One of the most important (and, in Australia, under-exposed) books on the relationship between environmental protection and the interests of workers is Eban Goodstein’s The Trade-Off Myth (1999). It fell to me to read and summarise Goodstein’s work in Chapter Two of my Doctoral thesis. My summary is over the fold.
The existence of an objective JvE [jobs versus environment] contradiction is challenged by Goodstein (1999). Goodstein critically discusses a number of widely held views about the relationship between environmental and employment objectives, specifically that:
At an economy-wide level [in the US], environmental protection has created long-run unemployment;
[E]nvironmental protection has been responsible for large numbers of plant shutdowns and layoffs in manufacturing; and
[T]hat environmental protection has led many US firms to flee to developing countries with lax environmental regulations
(Goodstein, 1999: 1).
Goodstein’s survey of the available economic literature and research found that there was no JvE tradeoff at a macroeconomic level. The effects of environmental protection and regulation were minor compared to other factors including the monetary and fiscal policies of the state. On balance they were found to produce a slight employment benefit and economic stimulus due to the effects of public expenditure on environmental protection, corporate investment in abatement measures and accelerated technological innovation, the stimulus to the environmental protection industry, and the adoption of more labour-intensive production processes (Goodstein, 1999: 17-38).
Goodstein also found that whilst some plant closures and layoffs had occurred due to environmental regulation, these accounted for less than 0.1% of layoffs annually, a fraction of those caused by relatively unproblematic business processes such as business failures, external competition, technological change, corporate restructuring, relocation, product changes, and seasonal variations in activity. The number of people laid off was also less than the extra jobs created by environmental protection, and minuscule compared to overall employment growth in the US (Goodstein 1999: 41-49).
Finally, Goodstein found that there were few examples of relocation of US plants to pollution havens. In general an environmentally induced capital flight had not occurred. This was because: the cost of environmental regulation was small compared to overall business costs (especially wages); costs were only one factor in relocation decisions; modern production technology obviates environmental compliance costs by incorporating pollution control devices to begin with; and environmental compliance could yield benefits outweighing the costs (Goodstein, 1999: 55-67, 171).
A key finding by Goodstein is that government and industry-funded macroeconomic modelling of the economic and employment effects of environmental protection had in all relevant cases grossly overestimated the adverse impacts. In thirteen cases of new national environmental laws, the models had overestimated compliance costs by up to 2900%, and in one case had predicted compliance costs where there were none! Such models had also predicted that proposed changes to the Clean Air Act in the early 1990s would cause a major economic downturn and from 200,000 to 2 million job losses. The recession did not materialise and less than 7000 workers required assistance because their jobs were affected by the new laws (Goodstein, 1999: 41-45). The models also usually inflated the benefits of environmentally contentious developments (Goodstein, 1999: 105-106). Such models are inaccurate because they proceed from unrealistic assumptions which militate against environmental protection and in favour of permitting “business as usual�, including that the economy cannot respond innovatively and flexibly to environmental regulation so as to minimise costs and create business opportunities, and that governments will pursue the most costly and least flexible means of implementing such regulation. They also fail to take account of the direct and indirect economic, social and environmental benefits of the regulation (Goodstein, 1999: 144-148).
On the other hand, Goodstein found that there was no strong case for a large overall employment gain from strong environmental regulation or an economy-wide shift to clean technology. As with the myth of a national JvE trade-off, the principal reason was that (un)employment levels are principally a function of the business cycle and government monetary and fiscal management (Goodstein, 1999: 114-136, 172). The mooted factors in a jobs and environment (J+E) synergy were considered by Goodstein to be of incremental benefit nationally, and to some extent merely involve a redistribution of work from region to region, or country to country. However, such synergies could be a significant element of job and enterprise creation in particular regions and localities (Goodstein, 1999: 130-136).
Goodstein devoted particular attention to the position of workers in the forest and coal mining industries, both of which had seen varying degrees of labour-environmentalist conflict. In both cases, environmental controversies (over preservation of old growth forests and over the Clean Air Act) occurred against a backdrop of long-term employment decline through technological change and structural change in the relevant markets. Goodstein found that environmental protection did directly displace significant extra numbers of logging and mining workers. However, the much larger secondary job losses and regional economic decline predicted to occur as a result of immediate job losses and reduced logging or mining activity did not materialise. In most affected counties overall employment had grown despite loss of logging and mining jobs. Goodstein’s conclusion was that the “base� model of regional economies (whereby one key sector supports employment and investment in all others in the region) is flawed, and that predictions of large-scale secondary employment impacts should be ignored (Goodstein, 1999: 71-109). An important implication is that, whilst Goodstein’s work clearly rebuts a generic JvE explanation of conflict, it also points to the significance of sector-specific political economy and occupational interests of particular groups of workers as a factor in the LER [labour-environmentalist relationship].
