Globalization, arguably the most important of modern day processes, continues to be a subject of intense debate and controversy, even as it increases with every passing day; integrating communities, societies, nations, and regions with an ever tightening gridlock of sharing of trade, business, knowledge, and culture. Extolled by its supporters for spawning a range of benefits that serve the cause of humanity, globalization has been credited for developments like remarkable economic expansion, extension of knowledge and new technologies, development of human freedom and respect of human rights, cross continental surges of information, the establishment of an increasingly democratic global order, and the exchange of the concept of the first, second and third world with that of developing and developed societies.
The strengths of globalization, according to supporters like Fukuyama lies in its ideological basis of distribution of economic and political power, which in turn lead to the ascendancy of liberal democracy, free markets, consumerism, technological advancement, and restricted government control (Bryner, 2004). Such advocates of the process also tend to use it for an unequivocal endorsement of free markets and trade, reduced regulation of TNCs (transnational corporations) by government forces, and unfettered work on new technology (Bryner, 2004).
Whilst the power of pro-globalization forces continues to grow, which is not surprising seeing the vast range of interests that appear to benefit immensely from its outcomes, the concept is strongly opposed by the many who feel it to be an oppressive development, maneuvered by rich countries and by amoral TNCs pursuing power and wealth for their own purposes rather than an inevitable and logical evolutionary process (Ekins, 2000, 27). Such critics argue (with the support of extensive statistical data) that globalization, until now, has benefited the rich far more than the poor. The gap between the rich and the poor has continued to widen, and the direction of economic activity that it espouses is ecologically unsustainable, environmentally dangerous, threatening to vulnerable developing world societies and cultures, and risky for the future of the ecosystem (Bryner, 2004). Much of these apprehensions are based on cold fact, it being widely accepted that the distribution of most of the benefits of globalization, like technological spread, increase in individual liberties and freedoms, growth in economic conditions, and spread of information, until now has been markedly choosy, irregular and concentrated in the richer nations (Bryner, 2004). Regions with greater education, better infrastructure, and more resources have done far better than the others (Ekins, 2000, 28).
Whilst supporters of globalization feel the generation of inequalities to be integral and necessary to globalization because of its positive impact on competitiveness and costs, the actual reality is far more complex. Apart from substantial lags in receipt of economic and other benefits, developing nations appear to have been adversely affected with regard to environmental quality. Air pollution, a key indicator of environmental quality, has improved in most advanced countries, from the 1970s until now, a period that has seen enormous economic growth coupled with significant population increases (Bryner, 2004). In contrast air pollution appears to have become much worse in the developing nations, with more than a couple of million people dying from air related causes in these countries every year. Beach and river quality is similarly far better in the advanced nations than in the developing countries, improvement in the former being accompanied by deterioration in the latter (Bryner, 2004).
Definition of Problem
Attempts to explain differences in environmental conditions and behaviour between the advanced and developing countries have come from various researchers and experts in economics and the environmental sciences. Two of them, the Environmental Kuznets Curve and the Pollution Haven Hypothesis, have been intensely discussed and debated in recent years. With environmental degradation worsening in totality and particularly so for the developing world, the issue has polarized the global community, created a North South divide and has become one of contention and dispute.
Grossman and Krueger were the first proponents of the Environmental Kuznets Curve, (EKC), which states that the emergence of environmental problems, as well as their abatement, in developing countries are likely to follow paths similar to that of the advanced nations; that of first worsening with intensive industrialization and urbanization, and then improving with the generation of local wealth, as development moves on an upward curve (Suhrke, 1994). Pollution, the EKC states, will first increase with the level of GDP per capita, reach its maximum at around USD 8,000 and then decrease at higher levels of income.
The hypothesis on Pollution Haven takes another stance to explain the diminution in environmental problems in the industrialized nations even as they continue to grow in the developing world. It argues that increasing pollution in developing countries is a direct outcome of the migration of polluting industries from environmentally strict advanced nations to the developing countries, where environmental laws are more lenient, and where these companies are welcomed because of their investments and the jobs they are able to provide (Ederington, 2007). This progressive impact of differences in stringency of environmental regulation is labeled the “pollution haven hypothesis”.
