2005 January 27 Thursday
Thinking About Economic Development And Pollution

The industrialization of China and India pose a significant threat to the world's environment because a large number of people in those countries are going to pass through a phase where they are engaged in enough industrial activity to generate pollution but where they are going to have earnings per person so low that they will not be strongly inclined to make political demands for reduction of pollution.

Economists have noted (and, yes, I need to go dig up some links in support of these points) that there are threshold levels of per capita GDP where populaces begin using different types of products. So, for example, there is a per capita GDP level at which laundry detergent demand becomes noticeable and other per capita GDP levels at which the demand for replaceable blade shavers and electric shavers start to be felt. This phenomenon is found for a large variety of products and services. Consumer goods companies such as Procter & Gamble use this knowledge as a guide for when to try to introduce various products and types of packaging in different countries. Even the sizes of portions sold change as people become more affluent.

Economists even argue that there is a level of living standard at which populaces will begin to make substantial demands of political systems to reduce pollution. As living standards continue to rise the demand for cleaner environments inevitably becomes stronger as people reach the point of having satisfied other desires. Among industrialized countries living standards had some influence on which countries developed environmental movements first. The United States, with a higher per capita GDP than Europe, adopted many environmental regulations before European countries did and, for example, banned the use of lead in gasoline many years before most European countries did. Also, leaded gasoline continue to be used in Mexico many years after it was banned in the United States. This makes sense. Mexicans were poorer and were more concerned about getting cheaper gas and cheaper cars than in getting cleaner air.

This brings us to China and India. When the United States and Britain went through their industrial revolution they had smaller populations than they have today. But China and India are each multiples larger than the current US population. So this strikes me as a problem. A few billion people are going to go through a stage where they generate more pollution but where they are not going to be making enough money to care all that much.

Will the economic development of India and China inevitably lead to massive increases in the amounts of air and water pollution coming from these countries? Well, we have a few things going for us I think.

One factor that weighs against a worst case scenario for increased pollution is an uneven rate of development in different regions in each country. The Chinese coastal provinces could conceivably reach average living standards high enough to trigger adoption of local area environmental regulations before the hundreds of millions of inland Chinese start to engage in much pollution generating economic activity.

Also, technologies that are cleaner ways to do various industrial processes exist today and have come down in price since first being developed. For example, the cost of reducing car emissions is much lower than it was in the 1970s. So resistance to environmental regulations based on costs should not be as great in China and India was it was in the United States.

Plus, the threats to human health and to the environment that are posed by pollution are much better understood today than they were 50 or 100 years ago. So arguments for economic benefits from pollution reduction are easier to make.

Still, China and India have a lot of people. Various types of pollution seems likely to increase in both countries for at least the next couple of decades. Will these sources of pollution become a serious problem for the rest of the world? Any educated guesses with real facts to back them up?

Share |      By Randall Parker at 2005 January 27 02:31 AM  Economics Development

Stephen said at January 27, 2005 3:16 AM:

I'm not so worried about localised pollution because that hurts the locals rather than the neighbouring countries - the 'live in your own squaller' answer to pollution self regulation that can be remedied by domestic political processes. The exception to this kind of pollution is the type that doesn't respect state boundaries - ozone depleters, greenhouse gasses and waterbasin polluters.

I think the far greater issue facing the world isn't so much pollution, rather its that Chinese and Indian peasants will stop being minimal resource users, and instead grow into resource hungary westernised consumers. I think there's an 80/20 rule - westernised consumers constitute 20% of the worlds population but consumer 80% of its resources. So, what happens when the remaining 80% of the worlds population start to consumer like westerners? Some might say that we'll just produce more to satisfy the demand, but that ignores the environmental problem - if people eat less rice, but demand more beef then imagine all the forests that will need to be cleared to graze a few billion more cows.

Oscar said at January 27, 2005 6:37 AM:

There is also CO2 and other greenhouse gas pollution. This is one reason why Kyoto is useless. We need more research into ways to alleviate the potential global warming hazards without directly trying to curb anyone's emissions (if it is even possible to do this) unless we want to have two very large very angry countries on our hands.

Eric said at January 27, 2005 8:14 AM:

Daily air pollution index reports, with major pollutant, for 84 cities in mainland China

Mainland dust-storms, aggravated by deforestation and industrial generation of fine respirable particles, have caused health effects in Korea and reached as far away as the US' west coast. See BBC report. I don't see that those are going to get better anytime soon.

The mainland's environmental regulations will probably just result in pollution-causing activities being shifted to the second-tier cities where any environmental laws would not exist or not be enforced if existing. HK is pushing Guangdong province to clean up, and the central government is putting the pressure on Guangdong to comply (all part of the "stick/carrot" approach at making HK people happy and less likely to protest in the streets). ALso, the central government wouldn't let its model "world city" Shanghai fall behind HK in this regard, so they'll likely push for similar regulations there.

On the bright side, a lot of factories have had to resort to setting up their own generators running fulltime in order to ensure a reliable supply of power; as China's electrical network becomes more reliable, these would likely be taken offline. Also, I think China is most likely to be open to a marketized system of "emissions trading" internally ... because this is the de-facto situation anyway, it's just that environmental enforcement officials are selling the "pollution credits" privately and putting the money into foreign bank accounts. The State definitely wants in on this very profitable racket.

