Economic Freedom: A Blueprint for Environmental Progress

"Research demonstrates that increasing prosperity, enabled by Economic Freedom, is the best tool at our disposal when tackling environmental issues."

Key Points:

• Economic Freedom enables the economic growth that creates prosperity.
• The Environmental Kuznets Curve demonstrates that economic growth and the prosperity it enables are not in conflict with environmental progress, but in fact, enhance it.
• If our goal is to improve the environment, then our strategy should be to get as many people out of poverty as fast as possible by giving them more economic freedom.

Introduction

Earlier this year, I introduced the idea that economic freedom is among the most effective strategies for tackling our most pressing environmental challenges. In this first column, I discussed the positive correlation between Economic Freedom and Environmental Progress. Now, in this second column, I begin to explore one of the underlying reasons for this connection: prosperity.

Economic Freedom Creates Prosperity

Economic Freedom is broadly understood to be the degree to which individuals in a society are free to work, produce, consume, invest, contract with others, and use property, free from excessive coercion and with equal treatment before the law. 

While often taken for granted, Economic Freedom is a prerequisite for a prosperous and flourishing society. The Heritage Foundation’s Economic Freedom Index demonstrates that there is a strong positive correlation between a nation’s Economic Freedom and prosperity, measured by per capita gross domestic product. 

Prosperity Means Environmental Improvement

While most of us agree that prosperity gained from economic growth is a good thing, there is a growing philosophy known as the “Degrowth Movement,” which stands in staunch opposition to human progress. A key tenet degrowthers hold is that human progress, whether in terms of technology, economic growth, or something else, is fundamentally incompatible with a healthy environment.

Author of the book The End of Growth: Adapting to Our New Economic Reality, and vocal supporter of the Degrowth theory, Richard Heinberg summarizes this belief well:

“[R]eining in growth would come with a raft of environmental benefits. Carbon emissions would decline; resources ranging from forests to fish to topsoil would be preserved for future generations; and space would be left for other creatures, protecting the diversity of life on our precious planet. And these environmental benefits would quickly accrue to people, making life more beautiful, easy and happy for everyone.”

And like most doomers, they justify their proclamations by pointing to a partial truth. In this case, the partial truth being that when humans do begin to get out of poverty their environmental impact initially does go up – but that is far from the full story.

PERC’s Vice President of Law & Policy, Jonathan Wood explained the full story this way:

“as economies grow beyond mere subsistence, environmental impacts initially increase but, after a certain point, those impacts decline. The intuition behind this phenomenon is simple: If you’re struggling to feed your children, you probably won’t devote much consideration to the environment far away from you in either time or space.”

Wood goes on to explain why this phenomenon occurs:

“As people grow richer, they care more about the environment around them and can afford to make choices that marginally increase consumer costs but in exchange for far greater environmental benefit.”

The relationship between environmental degradation and per capita income is known as the Environmental Kuznets Curve (shown below).

Source: https://www.c3solutions.org/policy-paper/free-economies-are-clean-economies-2023/chapter-2/

What the Environmental Kuznets Curve illustrates is that if our goal is to improve the environment then our strategy should be to get as many people out of poverty as fast as possible. 

Conclusion

Contrary to Degrowther fear-mongering, advancing environmental goals doesn’t mandate a retreat to pre-industrial times for those who are currently prosperous, nor does it mean that those living in poverty must remain destitute. Rather, research demonstrates that increasing prosperity, enabled by Economic Freedom, is the best tool at our disposal when tackling environmental issues.