Wednesday, November 30, 2005

Economic Growth as a Moral Imperative

The recent disastrous accidental discharge of benzene after an explosion at a plant in Jilin owned by a well-connected and powerful Chinese oil company into the Songhua River, eventually contaminating the water supply in the large downstream city of Harbin, is interesting. Not for the reasons the press emphasizes 9the secrecy of Chinese authorities in initially underplaying it, the power of giant state-owned Chinese firms and the like, which is to be expected. Instead, it is a useful lesson in economic growth as a moral imperative.

The incident is striking because one wonders why such a potentially dangerous plant would be placed so close to a major source of drinking water. The incident is actually of a piece with an economically similar mine explosion in Qitaihe, which has killed 161 people as of Wednesday. This latter event is disturbingly normal in China, where such mining disasters killing dozens of people occur almost monthly. Norman Jennings, whom Reuters identifies as a "mining expert with the International labor Organization," attributes it to that bane of planners and activists everywhere, the lack of "implementation" of the already existing "good and effective regulations."

But the reason mine disasters are so common in China is the same reason it is so prone to environmental carelessness, which is in turn the same reason transportation disasters involving trains derailing or colliding, buses falling off roads, and overcrowded ferries sinking are so common in poor countries and so rare in rich ones. It is also the same reason that, as Thomas Sowell notes, two earthquakes just hours apart and of almost the same magnitude could have such different effects, with one killing tens of thousands in Bam, Iran, as poorly constructed buildings in a country with strict building codes collapsed everywhere, and another killing fewer than ten in Paso Robles, California and the surrounding areas.

The reason is scarcity. Transportation, chemicals, housing, and coal (or, more precisely, the energy that coal helps produce) are all things of tremendous value, but the resources needed to make them must be bid away from their best alternate use. Further, the safer we wish the production of these things to be, the more costly the resources needed must correspondingly be. In poor countries such as China or Iran the cost of further safety becomes prohibitively expensive in short order, while in a wealthy society such as the U.S. we can literally afford much more safety and still be housed, heated and capable of getting from Point A to Point B.

So too with environmental damage. (And so too with illegal immigration, currently swamping the U.S. and Europe, which is a topic best left for another time.) Contrary to the thinking of much of the environmental movement, which depicts corporate polluters as heartless profit maximizers who have contempt for the effects of their discharges, the creation of water and air pollution is something no one takes pleasure in creating. Unfortunately, such damage is an unavoidable side effect of the creation of something else that we value in addition to cleaner air and water. The tailpipe pollution accompanying a trip in a motor vehicle might be the side effect of taking a heart-attack victim to the hospital so that his life might be saved, the pollution generated in the course of manufacturing a computer is a side effect of putting you in a position to read this, and so on. In rich societies, where the basic necessities of life have been met, the cost of doing more to protect the environment is relatively low, so that we are happy to trade more expensive cars and computers for cleaner air and water. But in poor countries what economists (with our typical indifference to linguistic elegance) call the marginal rate of substitution between these contending things of value is different. To install very costly environmental controls or to restrict the passenger load on ferries or to enforce building codes that are very affordable in California means far fewer jobs, far fewer ferries (and thus less transportation), and far fewer buildings (and thus more crowding or more homeless). These are unavoidable tradeoffs that residents of poor countries, who face desperate choices unfamiliar to most Westerners, are unwilling to make. And so competition among them as they pursue their self-interest forces the level of environmental protection, etc., down to whatever level supply and demand inevitably yield. There is no legislating it away; there is only the possibility of changing the tradeoffs they face through growth. Indeed, many societies often turn on a dime after events such as the Jilin disaster and decide that they can afford more environment and less stuff. One thinks of the Minamata mercury disaster in Japan, the disastrous London smog deaths of the 1950s and the publication of Silent Spring in the U.S. China is probably in my estimation still too poor (and its government still too unresponsive to public presssure) to make such a turn now, but that day is coming soon.

Even child labor, which is condemned throughout the developed and in much of the developing world, should be seen in this light. Most child labor does not occur because the children have been kidnapped but because the parents have sold them into bondage. The affluent Westerner instinctively wonders why "those people" would tolerate something like that. While culture is not completely unimportant, it is worth noting that throughout history slavery is the norm and the prohibition of it the exception. In fact, parents in Bangladesh or Pakistan or West Africa or elsewhere where such practices are common love their children as much as anyone else. It is the tradeoffs they face that are different. For them to choose this future for their children must mean that the alternatives are worse.

There is substantial evidence from economic literature that economic growth causes better environmental quality, and modest but growing evidence that it causes reductions in forced labor, improvements in workplace safety, and so on. And so economic growth becomes a moral imperative. With vast swathes of humanity trapped in the most miserable poverty, it is perhaps among the most compelling needs of our time. Whether globalization achieves that outcome is something that not everyone accepts (although they should). But whether that is true, the promotion of growth, rather than of foreign aid (which is often frittered away in corruption and white elephants) or "fair trade" or other mirage-like nostrums, is among the most important tasks facing world leaders. Policies by rich countries that frustrate such growth, such as protection of their domestic agriculture and industry, are then moral outrages.


Blogger Jamie Irons said...


I enjoyed this piece. But you wrote:

There is substantial evidence from economic literature that economic growth causes better environmental poverty...

Is that what you meant to say?

Jamie Irons

1:33 PM  
Blogger Evan said...

Nope; thanks for alerting me to it.

2:36 PM  
Blogger Jamie Irons said...


I took the liberty of referencing a comment you made at Belmont Club, and your blog itself here.

Scroll down to comment #3 as well. ;-)

Jamie Irons

4:47 PM  

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