Good Entrepreneurs and Managers Don't Need Regulators to Tell Them That Pollution and Waste Are Inefficient and Expensive
Pierre Desrochers is research director at the Montreal Economic Institute (www.iedm.org).
Devising prescriptions for “sustainable development” has made the fortune of a number of academics and consultants and provided a new raison d’être for countless bureaucracies. According to these “sustainability experts,” since the dawn of the industrial age the goals of economic growth and enhanced environmental quality have been at odds. Traditional capitalism was characterized by a linear approach in which materials and energy were extracted, processed, used, and dumped into, through, and out of the economy. Pollution was the price to pay for increased economic expansion and employment, and as a result, business was doomed to a perpetual conflict with nature, regulators, and environmentalists.1
In recent years, however, this assumption has begun to give way. Leading corporations, we are told, have slowly discovered so-called “win-win” situations where cutting down on waste and finding creative new uses for industrial by-products have turned out to be good not only for the bottom line, but also for reducing polluting emissions. As it turns out, profits are good for the environment.
At this point one must pause and wonder. Haven’t greed and the resulting search for profits always been viewed as one of the main engines of capitalist development? Could it be that greed has always been green?
Remarkably, many of our predecessors thought so and based this belief on a vast amount of evidence.2 For instance, the polymath Charles Babbage, in his 1832 classic, On the Economy of Machinery and Manufactures, noticed that “amongst the causes which tend to the cheap production of any article, and which are connected with the employment of additional capital, may be mentioned, the care which is taken to prevent the absolute waste of any part of the raw material.”3
Babbage’s friend, the chemist Lyon Playfair, similarly observed in 1856: “The whole history of manufacture [is] but the using up of waste materials for a long time unrecognised by capital, but which ultimately [have] produced the most important benefits to mankind.”4
Perhaps no author wrote more on the topic than a friend of Playfair, the journalist Peter Lund Simmonds. Although largely forgotten today, Simmonds was a journalist who wrote more than 25 books and countless articles on topics ranging from Arctic explorations to tropical agriculture, sea and animal products, and British commerce.
Simmonds’s bestseller was his treatise Waste Products and Undeveloped Substances, which was first published in 1862 and which he updated thoroughly in 1873.5 Although he presented himself as a “snapper-up of unconsidered trifles,” his 400-plus-page book documents everything from the numerous profitable uses of bones, the acid manganese solutions of chloride of lime factories, the scoriae of metals produced by blast-furnaces, “injurious and even poisonous” gases that used to escape during the process of smelting, distillers’ wash, blood, and old horseshoe nails, to name but a few items.
As he observed in 1862, “In every manufacturing process there is more or less waste of the raw material, which it is the province of others following after the original manufacturer to collect and utilize. This is done now, more or less, in almost every manufacture.”6
Indeed, as he put it a few years later, “Utilisation is the great law of Nature, and we are only following her teaching. . . . She, true to herself, is never at a loss what to do with any of her elements. Man, in an artificial state of society, and in an enlightened age, also provides for converting all the material he uses into useful purposes. There must be no loss of anything once within his grasp.”7
Looking for Profits
Why did Simmonds’s contemporaries behave that way? Essentially for increased profitability, because as “competition becomes sharper, manufacturers have to look more closely to those items which may make the slight difference between profit and loss, and convert useless products into those possessed of commercial value, which is the most apt illustration of Franklin’s motto that ‘a penny saved is twopence earned:’ our manufacturers have not been slow to appreciate this truth, as is shown in more than one branch of trade.”8 As a result, manufacturers simultaneously improved their environment.
Simmonds’s book may have been the first treatise on the widespread and spontaneous recycling behavior of all industries, but it would not be the last. In the following decades, lengthy books on the art of turning industrial waste into wealth would again be written in the United Kingdom, the United States, Germany, and France, among other places.
Everywhere engineers and economists observed that, in modern parlance, “it paid to be green.” As the American economist Rudolf A. Clemen noticed in 1927, “the development of by-products in industry is one of the most outstanding phenomena in our economic life.” He added that “from the viewpoint of individual business, this manufacture of by-products has turned waste into such a source of revenue that in many cases the by-products have proved more profitable per pound than the main product.”9
Why did this happen? In short, competition made manufacturers do it. “Modern conditions make it almost impossible materially to cut production and distribution of expense for the majority of commodities; hence one of the most important opportunities for gaining competitive advantage, or even for enabling an industry or individual business to maintain its position in this new competition, is to reduce its manufacturing expense by creating new credits for products previously unmarketable.”
He further noted: “Indeed, the materials from which the by-products in nearly all industries are manufactured today were formerly partially or wholly wasted, and the change to intensive utilization of these materials for by-product manufacture has been brought about by the ever-increasing force of competition in American business, both between individual concerns within a single industry and among different ones.”
The Way Forward
As the Danish statistician Bjørn Lomborg reminded us in his detailed book The Skeptical Environmentalist, much of our traditional knowledge about the environment is based on preconceptions and poor statistics.10 Actually, virtually all official statistics show us that in respect of the environment, mankind’s lot has improved by practically every measure.
Some (although not many) environmentalists will acknowledge these positive trends, but will usually attribute these successes to tough environmental regulations. When we observe long-term data trends on pollutants, however, it is often impossible to guess, based on the data alone, at what point new regulations were introduced in the generally improving picture.
In the end, one must recognize that good entrepreneurs and managers have never needed government officials or business consultants to help them figure out that pollution and waste are both inefficient and expensive. There has never been any contradiction between doing well financially and environmentally at the same time.
Notes
- See for example, Paul Hawken, Amory Lovins, and L. Hunter Lovins, Natural Capitalism: Creating the Next Industrial Revolution (Boston: Little, Brown and Company, 1999). See also William McDonough and Michael Braungart, “The Next Industrial Revolution,” The Atlantic, October 1998, pp. 82–92, www.theatlantic.com/issues/98oct/industry.htm.
- For a more detailed historical survey, see Pierre Desrochers, “Industrial Ecology and the Rediscovery of Inter-Firm Recycling Linkages: Some Historical Perspective and Policy Implications,” Industrial and Corporate Change, November 2002, pp. 1031–57.
- Charles Babbage, On the Economy of Machinery and Manufactures (London: Charles Knight, 1832), http://socserv.socsci.mcmaster.ca/~econ/ugcm/3ll3/babbage/babb2.
- Quoted in the Journal of the Society of Arts, December 12, 1856, pp. 56–61.
- Peter Lund Simmonds, Waste Products and Undeveloped Substances; or, Hints for Enterprise in Neglected Fields (London: Robert Hardwicke, 1862); Peter Lund Simmonds, Waste Products and Undeveloped Substances: A Synopsis of Progress Made in Their Economic Utilisation During the Last Quarter of a Century at Home and Abroad, 3rd ed. (London: Hardwicke and Bogue, 1876).
- Simmonds, 1862, p. 2.
- Simmonds, 1876, p. 10.
- Peter Lund Simmonds, Descriptive Catalogue of the Collection Illustrating the Utilization of Waste Products of the Bethnal Green Museum (London: George E. Eyre and William Spottiswoode for Her Majesty’s Stationery Office, 1875), p. 4.
- Rudolf A. Clemen, By-Products in the Packing Industry (Chicago: University of Chicago Press, 1927), pp. vii, 2.
- Bjørn Lomborg, The Skeptical Environmentalist (Cambridge: Cambridge University Press, 2001).
