“Capitalism is killing the planet.”

You’ve probably heard this claim or something like it. The narrative is familiar: profit-hungry corporations belch pollutants into our air and dump toxins into our water with no regard for anything but their bottom line. According to this view, only the strong, regulatory hand of government stands between us and environmental catastrophe.

It’s a compelling story—but is it accurate?

In our previous discussions, we’ve explored what capitalism really means: a system based on private ownership, voluntary exchange, and individual decision-making. Now let’s apply this understanding to environmental questions.

The standard environmental narrative often begins with the Industrial Revolution, comparing today’s temperatures or pollution levels to pre-industrial times. The implication is clear: industrialization (and by extension, capitalism) started us down a path of environmental destruction.

What this narrative misses is the difference between industrialization itself and the economic systems in which it occurred. More importantly, it overlooks how property rights—a cornerstone of capitalism—actually encourage environmental stewardship.

Think about your own belongings. Do you take better care of the things you own or the things that belong to everyone and no one? Most people treat their own car far better than a rental, and for good reason. Owning something means bearing the consequences of neglect.

The same principle applies to environmental resources. When something is privately owned, the owner has strong incentives to maintain its value. A timber company that owns forestland doesn’t just clear-cut without replanting—that would destroy their future business. They manage the resource sustainably because their long-term profits depend on it.

Contrast this with what happens when nobody clearly owns a resource. The world’s most depleted fisheries aren’t private property. They’re “open access” areas where everyone races to catch as many fish as possible before someone else does. Economists call this the “tragedy of the commons,” and it’s a problem that proper property rights solve, not create.

“But what about pollution?” you might ask. “Companies dump waste to cut costs all the time!”

This is where the concept of externalities comes in. An externality is simply a side effect of an economic activity that affects someone not directly involved in that activity. When a factory pollutes the air, creating health problems for nearby residents who had no say in the matter, that’s a negative externality. The factory gets all the benefits of cheap waste disposal while pushing some of the costs onto unwilling third parties.

When a factory can pollute without paying the costs imposed on others, that’s not actually a failure of capitalism. It’s an absence of it. Capitalism requires well-defined and enforced property rights. This means that what someone else does on their own property is their business right up until it starts impacting someone else’s property.

If I make a bunch of trash in my yard only to turn around and dump it into your yard, you can sue me. That’s how property rights work. The problem with many environmental issues is that property rights haven’t been clearly established or enforced, not that they exist at all.

Let’s look at some real-world evidence. The Soviet Union—hardly a capitalist paradise—created some of history’s worst environmental disasters. The Aral Sea was nearly destroyed by Soviet central planning, and Lake Karachay became so contaminated with radioactive waste that standing on its shore for an hour would deliver a lethal dose of radiation.

Meanwhile, as capitalist countries have grown wealthier, they’ve generally become cleaner. The air in London today is far better than it was during “The Great Smog” of 1952, despite the UK having a much larger economy and population now. The same pattern holds for the United States, where air and water quality have dramatically improved since the 1970s, even as the economy has more than doubled.

This pattern, known as the Environmental Kuznets Curve, suggests that economic development initially increases pollution, yes, but eventually leads to environmental improvements. Why? Because clean air and water are what economists call “superior goods”—things we demand more of as we get richer. In other words, eco-friendliness is a luxury good.

Here’s where capitalism’s power of consumer choice comes in. As societies become wealthier, people become more willing (and, more importantly, able) to pay for environmental quality. Companies respond to these preferences by developing cleaner products and processes. It’s no coincidence that the wealthiest countries generally have the most active environmental movements and the cleanest environmental outputs.

Incentives and the innovations they lead to play crucial roles, too. The profit motive drives companies to develop more efficient technologies that use fewer resources and create less waste. Take automobiles, for example. Today’s cars emit about 98% less pollution per mile than cars from the 1960s, largely because companies competed to develop better technologies in response to consumer demand for improved fuel efficiency.

None of this means that capitalism solves all environmental problems automatically or that no government role is ever needed. As we’ve previously established, capitalism implies the existence of institutions to enforce laws against harm and protect property rights. And some environmental concerns, like the global climate, present unique challenges because property rights are difficult to define and enforce internationally, to say nothing of the philosophical questions regarding the extent to which property rights can be enforced. 

For example, when you purchase a house and the land it’s on, how far up and down does that ownership extend? Do you own the groundwater? Do you own the air around it? What happens when that air and water eventually migrate outside your property line and, therefore, your control? Do you still have both claim and responsibility regarding them? These are reasonable questions without easy answers.

But the notion that capitalism and environmental protection are fundamentally opposed gets it backward. A system based on private property rights, voluntary exchange, and the incentives these create can be remarkably effective at promoting responsible resource use.

The path to a cleaner future doesn’t require abandoning capitalism. Instead, it means strengthening and more clearly defining property rights, ensuring that polluters pay for the provable damage they cause, and allowing markets to channel our increasing wealth toward the environmental improvements that people demonstrably want as they become more prosperous. And since capitalism’s inherent methods of wealth creation mean more prosperity for more people, the answer to the question of environmentalism becomes pretty clear.

Put simply: if you care about the environment, you should be a capitalist.

Learn more about capitalism here.