Finally, Goodstein found that the subsequent employment history and economic well-being of displaced workers varied according to the overall state of regional economies, and the adequacy of Federal government retraining and income-support policies. Timber workers found themselves amidst a buoyant regional economy which enabled most to be re-employed, whereas fewer coal miners were able to find jobs in their depressed regional economy, and their new jobs paid much lower wages than coal mining. The usefulness of retraining and job-search programs was limited by the strict eligibility rules, time-limited nature and ungenerous levels of US unemployment benefits, which meant most displaced workers could not afford to take the time necessary for adequate retraining (Goodstein, 1999: 83-87, 98-104, 106-108). The political significance of this for the LER is that groups of US workers displaced for environmental reasons face much greater hardship with much less assistance, and therefore have more to fear from retrenchment, than their European counterparts who benefit from a more generous welfare regime. As a result, argues Goodstein, US workers are much more susceptible to “job blackmail� tactics by employers than European workers, and this is a key factor in the sharp LER conflict which arose in the US during the 1990s in relation to coal mining and logging, but which was absent during the same period in Europe (Goodstein, 1999: 175-177).
Thanks for this excellent summary Paul. I’ve posted a link to it at the Oikos environmental economics blog.
I think I referenced this book in my thesis - if not I certainly made similar points.
The problem is (as I pointed out in my thesis) that the JvE equation is pushed by corporates and conservatives. Moreover, the environment movement (largely) buys into the lie and therefore attacks unions for protecting jobs and not the environment when really the environmentalists and unionists are on the same side.
They do cost jobs. Your missing the point. Corporations just move to 3rd countries with piss-weak enviromental laws. It is a vicious cycle and reflects what happens with labour laws as well.
Personally I think one way to help stop it(At least the labour laws part) would be to hang up the phone whenever someone with an “accent” calls. Unless of cause they can certify that they are Australian.
Also more corporate awareness campaigns are needed at a consumer level against companies that destroy enviromentally foreign countries. (Although this is no good because I doubt most people will care when it is not their country)
“The effects of environmental protection and regulation were minor compared to other factors including the monetary and fiscal policies of the state. On balance they were found to produce a slight employment benefit and economic stimulus due to the effects of public expenditure on environmental protection, corporate investment in abatement measures and accelerated technological innovation, the stimulus to the environmental protection industry”
Bad Keynesian analysis. All Keynesianism is bad. But this is a particularly atrocious example. It’s the broken window thesis and not even in disguise. Its the Keynesian habit of never just assuming that you want stability in aggregate demand and then afer deciding this putting the assumption away in a box somewhere.
Instead the assumption that we must have more demand is pulled out whenever another boondoggle is being advocated.
The central bank can produce all the demand it wants. Demand is no problem. It can produce hyper-inflation in a matter of months if it wants.
You economists out there should do the right thing and come down on this intellectual fraud.
Face it. The environment is a ‘luxury good’ (the laity need not get offended. That’s a technical economics term in this context). And it will cost money for the humans to make more space for the other species. But ecological regulation is perhaps the most expensive way of doing things rather then the cheapest.
Graeme, don’t bogart that joint man.
(Staccato) Don’t…….bo..gart that JOINT ……. MA Friend….
Yeah I know that song. But there’s nothing far out about the above. Straight economics.
For goodness sakes man. If you don’t understand something ASK!
Keynesiansim was always a fraud. When the book came out in ‘36 the older economists knew it was all nonsense. Bullshit momentum wins out over reason.
I’d have thought the environment was an externality. But looked at another way, it’s also a factor of production (and consumption - we need a habitable planet to generate any economic activity).
Well yes all of the above. I suppose you’d go for one or the other depending on the time-scale and the area you are talking about. But this idea that a barrage of regulations is costless. Its going to cost money to do what you want either way. If its an externality that can easily be taxed away you can cut other taxes. And if its only tax substitution rather then a tax increase that’s likely to be the cheapest way to go. If the taxes you cut are less harmful then the new one you are raising then that’s a net gain.
But you won’t get that far with the argument if someone pulls out the extra demand business. I thought we wanted stable aggregate demand. So now some Turkey comes out and says its costless because its stimulative. Then you say hang on there a minute. Didn’t we want only THIS MUCH aggregate demand and no more?
You guys in the profession ought to jump on this with more fervour. This silliness has gone on for seven decades now.