Free Markets Equal Sustainable Development

July 2, 2012

"The current global development model is unsustainable." That is the conclusion of the High-Level Panel on Global Sustainability, appointed earlier this year to outline the economic and social changes needed to achieve global sustainability. The panel urged the attendees of the U.N. Conference on Sustainable Development to embrace "a new approach to the political economy of sustainable development," says Ronald Baily, Reason Magazine's science correspondent.

This plea for change would advocate the introduction of a stronger global bureaucracy to enforce policies that are deemed "sustainable." However, history tells us that the only form of society that is sustainable and encouraging of development is democratic free market capitalism. This is first true in regard to capitalism's ability to allow for unprecedented prosperity for all economic classes.

  • Economic historian Angus Maddison calculated that, per capita, Western European incomes in year 1 A.D. averaged $600 and rose to $800 by 1500, reaching $1,200 by 1820.
  • In China average per capita income was $450 in 1 A.D. rising to $600 by 1500, and reaching $700 by 1820.
  • By 2008, average per capita income in Western Europe was $22,200 and in China $6,800.
  • The most significant changes that took place in both spheres during the centuries in question were the implementation and harnessing of markets.

In regard to sustainability, the fact that free market capitalistic societies are currently thriving across the world is a testament to their robustness. A slew of civilizations have risen and fallen in past centuries (which speaks to their unsustainability), and political scientist Gregory Brunk has proposed the "self-organized criticality cascade" model to explain why.

  • The usual example of self-organizing criticality is a sand pile in which grains of sand are constantly being added.
  • Many land and simply find a place in the pile; some grains land and cause small local avalanches that soon come to rest; and eventually a grain lands that causes a huge avalanche that changes the shape of the whole pile.
  • So a small, seemingly innocuous event (Franz Ferdinand's driver taking one route over another) can have incredible consequences (World War I).

Brunk emphasizes free markets protect societies from these avalanches. Profits and losses discipline people to learn quickly from and fix their mistakes, and consequently, markets are superb at using trial-and-error to find solutions to problems.

Source: Ronald Bailey, "Free Markets = Sustainable Development," Reason Magazine, June 12, 2012.

For text:

http://reason.com/archives/2012/06/12/free-markets-are-sustainable-development

 

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