Writing for Postmedia News, Craig Kielburger is concerned that Canadians are (a) not sufficiently committed to the task of recycling bottles, cans, paper, plastics etc., and (b) not willing to purchase recycled products in sufficient quantities to allow recycling businesses to be profitable. While his concern for the environment appears genuine, Kielburger fails to grasp the economic and environmental implications of the recycling industry he so fervently supports.
Kielburger says recycling is “a for-profit industry that keeps waste out of landfills. To keep the system sustainable, those businesses must be profitable.” It is true that independent businesses must be profitable in order to succeed. Equally true is that losses indicate that a business is wasting resources.
However, most companies in the recycling industry are not independent. They rely on municipal governments to levy taxes to finance the collection of recyclables on their behalf. Then, when these recyclables are sold to recycling companies and revenues fall short of the cost of collection, as is often the case, the difference represents a subsidy to the recycling companies, which must then be regarded as a special interest group.
These companies also rely on taxpayers to spend time cleaning and sorting recyclables prior to collection — another subsidy. Indeed, Kielburger scolds us for improper cleaning and sorting because that takes “a bite out of the industry’s bottom line.” In other words, he seems comfortable with the idea that we should all devote some of our time every week to the recycling companies, as unpaid workers.
We must remember that water is a resource which is used to clean bottles, jars, and cans before they end up in the blue box at the curb. And tax dollars are used to finance the trucks, equipment, and fuel — more resources — required to collect the contents of those blue boxes. Because these are subsidies, the monetary cost of these resources are not reflected in the books of recycling companies. When a business depends on government subsidies to avoid losses, it is regarded as a special interest group, and resources are wasted as long as the subsidies persist. This is the opposite of what the recycling industry is supposedly intended to achieve, namely the conservation of resources.
The Economics of Recycling
Profits tell us that a firm has taken various factors of production (labor, raw materials, land, buildings, machines etc.) and combined them to produce products that are valued by consumers, i.e., the products are worth more than the sum of their parts, which means these resources have not been wasted. In contrast, losses tell us that a firm has taken various factors of production and combined them to produce products that are worth less than the sum of their parts, which means these resources have been wasted!
Therefore, in order to determine the viability of a recycling enterprise, a free market firm must estimate the cost of committing resources (labor, trucks, machines, recycling plants, fuel etc.) to the task of collecting and processing recyclable materials. It must then estimate the revenue it expects to receive for its recycled products. If it believes the enterprise will be profitable, it will proceed. The firm will have decided that it is cheaper to make certain products from recycled materials than to make the same products from raw materials. In this way, resources in the ground are conserved.
However, if the firm does not believe the enterprise would be profitable, it will not proceed with recycling. But resources in the ground are still conserved, because a determination has been made that it is uneconomical to extract resources from the ground to build and maintain the trucks, plants, and machinery necessary for recycling.
This is the point constantly overlooked by the public when governments involve themselves in recycling. In our rush to conserve resources, we forget that resources are required for the task of recycling, and we just assume the government is doing the right thing. We must remember that the government operates outside the marketplace, and therefore does not concern itself with profits and losses. When it wants more revenue, it simply takes it from us. Thus, the government has little incentive to minimize costs, which means it has little incentive to conserve resources. As Floy Lilley explains:
… the price for recycling often tends to soar far higher than the combined cost of manufacturing from raw materials and virgin sources and dumping rubbish into landfills. To recycle waste is to use twice the energy and create twice the pollution from factories, trucks, and by-products.
Products Made from Recycled Materials
Kielburger says “our worst recycling mistake happens when we shop,” as he complains about low consumer demand because of “an unfortunate stigma against recycled products.” Well, it is what it is. Consumers are free to decide which products they will purchase. And Kielburger is free to encourage us to purchase more recycled products, but, as we have seen, any government subsidies for these products would be counterproductive.
A Social Contract?
Kielburger says “Recycling is a social contract … a partnership, and we all have to do our part.” He may be genuinely ignorant of basic economic concepts, but a “social contract?” I haven’t signed any such contract. Have you? When anyone talks about a social contract, they are referring to a nebulous document which supposedly defines the relationship between the government and its subjects. However, this so-called social contract cannot work because a moment’s reflection on government operations reveals a one-sided contract which imposes onerous responsibilities on citizens, while stipulating that politicians and bureaucrats are not to be held accountable for their actions.
Anyone invoking a “social contract” in support of a particular policy, is, intentionally or not, avoiding an analysis of the economic implications of that policy. Making decisions on this basis invariably results in economic regression, misallocation of resources, and lower standards of living.
Accordingly, with regard to recycling, we would do well to recognize that many towns and cities in the US have admitted that recycling doesn’t work. Did the politicians and bureaucrats in these towns and cities personally reimburse the taxpayers for all the resources they wasted on corporate welfare for recycling companies? No, they did not. There is no clause in the social contract requiring them to do so.