While substantial research has been carried out on both these hypotheses, their results continue to be mixed and sometimes contradictory. The EKC theory, (by implying that the increase of pollution in developing countries is no more than an evolutionary phenomenon that will lessen and disappear with improvement in income and living standards), furthermore works towards understating the dimensions of the problem and adversely affects the efforts for the adoption of concerted global action to deal with the issue (Ehrich and Others, 1997). Other experts have put forward the view that apart from levels of development, a host of other political, ecological, temporal and economic factors also systematically influence environmental outcomes.
The need to understand the impact of economic progress and trade liberalization policies on the quality of the environment is becoming increasingly imperative because of the progressive appearance of environmental issues into the sphere of public policy. Such a need has become even more important because of the often catastrophic consequences of human activities when they exceed certain limits. With economic development and trade liberalization also being critical public priorities, essential to the agendas of developing countries, the importance of studying environmental consequences of economic development and greater openness to trade has assumed critical importance.
This research paper aims to examine and investigate the various theories put forward for the explanation of increasing pollution levels and environmental degradation in developing countries, especially in relation to the movement of polluting industries from high income, environmentally rigid regulatory countries to low income, environmentally lenient regulatory countries.
The research paper aims to investigate a phenomenon that is international in scope, and is closely associated with globalization and international trade, industry and investment. Studied by numerous experts, the reasons behind the increasing environmental degradation in developing countries continues be a controversial issue, with opinions of the global community largely polarized along north-south lines.
The research effort is based on study of existing material and does not include any direct 121 interviews with experts qualified to contribute to the subject. Being based on study and investigation of extant literature, it needs to be recognized at this stage that the material available, though rich, is fragmented, and in a number of cases, dealt by researchers along with other issues like distribution of income, international trade, and agreements like NAFTA; which are closely linked to the globalization process.
Much work has been carried out on the Environmental Kuznets Curve (EKC) and the amount of literature available on the subject is not just enormous but also strenuous to go through, because of detailing and analysis of extensive empirical data that rarely lead to any but the most general of conclusions. Whilst this is possibly not related to the shortcomings of the various researchers who have struggled with the concept, (because of the dearth of concrete data available on pollution parameters with developing countries), the point of carrying out such extensive research knowing that such data sources are limited appears to be somewhat futile.
With the work on the Pollution Haven (PH) concept also being varied and largely inconclusive, the literature selected for study for the assignment has had to be chosen with care and effort in order to obtain access to different interpretations and views on an intensely controversial issue. The study is focused on the various findings obtained by researchers on KEC, PH, and other investigations on the increase in environmental problems in developing countries, with particular reference to the issue of migration of polluting industries from the wealthier nations to the developing countries.
The material chosen for study is listed in the bibliography at the end of the assignment. Whilst efforts have been made to make the literature chosen for research truly representative it is possible that some important contributions may have been left out, a factor that could affect the validity of the research findings.
3. Research and Findings
Environmental Kuznets Curve
Grossman and Krueger, in 1991, carried out a number of tests and regression analyses, using data generated by the Global Environmental Monitoring System (GEMS) covering about 40 countries between 1977 and 1986, on the relationship between per capita incomes of different countries and a number of factors associated with environmental pollution like sulfur dioxide, suspended particles, smoke, dissolved oxygen, biological oxygen demand, and fecal coliform (Markowitz and others, 2002).
Presenting a paper called “The Environmental Impacts of a North American Free Trade Agreement”, (1991), the duo came up with findings that appeared to link the movement of per capita GDP, which they took to be an indicator of development, with the levels of pollutants, in a relationship that could be illustrated diagrammatically with an inverted U curve (Devin and Others, 1999). This relationship was named the Environmental Kuznets Curve, after a framework originally designed by Kuznets in the mid 1950s, which uses an inverted bell diagram to illustrate the relationship between two variables, but in a completely different context. Nobel price winning economist Simon Kuznets (he received the 1971 price for his work on economic accounting), hypothesized that the relationship between income inequality and income level would follow an inverted U-shaped curve, a concept totally divorced from the behavior of income in relation with environment (Goklany, 1999, 52).
The proposition asserts that economic growth may be harmful to the environment before reaching a certain stage but becomes conducive afterwards and is graphically illustrated as under.
