The Ecology of Commerce is a critical analysis of the way we conduct our business and our society today.
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Human beings are clearly part of the human and world ecology. Among the hidden costs of industrial economies are their effects on the lives of working people. One of the enduring criticisms of capitalism was its inability to provide full employment.
Capitalism today, to some extent, is an immature ecosystem and would require an ecologically mature (sustainable or restorative) economy to provide a secure living for all who work in it. Along the same line, institutional racism has created the social equivalent of a “labor toxic waste dump” with a large pool of permanently unemployable people whose lives are consigned to increasingly horrific levels of violence and deprivation. Large multinational corporations are likely to resist change at every opportunity. Thus changes are revolutionary in practice.
Our world is in the midst of an environmental crisis. The biosphere is being destroyed, possibly irreversibly, by the demands placed on it by an industrial society flawed in its central components. Changes were initiated so that business will function in a restorative rather than a derogatory mode toward the environment. Some positive and often intriguing examples—pollution permits, reusable containers, and the elimination of non-degradable toxics from industrial processes.
Laws could be passed so that corporations had to own whatever toxins or wastes they produced. These waste products could be chemically marked at a molecular level, so they could always be easily identified. Then the corporation would be charged a yearly “parking fee” for the storage of these wastes. This would give the industry good incentives not to use toxics in the first place or at least a good incentive for figuring out how to break them down into reusable products. In a restorative economy, the least expensive means of manufacturing a product should be the most environmentally benign and constructive means.
Taxation plays an important role in this situation. “Markets are superb at setting prices but incapable of recognizing costs.” Hawken explains that the idea for “green taxes” did not start with him. In 1920, Nicolas Pigou, an English economist, proposed taxing businesses for environmental damages. This will provide incentives for businesses to produce things in an environmentally sound way, and it will also give a competitive advantage to products that have a smaller impact on the environment. But what can national taxation do in a world of multinationals?
The idea is simple: when you tax something, you increase its cost, and you get less of it. But what do we mostly tax? We tax “goods” — things like income, investment, labor, and property improvements. As a result, we get fewer jobs, less innovation, and less investment in property. The business believes that if it does not continue to grow and instead cuts back and retreats, it will destroy itself.
Ecologists believe that if business continues its unabated expansion, it will destroy the world around it. The benefits of global expansion are highly concentrated in the northern countries, and in the hands of corporations and their owners… you cannot grow out of a problem if it is embedded in the thing that is growing, or as the Somalians say, you cannot wake up a man who is pretending to be asleep.”
While we are smart enough to acquire real power over nature, we are too dumb and irresponsible to control our waste output. We are rapidly, and what is worse,
knowingly, continuing to fill the air and water with some of the most potent poisons and pollution that is known to man. Every individual business person thinks only about their individual needs and production processes. “If we keep fouling our planet (our home), then eventually it will be a foul place to live. This is not too hard to understand – it makes good sense. Consumers provide business with profit, and they are beginning to see that this theory makes sense. Since they provide the profit, they are now starting to demand some form of ethical accountability.
The concept of “place” is irrelevant as far as large corporations are concerned, but it is of prime importance to human beings. Where we live, a sense of community, what we do, our education and health – these things are vital to us all. We need to find ways in business to reinforce these core essentials.
Surveys show that consumers want what they perceive as value. Cheap throwaway clothing no longer dominates the market. Value is the key concept because “value” can encompass many invisible dimensions. The task is to enable the consumer to see the invisible, which brings me to the value of the regional and local business. Since our purchase decisions can affect social conditions, why not spend locally and keep more wealth in the local region? A large proportion of a product’s price goes on the packaging, transport, and big business overheads.
In the case of a household cleaner, analysis shows that only $0.57 of the retail price of $3.00 stays in the community where it is purchased, whereas, if the same cleaner were bought by a store in bulk, then $2.37 per bottle would stay in the community. A very small change in the convenience of purchasing would contribute a lot to community wealth. Using this principle of localizing
production and distribution, communities don’t export capital; they consume less energy, and they cause less pollution. Big business is quietly investing in cleaning up their processes because they know that the confronting and vengeful consumer will eventually turn up.
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People and companies should be made to pay all the costs of their activities, instead of being allowed to impose them on other people, including other parts of the world and future generations. Ideally, green taxes should be set at rates that reflect these ‘true’ costs. It would include all the ‘true’ present and future costs of the resources used – as well as the damage caused to the environment and human health at every stage of production, processing, distribution, consumption, and disposal.
