Monday, November 10, 2008

1991 satirical memo -- "pollution to Africa"


In 1991 Summers wrote a satirical memo (in the tradition of Swift's "Modest Proposal") suggesting some arguments to be used against serious proposals to the World Bank. 

Some people claimed to take it seriously, so Summers apologized, telling his critics that the memo was supposed to be a “sardonic counterpoint, an effort to sharpen the analysis” and that he had not been advancing a serious policy option. The week after the story broke, the Economist came to Summers’ defense, [saying] that if Summers “was merely trying to provoke debate,” “it is to be hoped that he succeeds—and that the Bank does not, instead, go silent on the subject.”  [ ref 'got re']


The excerpt below from Summers' memo should have made clear that the whole thing was satire. Some people chose to treat it as serious, and made it an issue in his confirmation hearings as Bill Clinton appointed him first Undersecretary of the Treasury, then Deputy, then Secretary. 

Bill didn't seem worried about it, though :-)

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.

Longer leaked text of the 'Africa' memo

1 comment:

1950 Democrat said...

From http://www.whirledbank.org/ourwords/summers.html

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.