The Retreat from Riches: Affluence and Its Enemies
To read this decent and often reasonable book is to be struck by how tenaciously the world resists uplifting advice; to be reminded that philosophers will continue to interpret the world in various ways even though the real task, as Marx said, is to change it. Passell and Ross are liberal economists. They favor economic growth and oppose as their joint adversary both environmental and fiscal conservatives. Such men they consider timid aristocrats whose Tory enthusiasm for clean air and sound money masks a selfish attachment to privileges which sprawling factories and the inflation that comes with full employment might destroy.
The real problem, according to these authors, is not abundance but stultification, and the victims, as usual, are the poor. While they acknowledge what is obvious—that industrial growth fouls the air and depletes scarce resources while full employment tends to inflate wages and therefore prices—these troubles, they say, flow not from economic dynamism but from stagnation, underdevelopment, and irresponsible public policy. What the world needs is not less production, as the apocalyptic environmentalists associated with the Club of Rome urge, but more equitable distribution, which, in turn, requires fewer restraints of the sort associated with balanced budgets, sound money, and favorable trade balances.
What we really need, they think, are more stimuli such as a successful New Deal might have provided—public investment in useful production, full employment, expanded credit, and so forth. Simple-minded protectionism, whether in the name of wetlands and ospreys or degenerate domestic industries, only denies opportunity and perpetuates poverty while the old plutocracy goes on lazily enriching itself. Passell and Ross are twentieth-century greenbackers, expansionists, unromantic sheepherders in simple costumes who know that the day of the longhorn is over. They want to put the range to more profitable, eventually more egalitarian, uses.
Their ideological tradition is progressivism. They presuppose a transparent distinction between “the interests” and “the people,” and have no doubt whose side they are on. Nor do they see a necessary contradiction between economic expansion and an amenable habitat: indeed, they would argue that the greatest good of the greatest number absolutely requires continued industrial growth and that such growth will more than provide the extra capital required to clean the air and water. What most alarms them is the idea, endemic among certain American politicians, that administered recessions are preferable to the inflation that accompanies continued growth.
Though they wrote their book before Nixon’s recent economic message, one can imagine their disapproval of a policy that would take work and money from the poor in order to stabilize old fortunes made in Key Biscayne real estate, long-established hamburger franchises, and prudently invested union pension funds.
At the center of their argument is the suggestion that we should take inflation for granted and let the government guarantee the purchasing power of pensioners and other small creditors by means of publicly administered escalators. Powerful trade unions, interlocked with oligarchic industries, would, in their scheme, no longer monopolize the proceeds of inflation in the form of higher wages and prices inconsistent with increases in value: instead, through the agency of a benign and enlightened government, the advantages of cheap money would be transferred to the poor, to new men and women who would then be able to pay their debts in inflated currency while unskilled workers would be absorbed by a fully employed work force. The idea is essentially that of James Tobin, the Yale economist, who has said that while full employment means “creeping inflation,” “the costs of such inflation are much less than the costs of avoiding it.”
To keep such inflation within reasonable bounds—the authors have in mind something like 4 percent—would require an ever expanding GNP. As for the pollution and depletion of scarce resources that would result from such increased industrial activity, the same government that conscientiously escalates the pensions of the poor could, according to the authors, see to the safety of the environment and the exploitation of new resources as well—for example, by encouraging the extraction of oil from shale deposits to replace the dwindling supply from conventional sources. It could also tax industrial polluters—make them pay, in effect, for the clean air and water that they now use freely—and apply this tax to cleaning up after them.
Such proposals raise countless questions, most of which the authors necessarily ignore, given the scope of their short but provocative book. For example, they don’t consider the extent to which the reduction of profit implied by their pollution tax might reduce capital for further investment and thus depress productivity as effectively, if by no means so broadly, as the Club of Rome would do in more direct ways; or as conservative politicians already do when they reduce public spending or raise discount rates in order to protect the fortunes of their rich constituents. One wonders how they would finance their expensive and highly polluting shale oil refineries, and what the oil would cost once their pollution tax had been applied, or what the appropriate tax would be on the coal companies that want to strip away the surface of much of Montana. Nor do the authors reach the still larger question that there may be a specific relationship between an expanding industrial economy—whether capitalist or socialist—and the pollution and depletion of scarce resources; or, conversely, a negative relationship between efforts to preserve the environment and rates of industrial expansion.
