It's Earth Day and the media will again carry several news items related to the terrible state of the environment on our planet. These will likely offer a variety of solutions such as government regulation, more government regulation, or perhaps, some government regulation.
That said, some writers have recently promoted the creation of linkages in industrial waste recycling between different industries, where the waste of one firm would become the valuable input of another. This is seen as a way to generate both economic and environmental dividends and as a more market-friendly way to solve problems. But most authors still believe that the search for increased profitability has traditionally been incompatible with this goal because it favors a short-term perspective in which manufacturers tend to lower their costs by dumping polluting emissions into nature.
This view, however, is based on an historically inaccurate assessment. Not only are higher profits and a cleaner environment compatible, but much historical evidence suggests that industrial recycling is a long-practiced, productive and, indeed, essential element of the market system.
Numerous books and articles documented the development of waste recovery linkages long before the birth of the modern environmental movement. These include Theodor Koller's The Utilization of Waste Products (1902); John B. C Kershaw's The Recovery and Use of Industrial and Other Waste (1928); and Charles S. Lipsett's Industrial Wastes and Salvage: Conservation and Utilization (1951).
Strangely enough, these works have been almost entirely forgotten, and most environmental and business researchers are not even aware of their existence. However, the details and extent of past industrial recovery practices were already so overwhelming by the middle of the nineteenth century that the British journalist Peter Lund Simmonds felt compelled in 1862 to state in the introduction to his 420-page survey Waste Product and Undeveloped Substances:
"The general subject treated of in this volume … is too extensive in its scope to be discussed successfully in detail here, since any one branch would of itself form a useful and interesting volume."
And as the journalist Frederick Talbot observed in 1920 in his book Millions from Waste,
"To relate all the fortunes which have been amassed from the commercialization of what was once rejected and valueless would require a volume."
As numerous writers observed, the profit motive has always enticed industrialists to find new ways of channeling as much of their outputs as possible through the economy instead of dumping them in the backyard, the river or the atmosphere. The Canadian-born economist Rudolf Clemen observed in 1927 that the tremendous development of by-products from waste in previous decades had been the result of "the ever-increasing force of competition" to which firms were submitted, as new substitute products were being constantly developed in other lines of work.
Even Karl Marx acknowledged that turning waste products into something valuable reduced "the cost of the raw material to the extent to which it is again saleable" and that these savings increased profitability. Marx even went so far as to say that after economies of scale, waste recovery was the second big source of economy in industrial production.
Industrial by-product recovery was also sometimes triggered by legal actions, or the threat of such actions, based on the common law doctrines of negligence, trespass, nuisance and strict liability for abnormally dangerous conditions and activities, or from specific laws that directly targeted industrial pollution.
In such cases, the idea of creating something profitable from polluting emissions was not the priority. On the other hand, it was regularly observed that creative engineers, chemists and technicians were rarely satisfied with simply neutralizing their waste products and that they often succeeded in creating commercially valuable inputs in the process of trying to dispose of them safely.
The idea that stricter environmental standards can spur innovations that reduce environmental harm and enhance business competitiveness has been independently rediscovered in recent years. However, modern commentators have so far failed to point out that unlike the modern "command-and-control" environmental regulatory apparatus which has often been blamed for institutionalizing barriers to innovative behavior, the common law did not mandate a specific technology to deal with particular problems and did not establish an arbitrary distinction between a useful material and a waste that specifically prohibits the re-use of the latter.
Reviewing how our ancestors dealt with these problems, one has to conclude that the best way to promote sustainable development is to remove these institutional barriers to innovation.
Pierre Desrochers is Assistant Professor in the Department of Geography at the University of Toronto and Research Associate at the Montreal Economic Institute. He is the author of the Economic Note entitled Reconciling profits and sustainable development: Industrial waste recycling in market economies.