Impact of the Economy on the Environment

[Administrator’s note:  This article needs more depth.  You can help the Interlock Project by expanding it – see the Participation page for more information on contributing to the Interlock Project.]

The short-term impacts of economic troubles on the environment depend somewhat on the severity of the problem.  On the one hand, if people are buying fewer goods and traveling fewer miles, cars and factories should be spewing out less pollution, and so on.  However, a prolonged recession and high unemployment creates a temptation to sacrifice long-term environmental goods for short-term jobs and profits.  Thus, when the economy slows and people are getting desperate, environmental protection starts to slip down their priority list; it’s not necessarily an easy decision for people and corporations to make, but when weighed against the alternatives, environmental protections are easy to discard, and the possibility of asking the regulators to look the other way “just until the economy recovers” becomes an increasingly cost-effective business plan.  The result of all this is that, as the economy suffers, eventually so does the environment.

In the long run, the relationship becomes even more complex.  If everything else stays unchanged, more growth means more factories, more fertilizer, more roads, more mines, and so on, and the history of the industrial revolution certainly shows that the initial effect of industrialization and economic growth is an environmental disaster.  But as people become richer, the air, water, and land become more polluted and public health effects become severe, so most societies – particularly democracies – become much more willing to institute better environmental protections.

Conservation efforts, government regulations, liability laws, and Pigovian taxes limit environmental damage and often turn out to be cost effective, saving society more than they cost the offenders.  Eventually, there is a tipping point, where reducing the environmental damage per dollar of GDP outweighs the increase in the number of dollars.  The US is probably past that point, but barely, and any continued reduction in damage per dollar depends heavily on the public mood and the ability of the political system to avoid the temptation to do favors for big donors at public expense.

In short, sustainable economic growth is possible and can be a positive for the environment, but only if the public continues to back environmental protection and only if political corruption is kept at bay.  Under current circumstances, we can’t count on either condition.

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