=======================Electronic Edition========================
RACHEL’S ENVIRONMENT & HEALTH WEEKLY #465
—October 26, 1995—
News and resources for environmental justice.
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A HIGH-WAGE, LOW-WASTE FUTURE–PART 5:
SUSTAINABLE AMERICA–PART 2
In the earlier parts of this series (REHW #461, #460, #459,
#458), [1] we asked the most basic political
question of our time:
Does the economy control us, or do we control it? Is the purpose
of the economy to promote prosperity with stability, or is it to
create wealth for the few at the expense of the many? The
so-called “conservative” majority in this Congress has its own
answer to that question. As the NEW YORK TIMES pointed out in an
editorial this past Sunday, “The Republicans are rushing through
Congress the greatest attempt in modern history to reward the
wealthy at the expense of the poor.” (10/22/95, pg. E12) We
think the TIMES is mistaken in blaming only Republicans;
Democrats who call themselves “conservative” are snuffling and
drooling at the same trough.
But the liberals deserve their share of blame as well. In this
series, we have seen that the economy is being deliberately
restructured along lines we call the “low road” [2]–the choice
that seeks profit and increased competitiveness by laying off
workers and replacing them with temporaries; by intentionally
increasing job insecurity for almost everyone; by reducing the
availability of health insurance; by speeding up environmental
degradation; by cutting social spending; by reducing regulation;
by cutting training; and by reducing taxes on corporations and on
the wealthy, shifting the tax burden onto the middle class and
the working poor. Both Republicans and Democrats, conservatives
and liberals alike, are promoting this low-road restructuring,
which cannot lead to either prosperity or stability.
Corporations are selling us the low road, saying it is required
by 2 factors: globalization of the economy, and increased
competition. Globalization is being greatly exaggerated, to give
the impression that the economy is now out of our hands. In
actual fact, only about 20% of the American economy involves any
foreign trade; roughly 80% of the economy is entirely domestic,
and these numbers have not changed much since the early 1980s. [3]
It is simply not true that globalization is preventing people
from having a say in the economy.
The second factor that supposedly “requires” us to take the low
road is increased competition. Competition HAS increased during
the past 20 years as the huge mass-production monoliths (Ford,
IBM) have been overtaken by a new industrial regime. The low
road is one possible response to competition –to turn the U.S.
into a country with wages so low that our workforce can compete
head-to-head with workers in Malaysia and the Philippines.
Goodbye middle class and goodbye stability.
The alternative choice –the “high road” –centers on
high-quality competition and the inputs that make such
competition possible: worker involvement in decisions; worker
training; timely information about new technologies and about
markets; economic cooperation between firms, and between firms
and communities; moral standards on the treatment of people;
environmental standards requiring clean production; high quality
public goods (which glue urban society together: schools;
hospitals; libraries; mass transit; recreation opportunities,
etc.); and the use of state purchasing power, and other public
mechanisms, to reward high-roaders and punish low-roaders.
We will describe the “high road” approach at another time. For
now, let’s continue examining the low road. Typical economic
development leads to the low road because of six errors, commonly
made by both conservatives and liberals:
Error 1: Typical economic development promotes job growth without
regard for the kind of jobs generated. This does nothing to
promote the general welfare, and often actually reduces it.
Through competition, new low-wage jobs drag down wages elsewhere.
This erodes the overall tax base, leading to cutbacks in needed
public services (transportation, libraries, schools, hospitals,
etc.), which in turn causes people to move to the suburbs,
leading to metropolitan decline, absolute job loss, and all of
the social problems linked to a chronically unemployed,
uneducated inner-city population. All of which, in turn,
confirms the typical view that jobs –any kind of jobs –are what
is needed.
Error 2: Typical economic development focuses on attracting new
businesses rather than retaining and renewing existing ones. Yet
the best evidence from the U.S. and abroad shows that
metropolitan economies thrive when their core businesses upgrade,
or link to one another to realize new economies of “scope,” or
attract or spin off related businesses, which benefit from being
near industry leaders. Upgrading, networking, and incubating
local firms, however, requires support in the form of technical
assistance, training, and the efficient supply of modern public
goods (schools, libraries, etc.). And providing all of these is
more difficult, although in the long run far more satisfying,
than simply “doing a deal” to attract another Walmart.
Error 3: Typical economic development uses generic tax abatements
and other fiscal giveaways, rather than targeted breaks and
regulation, as magnets for development. Again, the best evidence
is that traditional “enterprise zone”-type developments (i.e.,
tax abatements and other giveaways with no prior conditions on
them except perhaps “best efforts” to create X jobs of any kind)
simply do not work, and eventually erode a city’s fiscal base. [4]
