History of Environmental Economic Thought

Erhun Kula

• Publisher: Taylor & Francis
• Year: 1997
• eBook ISBN: 9781134784318
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This volume presents the ideas of major figures in economics throughout history on key environmental issues such as population growth, resource scarcity and environmental contamination. Throughout, the historical roots of current debates are explored with empirical case studies illustrating the link between theory and practice. The final chapters l

1

THE EARLY DAYS

THE ROMAN EMPIRE AND MIDDLE AGES

The Roman Empire had its roots in small, self-sufficient agricultural communities with impoverished farmers. At first there was little trade, but this changed with the conquest of colonies that had an abundance of natural resources and a favourable climate for farming. For a time, the Empire transformed the conditions of small farmers, until a more complex social structure was established. Slavery, which had existed in earlier Greek times, continued to be an institution and slaves were used in agriculture, the construction of public works and the domestic needs of the larger households. For a while, economic activity developed as the conquest of new territories made more and more slaves available.

In later years, however, as supplies of slaves diminished, the basis of the slave-dependent agriculture began to suffer. The administration of large estates became unmanageable and landlords began to rent out the larger part of their holdings to free tenants or slaves, retaining only a small part for themselves, which they kept under cultivation. In order to defend the outer parts of the Empire, the Romans settled people who were loyal to them in the sensitive regions and who had the military capacity to defend the frontiers. These tenants were given certain privileges, but they were also under considerable obligations.

Eventually, military threats from outside and within the Empire, together with the huge encumbrances of administration and the extravagant living of the ruling class, began to bear down heavily on the people. Widespread discontent created by the burden of taxation and the mass of despairing slaves began to chip away the power of the Empire and undermine its largely land-based economy.

Surprisingly, Roman intellectuals produced no alternative economic theories. Roman law was created and developed by the necessities of the times; it maintained the right to own land without limit and guaranteed freedom of contract. In ancient Greece, land ownership had been limited by a strong ethical concern, but in the Roman Empire the individualism of the owner was prominent.

Reckless usage of natural resources became a widespread practice. For example, aqueducts constructed to provide Rome with an ample supply of water resulted in too much water being drawn from the surrounding countryside. Furthermore, the used water was discharged without treatment into the Tiber, leading to land contamination. Before its conquest by the Romans, the Libyan coast had been covered with vineyards and the hinterland with dense forests (Dobben 1966). Today, in Libya and other parts of North Africa, the remains of sizeable ancient settlements in what is now desert are testimony to the land’s environmental impoverishment during, and after, Roman times. Similarly, deforestation, over-salinisation and land erosion were widespread in other parts of the Empire. The Old Testament mentions large-scale commercial transactions for timber and agricultural produce in biblical lands (see Kings 5: 6–17; II Chronicles 2: 8–13), but under Roman administration the timber supplies of these regions rapidly declined, while intensive agriculture in Palestine and Mesopotamia turned large areas into desert.

Despite the abundance of natural resources, the Roman Empire failed to establish a viable economic structure. Its dependence on slave labour neither allowed efficient production, nor established loyalty to a state which tried to survive by way of militarism, oppression and harsh punishment of dissidents. Unlike the Greeks, the Romans did not produce great philosophers and thinkers, although Pliny the Elder, one of the few Roman thinkers, expressed concern about the use of slave labour, which he considered was inefficient. In large land holdings, supervision of slave labour was costly. Furthermore, slaves had no incentive to become productive or use natural resources wisely. Even tenant farmers did not strive to increase production, since they knew that whatever they achieved would be taken, one way or another, by the state, which was chronically short of money.

Trade and expansion of the urban industries could not be carried out with the existing economic structures; they was also hampered by a shortage of manpower. Although the requirements for slave labour gradually disappeared from agriculture, making manpower available for other sectors, trade and industry were looked upon as unworthy occupations. During the height of the Empire, landowners had lived in relative harmony with the commercial classes, but this did not last. The seeds of dissent had been planted right at the start of the Empire and, as the difficult times arrived, the struggle between the landowners and the industrial and trading classes not only failed to create a new ruling class, but contributed to the decay of Roman society. Moreover, as slaves and the proletariat embraced Christianity further divisions were created and, eventually, invading barbarians put the final nail in the coffin of the Empire.

