Running Out of Resources? Jude Wanniski May 10, 2001

Memo To: Neela Banerjee, NYTimes
From: Jude Wanniski
Re: “Growth Accounting”

Your Sunday article in the NYTimes, “The Economy’s Apples and Oranges,” makes the case that economic growth has its environmental costs that do not show up in the Gross National Product. In other words, Mother Earth is being taxed to finance increases in the national living standard, but there is no accounting for the subtraction. It is an interesting idea, to develop such an index, but many of the premises in your article, I think, would show much less subtraction from the environment than you believe. Your general point, though, is a good one, as people do tend to tax the environment through pollution if that is the only way to make ends meet. I’ve argued for more than a quarter of a century that it was when Richard Nixon went off the gold standard in 1971 that the environmental movement began in earnest. It was the great inflation that followed the move to a floating “standard of accounting” that led industrialists to make up for their profit losses by cutting corners on the environment. The monetary deflation underway since 1997 has had a similar effect. When the price of oil followed gold’s decline, the world oil industry stopped investing in infrastructure for almost two years. When the world economy bounced back, it found the supply cushion had run out. The Bush administration now finds itself urging drilling on public lands because of energy supply shortages. Fixing the dollar to gold, I believe, is the only way to prevent future inflations and deflations from causing such environmental disturbances.

Environmentalists really hate to admit it, but the worst polluting of the planet takes place in the poorest countries of the world, not the richest. In its final days, the USSR was polluting its ecosystem at an incredible rate, and China was being denuded of its forests as communism was not enabling the intellectual capital among its people to substitute for physical resources. There is a bit less pollution in Russia now and much, much less in China, since it went on the capitalist road, even its forests coming back in healthy fashion. When Japan was poor, it also was polluted. Its wealth enabled it to clean up. If growth rates in Africa were sufficient to lift people out of poverty, they would not have to resort to poaching on wildlife preserves and also would be able to afford the policing of natural habitats. Growth is the solution, not the problem.

Your concern seems to be: “As the economy slows, any questioning of the price of growth may be drowned out in the effort to raise again the tide that lifts all boats. It may have happened already: President Bush dropped his support for regulating emissions of carbon dioxide because that could increase energy prices. Mr. Bush may forego plans to open up the Alaska National Wildlife Refuge to oil drilling, but only because the political cost is high, not the environmental toll.” You also report: “Environmentalists have repeatedly pointed out that what Americans really consume, in a staggering variety of ways, shapes and paint jobs, is a diminishing store of natural resources.”

If you are going to continue on the environmental beat, Ms. Banerjee, I’d recommend you read Gregg Easterbrook’s book, A Moment on the Earth, published in 1995. It is the best book on environmental issues I’ve ever come across, but it did not sell many copies because the greenies were unhappy that he was not as green as they wanted him to be in his accounting, and the growth conservatives were unhappy that he was greener than they wanted him to be. Both sides have found that only exaggeration works, in order to pass laws or raise money. On the issue of forest land, the greenies were most unhappy that Easterbrook pointed out, on page 399: “Adjusting for the entry into the union of Alaska, the United States had about 600 million acres of forest in 1920. Today the country has 728 million forest acres, with the total continuing to expand annually.” That’s because logging companies plant more trees than they cut down. Why were these statistics so surprising when I read them? It is because the greenies use statistics dating from 1620, not 1920, when reforestation began in earnest in the logging industry. Easterbrook also points out that this process is broadening the “sink” for carbon dioxide, which the environmentalists believe is harming Mother Earth, but which I do not.

What I would like to see is more journalism of the kind that Easterbrook produces, by doing his own thinking and asking questions until he has exhausted the subject, then making an analytical judgment. The readers of the Times can then do their own intellectual accounting, and punish the baddies and reward the goodies without having to resort to exaggeration, propaganda, and manipulation of statistics. No offense to you intended.