A conservative American viewpoint on sustainable developmentINTERVIEW WITH FRED SMITH, PRESIDENT OF THE COMPETITIVE ENTERPRISE INSTITUTE
- - INTRODUCTION
- - INTERVIEW WITH FRED SMITH
The following interview with Fred Smith, founder and President of the Washington-based Competitive Enterprise Institute (CEI), offers a conservative American free-market perspective on sustainable development. CEI, reads its brochure of presentation, " develops the moral and intellectual case for a free society and then aggressively promotes that case in the policy arena ". CEI was founded in 1984. In IIS 203, Fred Smith explains that American conservatives would see sustainability as the by-product of a classical liberal order. He then speaks of how Malthusian ideas dominate the thinking of the left today, which explains the underlying pessimism of the leftist interpretation of sustainable development. Although the left insists on presenting sustainable development as a process of integration, Smith thinks that " integration ", for the left, means in fact segregation between man and nature and overriding the market system. In IIS 204, Smith speaks about the American intellectual class and its role in the globalist movement. He presents Joseph Schumpeter's theory that capitalism would fail because it would produce the intellectual class, which would create the modern regulatory statist society. Smith also introduced Aaron Wildavsky's " cultural value theory ", according to which the four categories of individualism, hierarchy, egalitarianism and fatalism capture much of the political process. The Competitive Enterprise Institute does a lot of work with " value-based communication ". (This is, incidentally, an area where much greater Atlantic cooperation could take place). Business around the world needs to learn to demonstrate its genuine interest in human values and the human person. In particular, Smith argues, a better case should be made for the values of equality and justice.
Most American conservatives don't talk about sustainable development at all. They have not done more to clarify the global semantic confusion characterizing the UN consensus-building effort of the 1990s in part because the State Department and the Environmental Protection Administration have traditionally been headed by leftists. Although American corporate culture is changing under the influence of the global agenda, Smith does not believe that American companies are leading the global Corporate Social Responsibility movement : American business schools are, he says. But American businesses tend to try and appease the globalists and thereby make concessions to them instead of fighting for moral legitimacy independently from them. Business, explains Smith, is maladroit in fighting the global political fight.
- Under the aegis of the United Nations, sustainable development has become the new paradigm of international cooperation. Sustainable development was the object of a global consensus at the 1992 Rio Conference on Development and the Environment, and this consensus was reiterated and reinforced at the Johannesburg Summit a year ago. Where do American free market conservatives stand on sustainable development ?
Smith : The concept of sustainable development means, as I understand it from the Brundtland definition, that the use of resources in this generation should not impair the ability of future generations to obtain equal value. It is meant to be a concept of intergenerational equity in a way. As such, US conservatives would argue that we have created a sustainable world through the institutions of classical liberalism. Property rights, the market, contracts and all the other institutions that evolve from those, make it possible to use resources today to create incentives - if those resources are becoming in some sense scarce - encouraging people to invest in finding new resources, in finding better ways from using existing resources and in finding technological alternatives to achieve the services that those resources have. So sustainability means the dynamic process by which the resources patterns of today ensure the continued availability of such resources tomorrow. It is, in fact, nothing more than the by-product of a classical liberal world order.
- In the early 1990s, I remember that most conservatives in the United States would regard the so-called global consensus on sustainable development as a leftist agenda, and they would downplay the power of this agenda to achieve global cultural change. Have they changed their view and do they now endorse the concept themselves?
Smith : The modern environmental movement, which in many ways is the vanguard of the global leftist movement, is founded on beliefs stemming from the Malthusian view of the world. The Reverend Thomas Malthus has been dead for three hundred years, but his ideas are the dominant thinking of the left today. The left believes that man's presence on this earth is overstressing it, that we are non sustainable, that there are too many people. Its philosophy is a " terrible toos " philosophy: there are too many people, we consume too much and we depend too much on technology, which we understand too little. And the solution of the left, of course, is population control, consumption control and technology controls. Or, as conservatives call it : death, poverty and ignorance.
