Prospects for an Environmental

Could globalization trigger an environmental "race to the bottom," in which competition for investment and jobs relentlessly degrades environmental standards? Since billions of people subsist on less than two dollars a day, it would be cavalier to dismiss this threat lightly. Indeed, the race-to-the-bottom (RTTB) model provokes widespread concern because its underlying assumptions have an air of plausibility. In the RTTB world, decent environmental standards impose high costs on polluters in high-income economies. To remain competitive, these firms relocate to low-income countries whose people are desperate for jobs and income. Local governments ignore regulation to promote investment and economic growth, allowing businesses to minimize costs by polluting with impunity. Driven by shareholders to maximize profits, international firms follow suit. Rising capital outflows force governments in high-income countries to begin relaxing environmental standards, but this proves fruitless because the poorest countries have no environmental standards at all. As the ensuing "race to the bottom" accelerates, all countries converge to the hellish pollution levels that afflict the poorest.