Lawrence Summers is a US economist, former President of Harvard University, and former Chief Economist of the World Bank. The ‘Lawrence Summers’ Principle’ – a term coined by Martinez-Alier (1994) – can be summarised by the formula ‘the poor sell cheap’. This ‘principle’ originates from a 1991 memo written or dictated by Summers while he was the World Bank’s chief economist. In this memo, he promoted dumping toxic waste in the Third World for economic reasons:
“Just between you and me, shouldn’t the World Bank be encouraging more migration of the dirty industries to the LDCs [Least Developed Countries]? […] 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.”
The Economist (8 February 1992), to which the memo was leaked, found the language ‘crass, even for an internal memo’, but ‘on the economics his points are hard to answer’. As Harvard economist Stephen Marglin (2008) said:
“… people who have not been exposed to a college course in [standard] economics are likely to be outraged by the memo […]. After a freshman course in economics, college students begin to think like economists – that is the point of freshman economics after all – and will explain why and how both the low-wage and the high-wage countries benefit from the relocation of toxic wastes.”
Indeed, Summers’ conclusions were correct from a strict economic viewpoint. However, this is to the exclusion of any non-monetary considerations such as human rights to health and environmental justice.
The Philippine Associated Smelting and Refining Corporation (PASAR) provides an example of such assumptions at work (Korten, 1992). PASAR is a Japanese financed and built copper smelting plant located near the town of Isabel (Leyte Province). It produced copper cathodes and ships them to Japan for processing. The 15,000 residents of Isabel, a poor rural farming and fishing community, were promised development, including jobs in the smelting plant and cheap electricity from the related geothermal power project. However, the jobs turned out to be mainly part-time or contractual due to their dangerous and dirty nature. The geothermal plant did provide cheap electricity for the smelter, but the rates to local residents increased. Gas and waste-water emissions from the new facilities containing high concentrations of boron, arsenic, heavy metals and sulphur compounds contaminated rivers and the local bay, reducing rice yields, damaging the forests, threatening the local water supply, reducing fishing yields and increasing incidences of upper respiratory disease. Although the local economy has grown, Isabel’s poor – the project’s professed beneficiaries – have been impoverished and have started to protest against the company.
Many marginalised populations offer attractive locations for those who advocate the relocation of toxic waste facilities or polluting industries as a means to give employment and increase growth. One conspicuous example is the export of ships for dismantling in Alang, on the coast of Gujarat in India. The health risks from asbestos and heavy metals are borne at a low economic cost by poor labourers working on the beaches. In such cases, there is no real defence against pollution dangers through market negotiation over potential damages to property rights. The market and pseudo-market valuation of damages indicate that it is much cheaper to locate such industries in poor areas than where the rich live. The Environmental Justice movement in the United States that struggles against what it calls ‘environmental racism’ also likes to quote from Lawrence Summers’ memo of 1991.
The Economist (1992) ‘Let Them Eat Pollution’, 08 February, p.82 (UK edition).
Korten, D.C. (1992) To improve human welfare, poison the poor: The logic of a free market economist. People-Centered Development Forum, Column No. 29.
Marglin, S.A. (2008) The dismal science: how thinking like an economist undermines community. Cambridge, MA: Harvard University Press.
Martinez-Alier, J. (1994) Distributional conflicts and international environmental policy on carbon dioxide emissions and agricultural biodiversity. In: J.C. van den Bergh and J. van der Straaten (eds.), Toward sustainable development: concepts, methods, and policy. Covelo, CA; Island Press.
For further reading:
Martinez-Alier, J. (2007) Marxism, social metabolism, and ecologically unequal exchange. In: A. Hornborg, J.R. McNeill and J. Martínez-Alier (eds.), Rethinking environmental history: world-system history and global environmental change. Lanham: AltaMira Press.
This glossary entry is based on a contribution by Julien Francois Gerber
EJOLT glossary editors: Hali Healy, Sylvia Lorek and Beatriz Rodríguez-Labajos