Economics 308:

The Political Economy of the

Environment
James K. Boyce
Lectures 16 + 17:
Globalization & the Environment

What is globalization?
Integration of economic activity worldwide
economic activity includes:
markets
governance

worldwide includes:
global North
global South

The global South: Poor countries?

% population in poverty
Source: UN Food and Agriculture Organization.

Or Poor people?

Income inequality often is

higher in low-income and
middle-income countries
Brazil: top
quintile gets
>60% of
income

Lorenz curves

USA: top
quintile
gets 50%
of income

Preview:
Amazonian deforestation
In poor countries there are poor people
and not-so-poor people.

Amazonian deforestation: 3 questions

Q: Who benefits?
A: Cattle ranchers; beef exporters.
Q: Who bears the costs?
A: Rubber tappers (seringueros); quilombo residents.
+ current and future generations worldwide
via loss of ecological services of the forest.
Q: Why are the winners able to impose costs
on the losers?
A: Power disparities between winners and losers.

PWSDR: Amazonian deforestation

$

Power weighted MC to
losers after movement
Power weighted MC to
losers before the
seringuero movement

Power-weighted
MB to winners
after

before

Level of deforestation

How does environmental

degradation differ between
poor countries and rich
countries?

Environmental Kuznets Curve

(EKC)

EKC hypothesis: An inverted-U shape relation may exist

(in some cases) between environmental degradation and
per capita income.

Why might EKC relationships exist?

How does environmental degradation
change as per capita income rises?
Three effects:
1. Scale effect
2. Composition effect
3. Technology effect

Scale effect
If the aggregate pollution/output ratio is
fixed, higher output -> higher pollution.
pollution

output

Composition effect
If pollution/output ratios vary across sectors of
the economy, and if the relative size of sectors
changes with rising income -> the aggregate
pollution/output ratio will change.
Q: Which sector produces more SO2 pollution per
dollar output?
agriculture?
industry?
services?

Composition effect contd

Q: Which sector produces more SO2 pollution per dollar
output?
agriculture?
industry?
services?
A: Industry.
Q: How does the industrial sectors share of output
change as per capita income rises?

Composition effect contd

Q: How does the industrial sectors share of output
change as per capita income rises?
A: First it rises, then it declines:
At low levels of income, agriculture dominates.
At medium levels, industry dominates.
At high levels, services dominate.

Composition effect contd

Q: Can the composition effect account for the inverted-U
relationship?
A: If production and consumption take place
within the same country, the composition effect
can result in a concave relationship as
services sector grows faster than industrial
sector.
But: To pass the turning point at which the
slope turns negative polluting industries
must be outsourced to other countries
as dirty industries are relocated to other
countries.

Technology effect
If pollution/output ratios can be reduced by
technological change and if pollution-reducing
technological change is correlated with income ->
rising income can lead to lower pollution in each
sector and economy-wide.
Q: Why might pollution-reducing technological
change be correlated with income?
A: Induced policy response. (Grossman &
Krueger QJE 1995)

Q: What induces a policy response?

A: Vigilance and advocacy (Grossman & Krueger
QJE 1995)
Aka: Power-weighted costs of environmental
degradation.
Aka: Politically effective demand.

Wheres the Environmental

Kuznets Curve?

Recall:
Pollution dispersion spectrum
uniformly mixed
pollutants: e.g.,
CO2, CFCs

non-uniformly
mixed pollutants:
e.g., air toxics,
nuclear waste
SO2

Q: At which end of the spectrum is the EKC inverted-U

more likely to occur?

Q: At which end of the spectrum is the

EKC inverted-U more likely to occur?
A: In the middle.
At the uniformly mixed end of the spectrum
(e.g., CO2), global public good problem impedes
national solutions.
At the non-uniformly mixed end, harm can be
concentrated in localized hot spots again
impeding national solutions (especially if hot-spot
residents lack power).

