It wasn't, actually...
In a lot of manufacturing industries, "dirty" production processes are a lot cheaper than "clean" ones. Since labor productivity in many developing economies is still very low, a demand that developing countries adopt first-world standards of pollution control may be a demand that they not industrialize--that they stay very poor.
It's not clear what the right policy is. It is clear that taking expensive steps to reduce the risk of prostate cancer (the reference in your last sentence) which kills you a long time from now when you are old should not be a high priority as long as you still have amoebic dysentery and cholera in your water. And to the extent that industrializing faster in a cheap-and-dirty way gets your government the resources to clean up the water, industrializing faster is a good thing.
Things are complicated--and this is why it is hard to figure out what the right thing to do is--by the fact that the beneficiaries from cheap-and-dirty forms of industrialization (the bosses of manufacturing firms, and those workers employed in them who aren't whomped by pollution-related diseases) are different from those who suffer from pollution (children who get lung diseases, and nearby residents poisoned by heavy metals). Will the profits from cheap-and-dirty industrialization go to cleaning up the public water supply? Or will they go to Swiss bank accounts?
As I understand the context of Lant Pritchett's memo, it was written in an internal World Bank debate with a whole bunch of guys who were ducking this whole set of issues, and simply saying that no factory should be built anywhere in the world that does not use best-world-practice emissions control methods--and thus had gone overboard on the "Malthusian" side: arguing (implicitly at least) that the best policy is to keep people in developing economiespoor so they won't pollute very much...
Brad DeLong