The Bell shaped Environmental Kuznets Curve
EQ stands for environmental quality, EW refers to economic well-being, and X* is the turning point. The curve indicates that, as the economy grows, environmental degradation worsens up to X*, after which environmental quality improves.
Grossman and Krueger, (1995), based their study on the panel data available from the Global Environmental Monitoring System’s (GEMS) tracking of quality of urban air in different cities in developing and developed countries, as well as for water quality in river basins around the globe (Markowitz and Others, 2002). Their investigation incorporated fourteen diverse indicators of environmental degradation like sulphur dioxide, smoke, carbon, heavy particles, oxygen regimes in river basins, faecal contamination of river basins, and the presence of heavy metals such as lead, cadmium and arsenic in them (Markowitz and Others, 2002). Estimation was carried out through the use of the GLS (Generalized Least Squares) method to take care of other features that were not included in their list of regressors (Markowitz and Others, 2002).
Grossman and Kruegar found little to relate economic growth with steady spoilage of environment and natural habitat. Their relationship was determined between that of economic development (measured by GDP per capita) and environmental degradation (by levels of the chosen environmental indicators) and supported the view that economic development is associated first with an initial phase of deterioration, which is thereafter followed by a period of enhancement (Ekins, 2000, 54). The turning point, the threshold where environmental degradation apparently reverses, turned out to be about USD 8000 per capita in most cases (Ekins, 2000, 244). The study also revealed that (for most of the pollution measures used), the chances of further environmental degradation occurring with increase in income after countries reach a per capita income of USD 10000 was as low as 5 % and could be safely rejected (Ekins, 2000, 244). Grossman and Kruegar reported that their analysis of findings of the movement of various pollution related factors in relation to economic well being revealed broad conformity with the EKC curve.
The movement of the curve essentially implies that when countries with low income levels start growing economically their environmental quality will tend to decline along with economic growth, but will later, or rather, ultimately, after income levels cross a certain threshold, improve. Early stages of economic development, as per the EKC will invariably be associated with environmental degradation, atmospheric and water pollution, loss of wetland and deforestation.
The adjustment of Kuznets’ fundamental idea to environmental and resource economics leads to the hypothesis that economic development may be associated with initial increase in environmental degradation, and combines this with the empirical observation that environmental improvements can after initial hiccups move hand in hand with material economic progress. This is because when a country reaches “sufficiently” high standards of living, its people devote substantial attention to environmental improvement and make efforts to introduce environmental laws and new mechanisms to protect their environment; successful economic development and increase in living standards enable societies to prioritize environmental objectives, because of increased knowledge about the need to improve their environment as well as the financial resources to meet desirable environmental goals (Gallagher, 2001).
The EKC has found many takers, especially in the developed countries, and more so among the proponents of globalization, who feel that greater development, evinced by parameters like higher levels of income and standards of living, is very likely to lead to greater environmental degradation in the initial stages of growth. Such a view is possibly a natural outcome of the enormous environmental degradation that has accompanied the economic progress of the last two centuries (Modak and Biswas, 1999). Growth in per capita income is likely to be accompanied by the tendency for increased demand for services in comparison to agricultural produce and manufactured goods, leading to strain on energy resources and their greater exploitation (Modal and Biswas, 1999) (Gallagher, 2001). Activities associated with mining for coal and extraction of oil increase exponentially, along with increases in manufacturing activity, leading to enormous strain on natural resources, along with consequent pollution of atmosphere and contamination of water resources.
Proponents of the EKC however go on to stress that whilst initial economic progress is most likely to be accompanied by environmental degradation because of the natural urge of economically progressing and dynamic societies to increase their consumption of food, energy, petroleum products and other natural resources, a number of phenomena start taking place after economic progress moves through a certain threshold (Jha, 2003) (Modak and Biswas, 1999) (Hironaka, 2002).
· Population needs change with economic progress and move on from basic needs like food, water, clothing, to education, better employment, freedom from disease and a better quality of life
· The need for a better quality of life is fundamentally connected with a better environment, namely cleaner surroundings, better sanitation, hygienic schools, less smog on the roads, less filth in the rivers, cleaner beaches, cleaner roads, and less litter. The smog that was normally associated with London in the 19th century is today a thing of the past, even as it continues to be a reality in crowded developing country metropolises.