Green taxes began with the simple aim of discouraging people from damaging the environment by making them pay for using natural resources. For example, burning fossil fuels in power stations causes acid rain; it damages the environment and should be taxed. Raising the tax on motor fuel would encourage people to use more energy-efficient cars or to use them less, or both. Taxing the dumping of waste in landfill sites would encourage recycling and alternative ways of dealing with waste and might help to reduce the total amount of waste we create. And so on.
Green taxes are now seen as part of a wider restructuring of taxation – eco-tax reform – which will encourage not just environmentally sustainable development but also better economic performance, more jobs, and greater economic justice within and between nations. One reason green taxes make sense from an economic, social, and environmental point of view is that they tax ‘bads’ instead of ‘goods.’ If green taxes are successful, they will reduce the wholesale destruction of natural resources.
Green taxes are being used by the government to raise revenues rather than tackle climate change. Many green tax incentives are not merely tax deductions that reduce your taxable income. They are tax credits that directly reduce the size of your tax bill. Washington and Oregon fund their state environmental protection agencies more heavily from fees and taxes on polluters than many other American states.
Whenever production dies down, or social resistance imposes barriers on the expansion of capital, the answer is always to find new ways to exploit/degrade nature more intensively. To quote Pontecorvo’s Burn! “that is the logic of profit….One builds to make money and to go on making it or to make more sometimes it is necessary to destroy.” Multinational corporations have become so large and so successful at exploiting the earth’s natural resources that we are witnessing the physical limits being reached. The current method of increasing profits for corporations and their shareholders is to eliminate employees
On the other hand, a small fee will generally not be considered a tax unless it varies with the quantity or value of the commodity. A fee is charged for a privilege that you can start or stop at will, whereas a tax is a contribution for the support of a government required from those who live within the jurisdiction of that government.
The research found that significant increases in taxation would prompt a change in behavior. Green taxes guarantee that every penny raised in green taxes is handed back in income tax cuts. Green taxes must not be used as a stealth tax to raise government revenue. It is generally administered as a financial penalty on companies using excessive energy. It also acts as an incentive to reducing fuel emissions and promotes the importance of environmental sustainability by linking profit directly to fuel output.
Taxation of natural resources allows us to reduce the excessive load on taxing productive labor, thereby increasing international competitiveness. Green taxes are used to generate revenue to pay for the damages and cleanup costs from pollution and to pay for measures to reduce future pollution.
A green tax is a levy on pollution, ideally making polluters pay for the full social cost of their emissions. But if resources were properly priced to include the pollution costs, as producers passed on the pollution charge to their customers, consumption as such would not be a social problem. The problem today is that producers and consumers like car drivers do not pay for the environmental social costs of their activity.
In a truly free market, the government neither penalizes nor subsidizes production and consumption. If polluters do not compensate society for the damage they cause, they are in effect subsidized. A pollution charge prevents this subsidy. The green tax shift is therefore ethically right and good for the economy as well as the environment.
If polluters do not compensate society for the damage they cause, they are in effect subsidized. A pollution charge prevents this subsidy. The green tax shift is therefore ethically right and good for the economy as well as the environment. Taxes, some argue, should be similarly cyclical. This is the idea behind a green tax shift. The revenues generated by these taxes aren’t additional; instead, they are shifted to reduce other taxes (e.g., income tax) or even offset the green taxes themselves.
Furthermore, green tax schemes involve a shift from taxing good things (e.g., income, profits) to taxing bad ones (e.g., pollution, wasted resources) in order to encourage more environmentally sound behavior. Taxes, some argue, should be similarly cyclical. This is the idea behind a green tax shift. The revenues generated by these taxes aren’t additional; instead, they are shifted to reduce other taxes (e.g., income tax) or even offset the green taxes themselves. Furthermore, green tax schemes involve a shift from taxing good things (e.g., income, profits) to taxing bad ones (e.g., pollution, wasted resources) in order to encourage more environmentally sound behavior.
The whole key to redesigning the economy is to shift incrementally most if not all of the taxes presently derived from “goods” to “bads,” from income and payroll taxes to taxes on pollution, environmental degradation, and nonrenewable energy consumption. Because green taxes are incorporated into the price a company or customer pays for a resource, product, or service, they create powerful incentives to revise and constantly improve methods of production, distribution, and consumption, as well as means to reconsider our wants and needs. The purpose of a green tax is to give people and companies positive incentives to avoid them.
Essentially, the business that incurs the least waste and least environmental costs should also be the one that can produce the least cost widget. Hawken proposes a system of green taxes to make environmentally harmful and inefficient production methods more expensive. For example, his argument is that organic milk should be less expensive than conventional milk because, if you factor in the externalized costs of conventional dairy farming methods vs. organic methods, organic milk represents a more efficient and more sustainable way of doing business. It is only because conventional (often corporate) farmers can dump their costs on future generations that they are able to produce less expensively.
