social institutions assist or hinder the ability of private individuals, companies, and associations to protect the environment.

The goal is to document and publicize the largely unknown story of the private sector’s effort of conservation and environmental protection. The Center seeks to publicize its findings through publications, speeches, roundtables, and outreach to interested organizations.

We hope that by documenting exemplary case studies of private stewardship, both past and present, both for-profit and not-for-profit, it will be possible to encourage still more private conservation, and through educating the public on the extensive conservation achievements of private land ownership help slow the thrust for national land-use control of private lands across the nation.

Cohen: Where will we be in the future if free market environmentalists lose their battle with the statist elements now firmly in control?

Smith: The rationale for statism changes depending on context, but the statists’ goal–coercive imposition of values–remains. Current economic policy argues for economic liberty save for those activities having environmental implications where political controls are necessary. However, every economic activity involves some environmental consequence, thus, this prescription justifies political control over all economic activity.

Ecological socialism threatens economic freedom now as much as much as economic socialism did earlier. If it prevails, there will be little room for economic liberty.