· There is a tendency for general technological progress to lead to greater efficiency in the use of energy and materials, allowing a given amount of goods to be produced with successively lesser consumption of natural resources and resultant ease of pressure on environment.
· More efficient reuse and recycling of materials, a consequence of advances in technology and knowledge also leads to savings and protection of natural resources.
· Population preferences and needs change to incorporate preservation of environment and resources and are expressed through acts to regenerate and renew environmental goodness, viz. the creation of parks and gardens in urban cluster, the development of wildlife parks, bans on indiscriminate poaching and mining activities, embargos on river and sea pollution, and legislation to improve the quality of automobile emissions
· Technical change, adoption of modern production methods and changes in domestic energy usage plays a key role in reducing the pollution intensity of output over time, e.g. the switch from coal fires for cooking to the use of piped or canned gas has not just reduced environmental carbon and particle load but reduced the incidence of coal mining. Greater usage of nuclear, solar and wind energy is another such process that has reduced the load on mining and petroleum products.
· Democratic societies use political pressure to preserve and improve the environment, at least in their countries.
· Improved economic conditions also lead to stricter government rules regulating resource and environmental conditions, higher taxation of polluting discharges, taxation of particular resource inputs of products
· Research to combat high pollution and resource use is subsidized.
· The EKC U-shaped relationship is dictated by the ability of a society to spend on environmental amenities, implying that wealthy countries have lower levels of environmental damage because they can afford to pay for environmental improvement, whereas poor countries cannot afford to emphasize amenities over material well-being.
Advocates of globalization, as also the EKC, argue that environmental conditions in the developed countries have, along with economic conditions, improved during the past few decades, evidencing that economic growth ultimately leads to environmental upliftment. Air pollution, a proven health hazard, reached it highest limits in the USA in the 1950s and has declined since then because of the focus on using improved fuels and making more efficient machinery (Bryner, 2004). Along with the USA all wealthy countries have seen a reduction in air pollutants like carbon monoxide, volatile organic compounds and nitrogen emissions. Whilst some pollutants have deceased more than others, there has been no incidence of increase.
Economic progress, in these countries, have synergized with technological advances and improved environmental regulation to improve environmental quality (Jha, 2003). Whilst all industrialized countries have experienced spectacular improvements in these parameters, the corresponding situation in developing countries is remarkably different. Air pollution has become much worse and an estimated 2 million people die of air related problems every year in these countries (Jha, 2003). Data released by the World Bank reveals that pollution levels in developing world cities like Mumbai, Beijing and Mexico City are far higher than those of industrialized countries (Jha, 2003).
Water quality analysis reveals similar trends. Whilst water quality, beach pollution, and the incidence of substances like DDT have fallen sharply in the wealthy nations, an overwhelming majority of industrial wastes continue to be dumped into rivers and other water bodies in the developing world (Jha, 2003). More than 3 billion people, all of whom live in the poorer countries, have to do with contaminated water, a fact that leads to hundreds of millions of water related diseases and millions of water related deaths (Jha, 2003).
All the Asian rivers that make their ways through cities are badly contaminated; sewage continues to be the most critical problem, and sewage discharge along coast lines have increased enormously during the last few decades.
Advocates of the EKC suggest that the environmental qualities of these counties will improve with progress backed modernization.
“Some ecologists, like Bjorn Lomborg, agree, arguing that there is a simple relationship between wealth and environmental quality. As countries move from extreme poverty to medium income, pollution levels initially increase, but as wealth continues to grow, pollution levels eventually decline, for two reasons. First, developing countries can achieve economic growth as well as a better environment as they buy progressively cheaper, cleaner technology from the industrialized nations. Growth and environmental quality are not opposites but are mutually reinforcing. Second, as countries decide to pursue an improved quality of life for their residents, they decide politically to make pollution more expensive through regulations and taxes. “There are no decisive reasons to assume that the same development will not happen in the Third World which today faces serious environmental problems equivalent to those we faced 50-80 years ago.” (Bryner, 2004)
The EKC, whilst having many supporters among the proponents of globalization, has also been severely criticized by experts who feel it to be totally subjective, backed by specious and self serving reasons, and designed to make the subject of environmental pollution a simple and essentially self correcting evolutionary process.
