cj#877> Rachel’s #627: “SUSTAINABLE DEVELOPMENT, PART 4”


Richard Moore

Date: Thu, 3 Dec 1998 12:09:41 -0500 (EST)
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=======================Electronic Edition========================
.                                                               .
.           RACHEL'S ENVIRONMENT & HEALTH WEEKLY #627           .
.                    ---December 3, 1998---                     .
.                          HEADLINES:                           .
.                SUSTAINABLE DEVELOPMENT, PART 4                .
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Sustainable development means achieving human well being without
exceeding the Earth's twin capacities for regeneration (trees and
water, for example) and for waste absorption (carbon dioxide, for
example).  As we have seen in recent weeks (REHW #624, #625, and
#626), there is growing evidence that humans have already
exceeded both of these capacities and that further growth in
throughput (making more stuff using more energy) will only make
things worse.  Of course, increasing efficiency (making more
useful things with fewer materials and less energy) can buy us a
short reprieve.  But it appears that we are approaching (or have
already exceeded) the Earth's limits for handling many kinds of
wastes.  Sooner rather than later total throughput (measured as
the total number of humans multiplied by their furnishings and
the energy they require) must soon decline or we face a harsh
future with (for example) more big, costly storms and more
poisoned wildlife and people.  Recall that hurricane Mitch just
killed over 10,000 people and devastated several national

To bring human economic activity into line with Earth's limits,
we will need to understand the forces that are pushing us in
wrong directions. Chief among these is the drive toward "free
trade," according to economist Herman Daly.[1,2]  If there is one
thing that most economists, politicians, and business leaders
agree on, it is the desirability of free trade.  Daly, on the
other hand, says free trade undermines environmental standards,
drives down wages, weakens our capacity to do better, and
undermines our sense of community.

Free trade is the absence of barriers to international trade.
There are three common barriers: tariffs, quotas, and
restrictions on the flow of capital.  A tariff is a tax on goods
coming into a country --for example, a tax on Egyptian cotton
imported into the U.S.  A quota is a limit on imports --for
example, the U.S. might accept only a certain number of Japanese
automobiles.  A third limit on free trade might restrict the
amounts of foreign capital that could flow into a country.  For
example, in response to its recent (and ongoing) financial
crisis, Malaysia is now severely restricting the amount of
foreign capital that it will accept.

Almost all traditional (neoclassical) economists favor free
trade. Among economists, free trade has taken on the character of
a religious faith, its power to do good unquestioned.  Among
traditional economists, Herman Daly is viewed as a heretic.  He
believes free trade is bad for everyone (except transnational
corporations) for the following reasons:

** Free trade tends to lower environmental and social standards
internationally.  Take the example of two nations: One nation
internalizes environmental and social insurance costs to a high
degree (enforcing strict environmental laws; providing benefits
such as health care and social security).  The second nation
refuses to internalize these costs --providing no social
security, and throwing toxic waste into its rivers.   Products
from the second country will sell for less and will tend to drive
competitors in the first country out of business.  Thus there is
a clear conflict between a national policy of internalizing
environmental and social insurance costs and a policy of free
trade.  The country that exploits its environment and its
citizens is rewarded.  The country that protects its environment
and its citizens is penalized.

Of course if we had a world government to enforce environmental
rules and minimum standards for human well being, this problem
would disappear.  But no such government is in sight.
Furthermore, the world's economists cannot even agree on how to
measure the costs of environmental degradation; the vast majority
of economists continue to account for depletion of natural
resources as if it were income --a preposterous and wrongheaded
accounting practice that is nearly universal.  (Any business that
treated depletion of its assets as income would be bankrupt in
short order.)

One solution would be a tariff on goods imported from countries
that refuse to internalize environmental and social insurance
costs.  Such a tariff would aim not to protect an inefficient
domestic industry but to protect an efficient national policy of
setting prices to reflect the full costs of maintaining community.

**  Wage levels are set mainly by population size and growth
rates. Countries with large populations, rapidly growing, tend
toward low wages.  This is especially true because the laboring
class tends to have a much higher birth rate than the owning
class, often twice as high.  Labor is the main cost in most
consumer goods.  Therefore, cheap labor means low prices,
creating an advantage in trade.  Capital therefore tends to move
to low-wage countries.  Herman Daly believes that the effect of
unrestricted capital mobility is the same as the effect of
unrestricted labor mobility.  If the U.S. had unrestricted
borders, we would enjoy endless cheap labor, but wages would
plummet. Unrestricted capital flow will have the same effect,
Daly says. "United States capital will benefit from cheap labor
abroad followed by cheap labor at home, at least until checked by
a crisis of insufficient demand due to a lack of worker
purchasing power resulting from low wages," Daly wrote in 1996.

