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Going green doesn't kill jobs
OPINION
Toxic and wrong Claims that environmental regulations destroy jobs are false. When the economy is struggling the exact opposite is true, says Josh Bivens IN DECEMBER, the Obama administration approved long-overdue environmental regulations requiring US power plants to reduce emissions of mercury, arsenic and other toxic metals. The Mercury and Air Toxics Standards, or air toxics rule, is expected to prevent up to 11,000 premature deaths a year and have many other health benefits. And yet conservative members of Congress oppose it. Why? Because they say it will “kill jobs”. This is a familiar tactic for politicians opposed to any sort of regulation. Conservatives have been scarily disciplined in appending the job-killing label to all regulations, both old and new. As somebody who has been on the front line of this particular battle, I’m afraid to say that the tactic seems to have resonance. Of course, it has also been a disaster for those interested in a true assessment of regulation’s impacts on the economy. The rationale for attaching the job-killing label to nearly all mentions of regulation is pretty clear: even 32 months after the official end of the recession, the US continues to have a joblessness crisis. While the overall unemployment rate has fallen from its 10 per cent peak in October 2009 to 8.3 per cent last month, the large majority of this decline was explained not by increased job creation, but by a drop in people classifying themselves as actively looking for work. Conservatives are, in short, hoping to convert the public’s justifiable concern about 28 | NewScientist | 24 March 2012
joblessness into support for their decades-long battle against robust environmental, labour and financial regulations. Voters who might normally be sceptical of efforts to halt regulations that would protect them from mercury and arsenic spewed into the atmosphere could be more receptive to arguments that they should be postponed so as not to threaten an already fragile economic recovery. These arguments are how I entered this debate. I’m not a regulatory expert, but I am a macroeconomist and thus know what does and does not impact overall job growth. Textbook
macroeconomics indicates that, from the perspective of job creation, the best time to enact regulations that may require costly investments is precisely when the economy is depressed. The reasoning is fairly straightforward. When the economy is functioning well, the impact of new environmental regulation on job growth is roughly neutral, for two reasons. First, the direct effects of regulatory changes generally cut in opposing directions. Take the
“The net impact of the US air toxics rule will be to add 100,000 jobs to the economy by 2015”
economic impact of the air toxics rule. The rule requires investment in equipment to abate and control pollution, which will directly create jobs – people must be hired to manufacture and install the scrubbers, filters and baghouses that will reduce toxic emissions. But this extra investment adds to the cost of producing energy. These costs are passed on to energy-using industries, which pass them on to consumers in the form of higher prices. That reduces demand for goods and services, and so destroys jobs. Generally, these direct influences cancel each other out. Even if they don’t, the second reason for regulation’s neutral effect on jobs comes into play: the central bank. In an effort to hit its overall inflation and unemployment targets, a nation’s central bank – in the US, the Federal Reserve – will simply sterilise any change in job growth stemming from regulatory changes by adjusting interest rates to spur or slow economic activity. So when the economy is behaving well, environmental regulatory changes are generally irrelevant to job growth. But when the economy is not functioning well, regulatory changes are very likely to create jobs. There are three reasons for this. First, investments in pollution abatement and control do not threaten to crowd out other investments by monopolising scarce financial capital and hence pushing up interest rates. Financial capital is not scarce during recessions, but
Comment on these stories at newscientist.com/opinion
opportunities to undertake real investment projects are. Second, increases in energy costs following the implementation of new rules are unlikely to be passed on to consumers. With lots of excess supply around, firms are not in the position to raise the price of their goods without worrying about the effects on demand. Further, profit margins in the US corporate sector are at a 45-year high, meaning that increased costs can easily be absorbed by companies through reduced profits. Empirical research shows that high profit margins do indeed provide such buffers against price increases. Lastly, the boost to employment provided by new investments accompanied by muted price responses will not be neutralised by the Federal Reserve, at least not in the next few years, as it has committed to holding interest rates low until unemployment returns to more normal levels. In the specific case of the air toxics rule, my research indicates that the net impact of the regulations will be to add about 100,000 jobs to the US economy by the end of 2015. I should be clear: this would not make a large dent in the unemployment figures. But the toxics rule isn’t meant to be a job creation programme – it is meant to provide improvements to health and quality of life. And in this primary purpose the research is undeniable that it will hit its target. Holding up its enactment based on fearmongering about jobs is exactly wrong. In fact, pushing forward with it while the economy is depressed would add a modest knock-on benefit of job growth to the much larger benefits it will provide to health and quality of life. n Josh Bivens is acting research and policy director at the Economic Policy Institute, a non-partisan think tank based in Washington DC
One minute with...
