Cyanide poisoning E. European rivers,” proclaimed the headline on a recent news story in this newspaper. Datelined Belgrade, Yugoslavia, the story told of cyanide spill at a Romanian gold mine. The poison flowed into a tributary of the Danube and was wrecking havoc as it moved downstream through Hungary and Serbia, killing virtually all aquatic life.
For anyone who has been to Eastern Europe and seen the environmental degradation that took place under communist rule, this news is not likely to be a shock. But it would be a mistake to dismiss this incident as one particular to the legacies of central planning or Balkan ineptitude. As the earth’s population grows and technology becomes more widely diffused, transnational environmental disasters are likely to become more frequent and severe before the situation gets better.
The problem is that the ability to cause pollution frequently races ahead of the institutional innovations needed to prevent it. This is particularly true where pollution can cross national boundaries.
Pollution is an example of what economists call external cost. These occur when the person or company producing some good or service, say gold or electricity, gets to keep all the revenues from selling the product, but does not have to pay all of the costs that result. The costs that the producer does not have to pay often are the environmental damages caused.
Economists agree that externalities such as pollution are likely to happen in a free-market economy. They also agree that externalities such as pollution cause inefficiency, and that society as a whole is worse off, with less net satisfaction of its needs and wants than is optimal.
But they disagree on how best to avoid pollution. Some argue for government to use its police power to ban polluting activities. Others prefer organizing institutions so that private parties will no longer have any incentive to pollute.
For example, Ronald Coase, an Anglo-American economist won the Nobel prize a few years ago for theoretically demonstrating that if property rights were well-defined and if people who were harmed by pollution could sue for damages, pollution could be controlled as well under a system based on regulation.
Coase was right in theory, but applying that theory is difficult. The pollution that harms any one individual may come from many different sources. And as anyone who has worked with real-world lawsuits knows, litigation is an exceedingly slow and expensive way to settle anything.
Government regulation, especially the sort that attempts to work with market forces rather than against them, seems to be the more effective choice. But adopting and implementing such regulation is not an easy task.
The complexity of effectively protecting the environment is difficult enough when it all takes place within one nation. The problems multiply exponentially when a particular source or effect of pollution crosses international borders. Different countries have different legal systems and different institutional capacity to implement regulatory efforts.
Such problems mount as populations grow and larger numbers of people are affected by actions, such as mine spills, that might have less immediate effects on humans if they took place in more isolated areas.
Problems also grow as new technology puts highly dangerous substances in the hands of more people. Take a Minnesota example. Decades ago, when a tornado hit a rural Minnesota town, immediate wind damage to lives and property were the only concern.
Now, nearly every town in an agricultural area may have a farm supply dealer with a warehouse full of toxic agricultural pesticides. When Chandler was devastated in 1992, the local farm cooperative warehouse was blown down less than 200 yards from Chanarambie Creek, which feeds into the Rock, Big Sioux and Missouri rivers.
Luckily, the planting season was already past, and the coop’s inventory of farm chemicals was low. None of them ended up in the creek. But the potential for health and environmental damage was an order of magnitude greater than it would have been in the 1950s. And rural areas of many Third-World countries now face the same threat.
Society needs greater international cooperation on addressing environmental threats such as these. Such cooperation needs to include richer nations helping to foot the bill for mitigating environmental threats in poorer one, not out of a sense of altruism, but of self protection.
Eastern Europe is full of environmental time bombs that have the potential to harm wealthier western European nations. These time bombs include, but are not limited to, nuclear reactors of the type that failed at Chernobyl.
This is a time for enlightened leadership and cooperation by the United States and the European Union. Unfortunately, enlightenment and leadership are not particularly in the forefront of government right now, either here or in Europe. Let’s hope that even worse disasters than the recent cyanide spill do not take place before there is a change.
© 2000 Edward Lotterman
Chanarambie Consulting, Inc.