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13 May 1999
The tragic rise of the new Treasury Secretary
Back on December 12, 1991, 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 Pres. 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
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.
All the best,
Jim Vallette
International Trade Information Service
P.O. Box 658, Southwest Harbor, ME 04679 USA
Phone: 1-207-244-3106, Fax: 1-800-861-9611
e-mail: itis@igc.org
and itisme@downeast.net
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