Françoise Barbira Freedman After her toothache was treated by Amazonian villagers, the anthropologist is bringing their painkilling plant to the masses What took you to the Quechua Lamas community in remote Amazonian Peru? I was fascinated to learn about the highland people who live in the forests at altitudes between 200 and 800 metres, where there is great medicinal flora diversity. The Chachapoyas people who used to live here traded their medicinal and psychotropic plants, resins and colourful feathers with Incas. I was interested in learning about the forest people now living here, who had preserved their dynamic culture and plant knowledge – in a secret, underground way – despite several centuries of contact with the modern world. It had never been studied before. Why did the secretive tribe accept you when they had turned away other anthropologists? I went there in 1974 when I was a young-looking 22-year-old, and I think they just thought of me as a girl, like their own girls, rather than a woman. I was adopted by a clan and lived with them for two years initially, learning their dialect of Amazonian Quechua language. Over the past 30 years I have been back several times to live with them and now I’m a member of the council of elders. When I was pregnant, I was introduced to the whole range of hidden medicinal plant culture that they practise. I tapped into it almost inadvertently. The clan saved my life more than once with their medicinal plants. Tell me about the “toothache plant”, Acmella oleracea It’s a leafy weed with yellow flowers that grows on disturbed soil. It’s indigenous to this part of Peru, and the flower bud and other parts have been used as a toothache cure for hundreds of years. How did you come to develop it as a drug for the mass market? When I was living with the clan, I suffered terribly with my wisdom teeth, and so one of the villagers gave me a wad of the toothache plant to bite on. It was very effective at numbing the pain, lasting for an hour before I needed a fresh wad. I brought the plant back to the University of Cambridge in
Profile Françoise Barbira Freedman, an anthropologist at the University of Cambridge, was the first European to live with the Quechua Lamas people in Amazonian Peru. She is the founder of Ampika, whose painkiller based on a medicinal plant has been successful in clinical trials
2004, with other medicinal herbs, for a neuropharmacologist colleague who was interested in testing Amazonian plants. This is the first he has tested, and it has performed well as a local anaesthetic in two phases of clinical trials. Will the Quechua Lamas see any benefit from the new drug if it comes to market as planned in 2014? We spent two years working with lawyers to design a contract – learning from the best aspects of other pharmaceutical companies – to ensure that the Amazonian people benefit from a percentage of any profits with conservation and education initiatives. We are distributing the money through trusted, long-term local NGOs. So far we have created a beautiful medicine garden to conserve plants used for women’s health. We also want to build a training centre to teach the community the medicine and remedy-making skills I learned, but which the new generation has lost. Interview by Gaia Vince
24 March 2012 | NewScientist | 29
Toxic and wrong Claims that environmental regulations destroy jobs are false. When the economy is struggling the exact opposite is true, says Josh Bivens IN DECEMBER, the Obama administration approved long-overdue environmental regulations requiring US power plants to reduce emissions of mercury, arsenic and other toxic metals. The Mercury and Air Toxics Standards, or air toxics rule, is expected to prevent up to 11,000 premature deaths a year and have many other health benefits. And yet conservative members of Congress oppose it. Why? Because they say it will “kill jobs”. This is a familiar tactic for politicians opposed to any sort of regulation. Conservatives have been scarily disciplined in appending the job-killing label to all regulations, both old and new. As somebody who has been on the front line of this particular battle, I’m afraid to say that the tactic seems to have resonance. Of course, it has also been a disaster for those interested in a true assessment of regulation’s impacts on the economy. The rationale for attaching the job-killing label to nearly all mentions of regulation is pretty clear: even 32 months after the official end of the recession, the US continues to have a joblessness crisis. While the overall unemployment rate has fallen from its 10 per cent peak in October 2009 to 8.3 per cent last month, the large majority of this decline was explained not by increased job creation, but by a drop in people classifying themselves as actively looking for work. Conservatives are, in short, hoping to convert the public’s justifiable concern about 28 | NewScientist | 24 March 2012
joblessness into support for their decades-long battle against robust environmental, labour and financial regulations. Voters who might normally be sceptical of efforts to halt regulations that would protect them from mercury and arsenic spewed into the atmosphere could be more receptive to arguments that they should be postponed so as not to threaten an already fragile economic recovery. These arguments are how I entered this debate. I’m not a regulatory expert, but I am a macroeconomist and thus know what does and does not impact overall job growth. Textbook
macroeconomics indicates that, from the perspective of job creation, the best time to enact regulations that may require costly investments is precisely when the economy is depressed. The reasoning is fairly straightforward. When the economy is functioning well, the impact of new environmental regulation on job growth is roughly neutral, for two reasons. First, the direct effects of regulatory changes generally cut in opposing directions. Take the
“The net impact of the US air toxics rule will be to add 100,000 jobs to the economy by 2015”