Why is the left Malthusian ? Marxism was not Malthusian. Marxists were believing that man could solve any problem. Indeed, the new scientific socialism would harness mankind into a far more productive method for solving the world's problems. Marxism would create heaven on earth. As the left in the world saw their vision failing, they switched from " give us power and we'll bring heaven on earth " (the optimistic marxist vision) to the new " give us power and we'll prevent hell on earth " - which is the environmental vision. The optimism of the old left became the pessimism of the new left. The old vision was scientific socialism and progressivism. The new vision is malthusianism and demand side management, restrictions, suppression : the world would be wonderful if men were only fewer, poorer and stupider. In that sense, sustainable development is the view that man is overusing the resources today. And the precautionary approach means that our efforts to retain a non-sustainable world create even more risks for tomorrow. So sustainable development for the left is a static concept of poverty. And the precautionary principle is for them a dynamic concept of poverty. They are both demand side ideas. Restricting men's numbers and requests will, in the leftist perspective, make the world sustainable. Conservatives have a different view of sustainability and of precaution. In our view, the concept of finite resources is misleading. Resources are what they are. It is man and the institutions that man arranges to maintain and to utilize those resources that determine whether those resources will become more scarce or less scarce over time. Resources that have been integrated into a system of property rights and markets, historically, empirically are sustainable. No resource that has ever been integrated into a property right regime is more scarce today than it was a hundred years ago. Humans are the infinite resource, and sustainability is achieved by enlisting humans to solve human problems, and markets, and property rights and classical liberal institutions, contracts and so forth do that.
- To get back to my question : are conservatives in the US using the concept of sustainable development, or do they refrain from using it because of the left's leadership on its interpretation?
Smith : I have written about sustainable development. I don't like the term because it is so misused. It is very hard to use the term " sustainable development " today without confusing people. On the other hand, the term in itself is not a bad term. It is clear that if you believe in sustainable development, your goal should be to reduce government, expand privatization, deregulate the economy, enforce contracts - in fact the opposite of what the left wants to do in these areas.
- As you know, the UN defines sustainable development as a balance system between three parameters : environmental protection, social equity and economic growth. What do you do about social equity ?
Smith : Most people, even most lefties, have conceded that markets, the classical liberal order, are better to produce future wealth. Their argument is : " yes, but it does it at the cost of inequalities emerging, and at the cost of destroying the planet. " Let's address both of those issues. von Mises, many years ago, said : " yes, environmental issues do emerge, but they are not the problem of market failures. They emerge because we have stopped, frustrated or not completed the classical liberal program. We have left resources out in the cold. " The fisheries issue, which is now very current in the news, is a problem. Why ? Because fishing occurs in a global commons. What we need to do is to extend property rights institutions to the oceans, as has been done historically, culturally by tribes centuries, thousands of years ago. But the modern order has not yet accepted the view that the problem of the fisheries and other commons is not that there is too much private property, but that there is too little. Resources that are left in the cold in politically mismanaged commons will become scarce - fish, ground water, rivers, or clean air. The challenge of environmental policy is to complete the classical liberal program, to continue it and to allow property rights in the environmental resources that are now at risk. It is not to stop the part of the world that works, the part of the world that has been integrated in the classical liberal order, but it is to expand that world to bring in the parts that have been left out. The developed world - Europe, the US, are wealthy today. The solution to global policy is to not make us poorer but to extend the market institutions that have made us wealthy to the developing world. The same thing is true with the difference between market resources and environmental resources. The solution is not to suppress the market. The solution is to bring environmental resources into the market system. We call this " free market environmentalism ", or " property rights based environmentalism ".
- What the left claims it wants to do, and has not yet fully succeeded in achieving, is to " integrate ", as they say, environmental protection and social equity into market mechanisms. " Integration " is a key word in UN language. They are aiming at conceptual and operational integration of the three parameters.
Smith : Well, we do too. But they don't really want to do that. They want to segregate. Theirs is not an integration philosophy. Theirs is a segregation philosophy. In the environmental area, their approach is totally Malthusian. What do they want to do to protect African wildlife, elephants ? They don't want to integrate them into a market economy, where the local tribes would own the elephants and decide to harvest them today and preserve them for a higher value use tomorrow - which would be how to preserve elephants. They want to wall nature off from mankind, restrict man's ability to use resources, to innovate, to integrate with nature. Man is so evil that man has to be kept out of the garden of Eden. That is not an integration philosophy. They want ecological apartheid.
