subsidizing destruction

[Guest guest]

SUBSIDIZING THE DESTRUCTION OF THE COMMONS

 

For decades, major polluters have been claiming that they

cannot afford to clean up their acts without laying off

workers: "jobs vs. environment" is the common phrase.

 

Naturally, such talk can make workers feel insecure and

resentful of community activists. So for decades the "jobs vs.

environment" argument has served to divide workers from many of

their best natural allies -- activists concerned about quality

of life in their communities (including the natural environment

AND jobs). All too often, "jobs vs. environment" has allowed

the polluters to divide and then conquer whole communities,

even whole states.

 

Recent economic research shows that the "jobs vs. environment"

argument doesn't hold water. Communities and states that fail

to protect their environment don't do well. They tend to have

stagnant economies (low rates of job growth) and low average

incomes, unfair taxes (taxing the rich least of all, as a

proportion of income), and high prices for energy for the

average person. They also tend to have huge gaps between the

rich and everyone else, and mediocre public health (partly

related to pollution, partly related to the huge inequalities

in income). And finally, they have low participation in

elections (perhaps because people feel the system is rigged,

which in these states it tends to be).

 

States that enact strong environmental protections tend to

create good jobs, spread the wealth around more fairly, have

better public health, fairer taxes, and greater democratic

participation. In sum, numerous studies now show that good

jobs, a clean environment, and better quality of life all go

hand in hand. From the community's perspective, pollution does

not pay.

 

For example, studying Los Angeles County, California,

sociologist Manuel Pastor, Jr. has shown that the most

dangerously polluted areas of the county have the highest

proportion of minority residents and the lowest rate of job

growth. Thus it is apparent that jobs do not necessarily

increase when the environment is allowed to deteriorate. As Dr.

Pastor says, "Instead, it looks like environmental degradation

and economic weakness go hand in hand." [1, pg. 12]

 

In a series of studies over a decade's time, Professor Paul

Templet has analyzed all 50 states of the U.S. and found that

states with lax environmental enforcement are the poorest

states in the union, economically. Dr. Templet served as

Secretary of the Louisiana Department of Environmental Quality

from 1988 to 1992, and is now professor of environmental

studies at Louisiana State University.

 

Corporations that dump pollutants into air, water or soil are

using nature (a public resource) as a free toilet. But of

course nature's toilet (which economists prefer to call a "sink

resource") isn't really free. Someone besides the polluter

eventually pays -- for abandonment of a resource such as

shellfish beds, for cleanup, or for harm to health (asthma,

diabetes, cancer and so on).

 

Economists like to say that such polluters have "externalized

their costs" by dumping their poisons into public spaces,

forcing the public to bear the costs. In essence, the poisoners

have received a public subsidy in the form of a free toilet.

 

In the same way, a timber company is receiving a subsidy when

it logs a forest without paying the attendant costs of soil

erosion, stream siltation, loss of flood control that the

forest provided by storing water, and other environmental

damage.

 

These "pollution subsidies" increase a firm's profits while

imposing costs on those who are affected, ranging from

immediate neighbors to all taxpayers. Thus pollution moves

large sums of money from the pockets of its victims into the

pockets of its perpetrators. [2, pgs. 3-4]

 

Viewed by an economist, those who pollute without paying the

full costs are depreciating a "public trust resource" that

belongs to society at large.[3] They are appropriating

("taking" or "privatizing") a resource that belongs to

everyone, without paying compensation. Normally when a public

servant embezzles or steals financial capital from the public,

society imposes penalties including disgrace, monetary fines

and, in rare cases, imprisonment. But when polluters

appropriate and degrade public-trust resources, such as water

and air, they often get away scot free.

 

Many states provide a second kind of subsidy to corporations --

energy subsidies. In the U.S., the average residential consumer

pays about twice as much per unit of energy as an industrial

firm pays. This represents a subsidy by individual rate-payers

to the big consumers of energy.

