Markets and Environment Essay ⋆ Environment Essay Examples ⋆ EssayEmpire

This Markets and Environment Essay example is published for educational and informational purposes only. If you need a custom essay or research paper on this topic, please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.

Markets are physical or virtual spaces where people buy and sell commodities in exchange for money or for other commodities through barter. Markets can be local, national, or international in scale and exist within larger social and cultural contexts that affect the rules governing market transactions. Because markets can only deal with commodities, i.e., goods or services that are treated as somebody’s property that can be sold, goods can only be made subject to market forces if they are first converted to a commodity form.

For example, humans can be made into a commodity if they are enslaved, but this form of commodification is now illegal. On the other hand, the Kyoto Protocol opens the possibility of internationally trading permits to emit carbon dioxide, treating carbon dioxide emissions as a tradable commodity. The rules determining which kinds of things are treated as commodities, and how they can be exchanged, as well as the market structures that emerge, all affect how people use natural resources, with profound environmental implications.

Commodification Trends

The general thrust within the last two centuries has been to transform more and more things into commodity form, for example, by enclosing commonly owned resources as private property. Karl Polanyi referred to this process as the “Great Transformation,” making the market the dominant social institution. This transformation is justified as promoting the more efficient allocation of scarce resources, using Adam Smith’s “invisible hand” of the free market to ensure that each resource is used by the people capable of making the best use of it. However, Polanyi showed that a countermovement, led by unions and other oppositional forces, led to a partial reversal of the trend toward greater importance of markets in the course of the 1930s and 1940s (particularly in Britain, but elsewhere as well). Yet another “great transformation” occurred with the rise of neoliberalism in the latter part of the 20th century, as described by Blyth and Harvey. Hence, despite the general trend toward expansion, markets are constantly subject to opposing social forces.

Free Market Forces

According to most economic theorists, a market only yields favorable results if it is free. For a market to be free, there must be many buyers and many sellers of a commodity, ensuring that no buyer or seller can manipulate prices. If a market is dominated by only a few sellers, it is an oligopoly market; if it is dominated by only one seller, it is a monopoly. In both oligopoly and monopoly markets, sellers can raise prices in order to get extraordinary profits; in fact, many profitable companies in the world operate in oligopoly markets (e.g., pharmaceuticals, agrochemicals, petroleum, and hi-tech manufactures).

If only one or a few buyers dominate the market, they can depress prices, as typically occurs in markets for agricultural commodities, mineral resources, and mature (low-tech) manufactures such as textiles. These markets tend to be dominated by companies that act as middlemen between producers and consumers. If the producers of these commodities have no other viable economic alternatives, they are forced to cut corners in order to continue in business. In agriculture, this may include the neglect of long-term investments to maintain soil fertility; in mining, it may include the indiscriminate dumping of wastes (e.g., mine tailings); and in manufacturing, it may include excessive pollution. In all economic sectors, it includes depressed wages and disregard for workplace safety (e.g., exposure to toxic chemicals).

If entire countries depend on sales in buyers’ markets, these strategies pervade their entire economy, and development must be financed from foreign sources (e.g., foreign aid and loans). This increases the danger of falling into severe debt and of dependency on institutions such as the World Bank and the International Monetary Fund.

The companies that dominate the markets use their political and economic clout in order to perpetuate their market dominance, making it very difficult for a free market to emerge. For example, barriers to entry of new firms may be raised by the strategic use of below-cost sales, or by patenting of minor innovations. Furthermore, the core industrialized nations have until recently been very successful in bargaining for the relatively unrestrained entry of their products into the rest of the world at World Trade Organization negotiations, while keeping their own markets relatively protected.

Environmental impacts of these trade inequities include the inability of many Third World producers to invest in more environmentally sustainable production methods because of low profit margins and the wasteful use of cheap imported commodities (ranging from natural resources to many manufactures) in the wealthy industrialized countries.

Labor Markets

Labor markets also usually deviate far from the model of the free market (as emphasized by Karl Marx, and the political left in general). If workers do not own the means of production, do not have an independent source of livelihood (e.g., farming), and have little or no access to social welfare payments from the government, their only alternative to being employed is to starve.

They are then not free to withdraw from the labor market and must accept any wages employers may offer. Only a scarcity of labor can enable workers to negotiate a wage that exceeds bare subsistence levels; that is, if there are few workers with particular skills that are in high demand. The contradiction between labor and capital involves persistent efforts on the part of both workers and employers to try to shift the labor market in their own favor.

Capitalists frequently employ a “spatial fix” (in the words of David Harvey) to circumvent higher labor costs in one place by moving production to another place (e.g., from the northern to the southern United States or from high-wage to low-wage countries), a strategy also referred to as the “race to the bottom.” It involves not only the search for lower wages, but also disregard for worker safety and other environmental concerns. Employers may also invest in more machinery in order to reduce labor costs; this strategy depends on sources of cheap energy in order to be able to run the machinery efficiently.

Regulation

Many “market imperfections” that cause undesirable social or environmental outcomes can be addressed through government regulations and/or through pressures from civil society. While the need for regulation is often clear, the methods by which regulations may achieve desired objectives are often far more difficult to determine.

In addition to market regulation, some environmentalists seek to remedy the problems of existing markets by developing alternative forms of marketing. One example is fair trade, in which Latin American, African, or Asian producers of agricultural commodities and some crafts products are guaranteed a minimum price for their products, to enable them to make a sustainable living. Fair trade often includes provisions for environmentally sustainable production methods, such as organically grown coffee. Another example of alternative marketing is local currencies, which are intended to stimulate local exchange among individuals and small businesses, usually with environmental aims in mind as well. This illustrates that markets exist in many forms, capitalist as well as noncapitalist, and will continue to evolve with society.

Bibliography:

Mark Blyth, Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century (Cambridge University Press, 2002);
Peter Dicken, Global Shift: Reshaping the Global Economic Map in the 21st Century (Guilford Press, 2003);
David Harvey, A Brief History of Neoliberalism (Oxford University Press, 2005);
Andrew Leyshon, Roger Lee, and Colin Williams, eds., Alternative Economic Spaces (SAGE Publications, 2003);
Karl Polanyi, The Great Transformation (Farrar and Reinhart, 1944);
Philip W. Porter and Eric Sheppard, A World of Difference: Society, Nature, Development (Guilford Press, 1998);
Jeroen J.M. van den Bergh, ed., Handbook of Environmental and Resource Economics (Edward Elgar, 1999).