The Middle Ages cover a period of roughly a thousand years, between the fifth century AD and the fall of Constantinople to the Ottomans in 1453. The essential characteristics of this period are stagnation or very slow economic progress, unquestioned acceptance of rigid social divisions and domination by the Church. The medieval times were not a complete break with the earlier period since its class structure and the distribution of land and its regulation had had their origins in the later period of the Roman administration. Economic activities were overwhelmingly land-based and the land was acquired by the conquerors who then divided it up between their past and future supporters. A manorial system was first established in northern Europe, particularly among German-speaking communities, which then spread to other parts.

The division of the social classes was rigid with different and carefully defined rights and obligations, and everyone knowing their place in society. The decline of the Roman Empire had given more and more administrative power to the landowners and eventually the estate became the new economic unit. Trade that had existed in Roman times was continued by northerners and southerners. Industry was confined to the needs of this trade and the demands of the small local markets. Various restricting forces developed in the form of guilds, friendly societies and monopolies.

After the fall of Rome, the power of the Church grew steadily both in its institutional sophistication as well as in its acquisition of land and privileges. There was a good deal of rivalry between the feudal landlords, who were scattered and lacked links of national union, and the Church was a unifying power for all. Ownership of private property by the Church, once the sole privilege of the nobility, was in contrast with the early teachings of Christianity in which the search for earthly wealth was not encouraged. However, there was an insatiable desire by all powers to acquire more and more land – the foundation of wealth, power and influence – and the Church’s growing land ownership eventually made it the greatest landowner in the Middle Ages.

MERCANTILISM

During the sixteenth and seventeenth centuries, the economic and social structures established in the Middle Ages began to crumble, largely due to growing economic activities. The medieval economic structure had a strong regional focus in which the nobility was at the centre of economic and political power. The monarchy had the strongest interest in the decline of the power of the landlords as this would lead to an increase in its own influence. It wanted change, but could not bring this about on its own; it needed alliances with other dissatisfied groups.

One such group was that of the smaller landowners, the gentry, who looked upon the state as a counterweight to the powers of the great landowners. Their interests were quite different from those of the barons, who were preoccupied with family power, wars and jousts. The smaller landholders were interested in commerce and agriculture and thus desired a strong central authority to maintain order, reduce restrictions, and promote the already growing markets. They realised that a decrease in the power and influence of landlords and an increase in the authority of central government would lead to a rise in their wealth.

Another dissatisfied group was that of the professional classes such as the lawyers and public administrators who lived in the developing cities. The legal profession wanted a greater role in society in the interpretation and definition of the complicated economic relationships that were developing from free association and private contract in the growing market economy. As the markets opened up, old and familiar legal relationships were becoming obsolete. On the other hand, public administrators had a vested interest in the growth of the power of the monarchy.

The third and most important group who desired a rise in the power of the Crown were the merchants who were beginning to benefit from the expanding trade. This group was already engaged in transactions with the New World and Asia and wanted to increase trade with the other countries of Europe as well. But for international trade to develop there was a need to eliminate tolls on roads and waterways, to have national monetary systems and regulatory fiscal measures such as taxes and tariffs. Fusfeld (1977) contends that these structures, which we take for granted today, were gradually formed by the forces of the Crown acting against the interests of the feudal landlords in the fifteenth and sixteenth centuries. Merchants began to argue that the widening international trade, in addition to increasing their own profits, would benefit national interests through such diverse groups as industrialists, workers and farmers.