economic impact of the air toxics rule. The rule requires investment in equipment to abate and control pollution, which will directly create jobs – people must be hired to manufacture and install the scrubbers, filters and baghouses that will reduce toxic emissions. But this extra investment adds to the cost of producing energy. These costs are passed on to energy-using industries, which pass them on to consumers in the form of higher prices. That reduces demand for goods and services, and so destroys jobs. Generally, these direct influences cancel each other out. Even if they don’t, the second reason for regulation’s neutral effect on jobs comes into play: the central bank. In an effort to hit its overall inflation and unemployment targets, a nation’s central bank – in the US, the Federal Reserve – will simply sterilise any change in job growth stemming from regulatory changes by adjusting interest rates to spur or slow economic activity. So when the economy is behaving well, environmental regulatory changes are generally irrelevant to job growth. But when the economy is not functioning well, regulatory changes are very likely to create jobs. There are three reasons for this. First, investments in pollution abatement and control do not threaten to crowd out other investments by monopolising scarce financial capital and hence pushing up interest rates. Financial capital is not scarce during recessions, but
Comment on these stories at newscientist.com/opinion
opportunities to undertake real investment projects are. Second, increases in energy costs following the implementation of new rules are unlikely to be passed on to consumers. With lots of excess supply around, firms are not in the position to raise the price of their goods without worrying about the effects on demand. Further, profit margins in the US corporate sector are at a 45-year high, meaning that increased costs can easily be absorbed by companies through reduced profits. Empirical research shows that high profit margins do indeed provide such buffers against price increases. Lastly, the boost to employment provided by new investments accompanied by muted price responses will not be neutralised by the Federal Reserve, at least not in the next few years, as it has committed to holding interest rates low until unemployment returns to more normal levels. In the specific case of the air toxics rule, my research indicates that the net impact of the regulations will be to add about 100,000 jobs to the US economy by the end of 2015. I should be clear: this would not make a large dent in the unemployment figures. But the toxics rule isn’t meant to be a job creation programme – it is meant to provide improvements to health and quality of life. And in this primary purpose the research is undeniable that it will hit its target. Holding up its enactment based on fearmongering about jobs is exactly wrong. In fact, pushing forward with it while the economy is depressed would add a modest knock-on benefit of job growth to the much larger benefits it will provide to health and quality of life. n Josh Bivens is acting research and policy director at the Economic Policy Institute, a non-partisan think tank based in Washington DC
One minute with...
Françoise Barbira Freedman After her toothache was treated by Amazonian villagers, the anthropologist is bringing their painkilling plant to the masses What took you to the Quechua Lamas community in remote Amazonian Peru? I was fascinated to learn about the highland people who live in the forests at altitudes between 200 and 800 metres, where there is great medicinal flora diversity. The Chachapoyas people who used to live here traded their medicinal and psychotropic plants, resins and colourful feathers with Incas. I was interested in learning about the forest people now living here, who had preserved their dynamic culture and plant knowledge – in a secret, underground way – despite several centuries of contact with the modern world. It had never been studied before. Why did the secretive tribe accept you when they had turned away other anthropologists? I went there in 1974 when I was a young-looking 22-year-old, and I think they just thought of me as a girl, like their own girls, rather than a woman. I was adopted by a clan and lived with them for two years initially, learning their dialect of Amazonian Quechua language. Over the past 30 years I have been back several times to live with them and now I’m a member of the council of elders. When I was pregnant, I was introduced to the whole range of hidden medicinal plant culture that they practise. I tapped into it almost inadvertently. The clan saved my life more than once with their medicinal plants. Tell me about the “toothache plant”, Acmella oleracea It’s a leafy weed with yellow flowers that grows on disturbed soil. It’s indigenous to this part of Peru, and the flower bud and other parts have been used as a toothache cure for hundreds of years. How did you come to develop it as a drug for the mass market? When I was living with the clan, I suffered terribly with my wisdom teeth, and so one of the villagers gave me a wad of the toothache plant to bite on. It was very effective at numbing the pain, lasting for an hour before I needed a fresh wad. I brought the plant back to the University of Cambridge in
Profile Françoise Barbira Freedman, an anthropologist at the University of Cambridge, was the first European to live with the Quechua Lamas people in Amazonian Peru. She is the founder of Ampika, whose painkiller based on a medicinal plant has been successful in clinical trials
2004, with other medicinal herbs, for a neuropharmacologist colleague who was interested in testing Amazonian plants. This is the first he has tested, and it has performed well as a local anaesthetic in two phases of clinical trials. Will the Quechua Lamas see any benefit from the new drug if it comes to market as planned in 2014? We spent two years working with lawyers to design a contract – learning from the best aspects of other pharmaceutical companies – to ensure that the Amazonian people benefit from a percentage of any profits with conservation and education initiatives. We are distributing the money through trusted, long-term local NGOs. So far we have created a beautiful medicine garden to conserve plants used for women’s health. We also want to build a training centre to teach the community the medicine and remedy-making skills I learned, but which the new generation has lost. Interview by Gaia Vince
24 March 2012 | NewScientist | 29