>I dunno, maybe I need a reality check again. Every once in a while I read
>this paragraph and think Summers might be telling the truth. I mean,
>weren't both he and Pritchard still considered World Bank liberals around
>the time this was written -- still on the same side as Stiglitz? And
>sometimes this paragraph seems like too perfect a reductio ad absurdam
>argument not to have been made that way on purpose. Essentially the memo
>argues that, if we follow out the logic of World Bank thinking to its
>ultimate conclusion, it would justify environmental degredation and
>shortening the lives of the poor. So conversely, if we think that's
>wrong, then there must be something wrong with the logic.
Pritchett was one of the happiest to see Stiglitz go, I'm told.
While it may have been the joint bad conscience of Pritchett/Summers speaking, I don't think they meant it as critique. Though it's quite right that their argument is the logical conclusion of bourgeois economics.
If I may cite myself...
Doug
----
Title: Toxic banking. (World Bank's environmental and global
policies) (Editorial)
Authors: Henwood, Doug Citation: The Nation, March 2, 1992 v254 n8 p257(1)
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Subjects: Hazardous waste sites_International aspects
Developing countries_Finance
World Bank_Economic policy
Reference #: A11881332
========================================================================
Abstract: The World Bank's chief economist Lawrence Summers believes in
dumping toxic waste loads into the lowest wage countries. The
bank is lending more money to economically deprived countries,
but still retains an enviable surplus.
========================================================================
Full Text COPYRIGHT The Nation Company Inc. 1992
"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." The publication of these words, from a leaked internal memo, cause a rush of bad publicity for their author, World Bank chief economist Lawrence Summers, who now claims he was being ironic and provocative. There were calls for his resignation. But Summers was expressing honestly the logic of his discipline and his employer.
Summers -- whose salary is 225 times the per-person income of the bank's Third World clientele -- is a whiz-bang Harvard econocrat, a class that believes religiously that money is the final measure of value. Happiness is a growing G.D.P. Legal issues can be resolved as competing economic claims, and ethical decisions can be translated into dollar terms, with the cheaper alternative always preferable.
In his memo, which criticized a draft of the bank's World Development Report, Summers was applying cost-benefit analysis, which measures the value of a human life by the stream of wages remaining to it. Say it will cost Global Megatoxics $1 million to install a state-of-the-art scrubber in its chimney. If Global determines that not spending this sum will shorten the lives of five people by ten years apiece, all that would be lost would be the present value of these fifty years of wages. At a wage of $1,000 a year, the cost of the five lives can be figured at $41,000, thanks to the magic of compound interest; at $30,000 a year, they're worth $1.2 million. As Summers said in his memo, "health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages."
Since the costs of pollution -- always priced in dollars or their equivalent -- rise with development, Summers argued, it makes sense costwise to dump in Africa. If a pollutant is going to cause "prostrate" [sic] cancer, a disease of old age, why not locate it in countries where people aren't likely to live long enough to get it? He concluded this section by saying that disagreement with this logic suggests the belief that things like "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." Exactly; as they should be.
It makes no sense for Summers to resign; he expressed the bank's logic perfectly. It's a bank, and acts like one. It may preside over a steady erosion of Third World incomes relative to First World ones, but it makes big money. Last year, after paying $7 billion in interest and fees to its investors and bankers, it had a $1.2 billion surplus and a rate of return that commercial banks would envy.
What's a public institution to do with that kind of surplus? The bank's executive board spends a lot of time working that question over. In 1991 it decided to contribute $267 million to its soft-loan affiliate, which lends to very poor countries at concessional rates, $29 million to the Global Environment Trust Fund and stuff the remaining $904 million into its hoard of "retained earnings"' which now stands at $11.9 billion. According to Unicef, preventing vitamin-A-deficiency blindness would cost $6 million. Preventing "the great majority" of childhood malnutrition deaths would cost $2.5 billion. But adding to the World Bank's surplus is a higher priority.
In recent years, the bank has moved away from project-oriented lending-power plants and dams-and toward structural adjustment lending, in which credit is conditional on adoption of a standard austerity/deregulation package. Not surprisingly, these schemes have savage effects, to which the bank has a ready answer-more loans. The bank is lending its clients more money to treat the poverty, social dislocation and environmental damage that earlier loans helped create. The bank funds greenhouse-gas reduction schemes in countries where the greenhouse-gas producers were initially financed by the World Bank.
Bank publicity makes much of a new environmental consciousness, but actions tell a different story. The bank exempted structural adjustment programs from environmental review even though their point is to work human and physical resources harder, which can't be friendly to people or their environment. It has redlined its environment department, leaving it little power. World Bank claims to a larger role in global environmental politics -- to be pressed, for example, at this spring's United Nations Conference on the Environment and Development -- should be beaten back with heavy sticks.
Whether or not Summers returns to Harvard, waste export will be a growth industry for these sluggish times. The practice of shifting dirty industries to poor countries is well established. Greenpeace follows the routine stuff all over the world-German (per capita income: $20,440) plastic to Argentina ($2,160), U.S. ($20,910) mercury to South Africa ($2,470), car batteries from everywhere to Brazil ($2,540). Plastic dropped into recycling bins is likely to be shipped to Malaysia ($2,160). The logic is impeccable.
--DOUG HENWOOD