- What I mean is that they have developed a set of global social and environmental norms which they want to integrate into business activity and management - their values becoming normative for business, in other words.
Smith : Sure. But they use " integrate " in a very specialized way. It is not " integrate ". It is " override ". They want to override the classical liberal order. They want to suppress economic liberty by using the argument that the environment, which has been outside the market, has been neglected. Rather than bring the environment into the market system and values, they want to use the failure of government to protect the environment to make the market fail. And that of course is a very powerful means, but it is nothing more than the continuation of the old socialist agenda under new guise. There is nothing new there. They are just using environmental arguments as they used to use human arguments. When they were trying to advance socialism to protect humanity, that was a much more powerful argument than the current view, which is : " we want to promote socialism to protect ducks and bunnies ". After all, ducks and bunnies are nice, but protecting human life is more important.
- And what about the other issue - social equity ?
Smith : It is just a failure to understand what equality means. Equality does not mean a bland brave new world, homogenized products where we are all alpha males and beta females. It means a world where human ingenuity, humans can be all they can be and realize their full potential. And that is a world where there will be vast differences of outcomes, but no barriers to individuals achieving whatever outcomes they wish to do. I think that the true challenge of the world today is to recognize that the egalitarian values have been captured, seduced into centralization and lack of freedom, whereas if we believe in egalitarian values, we should be in favor of liberalizing human institutions. Only liberal institutions have allowed mankind to be truly equal.
- America is very misunderstood today in many parts of the world. While it might be fair to say that the global left is led by American intelligentsia, it is not fair to say that values such as equality, solidarity or participation are not genuine, real American values. But the global left has radicalized these sound American values and turned them against the American people, thereby feeding the anti-American movement and strengthening the institutions of global governance.
Smith : Oh yes. The lefties are very clever. They make good use of their intellectuals. The intellectual class has every reason to be against freedom. Think about what classical liberal successes have achieved. They have created a world where there was enough wealth for a middle class to emerge - middle class being defined as people who had leisure, who did not have to work from sun up to sun down, people who had extra energies. Some of the middle class used these energies to become entrepreneurs. But of course enterprise creates even more wealth and an even larger middle class. Others became intellectuals. And what do intellectuals do ? They think, they scribble, they ask questions : " What's this all about ? Why is there injustice ? Why is there sexism ? Why is there racism ? Why is the environment being harmed ? Why does poverty still exist on our planet? How do we have a more just world order ? "
Civil society wants these people. You want gadfly reformers in your society, because the world isn't all it could be, and we should make it better. But some intellectuals look up from their scribblings and say: " Wait, if we are so moral and good and smart, why are we not rich, like the entrepreneurial brother? " Envious intellectuals promote reforms and social engagement. They say : " We are not poor because we are stupid. The entrepreneurs are rich because they are exploiting something - the planet, the women, the third world. Their gains are not legitimate gains. They are ill-gotten gains. The rich are rich because the poor become poorer and we got to bring justice to the world. " So they feel psychologically superior and reason : " We are not immoral like our money-grabbing capitalist friends ". To bring justice to the world, they argue for reforms, for governments and institutions to come in and create balance, to take away the powers of capitalism, to regulate the business community. Intellectuals get psychological advantages, and they get economic advantages, to suppress freedom. Where are you going to get when the brilliant, self-serving moral individuals supervise a new world order ? The outcome will be a mandarinate society. The intellectuals become the mandarins of the modern administrative state. Joseph Schumpeter argued that capitalism would fail. Capitalism would create the intellectual class. The intellectual class, driven by envy and greed, would create the modern regulatory statist society, which would empower it to further suppress freedom.
- Who are the current leaders of the leftist intelligentsia in the US ?
Smith : Robert Reich, Ralph Nader, Robert Cutner, Ralph Neas, almost every college professor in the US. There is a new generation. The intellectual class in America is ninety/ninety five percent leftist, socialist, because their class interest is socialist. That's true in Europe. That's true in the US. The scribbling, chattering class around the world is the primary enemy of freedom. This was Schumpeter's argument : that the intellectual class would undermine the moral legitimacy of capitalism. Without moral legitimacy, no system can survive. So capitalism would create its own destructive forces. We are pretty far along the line. The thing is - we conservatives are intellectuals too. The renaissance of the classical liberal movement represents an interesting phenomenon, which I don't fully understand : we are enemies of our class. We are class treators. I'd be better off, economically at least, if I believed in the statist philosophy, because the mandarinate society does very well by the mandarins. The goal of the intellectual mandarins is to create a mandarinate world where everything is harmonized and done by the elite for the good of the poor.
