Alex Utopium of Utopium.blog and guest writer here recently penned a piece on his site called “Proper Price for Plastic?” He argues that the prices of plastics are artificially cheap due to subsidized shipping, disposal arrangements, and the lack of health and environmental protections in countries where most of the plastic production occurs (China). He raises an interesting question not only for plastics but also for just about anything we take for granted. With government hands burrowed so deep in markets, how many powder kegs are there just waiting to release a wave of economic turmoil?
Though while it is an interesting question, I’m not sure that it can be fully explored in a blogpost. Sure, we can look at cause and effect relationships with government intrusions in the markets, but with so many variables interacting and changing all at once, it is a monumental task to fully understand what’s ultimately powering the engine. It is certainly true that government actions could be causing plastic prices to be lower than they ought to be, causing overproduction and consumption without adequate ways to deal with the consequences of each. But it could also be the case that other government actions not mentioned by Utopium could be applying upward pressure on the prices.
Perhaps proper capital investment in the plastics industries are responsible for efficiencies in production and overall cheaper prices. Maybe red tape and regulations in western countries are driving production to places like China, raising the prices higher than what they could have been if property rights weren’t so subject to the whims of governments.
I don’t know what’s driving the prices of plastics and that’s because I don’t have enough information available to me. I am not able to understand how much each variable pushes the price up or down. I’m not even able to know what all the variables are! One thing I do know, however, is that government intervention causes the misallocation of resources and harms the economy. So whether or not we know if the plastics market is healthy, we do know without question that it would be better off without state fetters.
Now that we have the general criticism out of the way, let’s take a look at some more specific critiques of the article.
Utopium makes the claim that plastic production in China causes terrible environmental conditions for the surrounding communities and poor working conditions for workers. Let’s assume that this is true. Are conditions better in the West because “we are allowed to protest any bad environmental practices, to an extent”? Optics are important for a business and many are careful to make sure they don’t receive bad press for environmental and health issues, but optics are not the leading reason for cleaner production in the West. The United States used to feature filthy waterways and air in industrial centers just like China does now because it too was in the beginning stages of industrialization. It was made worse by the government taking the side of “business” in litigations of property rights violations involving pollution. Over time, savings led to capital improvements which led to improvements in processes and efficiencies; as a result, less waste was generated. Government environmental regulations can take some credit in making gains in putting pressure on businesses to clean up their processes but only because other arms of the government were preventing private property owners from doing so in a more productive manner.
The most compelling case that Utopium makes for an artificially lower plastic price is when he brings up subsidized shipping from China for consumer goods. And while plastics are used for packaging in those shipments and for many of the goods themselves, it is incorrect to assume that this must make up the majority of plastic exports from China. About 70% of plastics demands in Europe go to packaging (e.g. food), building and construction, and automotive. Many of these plastics are intermediate goods of production, durable goods, or at least wouldn’t be purchased individually (think of a huge freight shipment of plastic food containers to be distributed to other businesses in the importing country). It is true that the shipping subsidies do lower the overall price of these specific Chinese consumer imports, but how much does it affect overall plastics production? And if the subsidized shipping for customers purchasing goods directly from China didn’t exist, would the importation occur through larger freight shipments without a huge increase in overall product cost at the point of final sale?
Furthermore, what might we see in a world without tariffs and other sorts of red tape surrounding the movement of goods across borders?
Finally, we come to the issue of recycling and disposal: “I believe it to be the rude awakening of heavily consuming plastics, yet never having to store or recycle it properly.”
Says who? It is true that China has instituted bans on imports of plastic waste, citing environmental concerns (I wonder how many private waste disposal services in China there are…). This requires alternative places for plastics to be disposed of. This may not be the most popular idea in the world, but there is nothing wrong with using landfills for this task. Landfills are abundant and already even offer the opportunity to be used to produce natural gas. As the price of plastics disposal increases, it could make other waste-to-energy production facilities more economically viable.
I’m not trying to say that I know that Utopium is wrong with his conclusions. I’m saying that we don’t know enough to make a good judgement or at least that he didn’t make a convincing enough argument. While we may disagree with some points in his piece, I think we would both agree that if the state got out of the way of private property owners, the world would be considerably wealthier, healthier, more productive, and have a much better environment.