Critics stress that the acceptance of the idea that economic growth could over time lead to environmental improvement could be enormously damaging, because of the possibility of framing of policy decisions, which disregard taking of special care of the environment during early stages of growth on the basis that self correction will occur naturally with improvement in economic conditions (Devlin and Others, 1999).
· Such concepts and theories could make economies, which take decisions on such rationale, unable to protect their environment, leading to significant depletion of their natural resources and retardation of their future growth.
· Countries like these could become international liabilities or engage in internal and external disputes with the worsening of their economic and environmental conditions.
· Growth will become the guiding mantra for many policy makers, a phenomenon that could well lead to greater concentration of wealth in the hands of fewer persons.
The EKC also works against the concept of sustainable development, which states that growth needs to be monitored and guided carefully to avoid the growth related environmental disasters that have happened in the past. Sustainability, in such circumstances, could become a non-issue with policy makers because of the inevitability of environmental regeneration after the reaching of an income threshold (Devlin and Others, 1999).
The EKC has also been found to be theoretically faulty because of its use of GDP as an income indicator. GDP is accepted to be an inadequate measure of wealth because it does not take cognizance of loss of natural resources, misses numerous economic activities even as it measures others that do not represent true growth, is unable to measure quality of life and is skewed towards the cities because urban incomes are normally greater than rural ones (Jha, 2003).
Criticism has also come in because of the following shortcomings (Devlin and Others, 1999).
· The fact that a wealthy country is cleaner than a poor country does not imply that poor countries will become cleaner as they become wealthier.
· Development paths for poor countries differ greatly from those adopted by those that are now developed in many ways.
· EKC theorists do not consider the fact that wealthy countries may be cleaner because they were bequeathed better environmental conditions in the first place
· EKC theorists do not consider the fact that wealthy countries may be cleaner because their polluting industries have move south.
· There may be other intervening factors that lead to the surmise about the relationship between GDP and air pollution. Elimination of these factors may well lead to decreases in air pollution regardless of changes in GDP.
With a number of studies indicating the very weak empirical basis for the KEC, a number of sociological experts explain the willing and ready acceptance of the KEC upon essentially self serving reasons and objectives of the wealthy proponents of globalization, viz (a) focusing on solving problems through increased economic growth will help those who control capital in a society and who profit more directly from production, and (b) if economic growth is accepted to be the ultimate solution for society’s problems, there will be little need to regulate this growth (Hironaka, 2002).
The EKC draws support from the belief that the wealthy care more about the environment than poor people do, and that demand for environmental quality increases with income level. This, critics of the EKC assert, is an innately specious argument and disregards the fact that poor people are intensely concerned about their children suffering from asthma or food poisoning, even though they may be less concerned about saving endangered animal species and cleaning the Himalayas (Hironaka, 2002).
Pollution Haven Hypothesis
The EKC, for all its shortcomings, did lead to detailed and often vehement discussion on the relationship between economic progress and environmental degradation, which resulted in a number of studies on the issue. Such debate and research has helped in making the people of developed and developing countries realize that there is no alternative to sustainable development and that economic progress that focuses only on economic growth is a recipe for economic and environmental disaster.
Associated discussions on global environment, in recent years have focused extensively on the relationship between trade and environment. This issue has also become extensively polarized between the proponents and critics of globalization. Anti-globalization proponents stress that much of the improvement in environmental conditions in wealthy nations, which EKC supporters stress, comes out of economic advancement and its associated social and political developments, actually occurs because of the tendency of polluting industries to shift away from wealthy nations to those of the developing world (Hunter, 2000). Thus while increases in income and desires for living better quality lives in developing economies do lead to the generation of internal forces that work against pollution, polluting industries in such countries, because of strict environmental regulations, move away to poorer nations (Hunter, 2000). Such tendencies of polluting industries to move away from advanced nations to poorer societies were previously referred to as export of pollution now form the basis of the Pollution Haven Hypothesis, (PHH), the word Haven being analogous to Tax Havens and the associated dubiousness of the term (Hunter, 2000).