 

Economists say that some disparity in price can be justified

because the cost of delivering large quantities of energy to

one end-user is lower than the cost of delivering the same

amount of energy to many end-users. However, some states are

clearly favoring large users at the expense of small users --

thus taking money from individuals and putting it into the

pockets of corporations.

 

In Louisiana and Alaska, for example, individual consumers pay

four times as much per unit of energy as industrial users pay.

As Paul Templet observes, "The energy subsidy... reduces the

cost of obtaining a natural resource. There is no particular

reason that industry should enjoy drastically cheaper energy

than the public does.... The huge price differences in certain

states reflect political power. Eliminating the energy subsidy

would return the appropriated natural assets to citizens in the

form of reduced pollution and more equitable prices. It would

also promote more efficient use of energy, and enhance public

health. Citizens could spend less on energy, and more on

education or other needs." [2, pgs. 6, 13]

 

A third kind of subsidy occurs through taxation. In general,

income taxes and property taxes take a larger proportion of

wealth from the rich than from the poor. Such taxes are labeled

"progressive."

 

On the other hand, sales taxes tend to have the opposite effect

and are thus labeled "regressive." Sales taxes are regressive

because they take a fixed share of whatever is consumed and

those with low and moderate incomes tend to spend a greater

portion of their income on consumption, compared to the rich. A

poor person and a rich person will pay the same amount of sales

tax on the purchase of a hot water heater, but the cost of a

hot water heater is a much larger proportion of a poor person's

income than of a rich person's income, so the sales tax is

regressive -- it stings the poor worse than it stings the rich.

A state that relies on regressive taxes more than progressive

taxes is providing a subsidy to those with high incomes and

large property holdings, a subsidy paid by those with low

incomes and few property holdings. It is a way of picking the

pockets of the poor and handing the proceeds to the rich. Thus

a sales tax is like Robin Hood in reverse.

 

Professor Templet has shown that all three kinds of subsidies

-- pollution, energy and tax -- are associated with poor

environmental performance.

 

Templet examined all 50 states in terms of a Green Policy Index

(developed by the Institute for Southern Studies[4]), which

took into account 77 indicators of effective environmental

policies. Templet also examined all 50 states in terms of a

Green Conditions Index[4], which is based on 179 measures of

environmental quality.

 

Templet found that states that provide the largest subsidies to

polluters, energy hogs, and the rich are the same states that

have the weakest environmental protection policies and the most

degraded environments. The 25 states providing more total

subsidies than the national average are (in order of biggest

subsidies to the smallest): Louisiana, Utah, Florida,

Tennessee, Mississippi, Alabama, Washington, Nevada, Texas,

Arizona, New Mexico, Oklahoma, Hawaii, West Virginia, Arkansas,

South Carolina, North Dakota, Indiana, South Dakota, Virginia,

Kansas, Missouri, North Carolina, Alaska, and Georgia.

 

Templet also examined the relationship between the three kinds

of subsidies and various measures of economic well-being. He

found that the pollution subsidy is a good predictor of poor

economic performance as measured by poverty, income

inequalities (the gap between high and low incomes),

unemployment, and low average personal income.

 

In other words, as firms are allowed to externalize more of

their costs (freely dumping into the public's common-heritage

resources of air and water), poverty increases, the gap between

rich and poor increases, and average income declines.

 

As Templet notes, "This suggests that spending to control

pollution constitutes a progressive policy in terms of income

distribution." The benefits may be more than just economic,

since is it the poor, and often minorities, who are most likely

to live near polluting facilities, and who therefore bear the

burden of health damage as well.

 

Templet found that large energy subsidies are, likewise,

correlated with poverty, unemployment, income inequalities and

low personal incomes. The tax subsidy is also correlated with

increased poverty, greater inequalities in income, and lower

average incomes, not surprisingly because tax subsidies

effectively take from the poor and give to the rich.

 

Templet examined the pollution subsidy in relation to economic

growth and found a negative correlation: as firms dump more

pollution and thus externalize more costs, their states forego

jobs. Pollution retards economic growth.

