dancing beneath the diamond sky

And we'll dance beneath the diamond sky with one hand waving free Silhouetted by the sea Circled by the circus sands With all memory & fate Driven deep beneath the waves Let me forget about today until tomorrow... Hey Mr Tambourine Man play a song for me...

Sunday, October 08, 2006

iPods for us, Toxic Sludge for them

I was outraged to read the recent news headline (well, not actually headline, amazingly enough: just a little piece of “also happened in another corner of the world last week”) about the Dutch merchant ship that dumped a tanker full of toxic waste onto one of the world’s poorest and most strife-ridden countries – causing almost a 100,000 people in the Cote d’Ivoire to seek immediate medical attention. Close on the heels of this article was an op-ed piece (in the New York Times, by Bob Herbert- "Poor, black and dumped upon") that comments on how a disproportionate fraction of toxic waste disposal sites in the United States are located in or close to areas inhabited by blacks, poor whites and other ethnic minorities.

We study in any “Principles of Economics” course that one of the failures of the free-market system is that it doesn’t know what to do about the externalities it creates, of which pollution and toxic waste are prime examples. What I failed to appreciate until now however, was that the scale of the problem has shifted into a completely different league: with increasing globalization and world becoming a smaller place – these externalities have now become international. Are the poor countries of this world (like my own, for example) going to become dumping grounds for global waste?

The biggest irony of all this is something that comes out of an environmental expert’s analysis of the Ivory Coast affair: to quote, that “environmental regulation in the North has made toxic waste disposal so expensive that companies are now looking to the South.” This brings us back to one of the fundamental questions in law & economics and any of the social sciences, really: what are the consequences of government regulation? Can we ever really fully comprehend or foresee all the positive and negative externalities that regulation will have on the different parties involved in the social welfare function ? – a question that has become horrendously complicated now that the “social” in the social welfare increasingly means more than just your own country but as far as even - the West Coast of Africa.

I am tempted to say that a market-created externality can only be kept in check by a market-imposed punishment: investors will have to stop rewarding companies that act irresponsibly. But that brings us to the thorny issue of: if all the economic actors in the grand scheme of the free market are naturally driven to act in self-interest, then maybe self-interest points you in the direction of short-term profit maximization, and towards doing whatever it takes to keep your investors happy by delivering positive earnings growth quarter upon quarter, even if that means dumping your toxic waste cheaply in an ignored country in West Africa that no one cares about and which doesn’t have the teeth to bite anyone – because at the end of the day, it makes your 2006 2nd quarter results look better. And that’s what companies are meant to do, ultimately – generate wealth for investors. That’s how the engine of the market should work, and that’s how it chugs toward the greater satisfaction of “everyone”s needs.

What a tangle ! Are we ever going to find a way to fix the ills of the free-market system, or is anyone who even tries immediately and irrevocably condemned to be labeled a Marxist and thereby ignored, calumnied, and consigned into oblivion by the Establishment ?

4 Comments:

At 10:13 AM, Blogger georgefrancis said...

I feel the activism of people can ensure that the environment is protected - often pressuring governments and corporations to develop a conscious. Take the case of the French aircraft carrier that was turned back from Gujarat or the case of Pepsi and Coke being banned from certain states in India. All is not lost.

I don't think that the causality is clear. Is it that the toxic dump sites caused the area to cheapen and hence attract poorer residents or did poor neighborhoods result in cheaper land prices and hence viable toxic dump projects?

 
At 10:18 AM, Blogger georgefrancis said...

Sorry that was meant to be 'into developing a conscience'

 
At 10:43 AM, Blogger A.C.E said...

Well, I am not sure if it was a dutch vessel, but the point of the post remains. In any case, have we given any thought to laws and regulation present in the countries that are presented as "hapless victims"? In this case, according to the story I read somewhere, an European multinational co. sent a ship to a dutch clean up firm to cleanse it of "whatever it may contain", the dutch firm quoted a large sum to complete the task and the co. in question found a Ivory Coast firm to do the task, which it "accomplished" by dumping all contents into a local stream/river near the capital.So it appears as if european parties have done what they needed to do, but my question is should they do more than what is legally required? After all in this case they have contracted the Ivory Coast firm that is supposed to have cleaned up the ship and so can they be absolved or should they follow up what was done during the cleaning process? I am not so sure about that.

My 2c to GeorgeFrancis comment on banning Pepsi and Coke above: A cup of tea contains the equivalent of 160 bottles of pepsi(or coke) of pesticides. Should we ban tea? A cup of milk contains equivalent of 3000 bottles - should we ban milk? Punishing soda companies for what is actually the crime of Indian farmers using too much pesticides (the sugar in coke/pepsi is the reason for pesticide content in soda) is unfair. What kind of "externality" is this?

 
At 9:41 PM, Blogger Zulon said...

Re:a.c.e. comment...that depends entirely on whether accumulated cholesterol (form colas) gets you first or pesticides (ostensibly from tea though I disagree about the quantum)?
Also dumping toxic waste isnt purely a developing world problem - Italy has been struggling with the waste mafia for decades now and has suffered permanent degradation of fertile farmlands through I.Coast style dumping!!

My friend crime is a crime, it has little to do with where it is committed..and you need a serious relook at your stats

 

Post a Comment

<< Home