PHH is today among the most controversial and intensely discussed predictive hypotheses in modern day economic theory. Occupying a crucial position in the debate on trade and environment, it attempts to establish a strong connection between environmental laws and regulation and trade flows. In simpler words the PHH puts forward the theory that liberalization of trade in goods will over time lead to the movement of polluting industries from countries characterized by high income and strict environmental laws to countries that are poorer and have comparatively slacker environment regimes (Taylor, 2005). The PHH has already been put to widespread use in global bodies. At the NAFTA debate speakers used PHH principles to predict an environmental disaster in Mexico, as polluting industries would move there, accompanied by severe job losses in neighboring countries, where such units would have to necessarily close down (Taylor, 2005). The PHH can also be used to ban or push for intervention through appropriate tariff structures where trade movements could affect the economies or environmental conditions of different countries (Taylor, 2005). These issues have led to extensive research work on PHH by environmentalists as well as economists.
Copeland and Taylor, who originally put forward the hypothesis, worked on the application of economic theory. Assuming one primary production factor, categorized as human capital, they developed a static general equilibrium model of international trade for two countries with a range of goods, whish were distinguished only by their pollution concentration
Copeland and Taylor, (C and T), hypothesize that while production of goods leads to concomitant production of pollution, its diminution requires significant resources. In fact the production of pollution along with that of the manufactured product leads to a situation where pollution appears to be a production input (Taylor, 2005). C and T adopt assumptions on diminution of pollution to allow for specific and unequivocal ranking across a range of industries in two countries in line with their pollution concentration. With the two countries being labeled as North and South, (North having far greater human capital than South) the differences in human capital ensure the specializm of these countries to be sets of comparatively clean/unclean trading goods Taylor, 2005). C and T assume pollution to be local in its effect and the environment to be initially acceptable in both countries. Policy decisions in the two countries are made on the basis of tradeoffs of pollution increases that generate genuine income against the sum of marginal harm across the concerned population (Taylor, 2005).
With the model built to mirror three realities, namely (a) the distribution of income worldwide is grossly unequal, (b) the pollution concentration of industries vary greatly, and (c) the quality of environment is acceptable and environmental quality is fine, it progresses to the provision of forecasts on patterns of trade and the concomitant pollution levels from these assumptions. These are as follows (Taylor, 2005).
· The PHH is generated when countries vary in levels of human capital.
· A movement from national self-sufficiency to free international trade in goods results in the movement of production of unclean goods from countries with high incomes and strict environmental laws to countries with lesser incomes and slack environmental laws.
· The level of pollution rises in the poorer country and falls in the richer country.
· Global pollution, in totality increase with increase in trade.
It is obvious from the above that trade becomes instrumental in changing the nature of production in countries because of varying standards of environmental regulation between them. Furthermore unclean goods become more expensive in rich countries compared to poor countries.
Regulatory standards are internally produced functions of the Rich-Poor income difference; given the comparable cost structures in environments of self sufficiency, changes involving free trade leads to the shifting of production of unclean goods from wealthy to poor countries, decrease in pollution in the rich countries, increase of pollution in poor countries and a total increase in global pollution because of the movement of polluting industries to countries with poor regulatory norms (Hunter, 2000).
Whilst the explanation behind the PHH is relatively clear and straightforward its testing under actual conditions is another matter altogether and has proven to be extremely difficult. With the PHH requiring an externally generated movement away from self sufficiency to that of free trade, such conditions have been practically impossible for researchers to apply in real world situations; nowhere in the world is trade completely free, and liberalization cannot be a totally externally generated development.
Any empirical testing of the hypothesis has to deal with data coming from marginal movements towards free trade and address the endogeneity of both trade and pollution policy (Taylor, 2005). The theory was formulated in the context of industrial pollution, but testing has sometimes employed data on renewable resource use, consumption generated pollution or transboundary pollution (Taylor, 2005). Again C and T forecast the PHH by removing all other motivations for trade, apart from regulatory dissimilarities to establish patterns of trade. Other determining attributes like divergence in factors like population density, size, and assimilative capability are ignored, even as the authors state that in actuality trade is influenced by numerous often conflicting factors (Taylor, 2005).