Mercantilism was the first systematic body of economic thought that relied upon the power of the central authority (the Crown), national interest, self-sufficiency, exports (in particular, finished goods), the desire to accumulate treasure (in particular, bullion), opposition to usury and last, but not least, extensive regulatory and protectionist measures implemented by the Crown. Exports were stimulated by the acquisition of colonies, agriculture was encouraged by import restrictions as well as the taxation of food coming from outside, industry – including the supply of military hardware – was protected by various measures, wages were kept down and money supply was increased to keep economic activity buoyant. Many in the mercantilist school of thought believed that a favourable balance of trade was absolutely essential in order to bring gold, silver or other treasures into the country. With the accumulation of such treasures a country would increase its wealth. For example, Sir Francis Bacon argued in 1616 that care ought to be taken that exportation exceeded the value of importation and that the balance of trade be returned to the country in bullion. Likewise, Miselden, in 1623, wrote that in order to create a balance of trade surplus importation of foodstuffs and luxury goods should be discouraged and exports should be encouraged, creating employment opportunities for the poor at home. With a trade surplus England should be able to import bullion from other countries in order to enhance her natural wealth. (For further discussion of these views, see Roll 1953.)

The issues of population and natural resources featured in the mercantilist economic thought. An Austrian mercantilist, Phillip Von Hornick, wrote in 1684 that it was a good mercantilist principle to encourage the maximum growth of population that a country could support as this would strengthen the nation. Another writer, Antonio Serra, an Italian mercantilist, suggested that by favouring industry over agriculture a growing and healthy population would provide the industry with a diligent workforce which would enhance the nation’s balance of trade. Improved methods of farming were already making a large number of farmers redundant in the countryside and an urban drift was beginning to be seen. However, growing trade and industry were already absorbing a good proportion of migrant workers coming to the cities.

Early mercantilists were obsessed with the accumulation of gold and silver, a practice which had been common in the ancient world. The Greeks and Romans had had a policy of storing precious metals which would serve in case of need. In a letter from Jamaica in 1503, Christopher Columbus said that gold was a wonderful commodity. Whoever acquired it became the master of everything he desired; with gold one could even get souls into paradise. The more gold there was in a country’s coffers, the wealthier she became.

In Germany, Martin Luther abhorred the stupidity of his people by stating that Germans were making the whole world rich at the expense of their own country by sending their gold and silver to foreigners. Frankfurt was a hole through which Germany was losing her wealth. Mercantilist John Hales was especially concerned about the loss of precious metals in trade with other nations in order to import useless trifles.

It was a strong feature of the mercantilist doctrine to achieve its objective of hoarding precious metals by strict regulation. Since precious metals were the most highly prized representations of the wealth of a nation, it was a necessary policy to regulate their movements across national frontiers. Export of gold and silver was prohibited and their import was encouraged. In effect, prohibition of exports dates back to the medieval times. As trade with other nations increased, merchants were required to acquire a certain amount of treasure. For example, in England, an Act of 1339 required wool merchants to bring in a certain amount of plate for each sack of wool exported. The Navigation Act of 1381 also prohibited the export of gold and silver. The office of the Royal Exchequer was created to register all exchange transactions.

Mercantilist regulation was not confined to foreign trade, but extended to other parts of the economy, in particular, to manufacturing. Such regulation was tighter in some countries than others. In France, government regulation of industry was so detailed as to specify the required number of threads per inch in the manufacture of cloth. In England, however, although regulation was also tight, its implementation was not successful because the government was not able to administer regulations effectively, largely because of shortage of money.

Gradually, the basis of regulation began to change. Instead of acquiring bullion to increase the wealth of the nation, many recognised that wealth was created by trade, but that internal as well as external restrictions, aimed ultimately at hoarded bullion, were hindering rather than encouraging it. In the late mercantilist era, a different protectionist policy emerged to nurse industries and encourage work and employment within a country. Exports stimulated domestic employment and therefore they were encouraged; imports undermined it and thus they were restricted. The late mercantilist answer to ‘What is the source of the wealth of the nations?’ differed from the early one. It was the growth of trade and commerce rather than stock of precious metals.

