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- Back on December 12, 1991, then the chief
economist for the World Bank, Lawrence Summers, wrote an internal memo
that was leaked to the environmental community, and we, in turn, publicized
it. This memo remains relevant.
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- Mr. Summers, currently the Deputy Secretary
of the Treasury Dept., is President Clinton's nominee to replace Mr. Wall
Street, Robert Rubin, as U.S. Treasury Secretary. As the country's chief
economist, Mr. Summers will be the driving force behind its global economic
policy. We can thus look forward, with trepidation, to further exertion
of the U.S.' free trade - at any cost to people and the environment - policies.
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- In 1994, by the way, virtually every
other country in the world broke with Mr. Summers' Harvard-trained "economic
logic" ruminations about dumping rich countries' poisons on their
poorer neighbors, and agreed to ban the export of hazardous wastes from
OECD to non-OECD countries under the Basel Convention. Five years later,
the United States is one of the few countries that has yet to ratify the
Basel Convention or the Basel Convention's Ban Amendment on the export
of hazardous wastes from OECD to non-OECD countries.
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- THE MEMO
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- "DATE: December 12, 1991 "TO:
Distribution "FR: Lawrence H. Summers "Subject: GEP
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- "'Dirty' Industries: Just between
you and me, shouldn't the World Bank be encouraging MORE migration of the
dirty industries to the LDCs [Less Developed Countries]? I can think of
three reasons:
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- "1) The measurements of the costs
of health impairing pollution depends on the foregone earnings from increased
morbidity and mortality. From this point of view a given amount of health
impairing pollution should be done in the country with the lowest cost,
which will be the country with the lowest wages. I think the economic logic
behind dumping a load of toxic waste in the lowest wage country is impeccable
and we should face up to that.
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- "2) The costs of pollution are likely
to be non-linear as the initial increments of pollution probably have very
low cost. I've always though that under-populated countries in Africa are
vastly UNDER-polluted, their air quality is probably vastly inefficiently
low compared to Los Angeles or Mexico City. Only the lamentable facts that
so much pollution is generated by non-tradable industries (transport, electrical
generation) and that the unit transport costs of solid waste are so high
prevent world welfare enhancing trade in air pollution and waste.
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- "3) The demand for a clean environment
for aesthetic and health reasons is likely to have very high income elasticity.
The concern over an agent that causes a one in a million change in the
odds of prostrate cancer is obviously going to be much higher in a country
where people survive to get prostrate cancer than in a country where under
5 mortality is is 200 per thousand. Also, much of the concern over industrial
atmosphere discharge is about visibility impairing particulates. These
discharges may have very little direct health impact. Clearly trade in
goods that embody aesthetic pollution concerns could be welfare enhancing.
While production is mobile the consumption of pretty air is a non-tradable.
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- "The problem with the arguments
against all of these proposals for more pollution in LDCs (intrinsic rights
to certain goods, moral reasons, social concerns, lack of adequate markets,
etc.) could be turned around and used more or less effectively against
every Bank proposal for liberalization."
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- POSTSCRIPT
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- After the memo became public in February
1992, Brazil's then-Secretary of the Environment Jose Lutzenburger wrote
back to Summers: "Your reasoning is perfectly logical but totally
insane... Your thoughts [provide] a concrete example of the unbelievable
alienation, reductionist thinking, social ruthlessness and the arrogant
ignorance of many conventional 'economists' concerning the nature of the
world we live in... If the World Bank keeps you as vice president it will
lose all credibility. To me it would confirm what I often said... the best
thing that could happen would be for the Bank to disappear."
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- Sadly, Mr. Lutzenburger was fired shortly
after writing this letter. Mr. Summers remained in the World Bank before
joining the Clinton administration and continuing his incredible rise toward
the Cabinet. Meanwhile, world trade has burgeoned with imbalanced cargoes:
banned pesticides, leaded gasoline, CFCs, asbestos, and other products
restricted in the North are sold to the South; tropical timber, oil, coal,
and other natural resources flow from South to North with little or no
benefit to the host communities; and while regulations tighten around dirty
coal and dangerous nuclear power plants in the North, they are proliferating
in Asia, Africa, Eastern Europe and Latin America, where they are owned
and operated by Northern corporations.
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- This trade has been facilitated through
tens of billions of dollars of financing by the World Bank, the U.S. Overseas
Private Investment Corporation, and the U.S. Export-Import Bank, government
institutions in which Mr. Summers has wielded his economic logic. His 1991
memo can be considered a working thesis behind this decade's dominant global
economic policies.
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