[PEN-L:1816] Re: Re: Fwd: RE summers makes sense

[Ken Hanly <khanly@xxxxxxxxxxxxxxx>]

I fully  agree with Doug's column. In particular, he shows that the
conclusions of the memo follow with impeccable logic from the
presuppositions of Summers' own discipline and those of the World Bank.
Whether the memo was written by him or written as a lark is irrelevant.
As Henwood shows, the actions of the bank exhibit the same perverse but
impeccable logic as the infamous memo. Besides, I assume Henwood supports
implicitly my reductio view of the memo in citing the absurd consequences
that follow from the logic. Unfortunately, many do not see these
consequences as absurd and refuting the assumptions but as a recipe for
correct policy.
	By the way there are all sorts of ways used in CBA for measuring
the value of a human life, not just present value of future wages as in
Doug's article. Indeed, those who inherit and live off investments would
bridle at the thought that their lives are of no value because they will
never work for a wage. The consequences of such a definition would imply
that there was absolutely no cost to lives lost through  toxic pollution
in non-market economies where no wages were paid. This is just one of a
host of ways of valuing human lives for purposes of cost-benefit analysis
as I'm sure you are aware.
	 For example in health care some would recommend that the amount
spent on a person's health care should be equal to the amount of money
the person has, the present value of future wages, the amount that others
would be willing to pay towards his recovery etc. I can't recall but I
think this is called simplified Pareto life value. I probably haven't it
quite right, but the idea is that it is reasonable only to spend up to
the amount where any further expenditure could only make the person who
is ill better off by making someone else worse off, i.e. taking money
from them without their consent. In such cases there is not even a
potential pareto improvement because there is no way that the ill person
could even theoretically compensate those who spend further funds on him
or her.
	This definition of a life's value makes it irrational or at least
inefficient to spend large sums of money treating the poor, friendless,
and those without marketable skills. It may not be economically efficient
to treat a pauper with a broken leg but it might be quite efficient to
give a pop star a 100,000 dollar nose job every six months. Universal
health care systems are almost by definition inefficient when health care
policy is looked at within this framework. Health should be allocated on
the basis of wealth is what all this nonsense amounts to, not on the
basis of need.
 Similarly, pollution should be allocated on the basis of wealth and free
markets in pollution will assure this. The poor get the pollution and the
rich get rid of it. To a certain extent this can be done even without
some world body imposing a policy based on CBA.
	Desperately poor counties in South Dakota or elsewhere may be
happy to accept toxic wastes in their area as a means of bringing in a
few jobs and much needed economic activity. Those who are worst off will
"voluntarily" accept the trade, the libertarian will say! It is
paternalism to restrict voluntary trade. Indeed if the broader society
does nothing to help people in these areas why should we make things
worse by disallowing exchange that people in these areas believe is to
their benefit?  Within capitalism the argument has real force. Who are we
to say that poorer counties in South Dakota should not accept toxic waste
dumps or that  natives may not decide to use reserve land as dumps? The
problem is really a capitalist system that produces and/or does nothing
to remove these inequalities in the first place. There may be no viable
economic development of some reserves and many counties without
governmental development plans or policies that contradict the needs-and
demands-- of free-market capitalism. The free choice is this:
continue as you are jobless and with little hope or take a chance on
being poisoned but create a few jobs. The argument just proves that
capitalism is absurd and the shits for those worst off and forces them to
make choices that those of us who are better off do not face.
   Cheers, Ken Hanly
Doug Henwood wrote:
>
> N
> ========================================================================>
> 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