World Bank Exposed…Lawrence Summers leaked memo

World Bank Exposed…Lawrence Summers leaked memo


The word is out … President Obama is poised to nominate Larry Summers to be the next head of the World Bank One doesn’t need to look at the tenous nature of the world economy, criticality of clean energy investing, and elsewhere to recognize that this is a truly critical post but the impact and import of this post cannot be underestimated. Considering the World Bank’s rather troubled history when it comes to truly fostering prosperity and in directing investments toward a clean energy future, it is important to place an environmental/energy/global warming lens against any appointee to a senior World Bank position. And, in this vein, Larry has provided very serious reasons to question his candidacy … if not torpedo it.

For example, when at the World Bank, Summers signed a memo advocating exporting polluting industry and toxic pollutants to Lesser Developed Countries (LDCs), a concept which is fundamentally at odds with any concept of environmental justice and blindly ignorant of the potential and imperative for ‘clean’ developmental prospects. If Summers still holds to any of the concepts he put forth in that memo, he simply should not be considered for the World Bank post.

As Max Blumenthal reminds us, Summers wrote (signed?) a memowhile working at the World Bank that promoted pursuit of increasing pollution in the developing world as a path toward leading, eventually, to a cleaner development path. [Note that this memo has a long and controversial history.] This is very much in line, in many ways, with the development path that the World Bank has been following, with a very serious over-emphasis on traditional fossil-fuel energy and the promotion of high-energy intensity, high-pollution development in many parts of the worldunder the thesis that a society requires income from development, even if high polluted, before it will have the societal pressure and resources to clean up the environment.

Sadly, as per Summers’ 1991 argument, this is a fundamentally flawed argument on many levels. For example, as we are seeing in the conundrum of China’s development, it ignores the very real and very heavy drag that high pollution can have on development rates. It also, in essence, ignores the global impact of pollution shifting, a shifting of the chairs of pollution that is not affordable when we consider global challenges (e.g., Global Warming). It is also, at its core, an ethically troubled, if not bankrupt approach, asserting a fiscally-driven basis for arguing why ‘poor’ people are more appropriate to poison than the wealthy. Finally, as per the last item, it indicates a weltanschauung driven by financial models when, even heading the Treasury Department, looking at the world solely through a green-eye shade is no longer justified in seeking to develop sensible policy moving into the future.

Let us look at the extracts of memoin question:

DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject:GEP’Dirty’ Industries: Just between you and me,

Someone writing “just between you and me” should always be wary that the “you” is quite likely to expand in numbers.

shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]?


I can think of three reasons:1) The measurements of the costs of health impairing pollution depends on the foregone 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.

The moral element that is clearly absent: poor people earn less therefore it is appropriate to shift to poisoning them since that will have a lower economic cost. We must wonder whether Summers greets events such as the 2006 poisoning of 40,000 or so in Cote d’Ivoire via an illegal dumping and other pollution dumping in Africa with approval as smart economic policy.Environmental Justice is, evidently, something that a Larry Summers of December 1991 was unaware of and certainly unconcerned with promoting. Prior to any appointment, we should hope that Summers is questioned about environmental justice issues (in the United States and globally) and left out of the nomination process if his answers do not substantively reject the philosophy implied and stated in this paragraph.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always though that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.

The challenge and importance is not lowering “air pollution and waste” but ensuring that the burden of that waste is fairly shared?

3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.

Let us develop in a dirty manner so as to develop social awareness and concern about cleaning up the environment?

The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.

A ha, the real issue is that morality and other things will foster opposition to the World Bank’s drive for liberalization which, of course, must be pursued at full speed, damn the torpedoes (damn the risks).There are many things striking in these paragraphs, none of which reflect well on the author. In part, what is most striking is what is absent: no discussion of any concept of alternative, cleaner development paths. Those paths clearly exist now and we must, as an imperative for our own interests (Global Warming, stability, wealth creation globally), be making those paths central not only to our own internal economic progress but to any and all aid programs internationally. Considering the imperatives to deal with Global Warming and pursue better development paths, anyone holding the views of this memo should not be in a senior government position. If, on these issues, the Lawrence Summers of 2012 remains the same “Lawrence H. Summers” who wrote this memo, then Larry Summers should not be in a senior position.