One need not, for example, go so far as the Club of Rome to suspect that the environment is not infinitely exploitable or to feel that somewhere or other its ultimate capacity to support life implies a limit to the rate of industrial expansion. From what they have written, it is unclear whether the authors have such a limit in mind, much less that they have found out where it is. Instead, in their attack upon “the enemies of affluence,” they seem to presuppose more or less indefinite possibilities of growth; that whatever the real costs of environmental safety, an expanding economy can continuously absorb them. The example they give is the price of London’s clean air; only a few pennies a year for users of electricity. The richer we are, they seem to be saying, the more brooms we can afford, yet one wonders whether, in some circumstances, the manufacture of brooms may itself eventually become a source of pollution and depletion, and thus a further charge against an already burdened environment, as well as a charge against industrial profits, hence a reduction in the capital available for investment in further growth.
In a somewhat contradictory passage the authors seem to acknowledge such limitations when, for the moment, they side with the enemies of affluence and recommend that if New Yorkers want clean air, they should not only pay higher electricity rates for nonpolluting generators but use less air conditioning. For the most part, however, they are unequivocal expansionists. A growing economy, they think, can afford to keep itself both cool and clean.
Yet, according to a recent issue of The New York Times, financial analysts have begun to promote the paper industry as a likely investment not because it has grown in response to increased demand but because it hasn’t. “Ironically,” according to the Times, “the present supply-demand status of the industry is directly related to problems of the past…much of the industry’s capital spending has been aimed at pollution control instead of more capacity.” Paper prices will therefore rise while production is expected to grow by only 1.5 percent against a historic rate of 4 to 5 percent. The cost of environmental protection, in other words, is less paper at higher prices for an equivalent capital investment and industrial effort.
The Environmental Protection Agency dismisses this effect by showing that only twenty-nine plants have shut down in the last twenty-one months for reasons having to do with environmental control. Seven thousand and thirteen workers have lost their jobs, or two tenths of 1 percent of those unemployed. The worst case was a paper mill where 740 people lost their jobs, but the mill was old and, according to its owners, should have been shut anyway. The workers, on the other hand, may not have been so old and may not be so complacent as their former employers.
Passell and Ross confront this problem ambiguously; at any rate, unclearly. Society, they say, has a choice between “stopping growth…to protect the environment [as the Club of Rome, for example, advocates] or by doing the job directly…by requiring [for example] smokestack precipitators….” But in the paper industry, at least, the choice is not so simple. The requirement of smokestack precipitators, or the equivalent, means less growth per dollar invested. The real choice, apparently, is not between growth and no growth, as the authors suggest, but between faster and slower rates of growth, depending on how much is invested in pollution control and the productivity of the industry itself. What the authors don’t show is how these rates are inflected by environmental considerations for different industries and for the economy as a whole.
Some years ago Jane Jacobs proposed a solution to this dilemma. Pollution itself, she suggested, could become a source of profit, and scavenging a growth industry. For example, sulphur fumes that issue from the smokestacks of power plants could be trapped by canny entrepreneurs and turned profitably into sulphuric acid. And one hears of a certain brewery that claims to make a profit by recycling its old cans. But so far investors have not been convinced of the profitability of such imaginative adaptations, and Passell and Ross say nothing to suggest that they soon will be.
Their own proposals are even less promising. As if the problems of paper production were not severe enough, they would include as part of the price of the Sunday Times not only a charge for cleaning up after the mill but for carting the paper away on Monday morning. But surely the Times has enough trouble with its obsolete union contracts, its declining circulation, and its reduced advertising market. To impose this further burden whether directly or as an increased cost to purchasers might be more than the Sulzburgers or some of their readers will choose to bear. Mrs. Jacobs would, at least, have seen the possibility of a recycling profit.
Meanwhile, Mr. Iacocca, the president of Ford, has said—no doubt hyperbolically—that federal pollution controls have backed his company “to the cliff edge of desperation,” and that if the Federal Clean Air Act is not modified, the United States auto industry faces “a complete shutdown.” Such self-serving panic is obviously suspect; the more so in view of a report from the National Academy of Sciences that American auto companies are “concentrating on the most expensive and least satisfactory” methods of pollution control. Yet Mr. Iacocca raises an important question that Passell and Ross don’t consider. In an economy currently burdened with a rate of inflation already somewhat greater than they themselves advocate, how can companies like Ford meet the additional cost of environmental protection without significantly raising prices, thus limiting demand, hence production, hence employment, and so on through the cycle? And with their profits thus diverted, how can they generate the capital needed for increases in their rates of productivity?