Friday, January 12, 2007

Pay Now or Pay Later

At the end of an article in Bloomberg today, there is brief mention of an issue that has been getting significant print space over the last year or two, but there doesn’t seem to be much of anything in the way of actionable follow-up. Poor air quality in and around major Chinese cities is well documented – something that anyone who has been to Beijing over the last couple of years can attest to. When I visited Beijing in 2003, my first breath of non- recirculated air as I stepped off of the plane was a harsh awakening that made the air from my departing city (LAX) seem pristine – and conditions have most certainly worsened since my visit. Many officials chalk this up as the price to pay in a growing economy, and when growth slows (which we are already seeing signs of as mentioned in the article), the burden can be more evenly distributed and conditions, in general, will start to improve. Further, with economic growth comes the ability to afford multinationals to engineer away the negative consequences that accompany rapid growth. This is partially correct; however, it is not an effective way to deal with the scale of poor air and water quality China faces today. Economic growth cycles, particularly in emerging markets, are often regulated by factors such as interest rates, foreign investment and the strength of domestic currency. Once much of this investment ceases, trade begins to stabilize and the 2008 Olympics are history, there will be a massive clean up bill, and there will reduced funds for the necessary remedial actions. It is better to approach these issues head-on now, while the money is still flowing, instead of setting the stage for Superfund II. Future postings will address these and related issues as they arise.

No comments: