Pollution and the Effects on our Economy and Ways to Make it Better - Research Paper Example

due: Pollution and the effects on our economy and ways to make it better Economists and environmentalists come to an agreement that greater economic activities usually leads to increased industrial pollution both in the developed and the developing countries. This paper discusses the various forms of pollution and its impacts to the economy as well as steps towards reversing the practice of pollution-intensive production. Even though it is almost impossible to achieve nil pollution, the situation can be controlled through proper regulation of the production activities. Important to note is that in almost all economic activities, there is the negative part of it. In most cases, most of these negative implications hit more on the environment since most economic activities will involve the production in waste emitting industries. However, not all pollution may have some positive side as well. As it will be noted in the discussion, in some high levels of pollution, governments may be forced to create awareness on the issue and by so doing; employment will be created as human capital is needed to carry out the awareness campaigns. In this paper, discussion is made on how pollution impacts on various economic aspects, which are; Gross Private Domestic Investment, government spending, net export, employment rates and inflation rates. Keywords: Pollution, environment, Gross Private Domestic Investment, government spending, net export, employment rates and inflation rates. Introduction Pollution is a real crisis, with a lot of negative impacts on the environment, which goes on to stall economies locally, nationally and globally. Various economic activities result to pollution. In each of its diverse forms, it is linked to some particular consumption or production process. For instance, the amount of carbon monoxide released in the air has a definite relationship to the amount of fuel burned by diverse automotive engines; the discharge of polluted water into the streams and lakes can be directly linked to the level of output of the paper, steel, textile as well as all the other water-using industries and its amount is dependent on the technological facet of the particular industry. Description and explanation of the level of output of each sector of a given national economy as per its relationships to the corresponding levels of activities in all the other sectors is well done using input-output analysis (Clapp & Dauvergne 89). Undesirable by-products are linked directly to the network of physical relationships governing the daily operations of the economic system. The technical interdependence between the levels of desirable and undesirable outputs can best be described in terms of the structural coefficients similar to the ones used in tracing the structural interdependence between all the regular branches of production and consumption. Modern technology, on the other hand, can raise undesirable environmental effects, in the process of boosting economic growth. As per an analysis of census data and outdoor nitrogen (IV) oxide concentration, the difference in exposure between whites and nonwhites accounts to 38% (Clark, Millet & Marshall 7028-7035). In large cities, well-to –do whites inhale more nitrogen(IV) oxide as compared to poor white people (The Economist, Para 3). Exhaustible and renewable natural resources are inputs into the production of various goods and services. Societies have shown remarkable ingenuity in harnessing new technologies which conserve scarce resources. Forces are leading to change in the composition and techniques of production lead to adverse effects of increased economic activity on the environment. This paper addresses the empirical issues relating to ambient pollution levels in many countries. Air quality variables are the most common indicators of air pollution in cities as well as other densely populated areas. For instance, sulphur dioxide and suspended particles occur in great quantities in many cities, and their effects are severe on human health and the natural environment (Otti & Ogbuagu 80-84). Discussion will be made on the anthropogenic sources of the various pollutants and the health hazards they pose, and their economic impacts on local, national and levels. Pollution and the environment Pollution has a lot of negative impact on the environment, something which requires regulatory decision makers to estimate the costs of environmental pollution, that are properly grounded in economic theory and based on the most reliable and up-to-date scientific research. It is therefore, important to focus research on the approximation of the economic benefits of the effects of a polluted environment and the costs of pollution. For instance, marine pollution has a lot of economic consequences. This is evident in some areas like the New York and Bight region (Hall 350-374). Thus constructing a data set for the establishment of a baseline from which evaluation of changes in beach resulting from changes in pollution levels may be difficult. There are two types of effects on beach use; long term effects which result in degradation of water quality and short term effects. In most cases, long-term effects prompt government officials to close down beaches, in an attempt to rehabilitate it and the process normally takes years. On the other hand, short term effects may also lead to closing of the beaches but just for a short period of time. Contamination of rivers and lakes by human sewage or industrial discharges increases the concentration of organic carbon in forms usable by bacteria. Increased bacteria increases demand for the dissolved oxygen, leaving less oxygen for fish and other high forms of aquatic life (Munasinghe 109). This is from the biological view that aquatic life requires dissolved oxygen to metabolize organic carbon. High levels of contamination reduce the population of fish due to increased deaths. The same problem arises when there is water contamination from runoffs from agricultural areas where fertilizers are highly used. Excess nitrogen and phosphorous