I’m going to do two things in this column I haven’t done before. First, I’m going to discuss the same topic I addressed last month: free trade. Second, I’m going to reply to a letter to the editor that was written in response to that column.
Last month, I explained how free trade, despite its complexity, is beneficial to all nations. A reader responded with one of the more common criticisms of free trade: that it hurts the environment. The “damaged environment” argument is effective because it strikes a cord with many voters. The flaw with the argument is that it is completely false. The reality is, nations that engage in free trade see an improvement in their environment, not a deterioration.
A nation’s environment never improves due to external foreign pressures (such as a treaty). There are no political payoffs for government leaders to enforce values that come from abroad. Why would an elected official in Indonesia spend scarce resources to appease American voters? First World nations may force Third World governments to adopt strict environmental laws, but these governments won’t commit tax resources to enforce such laws. As a result, the laws are on the books with no inspectors to enforce them. In contrast, when a nation’s own people start to exhort political pressure on their own elected officials, environmental laws get enforced.
And guess where that internal political pressure always comes from? The middle class. People in poverty don’t push for environmental protection. They are more worried about putting food on the table. It is only after a person has a roof over his head, food in his stomach, and security from lawlessness, that he turns his attention to protecting the environment. The empirical record shows that a nation’s environmental movement is always tied to a rise in the middle class. It’s an uncomfortable fact, but rich countries protect the environment, poor countries don’t.
Here’s where free trade comes in again. Rich countries trade. Poor countries don’t. Free trade leads to economic growth, a higher standard of living, and the development of that crucial middle class. It is the emerging middle class that begins to engage politically, forming interests groups and social movements that push environmentalism. China, for example, has never had an environmental movement until just recently. China was bogged down in poverty and its citizens concentrated on feeding themselves. Then China joined the WTO, saw massive economic growth, and for the first time in its history, the newly created middle class started using violent demonstrations to demand environmental protections (See the NY Times, August 21). In contrast, the nations that remain economically isolated have the world’s worst environmental records.
Economist refer to this phenomenon as Kuznet curves. A Kuznet curve looks like a shallow “J” (a brief downturn followed by a steep upswing). Researchers have shown that nations which accept free trade experience a brief downturn in environmental standards followed by a long term and significant improvement in environmental standards. Professors Jeff Frankel and Andrew Rose have shown that NO2 and SO2 decreases after nations adopt free trade policies. The World Development Report (1992) states, “The view that greater economic activity inevitably hurts the environment is based on static assumptions about technology, tastes and environmental investments” and that “as incomes rise, the demand for improvements in environmental quality will increase, as will the resources available for investment.” Furthermore, Professors David Bradford and Stephan Shore show that once nations adopt free trade and see the development of a middle class, birth rates fall. The long-term result of lower birth rates is people do less harm to plant and animal habitats.
Liberals who oppose free trade on environmental grounds must face a difficult decision. They must decide if they truly want to help the environment, or, simply feel good about themselves. Those who only want to feel good about themselves, ignorantly participating in anti-free trade rhetoric, can continue with their same behavior. But those liberals who sincerely seek to help the world’s environment, must do the difficult thing and admit they were wrong. Let’s hope they put the environment before their ego because their ego is standing between us and a cleaner world.