So the government should phase in taxes on these non-environmental businesses and their products so that costs are paid upfront, so businesses and consumers have a real picture of the expensiveness of doing business the old, wasteful way. He even suggests that all proceeds from green taxes be earmarked to reduce the public income tax liability so that nobody could use the money for political agendas.
Businesses that pollute would be forced to account now for all pollution they dump on the public, plus they would be liable for any future health or property damage. They would be accountable to somebody for their pollution instead of now being able to externalize these costs on the public. In this way, wastefulness would be less efficient, and the bottom line would push the business in the right direction.
Getting them to account for the costs of their wastefulness and destructiveness, however, is one way to ensure that profitability and environmentalism go hand in hand. Ideally, this is something to which corporations should be accountable directly to the public without the corrupting influence of government murking up the waters.
According to Paul Ekins and Simon Dresner, “Environmental or ‘green’ taxes and charges send signals to consumers by making consumption of environmental resources more expensive. However, there are concerns that their effect could be ‘regressive’ by hitting lower-income households disproportionately. Possible impacts on low-income households were attributed to four areas of environmental and social importance: domestic use of energy, water and transport, and domestic generation of waste. It also considered whether any negative impacts could be reduced if the tax or charge were designed appropriately, or if a compensation scheme were introduced”.
- Low-income households’ use of energy, water, and waste disposal services, and their use of cars where they own them, is disproportionate in relation to their income. This confirms that a flat-rate tax or charge applied to such usage would be regressive.
- For the average low-income household, the disproportionate impact could be removed through an appropriate (i.e., non-flat rate) design of the tax or charge scheme and by introducing a compensation scheme along with the tax or charge.
- However, the use of environmental resources tends to vary widely within a given income group. This means that, in practice, some low-income households would end up as net losers from any charging-plus-compensation scheme, even when the scheme leaves low-income households better off on average.
- Taxes and charges will cause some people to reduce their consumption of the environmental resource in question. This should reduce both the number and extent of the net loss, low-income households.
If environmental taxes and charges are introduced, they are designed so that they do not have unintended social consequences.
Most British people would accept new taxes on goods and services that damage the environment, according to a Guardian/ICM poll which reveals a widespread willingness to make personal sacrifices to tackle the threat of climate change. Some 63% said they approved of a green tax to discourage behavior that harms the environment. The poll comes as ministers face increasing pressure from environmental campaigners to combat global warming by increasing taxes on polluting flights, homes that waste energy, and cars with poor fuel efficiency.
The Natural Wealth of Nations offers concrete solutions to environmental problems by showing how we can turn the tremendous power of market economies away from environmentally destructive activities and toward protecting the natural wealth of human health. These and other proposals in this book would make the market better reflect the environmental costs and benefits of what we do. Putting a price on pollution turns environmental protection into a profit opportunity.
When businesses are faced with environmental taxes, many turn their expertise to creating technologies that conserve resources and slash pollution levels. Market-based solutions for environmental protection exploit humanity’s greatest resource: its creativity in problem-solving. The Natural Wealth of Nations put in our hands a clear proposal for encouraging a vibrant economy and protecting our planet.
Tax shifting-an innovation implemented in a dozen European countries–means reducing taxes on paychecks and profits and replacing the revenue, dollar for dollar, with taxes on pollution, resource consumption, sprawl, and traffic. Phased in over years, tax shifts actually boost prosperity and enhance environmental and human health at once.
Environmental issues are often framed as a choice between a strong economy and a clean and healthy environment. The Ecology of Commerce shows that we can have both and that environmental health can and should drive long-term economic health. None of us exists except in relation to our environment – in the broadest possible meaning of that word. Words relating to wider society are relevant to business: The celebration of… our mutual dependency as a species should be encouraged.
According to Tim Harle: “One concept which bridges the worlds of nature and business is the S (or sigmoid) curve. Organizations go through cycles of growth and decline, as do all things in nature: crops, generations, civilizations. Some organizations never recover from decline and cease to exist. Some become victims of their own success: the processes they implement to improve efficiency become established routines, departmental boundaries then act as barriers to change.”
According to Hawken, “Restoration of the natural environment isn’t possible without a substantial change in prevailing economic attitudes. For instance, corporations have to abandon the profit motive as their central organizing principle. The extraordinarily complex way in which a company ends up with a profit is reduced to a single concept, numerically neat and precise, but eliminating distinctions as to how the profit was made, whether people or places were exploited, resources depleted, communities enhanced, lives lost, or whether the entire executive suite was in complete and utter turmoil requiring stress consultants and outplacement services for the victims.”
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