PWSDR

EKC

If more equal distribution of power is

correlated with rising incomes (e.g.: via
greater literacy, more political rights & civil
liberties, more equal income distribution) ->
rising income can lead to more vigilance
and advocacy & more politically effective
demand for environmental protection.

Per capita income

and power distribution
But some countries have high per capita
income and low democracy (relatively
large power inequities).
While others have low per capita income and
more democracy (relatively narrow power
inequities).

See: http://www.cseindia.org/

The original Kuznets curve

Simon Kuznets
(1901-1985)

EKC - revisited
Environmental
degradation

Democracy = equality in the distribution of power

Population growth

Question:
Which projection
would you call
optimistic?

Current population growth rates

world
China
India
US
Tanzania

1.2%
0.5%
1.2%
0.7%
3.0%

Sharply declining global birth rate

Total fertility rate (TFR): the
average number of children
born to a woman over her
lifetime.
Replacement-level fertility:
TFR at which births =
deaths and population is
stable:
2.1 in high-income
countries
3 or more in low-income
countries (due to higher
mortality rates)
2.3 worldwide
Source: Go forth and multiply a lot less, The Economist, 29 October 2009. Online
at: http://www.economist.com/opinion/displaystory.cfm?story_id=14743589.

The move to replacement-level fertility is one of the

most dramatic social changes in history.
- The Economist (29 Oct 2009)

Source: Go forth and multiply a lot less, The Economist, 29 October 2009. Online
at: http://www.economist.com/opinion/displaystory.cfm?story_id=14743589.

aka population explosion

Why do people have kids?

children as a source of family labor
children as source of old-age security
infant & child mortality
son preference
lack of access to birth control
love
lack of female education & employment opportunities

Q: How do these change as living standards improve?

Q: How do these change as living standards improve?

children as a source of family labor
children as source of old-age security
infant & child mortality
son preference
lack of access to birth control
love

lack of female education & employment opportunities

Effects of population growth on

living standards
Negative effects:
more mouths to feed
Positive effects:
more hands, more brains

Malthus and the dismal science

Reverend Thomas Malthus

(1766-1834)
First edition: 1798

Neo-Malthusianism

How does population growth affect

per capita food supply?
Denominator effect: holding food supply
constant, more people -> less food/person.
Labor supply effect: more people -> more labor for
food production -> increases the food numerator
but as land frontier is reached, diminishing
returns set in so food/person falls.
Induced technological and institutional change:
productivity increases (induced + autonomous) ->
possibility of more food/person.

What did Malthus underestimate?

1. Technological change: the possibility that
this could be strong enough to offset
diminishing returns.
2. Demographic transition: the possibility
that rising living standards could lead to
falling birth rates.

Population policy debates

Three big questions:
1. Is population growth a problem?
2. Should governments ensure access to
birth control?
3. Is coercion ever justified?

Population policy debates contd

Three broad camps
differentiated by their answers to the questions:

1. Population controllers.
2. New right.
3. Womens health advocates.

1. Population controllers
Answers

1. Is population growth
a problem?

Yes: its the #1

problem.

2. Should governments
ensure access to birth
control?

Yes: they should

promote it to limit
population growth.

3. Is coercion ever
justified?

Yes: the end may

justify the means.

Coercion in a good cause?

When he [a senior government official in India]
suggested sterilizing all Indian males with three or more
children, we should have applied pressure on the Indian
government to go ahead with the plan. We should have
volunteered logistic support in the form of helicopters,
vehicles, and surgical instruments. We should have sent
doctors to aid in the program by setting up centers for
training para-medical personnel to do vasectomies.
Coercion? Perhaps, but coercion in a good cause. We
must be relentless in pushing population control around
the world.
- Paul Ehrlich, The Population Bomb (1968), pp. 165-166.

Chinas one-child family policy

Incentives

2. New right
Answers

1. Is population growth
a problem?

No: people are the

ultimate resource.