 

Templet also wondered whether corporate profits increased in

those states where subsidies were highest. Data on corporate

profits were not available, but he found a surrogate measure --

value added in manufacturing -- that allowed him to test

whether profits increased as subsidies rose. They did.

 

If firms invested these increased profits within the state,

then they might contribute to public welfare through increased

employment and income. Unfortunately, Templet found that most

of the profits go to shareholders and managers, most of whom

live in other states and even other countries.

 

As value added per job (the surrogate for corporate profits)

increases, a greater proportion of gross state product leaves

the state, Templet found. "In general," he says, "profits tend

to leak from high-subsidy, low-income states to low-subsidy,

high-income states, fueling inter-state inequality." [2, pg.

10]

 

Leakage of profits from high-subsidy states to low-subsidy

states is a major source of income inequalities between states.

It drains income from states that consume the most resources

and generate the most pollution. As income leaks from a state,

we see a rise in unemployment, poverty, and pollution. Leakage

goes somewhere -- in general, it goes to the states where the

owners live. Indeed, a number of the richer states actually

import income -- their total income exceeds their gross state

product. "The situation is analogous to colonialism in which

the mother country draws resources and other wealth from the

colony, proffering little compensation in return. In this

respect, the United States displays a kind of internal

colonialism," Templet says.

 

In addition to environmental degradation and economic decline,

subsidies also damage our democratic ideals. By examining all

50 states, Paul Templet found that, as subsidies increase for

polluters, energy hogs, and the rich, political participation

declines -- fewer people bother to go to the polls at election

time. States with above-average total subsidies have a voter

participation rate that is 15% below the U.S. average.

 

Based on his personal experience as a cabinet official in

Louisiana state government, Templet believes that subsidies

damage democracy because polluters and the rich use their extra

profits to buy political favors to further increase their own

power. He says, "Citizens in high-subsidy states may well feel

disenfranchised, perceiving that their elected representatives

cater to special interests. They may doubt that voting will

change anything. Yet low [voter] participation itself

contributes to the further concentration of power."

 

Templet goes on: "Those receiving subsidies can use additional

financial capital in a number of ways. One obvious way is to

spend more on campaign contributions, and to hire more

lobbyists to protect and augment the subsidies. Industrial

corporations are major contributors to political campaigns. In

making contributions, special interests not only help to elect

representatives, but may also influence choices for appointed

positions.

 

"In my experience as a cabinet official in Louisiana's state

government, I found that the quality of public leadership

declines as special interests increase their sway. Even

federally funded programs tend to languish. State agencies

become less responsive to citizens, who in turn withdraw from

the political process. The state becomes a less attractive

place to live and do business. The end result is institutional

failure, the erosion of democracy and the loss of social

capital." [2, pg. 11]

 

Templet shows that all three subsidies -- pollution, energy,

and tax -- foster inequality in at least three ways:

 

(1) Subsidies diminish productivity, disposable income, health,

and quality of life for those who bear the costs.

 

(2) Subsidies enhance the political power of those who are

subsidized, allowing them to manipulate markets and the

political process to further their own interests; and

 

(3) Subsidies deprive governments of revenues that they could

have used for education, health care, and other programs that

serve citizens. [2, pg. 4]

 

In sum, Templet describes a vicious circle. By discharging

poisons into air, water, and soil, corporations take -- without

compensation -- the public's clean environment and the public's

health. In so doing, the poisoners capture subsidies, for which

the public pays the price. Thus the poisoners increase their

profits. With their ill-gotten gains, the poisoners then

purchase favors from public officials, who in turn pass (and

fail to enforce) weak laws that allow the poisoners to continue

using the environment as a free toilet. These policies make the

state less attractive to other firms, so the diversity of the

economy declines.

 

As Templet notes, "Communities may be left with a 'company

town' syndrome. They grow poorer, more polluted, more subject

to boom-and-bust cycles, and more dependent on the industries

that are reaping the benefits. As concentrated wealth fosters

concentrated power, public policy embraces subsidies even more.