- How do US conservatives respond to the argument, used by the antiglobalization movement, the UN, many Europeans, that business is immoral, at best amoral? Somehow business needs to prove that it cares about the human person and is moral.
Smith : Exactly. And it does that by empirical evidence.
- Don't we need an argued, conceptual response as well?
Smith : We are doing a lot of work on what we call " value-based communication ". We argue that any institution, to survive in a representative democracy, has to not only succeed in empirical terms : it has to have moral legitimacy. The illegal drug industry is successful in the sense that it is flourishing, but it lacks moral legitimacy. So the drug industry is not a success story in the full sense of the word. Markets have been tremendously successful in creating wealth, but they have been far less successful in gaining legitimacy. So they are at risk today. The multinational corporation is being attacked on many fronts by left wing groups who then encourage others, and the government becomes antibusiness. Almost all the governments in the world are antibusiness today. America, in many ways, just as much as Europe is. The American regulatory structure is shockingly anticorporate, whether it is a Republican administration or a Democratic administration : the antitrust regulations, the SEC regulation in the US are horribly antibusiness. So what do you do ? You have got to develop a strategy which communicates your virtues, not just your vices. Your vices will be found out by others.
- And how do you do that ?
Smith : Aaron Wildavsky did what he called "cultural value theory ". Wildavsky believed that a society's attitude towards risk and towards everything would be determined in the political world by whether that society thought institutions, policies, technologies were compatible with, advanced or harmed the values of the people of that society.
I'll make a distinction between the private world of consumer choice and the governmental world of preferences. People, I believe, reach their decisions about where to go to school or what car to buy in a very different way than they reach their decisions about determinations such as: " What should we do about sustainable development, global warming? Should we join the euro or not ? " In the private world, there's information about choices. " Should I go to this school or that school ? Should I retire in Belgium or Italy ? " And you can acquire that information with work and effort, and that information affects your choice, and your choice affects your welfare. So in the private world of choice, people are rationally informed.
In the political world, people are also rational, and knowledge can be acquired about the pros and cons of joining the EU, various alternative views of sustainable development, free trade, agricultural subsidies. There are tremendous amounts of information out there, but at the end of the day, when you have spent all the time and effort becoming an expert on that question, so what ? You are not enlightened and hardly know what to do. For most people, there is very very little they can do about those political issues. Political rationality is in fact " rational ignorance ". This means that people in the political world are rational in their own way and therefore they spend very little time learning about the issue. You cannot educate the public on policy. The concept of an informed citizenry is illusory. There is no such thing as an informed citizen. People can't be informed about all the things that government does. In politics people aren't stupid because they are stupid. They are stupid because they act rationally and are smart. And if we try and make them smart, we are being stupid. But they have opinions. And those opinions determine what the politicians will do, pro-euro, anti-euro, pro-sustainable development, anti-sustainable development. Where do these beliefs come from ? Why do people have attitudes about things they haven't thought about ? Wildavsky argued that in the political world, people have filters. The filters deal with things such as : " I have core values. Does this policy in my quick judgment tend to advance or threaten the things that I care about ? "
- So this would be Wildavsky's " cultural value theory ". Can you further elaborate on what he meant ?
Smith : Wildavsky argued that there are four values that capture much of the political process : individualism, hierarchy, egalitarianism, fatalism. Fatalism is a non active political view : " there is nothing you can do about the world, it is going to happen one way or the other, it is all inevitable, it doesn't matter, it may be good, it may be bad, live with it ". These are the attitudes of many people in many countries, but of course in most developing world countries where it looks hopeless to try and affect the political future. If you get gold, you get rich, if you get hit, you are dead ; there is nothing in between.
The other three values, though, individualism, hierarchy and egalitarianism, are politically relevant variables. Individualism is a classic American viewpoint : " I run my own world, I am the captain of my ship, I make my own rules, leave me alone, get out of my life, let me run my world. " Freedom is the major criterion for the individualist class.