2. Should governments
ensure access to birth
control?

No: and some forms

should be banned.

3. Is coercion ever
justified?

No: coercion violates

basic human rights.

3. Womens health advocates

Answers

1. Is population growth
a problem?

Its not the main

problem.

2. Should governments
ensure access to birth
control?

Yes: people have a

right to reproductive
self-determination.

3. Is coercion ever
justified?

No: coercion violates

basic human rights.

Population politics spectrum

Population
controllers

Womens
health
advocates

New right

THREE QUESTIONS
on globalization & the environment
1. Will globalization lead to environmental
convergence or polarization?
2. If convergence, will it be harmonization
upward or a race to the bottom?
3. What is up: the global North or global
South?

Globalizations double movement

Globalization: the worldwide integration of
economic activity. Economic activity is
structured by (i) markets and (ii) governance.

Polanyis double movement:

expansion of the market
expansion of social protection
aiming at the conservation of
man and nature as well as
productive organization

The globalization of market failure

trade at market prices that do not capture
external costs

external benefits

 and globalization of
governance failure?
Governance institutions may fail to remedy
market failures due to:
inability (e.g., bureaucratic competence);
and/or
unwillingness (e.g., the political influence
of those who would bear the costs of
internalization relative to those who would
benefit from it).
Globalization can exacerbate both.

Trajectory #1:

Ecological modernization
The scenario: harmonize environmental capacities and
regimes up to at least the level that has been achieved in
the [Europe-North America-Japan] triad countries.
- A.J.P. Mol Globalization and Environmental Reform (2001)

E.g.: NAFTA proponents: Mexico will

become more like us: NAFTA will lead
to environmental improvements in
response to rising incomes, foreign
direct investment, environmental
agreements, and civil society demands.

Trajectory #2:

Environmental protectionism
The scenario: free trade leads to a race to the bottom
as countries compete for competitive advantage by
externalizing costs.

E.g.: NAFTA opponents: Lax

environmental standards in Mexico will
put pressure on the U.S. and Canada
to weaken regulations and become
more like them.

Trajectory #3:

Greening the global North

The scenario: transformations of production and
consumption will reduce environmental impacts in the
global North, so that it converges towards the more
sustainable levels of the global South.
E.g.: organic farming; urban and
community-supported agriculture; slow
food.
NB: Per capita income in the richest quintile of
the worlds countries is 67 times greater than in
the poorest quintile (for details, see Bob Sutcliffe,
A More or Less Unequal World? 2003).

Trajectory #4:

Environmental imperialism
The scenario: transformations of production and
consumption in the global South will worsen environmental
impacts, so that the South converges towards the more
unsustainable levels of the global North.
E.g. #1: displacement of milpa
agriculture in Mexico and Central
America by cheap corn (maize)
imports from the U.S.
E.g. #2: displacement of natural fibers
by synthetics (e.g., displacement of
sisal by polypropylene).

Trajectory #5:

Environmental polarization
The scenario: globalization will lead to widening disparities
as environmental costs are shifted from the global North to
the global South.

Example #1:
Tropical deforestation coupled
with forest protection in the
global North.

Environmental polarization
Example #2: Toxic waste trade
The measurement of the costs of healthimpairing pollution depends on the forgone
earnings from increased morbidity and
mortality. From this point of view 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.
- Lawrence Summers memorandum, published
in The Economist, 8 February 1992.

Five trajectories: green & brown

1. Ecological modernization
2. Environmental protectionism

Convergence
Harmonization
upwards

3. Greening the global North

4. Environmental imperialism

Race to the
bottom

5. Environmental polarization

Divergence

Which trajectory?

Prospects for global

environmental governance
Formal governance
creation of a world environment organization
issue-specific international agreements
greening international institutions

Informal governance
e.g. #1: advocacy-led third-party certification
(such as the Forest Stewardship Council)
e.g. #2: the international right-to-know
movement