Greg Autry

Fighting for space, not over it.

China’s Silent Spring is an Economic Weapon

 

 

Communize costs and privatize profits-but don’t tell anyone. This has been a formula for success for centuries.

– Garret Hardin[1]

 

 

 

 

 

Of all the myriad sins committed by the Chinese Communist Party, its wholesale rape of China’s natural environment and complete toxification of its urban landscape is often the most puzzling to Westerners who focus on economic gains. Why, on Earth should anyone care – except those left-wingnut tree huggers – what happens to the Yangtze river dolphin or to the kids in Beijing? Well, let me offer an explanation that even the most free-range capitalist can put his arms around.

First, a couple of facts:

The health costs of China’s rampant pollution binge amount to 4.8% of China’s GDP and the total costs are 5.8% of GDP according to a report from the World Bank.[1]

700,000 Chinese die each year from polluted air and water according to a report from the World Health Organization.[2]

Lee Liu, of the University of Central Missouri documenting China’s infamous “Cancer Villages” reports that, “China appears to have produced more cancer clusters in a few decades than the rest of the world ever had.” [3]

We could go on about species loss, desertification, and more but the question is why would anyone allow this sort of damage to their economy and their people if it weren’t a necessary choice? The answer to this question, like so many others in China, is: it keeps the Communist Party in power. The World Bank and WHO reports have been suppressed in China to prevent “Civil Unrest” (the PRC scare words for revolt against the party).

What Westerners cannot put their heads around is the topsy-turvy relationship between economics and politics in Communist China. We are used to a system where the goal of politics should be the bettering of life for the citizens. In China, the bettering the life of citizens is simply a political tool – along with censorship, labor camps, and torture – for maintaining order. GDP growth is a goal ONLY because it can be used to justify the continued rule of the Boys from Beijing; not because of any benefit it offers actual Chinese.

So just how does a country with an inefficient and astoundingly corrupt, centrally planned economy manage 10% year over year growth? By cheating of course! There are several ways to cheat on todays GDP and most involve pushing costs – notably negative economic externalities – off the national P&L, usually by moving them to the future.[4] China uses a variety of cheats not the least or which is virtually enslaving a large portion of its rural poor in the plantation like factories that enable Wal-Mart’s price matching strategy. When you drill down, the environmental issue is actually no different.

For instance, if China can’t make steel as efficiently as America – the fact is that it cannot – and if its low labor cost isn’t an advantage – the total labor per ton is less than the shipping per ton – how about just using a lot of the world’s dirtiest coal and dumping all your mill waste right into the Yangtze river – birds, people, and dolphins be damned! Might as well rename the province from 四川 to 死川![5]

I’m not just passing on the hysterical reporting of some NGO, anybody who has breathed the air in Beijing and come home sick (I have more than once) knows what’s going down and anyone who travels out of the cities and opens their eyes will see it there too. Consider this series of photos I shot on a 2007 Yangtze cruise:

The first picture shows some coal bins along the river that are used to load the thousands of barges

 

 

 

 

 

 

 

 

 

 

that service the endless power plants and mills (second photo) which pump God knows what into the oddly green and sterile waters of China’s formerly great river.

 

 

 

 

 

 

 

This third photo shows where one of these bins collapsed and dumped its load into the river.

 

 

 

 

 

 

 

The forth shows the “Repair Job” – honest to God – in progress. I can hardly wait to see the “environmental remediation plan!”

 

 

 

 

 

 

 

Alas, some poor woman downstream trying to earn her keep fishing in the cesspool that was once the majestic Three Gorges.

 

Obviously, all interspecies ethics aside, if you destroy your fishing grounds and plunder your agricultural and urban water supply you are going to incur real, hard economic losses in the future. But, hey cancer takes a while and you can still sell whatever fish you can raise in this florescent green ooze to the Americans for a few more short-term GDP points.

 

 

 

 

Those all-important GDP points make party bosses happy because they keep Chinese busy and restless Chinese have a tendency to toss out their rulers – a fact which keeps Wen Jiabao up at night. If citizens die in the future or become extremely ill, at least they aren’t protesting and besides the Chinese government doesn’t really provide healthcare for anyone outside the government.[6]

Running this game is not only destroying China’s once beautiful landscape, but it also creates competitive pressures that are leading the world in yet another Chinese race to the bottom. China directly exports their Dickensian environmental ethic in the extraction of African and Latin American resources acquired by their SOEs and indirectly by driving out of business American and other Western firms that are required to compete without killing their neighbors. While using this invisible hand of communist coercion against defenseless Chinese and others (for instance by gutting Tibet or damming of the Mekong river that feeds Vietnam) the Boys from Beijing are still able to cloak themselves in a mantle of “free trade” while actually communizing all the costs of their fraudulent and unsustainable economic “boom.”

A perfect example of this is the business of rare earth elements. Just a decade ago, about 80% of rare earths came from the US, specifically Molycorp’s Mountain Pass mine in California. Now, California might rightly be called the home of excessive environmental regulation, but Molycorp was supplying the world without poisoning its neighbors. The central planners in Beijing decided to corner the market in rare earths, because among other things they are critical to most high tech military hardware. China embarked on a scorched Earth policy in Sichuan province and its captive state of Mongolia using a massively destructive acid leaching process to extract things like Yttrium from the clay. Thousands of acres of pristine forest and farmland have been rendered unrecoverably toxic, while China rapidly cornered 97% of world production – shutting down Mountain Pass in the process. Upon doing so, China promptly claimed monopoly-pricing power and implemented illegal (violation of the WTO rules they signed on to) export restrictions to raise world prices on these metals up to 1000% in just two-years![7] So what if several thousand farmers go belly up or die in places nobody ever looks at? How’s that for “free trade?”

Now, if China’s pollution victims had any say in the choices being made it might be a different story, but until that day the multinational firms extracting cost savings through China’s coercion of its population are not simply “choosing to exercise their best economic option in a free market” anymore than is the businessman who “chooses” to develop a relationship with the local mob to clear out his competitors and intimidate his employees. The manufacturers and big retailers are simply co-conspirators in denial and it is no wonder they and their captive pundits run screaming “save free trade!” whenever criticism of their fascist friends comes to the fore. That too is unsustainable as more Chinese are beginning to bravely push back on their oppressors and average Americans are starting to notice that under this so-called “free trade” regime, they may be saving money but they sure as hell are not living better.

– Greg Autry teaches Macroeconomics at the Merage School of Business, UC Irvine and is co-author (with Peter Navarro) of the new book “Death by China” www.gregautry.us


[4] For instance, the US borrows money from China it can probably never repay to keep its anemic economy on its last legs (a looming diaster that Beijing happily accommodates for obvious reasons to be discussed in a future posting).

[5] A little Chinese pun here.  Si-chaun (四川) means “4 rivers” while substituting 死 for the first character (Sǐ) makes it “death river” with a very similar pronunciation.

[6] Although, of course they falsly claim to insure a significant portion of the population. A topic for a future posting.

[7] They’ve also demonstrated the ability to extort policy changes from other nations with this monopoly when they halted shipment of rare earths to Japan until that nation relented in a maritime dispute.

 



 

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