The second class is hierarchy : " What do the experts say ? What does tradition say ? What do my religious values say ? " Hierarchy looks to a natural ordering of society and adopts or fails to adopt, depending on whether they believe the resource is or isn't likely to be utilized. Hierarchy's major value is order. Europeans tend to be much more hierarchical than Americans do. They historically accept authority more than Americans do. The change force that has been around in changing America and changing Europe is egalitarianism. Egalitarianism focuses on justice, fairness : " What about the little person, the person left behind ? " These values, we all have to some extent, but in societies they tend to be dominant. Americans tend to be more individualist and less hierarchic than Europeans. Those would change the flavor. But egalitarianism, in many ways, is a dominant value of a world that is more free than it once was, and more orderly than it once was - the developed world. Egalitarianism becomes an emerging value. It is not per se antifreedom, but freedom isn't its highest value : justice is its highest value. The argument has to be made that a liberal world order will not only make the world freer and more orderly, it will also make the world fairer, more just. We happen to believe that that is true. The classical liberal order has done more for a fairer world than anything that has ever existed. The arguments made by business tend to be order variables. The arguments made by libertarians and classical liberals are freedom arguments. As a result, we don't argue the fairness debate as much as we should. We leave that to the leftist and socialists. And the socialists have taken the egalitarian value and used it to hammer the market over the head.
Our challenge is to find ways of demonstrating that our structure, our policies, our approach would make the world a more egalitarian, fairer place. American egalitarians once believed that. In America, there is a term called " American exceptionalism ". It argues : why didn't America become socialist ? We are the only country in the world that never became socialist. Why ? The argument is that in America, the egalitarian value was not as centralist as elsewhere. American egalitarians believed that centralizing power, giving more power to Washington, would be anti-egalitarian. Thomas Paine, Thomas Jefferson and Alexander Hamilton can be thought of as the three archetypal figures of America's founding. Thomas Jefferson the individualist - freedom. Alexander Hamilton, the centralist, the federalist - order, strong central government, the Paris belief. And Thomas Paine, the egalitarian - government is the friend of a powerful interest ; it is the enemy of the little person. If we give power to government, we are giving power to special interests which will abuse the little person. Historically, that is exactly what has happened.
We have not done enough with public choice thinking. We have not made the argument adequately that centralizing power, increasing the political element of our societies harms the poor, harms the less powerful, that government is not about empowering the poor. Government is about empowering special interests, which are often the rich and powerful already. So if you are worried about inequality, the last thing you want to do is increase the role of government.
- For geopolitical reasons, given the rise of antiamericanism in Europe and other parts of the world (due in part to the American pro-market attitude), it has become very important for America to argue and more clearly express its interest in the human person.
Smith : Part of the problem is that American politicians don't understand this very well. I wrote some papers to members of the Republican party telling them : " this is what you should do ", and they are not listening yet, but they are beginning to listen a little bit at the edges.
- It is very important in the context of globalization.
Smith : I agree totally. The USA did a little of that at the Johannesburg Summit, but not perfectly. We did not argue what sustainable development meant, but we did argue that development was the best way of addressing pollution. Paula Dobrianski, our Under Secretary of State, argued that poverty is the greatest source of pollution, and that meant that we had to have development in order to address the environmental issues. And that was a powerful change for America, and a direct assault on the Malthusian sustainable development view.
- But why is it that American conservatives do not clarify the meaning of sustainable development, the difference there is between their view and the UN view, the Clintonian view ? The Competitive Enterprise Institute has worked on that, but I mean American political leaders, and America as a nation?
Smith : I agree with you on that, but most conservatives don't talk about it at all. Part of the problem has been that the Environmental Protection Administration (EPA) has always been headed by leftists, whether republicans or democrats were in power. And the State Department has typically been headed by leftists, whether republicans or democrats. So the people who would have been the right people to make that statement did not understand it, did not believe in it. Yes, I agree with you totally. There is a definite need for a conservative environmental spokesperson. We have not had that yet.
- Well, it seems to me that the issue is global and should not be reduced to the environment, isn't it ?