Amit Uttam said at January 27, 2005 11:48 AM:

The comments made already and the article seem to miss the true implications of the economic forces in work behind the scenes in these countries. Economic forces have always been a rationing force that makes sure that limited resources are distributed at least in the long term in a way appropriate to the needs. In countries like China and India everybody is not going to be driving a car like in America. The amount of resources required to acomplish that will be too great and forces of supply and demand will step in to make sure that this dosen't happen. This is very apparent if you look at China or India today in that both countries have large populations that have seen no change due to the economic progress in these countries. So to start thinking that their industrial revolution will be at a scale of the US or Britain is just plainly false. It will be more as it is now (and as is pointed in the article) where small sectors industralize rapidly and develop a middle class while most of the population very slowly gains anything from these industralizations. What's more if and when we do get to the point where we see these countries fully industralized then by that time technology will have already been invented to provide the majority of the people with cheap and clean modern life benfits. This is because that would be the only way these countries can ever survive to be in that position in the first place. Another set of principles working against rapid pollution due to devlopment in these countries is the simple fact that if they destroy their envoirment they will suffer dire reprecussions that will work to halt the further worsening of their envoirment. For example if they plan to get rid of their natural ecology surely a rise in wide reanging pest problems, crop failures etc. will work against a full exploitation of all natural resources by causing widespread human disasters that will probably mitigate their populations. In fact the governments in these countries would probably react to such wide rainging problems by enforcing against them. So in conclusion economics, nature and government in these countries will work to stop any sort of widespread pollution problems.

Amit Uttam said at January 27, 2005 11:58 AM:

About stephen's comments in the parapundit article about pollution...even if everybody demands beef in these countries will they all be in a position to get it?? No!! Acording to your idea if I demand big screen tvs and pooff here it is a big screen tv?? What are you that I am Jeanie girl!! Supply and demand!! Just because demand increases it is not necessary for supply to increase since supply also depends upon the resources it is depending upon if the resources are scarce then the price of that object will invariably rise and put it out of the reach of most of the chinese. So this is what I would expect: A huge rise in oil, beef and other such commodity prices. Maybe 10 to 20% increase in supply thats about it. So yeah going to your local resturant and ordering beef is going to be a luxury for all and we might just become healthier vegans!!

Stephen said at January 27, 2005 3:05 PM:

Amit, naturally agree that price will increase with demand for the majority of resources, and not every peasant will have an increase in income sufficient to catch up with the increase in price. However, in terms of environmental degredation, my guess is that it will only take a tiny sustained increase in cattle prices for us to wave goodbye to a few more million hectares of {insert your favourite 3rd world forest here} as the market tries to cater for the extra demand.

I also agree that the other factors you mention will change and a new equilibrium will be reached, but I have a significant proviso. That is, that nature moves at the same speed it always has, while humans can cut a tree down in a few seconds, so the forest is long gone before nature has a chance to react. Ditto open ocean fisheries.

Its the tragedy of the commons writ large.

Amit Uttam said at January 29, 2005 4:34 PM:

I agree with you to a point that yes that human growth does harm the enovirnment but I disagree on principle that this will continue forever and cause a total deforestation and envoirmental devastation. It will come close to that but if it really happens then we will see a drastic decrease in human populations due to the reprecussions of this. Therefore even before it happens, I believe, there will be a concurent increase in human participation in creating measures for creating anti-deforestaion measures either with the improvement of technology or artifical governmental intervention.

My point is simply this, human beings are dynamic creatures that adapt to change and the nature is a dynamic force that also forces everything within it to adapt to change. While yes we will push our natural resources to the limit, we won't go over because of all these forces moving against it. No matter how high the demand for beef, the demand for beef will be mitigated and it won't really lead to deforestation. It is even better if the government in control of the state is a democracy. I hope that the Chinese slowly change over to a more democratic system with freedoms of speech where these issues can become more aparent...otherwise it will take them longer but even they will eventually also see the importance of preserving nature.

Erin said at April 23, 2005 6:10 AM:

Amit, do you really think that someone is going to give up their standard of living to help the 'dynamic creatures' of the world? Doesn't the beef industry just like others constantly expand?

Nothing is localized anymore. we are well beyond that phase. Our affluence is projected to the world as we only try to reaise our own standard of living. THere are only so many markets within the United states. No not all peasants in china will have access to beef. There will be though, a significant rise in the number of people throughout the developing countries that will get access to beef. Was beef not a major industry in the United STates, once the resources to ship it were secured? (Refrigerated freight) What happens when India and China's infrastructure can support such aspirations? Did the United States concern itself with pollution as it developed industrially? We now only see the problem. We in our own persuit, deforested a huge span of North America. We have dried up the only archaic aquifer in the United STates to support the bread basket of the world. When that is no longer economically pheasable to use what happens? The United States in search of wealth has spread itself over the globe scouring for land that it will degrade to sell beef. The land is cheap and unimportant, because it is not in our country? Where do these developing nations farm, if we grow cattle on the profitable land? The movement into rimland causes much degredation, and will not be fixed by some legislation. A nation such as our built on the best of resources, only now is catching light of the mistakes it has made. What then of the countries who are building on less arable, profitable land. How fast will they catch up with the environmental conciousness of the developed world?

Amit Uttam said at May 11, 2005 12:25 PM:

About Erin's comments on April 23, 2005...the shortest answer I can give to this is simply that the same forces of globalization that seems so threatening to the envoirnment and to the quality of life in so many places in the world, will also play a role in all this. The idea that is expressed in Erin's article simply put states that the devloped nations will by their drive to devlop keep exploiting devloping nations and the whole process will degrade more and more...but this will never happen because globalization also links everybody and everything together and I think as time goes on we will demand more and more change everywhere on a very global scale and this will then mitigate the quality of the envoironment.

Does this mean that we stop caring? No, we care even more!! We keep up the preassure on our government but at the same time don't seem so outrageously unreasonable. Human beings will try to cope and not every one of our efforts will pay off and maybe even hurt the envoironment. In the end I think the forces against total ecological destruction are greater than the forces causing the destruction.

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