According to Roll (1953), mercantilist doctrine and policy had a commonsensical validity in its time and was, by and large, successful in achieving its goals. Its main achievement was the abolition of medieval restrictions and the creation of unified and strong states that were powerful instruments in fostering trade. This prepared the ground for the development of industrial and commercial capitalism in later years. Mercantilists also turned out to be right about trade and national power, since the most powerful nations in Europe in the sixteenth and seventeenth centuries were those which had developed their international trade. However, as a criticism of the mercantilist doctrine, one could argue that the whole movement was, essentially, a means of justifying all sorts of interventionist policy by the state.

With regard to the natural resource scarcity, apart from precious metals, mercantilists had little to say. The population issue was not regarded as ominous. As previously mentioned, some mercantilists actually encouraged the growth of population with the understanding that a large supportable population would increase the strength of a nation. As new territories were opened up, land and natural resource-based commodities appeared to be endless, and there were no overwhelming pollution problems.

THE PHYSIOCRATS

Physiocrats was the name given to a number of French economists in the eighteenth century who were identified as anti-mercantilists. The most famous of these were Quesnay and Turgot. They disagreed with the doctrine of the mercantilist school and held that it was not the trade or volume of precious metals which created the wealth of nations but its land. Quesnay, in his famous economic Tableau économique, first published in 1758, tried to prove that surplus was first created by agriculture, which was then made available to other sectors and social classes. Although the land was owned by landlords, it was cultivated by tenant farmers, who were the real productive class. In addition to satisfying their own needs, farmers also provided for the needs of the landowners, public servants, artisans, merchants, the Church, and the monarchy.

The tableau attempts to show how agricultural output is shared between different classes in society, which is then repeated each year. Artisans, merchants and others cannot create any value themselves; they can only transform the value created by agriculture into manufactured goods which are consumed. Thus, it is agriculture alone which creates a surplus. The tableau ignores the exchange value of the product. It only differentiates between the use value, which is consumed, and that which is produced.

Turgot, like Quesnay, believed that only agricultural workers could create a surplus. Unlike Quesnay, however, Turgot contended that exchange value for goods existed, which he called valeur appréciative. When he became a minister, he introduced anti-mercantilist and anti-feudal reforms, which were supported by the king but opposed by the nobility. Eventually he was forced out of office. Turgot was essentially a non-interventionist with a capitalist flavour. In a way, he regarded landowners as capitalists who employed the farm labourers.

The physiocrats believed in the natural order which ruled human society. This order could not be changed by the state. The natural order was established by the benevolent providence for the good of humanity, which was so clearly in evidence that it should require only a little reflection to recognise it. Some important aspects of this order were the right to enjoy property, to exercise labour and pursue self-interest. The physiocrats’ view of wealth and the economic system in general was entirely based upon the ultimate natural resource – land.

Another name often associated with these ideas is that of Richard Cantillon, who has been regarded by economic historians as an independent thinker rather than as a physiocrat, despite the fact that some of his views share the same ground as those of Quesnay and Turgot. In his book Essai sur la nature du commerce en général, published in 1755, Cantillon (1931) defined land as the source of all wealth and labour as the power which produced it. All material goods and their value essentially stemmed from land and labour.

Cantillon pointed out that as a nation developed a trade surplus, spices, and other commodities, would eventually be drawn into increasing the purchasing power and availability of money at home, but scarce national resources such as land, domestic mines and labour would slowly become dearer. With regard to mines, their output at home would increase and the miners who worked them out would demand more food, clothes and manufactured goods. With this process, the share of commodities going to miners would increase, but to others, who did not participate in the mining operations, their share would decrease. The same would happen to the other products of land. Since land and labour were the only...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication
• Contents
• List of illustrations
• Preface and Acknowledgements
• Introduction
• 1 The early days
• 2 The Malthusian problem
• 3 Ricardian stagnation
• 4 Socialism, Marxism and the environment
• 5 Natural resources and the environment in neo-classical tradition
• 6 The interventionist school on natural resources and the environment
• 7 Market environmentalism based on property rights
• 8 Empirical studies on scarcity after the Second World War
• 9 Spaceship Earth
• 10 The sustainability debate
• 11 Ethical and spiritual dimensions of environmental exploitation
• 12 Summary and conclusion
• Glossary
• Bibliography
• Index