Subsequent empirical research on PHH has often confused empirical findings linking regulation to trade flows, straying from the PHH theory that tightening of environmental regulation discourages exports of unclean goods. In some PHH models tightening of environmental regulations leads to increase in production costs and to lowering of both production and exports of unclean goods (Taylor, 2005). Some researchers have adopted a direct approach, seeking empirical evidence that lessening in trade barriers budges polluting industries from countries with tight laws to those with weak regulations (Taylor, 2005). Again others have approached the issue from a different perspective investigating differences in trade flows and relating such variations to differences in environmental regulations.
Whilst studying this phenomenon it is useful to distinguish PHH from what is known as environmental dumping, a phenomenon that is quite different and applies to situations where environmental regulation is less tight than it would be in the nonexistence of deliberate dealings (Devlin and others, 1999). Although environmental dumping and the deliberate use of environmental regulations could also stimulate trade patterns that resemble PHH, the two phenomena are quite distinct. Furthermore environmental dumping carries with it a negative connotation whereas PHH is merely a forecasting hypothesis on how trade flows are dependent on differences in the environmental policies adopted by two countries and does not make any value statement on welfare aspects (Devlin and others, 1999).
Recent years have seen extensive work on the concepts related to PHH. In many cases researchers have questioned the assumptions made by C and T; others have examined the sensitivity of decisions regarding location of industry to pollution policies, a vital input of all PHH models (Ederington, 2007). Some researchers have examined whether location decisions are affected by trade regimes whereas others have moved towards a consideration of strategic issues by investigating whether countries deliberately adopt weak environmental regulations to attract industry and jobs. Researchers have also taken more uncharitable attitudes towards the abilities of governments to internalize external forces and assessed the impact of PHH driven trade on welfare, when polluting forces are local, regional, or global.
Environmental Degradation in Developing Countries
The wide acceptance of the need for globalization and its numerous benefits tends to overcome most of the apprehensions voiced against the process, including those that concern environmental degradation. Much of the reasons for the increasing environmental degradation of developing countries in recent decades lies in the fundamental unevenness of the globalization process; the fact that it has been far kinder to the countries of North America, Western Europe, and the Far East than to countries in Africa, South America and South Asia. The complexity of the current globalization process makes it specious to standardize the worldwide consequences of globalization to simple statements and hypotheses put forward by the proponents of the EKC and the PHH. The literature on these propositions, as also on theories like those of the “race to the bottom” and “global convergence” are based on the broadest of generalizations and simplifications of multifaceted and complex phenomena
Whilst the PHH is based on the premise that developing countries attract polluting industries because of their lax environment regime, the truth actually is far more complex. Developing countries can undergo severe environmental degradation whilst not functioning as pollution havens because the environmental degradation caused by trading, national or translational, industries may be considerable higher than it would have been in an industrialized country because of weaker institutional strength and lesser investment in environmental control. Gallagher, (2004), states that the environmental condition of Mexico has deteriorated drastically, since its integration into the North American Market, (despite it not serving as a pollution haven for American industries), because of inadequate mechanisms for avoidance of environmental degradation, along with low investment in environmental improvement.
Apart from local laws and regulations, environmental degradation is also strongly dependent on the size, scale, and nature of trading and manufacturing activities. Countries in Africa and South America still largely deal in the extraction, processing, and trade of natural products and derivatives. With the demand for these products increasing with globalization, increase in trade will obviously increase environmental damage. Iron ore mines in Goa, in India, exported 10 million tons of iron ore in the 1980s, a figure that has gone up to 30 million tons to feed international, particularly Chinese demand, with widespread ecological devastation, and groundwater contamination (Jha, 2003, 270).
The essential nature of environmental damage may vary from industrialized nations to developing countries (many of them located in tropical and biodiversity-rich areas). Again while peanuts are cultivated both in Pakistan and in the U.S., the environmental damage that can be caused by expansion of groundnut cultivation can be quite different. The current expansion of the Indian groundnut industry to feed international demand is predicted to lead to extensive loss of biodiversity, which is not the case in the USA where cultivation of groundnut plantation has reached significant sophistication (Jha, 2003).
