Fossil Fuel and Capitalism: the foundations of the modern world

The following article is contributed by Henry Chew Zi Cun. Henry is the founder of Philosophy of Life, an organisation which promotes the philosophy of Objectivism. Together with co-founder Justin Ong, they make philosophy and economics simple, fun and easy for Singaporeans. 

In criticizing capitalism, Bertrand Seah and the climate activists miss the forest for the trees. Our modern lives are immensely productive, comfortable, and convenient because of capitalism. And capitalism is   underwritten by fossil fuels. 

To address the challenges raised; 1) Exporting heavy industries to developing countries is good for them, 2) The state should leave the economy free, 3) Capitalism have a much better track record than non-capitalistic countries in environment protection, 4) Fossil fuels are not over-reliant on subsidies but renewables are. 

Fossil fuel is an irreplaceable step to prosperity

The concern of carbon leakage, where companies export their emission-intensive industries to developing countries to escape regulation, is partially distorted. If the shift of heavy industries were purely due to carbon leakage, then that would simply mean the failure of local environmental laws.    

Some heavy industries did shift to developing countries, but this is also because developed countries were wealthy enough to turn down low-paying industrial jobs and needed a higher use of land and capital. The economies were simply transformed by wealth.

On the side of developing countries, where the politics allowed, they were incredibly earnest on economic progress. Economic history clearly documented these vital transitions of Singapore, Hong Kong, South Korea, Taiwan, and Japan. 

To alleviate poverty, developing countries need to industrialize their way out. One essential factor of such development is accessed to cheap, reliable and plentiful energy- fossil fuels.

Drawing from a study using statistics by World Health Organization in 2011, of ranking 24 leading causes of death globally, we find that poverty-related deaths outrank climate-related deaths tremendously. When we add up all poverty-related death like undernourishment, vitamin A deficiency, zinc deficiency, unsafe water, unsafe sex, sanitation, iron deficiency, indoor smoke from solid fuel, and we found that they are 60-70 times larger than climate-related deaths. 

Poverty-related deaths affect developing countries much more than in developed countries. Developing countries are right to focus on poverty alleviation and not climate change. Every single development is powered by cheap and reliable fossil fuel. It is more likely that a massive carbon tax would result in more deaths in 2050, than 2 degrees increase in temperature for developing countries. 

It is even more inhumane to force unreliable and expensive renewables upon developing countries. In fact, Greenpeace foolishly displayed the spirit of neo-colonialism when it campaigned against financing Nghi Son 2 by insisting that Vietnam “had the capacity for clean energy”. Fortunately, the Vietnamese coal plant obtained the necessary financing, and it will be (em)powering six million families.

Separation of state and economy

The function of the state (a monopoly of force) is to protect to individual rights, including property rights, under the rule of law. The market cannot function well when force operating within the market. When state gets involve with industry, individual responsibility diminishes into the “collective good”.

Consider the popular Marxist-Leninist dogma, “environmental deterioration was precipitated by the logic of capitalism and its relentless pursuit of profits.” Socialism, on the other hand, would avoid capitalism’s excesses. “Guided by ‘scientific’ principles, socialism’s goal was a classless and bountiful society, populated by men and women living in harmony with each other and the environment.” 

When British Petroleum, a privately-owned corporation, caused an oil spill in the Gulf of Mexico. It immediately established a $20 million fund to pay for damages and to help clean up the mess. It had legal obligations under the rule of law. Being a private corporation separate from the government, it was possible to bring legal recourse against it. 

Compare this to Pemex, Mexico’s government-owned oil company. In 2015 alone, Pemex was responsible for three catastrophic oilrig explosions, which resulted in several deaths, other injuries to workers on the oil platforms, as well as air and water pollution. Pemex denied responsibility, despite evidence from satellite imagery. When the media shed light on these events, the Mexican government tried to censor them. 

The collectivists argued that the Mexican oil industry was a “public commodity” and adverse media reporting would hinder progress of the “common good”. A few individuals should not stand in the way progress for all. 

Hence, the victims had no legal recourse, because Pemex is owned by the very government the victims needed to extract justice from. However beautiful was Marx’s promise, history prove that it is a gorgeous lie.

Capitalism is imperfect, but does that mean socialism is good for the environment?

Capitalism may seem to exploit the environment at first, but countries that embraced capitalism transformed out of heavy industries very quickly with the help of wealth creation. It was countries that embraced socialism that never got out of heavy industries and continues to destroy the environment. 

The Aral Sea was the fourth-largest freshwater lake in the world. Due to the massive irrigation projects in the Soviet Union, the sea shrank. Today, it is about one tenth of its original size. This was called “one of the planet’s worst environmental disasters.”

Similar histories can be found with socialist Poland, East Germany, Czechoslovakia, Cuba and present-day North Korea.

Even in “democratic socialist” Venezuela, Lake Maracaibo was heavily polluted with toxic chemicals such as mercury, as well as human sewage. There are about two million people that live around the lake, and with no plants to treat that sewage. As the result sewage discharge was at more than 10,000 gallons per second.

Climate activists are zealous to forget about socialism’s track record in both economic mismanagement and environmental deterioration when criticizing capitalism. 

However, we will likely be warned not to blame beautiful socialism, because the conditions were not right for socialism, perhaps due to climate change this time. 

Luckily for us, capitalism has worked for humanity regardless of rainfall, bee population and solar winds.

Subsidies and other dark monies

The claim that fossil fuels have remained the dominant energy merely because state subsidies, is taken entirely out of context. 

According to a study from the Institute of Energy Research in 2011, fossil fuels received USD$0.64 per Megawatt energy produced. While solar and wind received USD$776.00 per Mwh and USD$56.30 per Mwh respectively. Fossil fuels remained the dominant energy because it is cheaper, more reliable and more plentiful than renewables.

Fossil fuel can likely survive subsidies from being pulled from under its feet, the same cannot be said for renewables.  

It is also untrue that energy subsidies in ASEAN are hindering its transition to renewables. Wind and solar, by its nature, are intermittent and expensive. It is also dilute, which means that wind and solar needs 110 times more land than fossil fuels to produce the same amount of energy. Considering that most ASEAN countries are poor and have simply not enough flat empty lands, renewables are unrealistic options.  

Climate activists can erase the naïve mental image of fighting alongside Captain Planet against big evil businesses. They must know that taking up the green position does not automatically award them moral sanction, as not everyone in their camps sincerely supports their cause.

Energy companies fund climate activism, invest in wind and solar because they are lucidly aware that the intermittency for wind and solar increase the demand of natural gas as a backup energy source. 

Green is the new red

Critiques of capitalism had been made over champagnes in the past. However, recently the same critiques are made again over petroleum-enabled PCs, smartphones, and advanced university facilities. 

Carbon tax has a direct correlation to food price. According to researches done International Institute for Applied Systems Analysis, a raise in carbon tax to USD$190 per ton would cause a daily loss of 300 calorie per capita globally. We should be wary that the critics of capitalism are trying to starve us again, this time with carbon taxes, mal divestments of fossil fuels and impractical energy. 

Be it Greta Thunberg’s hostile speeches, SG climate die-in or the global extinction rebellion protest, they are all symbols of death and despair. Instead of joining them, we should live robust, active and exuberant lives of capitalism. 

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