Smith : In America it would probably come through as an environmental agency. We desperately need that, and we try to get people to do that. We have not succeeded yet. The next EPA administrator may be better than the one we have got today. So I agree with you that there is a need for clarification in this area. Part of the problem has been that up until these last two years, everyone who headed the environmental committees in the house and the senate of the United States, in the EPA and the interior department, with some exception, has been a lefty. So they have no reason to clarify. Now for the first time, we have some differences there. The people in the house and the senate represent a more free market perspective and we probably should give them a chance to give a speech, actually. Have you read the book of Bjorn Lomborg , " The Sceptical Environmentalist "? He, in many ways, is making the case that you would like us to make. He is making it from a lefty perspective. But from a lefty perspective, he has more penetration. He can get in quicker than we can.
- Do you see American corporate culture changing under the influence of the global, sustainable development agenda ?
Smith : American culture is affected. American liberals, in the American sense of " liberal ", now increasingly see themselves as part of a world society, a global catering class. They identify themselves with this global activity, they see nationalism as an obsolete concept, the future as internationalism, they want to abandon sovereignty and so on down the line. The arguments for doing so is that everything is connected to everything else, the environmental argument, the human rights argument, human rights abuses... We are partly responsible because this is just one planet. The one planet idea, the idea that everything is affecting everything is creating an intellectual net that is encouraging the US to be integrated in globalism, and the UN to be in charge. So there are people in the US who probably have more allegiance to the UN than to the US.
- Europeans paradoxically believe that Americans are leading the Corporate Social Responsibility movement.
Smith : I don't think that is true. American business schools are. We have a lot of courses on business ethics in business schools which are horrible, all about how to be ashamed. Most American business ethics courses essentially teach you how to apologize for capitalism. They are shockingly anti-business and anti-market. Historically, businesses in America faced a major crisis around the end of the 19th century. The national corporations were being attacked everywhere by governments, by Quakers, by NGO equivalents of that day, and businesses retreated, they tried to apologize, and then they gradually began to fight back and they began to argue that they were moral activities. Here is a quote from the 1920s by a business advisor : " If any manufacturer says : " I do not care what the common mass of people think about my business, whether it be popular or unpopular with them, that man is a liability to business leadership as a whole. No major industry has any moral right to allow itself to be unexplained, misunderstood or publically distrusted, for by its unpopularity, it poisons a pond in which we must all fish. " Businessmen at one point realized that they needed a certain moral legitimacy, and they acted on that belief. In the current crisis, now, the business community is apologetic and has adopted a Chamberlain style appeasement policy. Just as Chamberlain in Munich appeased Hitler and created arguably World War II, the business community is appeasing the globalists, and in the process they are threatening to undermine the whole possibility of a viable market global economy.
- What are the rootcauses or practical consequences of appeasement ? What is happening in American businesses today ?
Smith : I see it in American businesses, I see it more in European businesses, I see it in businesses across the world. Partly the problem is that the CEOs of major corporations do not understand the political process. They don't like the political process, they feel unsure of themselves, it is not their milieu, they don't know how to deal with it, they don't do very well with that, they don't have advisors who advise them well. And as a result they tend to shun it aside. They hire public affairs people, government lobbyists, they try to bribe They say: make this all go away. But they can't make the fight for legitimacy go away. They win the market, they do a wonderful job with the market place where consumers choose, and they fail on the political market place where citizens make decisions, and they leave themselves vulnerable. The wealth you create in the private world can be predated away by political predators, by political entrepreneurs, by NGOs, by exploitive international organizations. Business needs to fight a war in two worlds: the private world of competition, and the political world of rules and regulations. And that fight is a different fight. Business is maladroit in fighting that global political fight. They need to align themselves with policy groups that understand those wars and who can advise them on how to defend their moral legitimacy. Every businessman is vulnerable, no matter how much of a market share they have. If they fail to create moral legitimacy, they are at risk, because politicians are entrepreneurs too. Politicians would always sense moral vulnerability. And if a business is vulnerable, if it fails to justify its existence, then it can be held hostage, it can be taxed, it can be regulated, it can be destroyed.
- The UN has sensed that vulnerability since the end of the Cold War, on a global scale.
Smith : The UN is not the only one: the EU, national governments - and litigators in America are probably the greatest threat to corporations, and that is an American problem. America created the current litigation problem.