Ask the Experts

Earth and the Economy

I have some great friends here, at school. Some of them are very, very different from each other. For instance, I have some very liberal environmentalist friends, and some very conservative, business-minded friends. Everyone gets along pretty well–until we have a few drinks, anyway. Then I’m suddenly in the middle of the great moral debate of our time. My liberal friends think that unchecked business interests are destroying our Earth. My business-minded friends think that hippies are ruining business with unnecessary regulation.

I know you guys don’t get political, but I’d love some context on this. If I’m going to listen to this debate, I at least want to understand it. What’s the case for destroying the environment to create jobs? And what’s the case for destroying jobs to save the planet?

It sounds like you’re in a tricky debate. Part of the issue may be rooted in the way you’re phrasing the two sides of the debate (part of it may also be rooted in those drinks you’re having–maybe you should take it easy next weekend!). To you and your friends, it seems, the conflict between the environment and business is a zero-sum game. Is that so?

It’s certainly true that the business world has had its share of run-ins with the planet. Profit motives can be short-sighted, which is how we ended up with approximately 40% of U.S. lakes too polluted to use for recreation or fishing. But, regulations can cost a ton of money: one study found that regulations cost manufacturers $21 billion annually. And, when businesses are restricted from certain business areas and have to spend money on other things, they can’t hire and pay employees. Right?

Well, yes and no. There are certainly ways in which businesses and the environment are directly at odds. But in some other ways, the two may see their interests align. For instance, the farming leaders at seed vendor Siegers say, you could look at the way in which farmers have used crop rotation to work with the earth to avoid exhausting the soil. This practice goes back to ancient times, long before we worried much about the earth; but, it made economic sense too, giving the land a break actually allowed for better crops. Experts say the practice is good for the planet because it encourages biodiversity and prevents erosion that farming might otherwise cause, among other benefits.

These same farmers, of course, need fresh water. So while it might be good for one business to pollute a river, it may not be good for the economy in general. When we talk about ‘business’ in this collective way, it’s not as clear that less regulation is always better.

Here’s another example: the controversial process of fracking combines water with chemicals to break apart rock and extract oil. Fracking has been great for the economy, but environmentalists point to fears about its consequences. Right now, it’s legal in many areas–but the companies doing it still have to do something with the chemical-filled water after they use it. They have to pull it back out and get it treated, which is an expense. But, that money doesn’t disappear, it goes to companies that perform the water treatment process necessary to make that water safe again, and those companies, of course, have employees and investors just like any other.

There are all sorts of regulations to debate, of course, and we won’t get into the politics here. You can (and probably will) argue with your friends about the virtues of demanding companies complying to environmental standards, using government funds to subsidize private research into future green products and energies, or forcing companies to pay to clean up past environmental mistakes. You won’t find many people advocating for no regulation at all, but you also won’t find many people advocating for complete government oversight of all forms of business. The reality is somewhere in between, and as you and your friends search for it, the experts have just two suggestions: first, remember that great policy can sometimes be win-win, because business and the environment are not always irreconcilable enemies. Second, maybe have a little less beer next time–it sounds like you and your friends had more than enough!

“We don’t have to sacrifice a strong economy for a healthy environment.” — Dennis Weaver

Miriam Metzinger is a regular contributor and editor for the financial website, Seeking Alpha.