Daly's words have a special resonance today when Asian economies
have been devastated by overcapacity for cars, chemicals, and
electronics. As Louis Uchitelle of the NEW YORK TIMES wrote
recently, "In an open-border global economy nearly every car
manufacturer, for example, is trying to have a presence in every
market.  But when all the factories crank out more cars than
people can buy, down come car prices.  Down go the profits of car
companies.  Out go the workers. And down go the number of people
who can afford to buy cars.  Economies can spiral downward toward
recession, or worse.... The global economy appears, in effect, to
be capable of self-destruction."[3]

The problem of uniformly low wages could be solved by maintaining
low population growth everywhere, plus a fair distribution of
benefits, plus policies to internalize the costs of environmental
protection and social insurance.  But even if all this were
achieved, Daly says, free trade would still be harmful:

** Free trade and free capital mobility separate the ownership
and control of businesses, and force labor to become mobile
--both of which undermine human community.  "Community economic
life can be disrupted not only by your fellow citizen who, though
living in another part of your country, might at least share some
tenuous bonds of community with you, but by someone on the other
side of the world with whom you have no community of language,
history, culture, law.  These foreigners may be wonderful people
--that is not the point.  The point is that they are very removed
from the life of the community that is affected significantly by
their decisions.  Your life and your community can be disrupted
by decisions and events over which you have no control, no vote,
no voice."[4]

** Daly believes that free trade and free capital mobility have
created economic instability by permitting huge imbalances in
international payments and capital transfers resulting in debts
that are unrepayable or excessively burdensome.  Efforts to pay
back loans while still meeting domestic needs have fostered
government deficits and high inflation rates, furthering
instability.  Inflation then takes an additional toll: currency
devaluations, foreign exchange speculation, repudiation of debts,
and bank failures.  Thailand, South Korea, Malaysia, Indonesia,
the Philippines.  Who is next?

** Free trade appears to loosen the constraints of the ecosystem,
but this is a false picture.  We must all live within the
absorptive and regenerative capacities of the ecosystem.  Trade
allows us to import environmental services (including waste
absorption) from elsewhere. Within limits, this makes sense.  New
York City cannot grow its own food and must import it from
elsewhere.  But, Daly says, free trade leads to a situation in
which every nation is trying to live beyond its own absorptive
and regenerative capacities by importing these capacities from

It requires 12.6 acres of land per person (5.1 hectares) to
create the flows of materials and energy needed to maintain an
American lifestyle, and Europeans require nearly as much.  But if
you divide all the good land on Earth by the present human
population, you find there are only 3.7 acres (1.5 hectares)
available per person.  This tells us that everyone on Earth will
never be able to enjoy the hedonistic lifestyle to which we are

Secondly, if you divide all the good land in the U.S. by the
current U.S. population, you find that we have only 6.9 acres
(2.8 hectares) per person.  This means each of us is "borrowing"
12.6-6.9=5.7 acres (2.3 hectares) of someone else's land to
maintain our lifestyle.[5] (Is this one reason why we spend $250
billion each year --5 times as much as any other country
--maintaining our armed forces?)

Thus we in the overdeveloped north face a number of uncomfortable
moral realities: with at least a billion people not getting
sufficient food calories each day to maintain subsistence, they
require economic growth --not merely development --to meet their
needs.  Yet growth is already stressing the planet's capacity to
regenerate itself and absorb our wastes.  It appears that the
overdeveloped north will have to stop growing (and perhaps
shrink) before the south can take its rightful place at the
world's table.

Daly acknowledges that the roots of this problem are much deeper
than free trade ideology.  But, he says, "The point is that free
trade makes it very hard to deal with these root causes at a
national level, which is the only level at which effective social
controls over the economy exist....  [T]he unit of community is
the nation --the unit in which there are institutions and
traditions of collective action, responsibility, and mutual help,
the unit in which government tries to carry out policies for the
good of its citizens...."

Daly favors not free trade but regional trade among national
communities that share similar community standards regarding
wages, welfare, population control, environmental protection, and
conservation.  "True efficiency lies in the protection of these
hard-won community standards from the degenerative competition of
individualistic free trade, which comes to rest only at the
lowest common denominator," he writes.[2,pg.235]

Today a growing movement of workers, environmentalists,
consumers, farmers, and social activists worldwide is urging an
alternative to the destructive practices called "free trade."
Instead of free trade, they are promoting fair trade.  Fair trade
is a concept developed in the U.S. (and elsewhere) in the 1940s.
Fair trade is international trade based on bedrock principles:
workers are paid a fair wage--whenever possible not a minimum
wage but a family-sustaining livable wage; the business unit is
the cooperative or producer association; raw materials are
locally derived and managed in a sustainable fashion; fair trade
organizations respect the cultural identity of their trading
partners; and they insist on public accountability for their
business operations.[6]  Different.  Very different.

                                                --Peter Montague
                (National Writers Union, UAW Local 1981/AFL-CIO)

[1] Herman E. Daly, BEYOND GROWTH (Boston: Beacon Press, 1996).
ISBN 0-8070-4708-2.

[2] Herman E. Daly and John B. Cobb, Jr., FOR THE COMMON GOOD
[Second Edition] (Boston: Beacon Press, 1994). ISBN 0-8070-4705-8.

[3] Louis Uchitelle, "Global Good Times, Meet the Global Glut,"
NEW YORK TIMES November 16, 1997, Section 4, pg. 3.  And see
William Greider, "When Optimism Meets Overcapacity," NEW YORK
TIMES October 1, 1997, pg. A27.  And see William Greider, ONE
York: Touchstone Books, 1998). ISBN 0684835541.

[4] Daly, BEYOND GROWTH, cited above in note 1, pg. 163.

[5] Mathis Wackernagel and William Rees, OUR ECOLOGICAL
British Columbia, Canada: New Society Publishers, 1996). $14.95
plus $3.00 shipping from: New Society Publishers, P.O. Box 189,
Gabriola Island, B.C., Canada V0R 1X0; telephone (604) 247-9737.

[6] Learn about fair trade on the world wide web:
http://www.fairtradefederation.com/ab_princ.html and

Descriptor terms: herman daly; growth; economic development;
free trade; fair trade;

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