Economics – Have you ever wondered about the negative side of globalization?
Have you ever wondered about the negative side of globalization? Nowadays there is hardly any economist who isn’t talking about its benefits, especially for low-development countries who get a chance to obtain foreign investments. However, we oftentimes forget about the dark side of globalization. During the recent years globalization has had a very important influence on the environmental issues. As the countries get more connected with one another through the globalization tendencies which are very strong nowadays, the problems of environment protection and pollution rise more sharply than ever during the previous years.
The capital which is flowing to the developing countries from highly-developed ones becomes one of the causes of damage which the world environment is getting nowadays. Even though many of such projects are presented as those which are favorable for the environment or at least the ones which don’t do any harm to them, the real situation is very dangerous, since the pollution of low-developed countries is facing their nations.
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In 1991 Lawrence Summers who was at that time US Treasury Secretary in the Clinton Administration and Chief Economist for the World Bank was supporting controversial adjustment policies. The report which he wrote and announced was dealing with the necessity of moving the dirty industries, i. e. those which pollute the atmosphere, to the lower-development countries. In his opinion, only this action could help the industrialized world at this moment, and it was the best possible alternative.
In order to support his statement, Lawrence Summers gave 3 reasons which were very logic, from his point of view. 3 reasons he gave are very similar in the idea which Summers was trying to bring to the audience but the strongest of them was the following: “The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always thought that under-populated countries in Africa are vastly under polluted; their air quality is probably vastly inefficiently low [sic] 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. ” (R,Mokhiber, R. Weissman, 1) Lawrence Summers was talking on a solely economic issue, but we can also see that his political views have very much influenced his opinion.
As an economist, Lawrence Summers could easily realize that the costs of pollution are much higher in industrialized countries like the US and others, but they are relatively small if the “dirty” industries were shifted to the lower-development countries. In the opinion of the economist, it’s much cheaper for the world to locate such industries in the countries where the level of life is very low, and thus the wages and the costs are very low. Lawrence Summers was certainly right in relation to the cost of health-impairing measurements taken in the lower-development countries.
According Anup Shah, Lawrence Summers “… gives a further excuse for corporations to prevent refitting factories in the first world with costly environmentally oriented measures and protections, and move elsewhere where regulations have been reduced or removed thanks to economic agreements”. The conclusion resulting from this is that instead of looking for ways to eliminate pollution resulting from industries’ activities by introducing new technologies, a much simpler solution can be introduced.
The highly-developed world will get rid of all the externalities resulting from dirty industries at the lowest cost by simply shifting those industries to other countries or even continents. According to Lawrence Summers, the huge amounts of costs which the industrialized world pays nowadays to overcome the results of pollution can be eliminated once and forever by using his policy. However, there are some issues to consider regarding the suggested policy.
In the economic sense, the argument is very logic because the costs of pollution are actually going to be non-linear due to the low costs of labor and low health-impairing costs in lower-developed countries. People who are going to work for the industries in those countries will be receiving much lower wages in comparison with the wages of employees who would otherwise be working for the industries in highly-developed countries. It will also be much easier to overcome the results of pollution in those countries due to the low costs of such measurements.
The policy which was declared by Lawrence Summers is very similar to the policy which International Monetary Fund and World Bank are providing. In the situation of globalization, they also stand for shifting dirty industries to developing countries in order to get benefits from their comparatives advantages. As far as experience shows, some companies were really successful when putting into life the suggested approach. It had a positive impact both on the activity of companies and the problem of minimizing environmental costs.
For example, Nike moved its production to the Asian countries. G. M. started using Mexico as the territory for producing the cars. As the companies’ management mentions, the technologies of production have remained the same. The only difference is that companies provide their production in countries with low wages, and thus they get many advantages. The environmental costs of the company in this case have also decreased dramatically. Many companies which wanted not to fall under the environmental regulations in the United States have also used this approach.
For example, some companies located in Los Angeles shifted their production to Mexico which is close by. Other companies moved production even to other continents. Owing to this move, they no longer functioned under the regulations of the US. One more advantage of this approach was for producers of polluting technologies because they got a new market of selling their production. If they could only sell their production to industrialized countries in previous years, now they had a whole market of third-world countries to sell technologies to.
Lawrence Summers also mentioned that for a while there was a problem of international trade of toxic waste but owing to shifting the production developing countries, this problem just disappeared by itself. Industrialized countries no longer have to care about getting rid of the toxic waste they got owing to the dirty industries located in their territories. As far as IMF and World Bank suggest, developing countries should better get more oriented on export industries than on the production for the need of the countries.
There is a rational thought in that as well- but industrialized countries still get the most benefit from that. The main question which remains controversial in Summers’ theory is whether anybody will actually be taking health-impairing measures in those countries, and whether there will be any actions taken to fight the externalities. It’s very possible that nobody will care about the environment of Indonesia or any other country in Asia where the plants polluting atmosphere are built. The managers of the companies would care if that were their country, and they were subject to different government regulations.
However, when they are abroad in developing countries, there is very little possibility that government agencies in those countries will put any restrictions over them. They will more care about the investments into their country than about the pollution in which those investments result. According to Russel Mokhiber and Robert Weissman, “in Thailand, for example, devaluation and the export emphasis has led to more agricultural exports and the expansion of shrimp farming, which the Asian Development Bank says is causing “destruction of wetlands and increased salinity of rice lands.
Illegal logging is leading to further erosion and deforestation” (R,Mokhiber, R. Weissman, 2). It’s also very easy to understand that the policy which Lawrence Summers is providing is very close to racism. The suggestions he makes are very useful for industrialized countries in the economic sense because they help those countries to get rid of harmful industries. However, the attitude towards developing countries is in general sense nothing but racism.
Globalization brings nations closer together but it also leads to advantages which highly-developed countries will get over the developing ones. We all know about the case with American oil company Texaco which had been polluting Amazon for many years (total, it dumped 16 millions of gallons of oil). There was a famous law-suit with this company which it lost. A tape was found in which the managers were talking to one another, and calling African-American workers “black jellybeans”.
There is no wonder the managers didn’t care about dumping the waste in Amazon- they simply didn’t care about any other nations except theirs which is an example of racism. Therefore, this issue raised by Lawrence Summers appears very complicated. In the economic sense, it’s a very good suggestion because it would be beneficial for the world economy. The total costs of pollution would be much lower in case of shifting the “dirty” industries into developing countries. However, the environmental issues are very important in this case, too, and they would have to be considered very carefully.