Sriracha pollution and how a free society might handle it

On Oct. 31, Judge Robert H. O’Brien denied a request made by attorneys representing the city of Irwindale, Calif. for a temporary restraining order against a Sriracha hot sauce factory. Residents of the city have been complaining that pollution from the factory in the form of garlic and chile vapors are causing coughs, sneezes, headaches, burning throats, and watering eyes.

John R. Tate, representing Huy Fong Foods, the company that manufactures Sriracha, argued that shutting down the factory now would cause severe financial harm and interrupt a delicate production cycle, as well as prevent inspectors from the South Coast Air Quality Management district from completing an analysis of the air coming from the plant.

An upcoming hearing on Nov. 22, a judge will decide whether to grant a preliminary injunction against Huy Fong Foods. If this is denied, the city has also sought a permanent injunction on factory operations, though a hearing date has not been set for this request.

Situations like this one present one of the greatest challenges to free market anarchists, as many people cannot envision how people could solve a problem like environmental pollution without a government, and will thusly support the state out of this believed necessity. It is therefore worth examining how voluntary methods can solve pollution problems.

First, we must define what pollution is. The Free Dictionary provides a useful definition: pollution is the contamination of soil, water, or the atmosphere by the discharge of harmful substances. As everything in a stateless society is privately owned, pollution results in damage to private property. Thus, dealing with pollution is properly viewed within the context of dealing with damage to private property.

The first step is to mitigate losses, which as with other forms of private property damage, such as fires and floods, is best handled through insurance. Pollution insurance would cost a property owner a certain amount to maintain a policy and pay out a certain amount if the insured property becomes polluted in a manner described in the insurance policy. This system protects property owners against losses and incentivizes the insurance company to act to maintain a clean environment, as they make a steady stream of money unless and until pollution occurs, at which point they lose money. (Note: this type of pollution insurance is not the same as the commercial pollution insurance that is used today. Commercial pollution insurance is for the purpose of making sure that victims of pollution can be compensated in the event of the bankruptcy of a corporation that has caused an environmental disaster. As corporations are legal fictions created by the state, a stateless society would have no corporations in the contemporary sense, but commercial pollution insurance policies would likely still be held by private business owners.)

As with many problems, an ounce of prevention is worth a pound of cure. Such prevention can be accomplished through a system of dispute resolution organizations (DROs). These organizations would provide dispute resolution services, contract insurance, and contract enforcement in the absence of a state, and it would be necessary to retain the services of a DRO to ensure that one’s business associates cannot repudiate contracts without penalty. It is easy to ensure that people abide by DRO rulings which they agreed to accept in advance by employing a reputation rating or contract rating that works similarly to today’s credit ratings. Not keeping one’s word reduces one’s contract rating, which leads to higher costs for DRO services (if the DROs do not ostracize the person completely) as well as a reluctance by any other person to enter into a contract of business with a person who is known to be untrustworthy. This would make it difficult to acquire even the basic necessities of life, so people would obey DRO rulings in all but the most extreme cases.

Now that the conceptual organizations of a free society have been discussed, let us see how they can deal with pollution. Whenever the owner of a potentially polluting business wants to set up shop somewhere, they must first buy land from someone. In a free society, if private landowners choose not to sell to a particular buyer, then no one can force them to do so, as eminent domain is a violation of property rights which can only occur under a coercive system, such as the current statist system. But suppose that someone is willing to sell land to a potential polluter. A pollution insurance business then has several options: it can move to outbid the potential polluter, depriving them of a place to pollute; it can engage with the seller and explain why selling to the potential polluter is bad for everyone; it can pay the potential polluter to refrain from polluting; or it can work out a non-polluting contract with the potential polluter.

Let us assume that the potential polluter is extremely rich, such that outbidding the potential polluter is impossible. Let us also assume that talking the seller out of selling to the potential polluter is unsuccessful. The pollution insurer can pay the potential polluter up to the amount of money coming in from policyholders and still be making some profit. This could go toward pollution reduction technology, a buyout of the polluting factory, or a subsidy for running the factory at less than full production. Failing all of this, the insurer can pay out the claims from the property owners in the polluted neighborhood so they can clean up their properties or move away from the pollution source.

The DRO that represents the potential polluter would also be against the pollution, as pollution results in damage to private property, which leads to damage claims against the polluter. (Such claims can be filed regardless of pollution insurance, as a violation of property rights is occurring either way.) The DRO, in its roles as dispute resolver and contract insurer, would be paying out on such damage claims. A DRO would recoup these losses by raising rates for the polluter, and may drop the polluter as a customer if the claims against the polluter become too costly. The polluter would be unable to enter into contracts if no DRO is willing to accept the cost of paying out pollution damage claims, which would cripple the polluter’s business.

In a free society, there are the DROs of the residents, the DRO of the potential polluter, and the pollution insurance company all working to minimize pollution levels. The market has not failed at solving the problem of pollution; it has been forcibly prevented from doing so by state violence.