The result is a spiral of public and ultimately private

decline. Although corporations can eventually pick up and go

elsewhere, the public as a whole cannot." [2, pg. 14]

 

The public sees what is going on but believes it cannot affect

the outcome of this corrupt game, and so drops out, refusing to

participate in elections or other forms of democratic

engagement. Thus social capital (an economists's phrase for

civic spirit) declines, leading to the further decline of

public-trust resources -- a downward spiral of social,

economic, and environmental decay.

 

What can be done? The short answer is that we could improve

public health and well-being, and enhance environmental

quality, first by reducing or eliminating subsidies for

corporate polluters, energy hogs, and the rich, and, secondly,

by taking back control of "the commons" to put citizens in

control of our public-trust resources, the environment. It is

time we denied special interests the right to "privatize" our

air and water (and the environment's limited capacity to absorb

wastes) without full compensation to their rightful owners --

the public.

 

One way to tackle these problems would be by reviving and

revitalizing the ancient "public trust doctrine" -- the legal

doctrine that says state governments have an affirmative duty

to protect our common-heritage resources, such as water and

air, for generations unborn. States have an affirmative duty to

prevent private parties from "taking" or degrading our

common-heritage resources. Like the "precautionary principle,"

the "public trust doctrine" is a powerful new tool for

community protection that can be learned, articulated,

expanded, and advanced by grass-roots activists.[3] You'll be

hearing more about this from us. --Peter Montague

 

=========================

 

* My thanks to Carolyn Raffensperger and her colleagues at the

Science and Environmental Health Network for their exploration

of the "public trust doctrine."

 

[1] Templet, Paul H. 2001. Defending the Public Domain:

Pollution, Subsidies, and Poverty [PERI Working Paper No.

DPE-01-03]. Amherst, Mass.: University of Massachusetts,

Amherst, Political Economy Research Institute. Available at:

http://www.umass.edu/peri/pdfs/WP12.pdf .

 

[2] Pastor, Jr., Manuel. 2001. Building Social Capital To

Protect Natural Capital: The Quest for Environmental Justice

[PERI Working Paper No. DPE-01-02]. Amherst, Mass.: University

of Massachusetts, Amherst, Political Economy Research

Institute. Available at:

http://www.umass.edu/peri/pdfs/WP11.pdf .

 

[3] Air, water, and soil are sometimes called "public trust

resources" because they are common resources owned by everyone

and by no one. Under a legal doctrine traceable back to the

laws of ancient Rome, governments have a special duty to

protect these public trust resources for the benefit of future

generations. This "public trust doctrine" is firmly embedded in

state laws in the U.S., though like all laws it is sometimes

forgotten, sometimes ignored and sometimes breached. We at ERF

believe it is a powerful, little-used idea that grass-roots

activists should be learning about, speaking about, and

expanding. On the public trust doctrine, see:

 

James T. Paul, "The Public Trust Doctrine: Who Has the Burden

of Proof," paper presented at the July, 1996 Meeting in

Honolulu, Hawaii of the Western Association of Wildlife and

Fisheries Administrators, Hosted by the State of Hawaii

Department of Land and Natural Resources." Available on the web

at http://www.rachel.org/library/getfile.cfm?ID=190

 

and:

 

Carolyn Raffensperger, "Precaution and a Theory of Property,"

The Environmental Forum May/June, 2003 (a publication of the

Environmental Law Institute in Washington, D.C.). Available at:

http://www.rachel.org/library/getfile.cfm?ID=192

 

and:

 

Mark Dowie, "In Law We Trust," Orion Magazine July/August 2003.

Available at: http://www.rachel.org/library/getfile.cfm?ID=191

 

 

[4] Hall, Bob, and Mary Lee Kerr. 1991-1992 Green Index; A

State-By-State Guide to the Nation's Environmental Health.

1991. Washington, D.C.: Island Press. ISBN 1-55963-114-7.