promote growth of algae, which decays consuming oxygen, resulting to reduction in fish population. However, many forms of the marine pollution are not detectable by sight, as the levels of coliform bacteria, thus calling the intervention of public officials to limit beach use based on public health criteria. This type of pollution comes with economic effects and losses. Like for instance, the pollution may force the public health officials to close down the polluted beach (Evans & Kantrowitz 303- 331). This prompts beach users to move to another beach and perhaps in another community. This way, the tourism industry may be affected because of the effects on travel, decreasing the tourist volume as a result of the fall in beach use. Prolonged beach closings may reduce vacation plans both in the short-term and the long-term reducing demand for travel and tourism related activities in communities near the affected beaches. Consequently, there will be decrease in revenues, profits and producer surplus to increase resulting in ripple effects of increased economic activities throughout the local economy. Beach closing will ultimately produce a net effect dependent on whether the decrease in economic activity in communities near the affected beach is less than, equal to or greater than the increment in economic activity in communities near the unaffected beaches. Moreover, China has come up with new rules requiring 15,000 enterprises including the biggest ones to announce the details of their air pollution, waste water publicly as well as heavy heavy-metal discharges (The economist, Para 3). Economic analysis of the costs of pollution needs keen methods for extending the dollar or the monetary price measure to things that are valued by individuals but fail to pass through markets, so as to provide a foundation for comparing the benefits and costs of environmental changes. However, ecosystem changes that do not affect human activities in any way are not measurable in dollars. This is because it is only environmental effects that directly affect activities of consumption and production that are estimated. Economic implications of pollution on the Gross Private Domestic Investment Pollution leads to a decrease in investment opportunities, impacting negatively on the economy of a particular country. This section applies the concept of environmentally adjusted accounting to measures of savings and investment. Adjustment of savings provides a measure for reflection on environmental depletion which fits well with many of the traditional concerns of development economics, which include the savings-investment gap and the importance of investment finance for development. Damages caused by pollution include depletion of natural resources, something which affects industries dependent on such natural resources. This translates to negative effect of low savings and hence reduced wealth accumulation which is measured by the level of gross saving; that is GNP (Gross National Product) minus public and private consumption (Harris 37). Gross saving is equivalent to gross domestic investment less net foreign borrowing. Net savings are accurately measured by applying a minus operation on the value of depreciation of produced assets from the gross savings. Resource depletion is a measure of the total rents on resource extraction and harvest. Rent implies the difference between the value of production at world prices and the total costs of production. For pollution costs, adjustment represents pollution emissions valued at their marginal social cost. Taking account of the human capital investment, explanation is made on the concept of extended domestic investment, which gives a revised genuine savings estimate including both environmental depreciation and human resource investment. Environment ministries are faced with the challenge of reducing pollution damages. In India, for example, 1991 pollution damages were calculated at approximately 2.5 percent of the GNP, lowering genuine savings from 10.5 percent to 8 percent. Since such implications result in declined well-being, there is a need for a variety of interventions which include macroeconomic policy and human resource policy. In accordance with the Environmental Kuznets Curve hypothesis (EKC) however, there exists an inverted U- curve relationship between indicators of environmental degradation and levels of income per capita. This has the implication that economic growth will eventually reduce environmental impacts associated with the early stages of economic development (Harris 42). Economic implications of pollution on the Government Spending Environmental policy choices are made difficult by their economic implications. Control of pollution bears a significant economic cost for many firms today. Increased government regulatory intervention in industrial processes and outputs has a reflection on the indisputable fact that market forces by themselves as they will not guarantee the protection of health and the environment. Even though everybody is entitled to clean air and water, polluters have little economic incentive to stop polluting. Most firms tend to maximize profits by minimizing costs of environmental protection, especially when these firms are left unregulated. Governments have faced challenges on determining exactly what constitutes environmental pollution or environmental degradation and deciding how to regulate polluting activities which have tremendous economic implications. However, too much regulation depresses economic growth at national, state and local levels, reducing employment and even forcing some companies into bankruptcy. For instance, some states that imposed costlier regulatory burdens in the US experienced lower rates of new capital investment. Conflict can be spawned on the trade-offs between economic growth and environmental protection (Bowman & Richard 496). . Figure 1: AD-AS curve illustrating the government expenditure. Equilibrium is at the intersection of the two curves. An increase in government expenditure will be reflected in a rightward position of the AD curve. It is out this reason that public opinion polls