The jobs created in a more-or-less fully deregulated economy are
seldom high-paying or associated with significant capital
investment. On the other hand, there is good evidence that the
gradual tightening of control over production –e.g., requiring a
livable minimum wage for labor, or curbing toxic emissions –can
push business to innovate in ways that improve productivity and
improve the quality of community life. The productivity increase
is achieved by boosting the cost of factors of production (e.g.,
increasing wages), thereby creating incentives for their more
efficient and productive use. Regulation can be oppressive and
inefficient, or it can be the opposite, depending on the match to
the problem regulated. [5] But this requires a willingness to
impose, from a weak bargaining position, significant costs on
business. And it requires a willingness (and the ability) to
insulate those same businesses from ruinous competition from
non-complying competitors. This is the crucial policy step that
most city governments have been unwilling or unable to make
–especially when faced with the loss of high-wage jobs caused by
Errors 1 and 2, above.
Error 4: Typical economic development sees greater public control
and accountability as bad for the economy. It proceeds from a
largely correct idea that government and the general public (if
not workers within the firm) are ill-prepared to tell business
how best to achieve goals. However, this correct idea gets
carried over into the false assumption that the public is
incapable of specifying what our economic goals should be, such
as full employment for the able-bodied; decent housing,
education, and health care for all; an economy that is not
obscenely unfair nor massively wasteful of natural resources.
Again, however, all evidence shows that modern economies operate
best when they can rely on a fair degree of public support for
business goals. Public support for business goals is strongest
when the public has significant say in setting those goals. And
such public support is especially crucial for the modern
production systems that cities should be trying to attract. Here
we return to a characteristic weakness of liberalism.
Error 5: Typical economic development sees a necessary tradeoff
between environmental improvement and jobs. Of course, taking
the environment seriously will involve considerable dislocation,
resulting from the disruption of many traditional habits of
production. But environmental values, like others, can be
incorporated into the economy itself. Environmental values should
have no effect on the availability of employment at a
family-supporting wage. Indeed, the experience of all sorts of
metropolitan regions, which once relied on highly polluting
industries, suggests that enormous job gains can be reaped by
paying serious attention to the market for “green” goods and
clean technology. Germany’s Ruhr district and Sweden’s Smaaland
are good examples. And there is compelling evidence that
environmental regulation has forced regulated industries to
achieve enormous efficiency gains and a raft of profitable
spinoff products. To realize any of these gains, however,
government and the rest of society must be willing to impose some
terms on economic deal-making, while at the same time investing
in people’s ability to monitor, enforce, and negotiate in the
most efficient ways to achieve those values. People’s ability to
monitor, enforce and negotiate is pretty much taboo to a liberal
government, especially one driven to passivity and fear by Errors
1 through 4, above.
Error 6: Typical economic development neglects the critical role
played by public goods of all kinds –transportation, recreation,
education, public safety. Here, local economic development
efforts lag behind the learning of many businesses. Many
businesses now recognize the importance of easy movement of
labor, products, and information; a well-trained workforce; and a
nice place to live. These things are important because they help
attract highly skilled personnel. Of course, no individual firm
wants to pay for these–even though all businesses benefit from
them. (Economists call this the ‘free rider’ problem.) If
economic development is seen largely as a firm-by-firm
ignore-the-social-cost project, this free-rider problem cannot be
solved. But if development is aimed specifically at solving
these collective action problems, it can solve them –using state
requirements and, even more, by greasing the wheels for private
actors. However, to do this, government must be willing to invest
directly in popular, cross-firm, coordinating institutions (such
as training programs), which liberal governments are often not
willing to do. As a result, even conventional investment becomes
less likely, given the shrinking tax base of a city that has
given up its good jobs through Errors 1 through 5.
If typical economic development seems to be a dead end, have we
got something better? Yes, and this is what Sustainable
America [6] is about.[To be continued.]
                
                
                
                
    
–Peter Montague
===============
[1] All Rachel back issues, and hundreds of other documents, are
now available via E-mail; send a one-word E-mail message (“info”)
to info@rachel.clark.net.
[6] To learn about the project, Sustainable America, phone Elaine
Gross at (212) 727-4407 or send E-mail to
egross@igc.apc.org.
Descriptor terms: economic development; economy; wealth;
poverty; income distribution; republicans; democrats; global
economy; corporations; inner cities; suburbs; technology
transfer; taxation; regulation; enterprise zones; wages; minimum
wage;