USA/Africa Dialogue, No. 286: Lawrence Summer's World

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 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