indicate that most people are in support of increased government spending for environmental protection, as opposed to efforts to weaken the environmental standards. Environmental protection is a topic of concern for all people. This is because everybody is a potential or actual victim of the environmental problems. Polluted air, water and land threaten the health and safety of people (Bowman & Richard 497). To save this situation, the national government needs to assume full enforcement authority for the pollutions affecting natural resources like water. Economic implications of pollution on Net Exports In the production activities of a domestic firm, there are pollution effects that come with it. Comparing the pollution content of exports (Em) and imports (Ex), an analyst will be able to arrive at a country position in the effluent trade balance. If Em /Ex is larger than unity, there is the implication that the country’s overall imports are more pollution intensive than their overall exports. For instance in the early 1980s, China’s net imports were dominated by both machinery and industrial materials. Compared with the net exports, the weighted pollution intensity of China’s net imports was almost three times as intensive. Recently, China’s net imports have been very much dominated by industrial raw materials and fuels. On the other hand, with an increased share of machinery exports, the pollution content of the Chinese net imports has been significantly reduced. However, in most developing countries pollution does not have significant effects mainly because production is for domestic consumption, not for export (Welfens 62). According to Welfens (2001) pollution abatement expenditures have a statistically significant negative effect on net exports but this effect diminishes over time (p. 63). Although the net exports in some environmentally sensitive industries are susceptible to higher levels of environmental regulation, like chemicals, others are not, e.g. petroleum and coal products. To achieve a much better production process, industries practicing pollution-intensive methods need to be fully regulated. With full enforcement of the production regulations, production will be environmental friendly thus avoid exporting at the expense of the environment. Economic implications of pollution on Unemployment rates Increased pollution as a result of production activities in various industries will call for intervention of the governments. The intervention may mean the government officials closing down such industries. This will result to laying down of the employees, leading to unemployment. However, this is not always the case. For instance, environmental regulation has produced significant macroeconomic impacts in the US, but the size of the impacts has been subtle. Like in 1975, inflation was 0.25 percent higher than it would have been expected in the absence of all environmental regulation (Portney 459). Some economists have suggested that environmental regulations may increase economic productivity by directing capital to more efficient industries. Environmental regulations in the US may have created more jobs than they have displaced, contributing to lower unemployment rates. Economic implications of pollution on Inflation rates Higher production costs resulting from pollution control programs will result to high prices on the final product reaching the consumer. Prices of the goods will keep on rising at high rates, raising inflation. Increasing inflation rates may have a cross-cutting implication on the economy. For instance, increased inflation rates may result in high costs of production, which may force industries to lay off some of its employees. This creates the other problem of unemployment. A way out of this problem can be realized when the government imposes regulations that are not very expensive to the production industries. This will serve as an incentive to investors who will bring in competition, which ultimately benefits the consumer (Costantini & Monni 867-880). Conclusion Increased production activities in both developed and developed world has resulted to increased pollution. This has however come with the negative effects of pollution which has resulted in adverse effects. Economic activities have impacted a lot on gross private domestic investment, government spending, net exports, unemployment rates as well as inflation rates. This has been witnessed at the national and global levels. Works cited Bowman, Ann O. M, and Richard C. Kearney. State and Local Government. Boston, MA: Wadsworth, Cengage Learning, 2011. Print. Clapp, Jennifer, and Peter Dauvergne. Paths to a Green World The Political Economy of the Global Environment. Academic Foundation, 2008. Clark, Lara P., Dylan B. Millet, and Julian D. Marshall. Air quality and urban form in US urban areas: evidence from regulatory monitors. Environmental science & technology 45.16 (2011): 7028-7035. Costantini, Valeria, and Salvatore Monni. "Environment, human development and economic growth." Ecological Economics 64.4 (2008): 867-880. Evans, Gary W., and Elyse Kantrowitz. Socioeconomic status and health: the potential role of environmental risk exposure. Annual review of public health 23.1 (2002): 303-331. Hall, Stephen J. The continental shelf benthic ecosystem: current status, agents for change and future prospects. Environmental Conservation 29.03 (2002): 350-374. Harris, Jonathan M. A Survey of Sustainable Development: Social and Economic Dimensions. Washington, D.C: Island Press, 2001. Internet resource Munasinghe, Mohan. Macroeconomics and the Environment. Cheltenham [u.a.: Elgar, 2002. Print. Otti, V. I., and F. U. Ogbuagu. "Environmental Health Effects of Exposure to Air Pollution in Industrialized Areas." Civil and Environmental Research 6.5 (2014): 80-84. Portney, Paul R. "Macroeconomic impacts of federal environmental regulation, the." Nat. Resources J. 21 (1981): 459. The Economist. The Economist Newspaper, 8 Feb. 2014. Web. 3 Nov. 2014. . Welfens, Paul J. J. Internationalization of the Economy and Environmental Policy Options: With 61 Tables. Berlin [u.a.: Springer, 2001. Print. Read More