Oh, yes, this memo leaked into the public a long time ago.

International Reaction

With an Administration struggling to rebuild / maintain America’s stature in the world, perhaps it is worthwhile to remember the international reaction to the leaking of Summers’ memo.

After the memo became public in February 1992, Brazil’s then-Secretary of the Environment JoseLutzenburger wrote back to Summers: “Your reasoning is perfectly logical but totally insane… Your thoughts [provide] a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness and the arrogant ignorance of many conventional ‘economists’ concerning the nature of the world we live in… If the World Bank keeps you as vice president it will lose all credibility. To me it would confirm what I often said… the best thing that could happen would be for the Bank to disappear.” Sadly, Mr.Lutzenburger was fired shortly after writing this letter.Mr. Summers, on the other hand, was appointed the U.S. Treasury Secretary on July 2nd, 1999, and served through the remainder of the Clinton Admistration.

And, of course, served with great distinction in the Obama Administration where, among other things, Summers helped sabotage progress on Climate Change mitigation(much as he had undermined Global Warming mitigation efforts in the Clinton Administration).
This memo has, over time, received discussion. From the wikipedia discussion:

excerpt was leaked to the media with the implication that it was a serious, standalone memo …Lawrence Summers initially accepted responsibility for the memo, but claimed that this argument was satirical and not meant to be taken seriously. An aide, Lant Pritchett, later stated that he had written the memo and Summers had only signed it. Critics have argued that even if it was meant as satire, the memo is in fact an accurate reflection of existing World Bank policy.

But, as to its being a satirical memo and a misconstrued partial publication, here is howSummers reacted to this:

“I think the best that can be said is to quote La Guardia and say, “When I make a mistake, it’s a whopper.'”

Thus, perhaps this was simply a mistake and the fact that the concepts within this fit perfectly with the Bank’s actual operating patterns is irrelevant …Not just one memo …

There are many other troubling items to remember from Summers’ past such as his questioning women’s ability to do science(more traditional media story from Boston Globe) and how he seems to have been fundamentally wrong about (or blindsided by) the financial travails of the stock bubble, deregulating the financial markets, and the $8 trillion or so housing bubble. This memo, and the philosophy behind, are highly troubling — especially thinking about an appointment to the World Bank.
As Blumenthal comments when it came to President Obama’s nomination of Summers as Secretary of the Treasury,

If Obama nominates Summers, he will send a dispiriting message to governments of developing countries — especially in Africa — just as they have begun to look at the United States as a beacon of hope.

Sigh … does nominating him to the World Bank promise anything better?
A final word …To be clear, this “memo” is not enough grounds for fighting Summers, but it is something that does merit discussion. And, if it was satire, that discussion should help foster a discussion of smart policy moving forward.

Additionally: This post was a quick shot at highlighting a controversial Larry Summers memo and to raise questions that merited discussion/asking. It was (is) not an effort to examine the totality of Summers’ views on environmental/global warming issues. That would be a separate piece. You might, however, be interested in Summers’ 2007 OPED Practical steps to climate control:

If global warming is the ultimate inconvenient truth, the most important inconvenient truth about global warming policy, argued in last month’s column, is what happens in the developing world. These countries will deliver three-quarters of the increase in global greenhouse gas emissions over the next generation, on current forecasts. … Whatever targets are negotiated or set, emphasis should also be placed on concrete measures that will have meaningful impact. … the major industrial countries should commit to a very large increase in funding for research in technologies that offer the prospect of reducing the concentration of greenhouse gases, such as renewable energy, carbon sequestration and energy efficient engines. They should also learn a lesson from the pharmaceutical experience and commit to making intellectual property relating to clean energy available to developing countries on preferential terms. It may be that ambitious emissions- reduction targets can be achieved with existing technology, yet new technologies could help. … the World Bank … should … take on as a major mission the provision of subsidised capital for projects that have environmental benefits that go beyond national borders. There is much that can be done to encourage energy efficiency in almost every sector within developing countries, yet national governments have inadequate incentives to take account of global impacts.

While not agreeing with everything that Summers writes in this OPED, there is grounds for more positive discussion than what is the case with the 1991 memo. Again, this diary was not and did not pretend to be about covering the totality of Summers’ career and views on sustainable development. That is a work for another day and perhaps another author.

Pdf file showing memo….

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