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Summers, Trade, Treasury

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Page 1 of 3;Larry Summers' War Against the Earth;By Jim Vallette;CounterPunch;1999;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.;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.;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.;THE MEMO;DATE: December 12, 1991;TO: Distribution;FR: Lawrence H. Summers;Subject: GEP;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;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.;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.;3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income;mhtml:https://fullerton2.blackboard.com/courses/1/SPRING_2009_ECON_335_01_11894/content/_11815... 4/20/2009;Summers, Trade, Treasury;Page 2 of 3;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.;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.;POSTSCRIPT;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.;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.;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.;More on Environmental Policy & the UN System;mhtml:https://fullerton2.blackboard.com/courses/1/SPRING_2009_ECON_335_01_11894/content/_11815... 4/20/2009

 

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