Spiral Economy Trumps Circular Economy: Part 1 Protectionist Rules in Emerging Markets

The debate is over 5 Markets

1) Value Added New Industrial Goods
2) Value Added Second-hand Goods
3) Clean Graded Raw Materials
4) Raw Materials Requiring Disassembly Labor
5) Waste Dumping

Very large, emerging, but historically agrarian markets like China and India have somewhat ironically tended to be more Marxist in their economics.  While Marx predicted that Communism would be the logical evolutionary outcome of very large industry, it was the relatively rural Russia (compared to Europe generally), and agrarian China, which implemented Communism.

Before you can define the environmental interests of a "circular economy", you need to draw X's and O's for the competitive economic interests.  It may be a circular one, but it's still "the economy, stupid".

So let's say that in pre-industrial or non-industrial or aspiration-to-industrial economies, there is a will or jealousy or desire to catch up fast.  At the same time, the proportion of paid high-school-graduate non-farm work is going to be much more in government, command and control, regulatory sector than you would find in an industrialized economy.  If you were a teacher in these emerging markets, your best students are less likely to have a job in the private sector.

That regulatory "bully-boy" culture is given steroids in the "curse of natural resources", when proximity to authority over a billion dollar oil well, diamond mine, gold mining lease is the fastest way to make wealth.  It is the government authority which is the source of "value".  Being the nephew of the Minister of the Interior Department pays great dividends in resource-curse economies... which fight with recycling for the #3 "raw material" economy.

So as those nations seek "industrial economy" they tend to inject government resources.  Mao set up Communist Party-led "Industrial Institutes", kind of like "The Ministry of Toasters", to signify China's intention to industrialize.   My recollection is that Indira Gandhi also tended to believe an India-government-regulated homegrown industry would be better than outside investment.  It was like Gandhi weaving his own shirt instead of buying European clothing.  Foreign #1 and Foreign #2 were the industries feeding Protectionism.

To be sure, Protectionist Debates rage over raw materials as well.  But my strong hunch is that a magnate in US Steel, even while promoting protectionism for labor unions, is capable of trading Japanese steel on the side and making billions.  It would be much more difficult (though Proview of Taiwan tried) to control second hand added value goods.

You see where I'm going here.  In the game of "survivor", #2 is the most profitable, most talented market... and through planned obsolescence or "waste" regulation, it's at risk of getting "voted off the island".

So, as the rapidly emerging markets like India, China, or nations in Africa direct government authority to develope and "protect" domestic #1 Industry, the idea develops that foreign second hand goods are "dumping" in the below-cost sense.   The Chinese institute and EPA officials I interviewed in 2002 were very clear that working CRTs were not allowed to be imported, but broken CRTs could. The CRT manufacturing industry needed raw materials, and they imported raw materials.  But working product - refurbished CRTs - were unfair competition by foreign #2 against Party-owned CRT #1 manufacturing.

 -- - --

This weekend Part 2:  Environmentalists Get Punked