Whilst globalization does in some cases lead to transfer of environmentally friendly technologies and practices, literature is replete with cases of harsh and permanent environmental worsening connected to an enhanced enlarged rate of global economic integration of some industrial activities. Although it does not appear to be possible to generalize at all about the connection of factors like trade flows, weak environment laws, and economic progress with environmental degradation, it appears to be clear that absence of impartial global institutions and regulations often leads to over degradation/exploitation of environmental.
It is also widely accepted that abatement of environmental degradation occurs at different speed for the poor and the rich. This is true for communities, societies, and countries. The rich always live in far better environmental conditions than the poor, even in the poorest of countries, not because of their desire to live in a better environment but because of their economic and political power to do so. With it being possible for victims of environmental degradation to end the causal factors if they had the economic and political power to do so, it follows that that pollution will remain unabated when the net losers from the polluting activity have less political power than the net gainers.
A striking example of this is the long range pollution that occurs through carbon emissions by rich countries, the main cause behind global warming. Much of the buildup of carbon dioxide in the atmosphere has originated and continues to originate in the developing world. Most studies of the threats of climate change indicate that poor tropical countries are likely suffer far more than rich temperate countries, in fact the rich countries may even realize net gains from the climate change brought about by fossil fuel combustion.
“Where pollution by the rich affects other rich and, therefore, powerful people, abatement measures are faster in coming. The abatement of halocarbons that threatened the ozone layer, and that would affect the rich temperate countries most, is an example. The Montreal Protocol and its successors have been very effective in reducing and even ending emissions of various halocarbons. It is true that the difference between these two cases can also be explained by appealing to costs. Abatement of halocarbons is a low-cost affair compared to abatement of pollution from as fundamental a part of the economy as its principal energy source.” (Somanathan, 2002)
Environmental degradation, economists, and environmentalists feel, occurs, not because of deliberate intention but as a side effect, albeit a known side effect of deliberate actions. Economists have also emphasized that environmental degradation represents a case of negative externalities and is left unchecked only because the losers are different from those whose actions create or lead to the creation of these problems. Such statements, whilst being ironical in the modern day world of globalization and close cooperation, are reasonably accurate. They however need to take cognizance of the fact that victims of degradation are often unable to take corrective action because of their lack of awareness, knowledge, and financial and political power.
Much of the environmental degradation that the developing countries are experiencing at the moment relates to their inferior knowledge and lack of economic and political power, a condition that leads to the devastation of their habitat, not only due to long range causes like carbon and sulfur emissions from factories and manufacturing units that serve the interests of the wealthier nations, but also because of the systematic movement of polluting industries from the developed to the developing countries. The situation is further compounded by numerous theories floated by first world supporters of globalization that either try to explain the causes of such environmental degradation in terms of natural evolutionary processes or seek to lay the blame for these conditions on the inadequate systems, laws, and regulations that exist in third world countries.
Such rationale often tends to overlook the fact that unbridled expansion of production and trade is not sustainable and can lead the world towards ecological disaster. Phenomena like unbridled growth in greenhouse gas emissions and generation of toxic wastes and the reduction of biodiversity and environment represent threats to the environment that are steadily increasing with global trade, and will continue to do so, considering the constant emphasis on the need for unrestricted markets and the refusal to recognize that such actions are putting unbearable pressure on limited global resources.
Modern day industrial progress, along with production of energy, and increase in consumption, is disrupting ecological activity and regenerative processes. Much of this activity, be it through greater production of goods in China, increased mining in India, or the burgeoning of cheap labor factories in poor nations, is accelerating environmental degradation in the developing world, with the sole purpose of feeding the markets of the wealthy nations, policy makers of which are steadily forcing the movement of environmentally dangerous activities form their countries to the poorer nations through a range of stratgems.
The debate over trade liberalization and the environment is certainly not going to end soon. The growth of global population will inevitably lead to environmental consequences, and some of these consequences will be negative. Given this premise, it is however essential to realize that ecological sustainability, an essential condition to guarantee the survival of the world, depends upon strong globally integrated commitments to the integration of ecological fortification and economic movement with social evenhandedness and political empowerment.
Sustainability is not just an ecological requirement it concerns social fairness, inclusion, evenhandedness, community welfare and political commitment. The current approach of globalization theorists works against these basic principles of humanity and needs to be revisited by the world community.
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