Unintended Consequences

I was listening to NPR the other day and heard a very interesting segment on problems in the paper recycling industry. It seems that the bottom has fallen out of the market for waste paper to be recycled. The price recently fell from $150/ton to about $20/ton, making recycling very difficult from a financial perspective. The primary side effect of this is that more paper will be landfilled instead of recycled until the market comes back up. Interestingly, most of this scrap paper was going to China, filling up containers that came over filled with TV’s, Ipods, and the other consumer goods that we have been eating up for decades. China was in a position to pay a premium for the waste paper, since their ships would otherwise return empty, making their shipping costs essentially free. Now that our shopping binge is pretty much over, fewer goods are being made, reducing the number of boxes to package them in, which means that they need less paper to recycle into those very boxes. According to the LA Times, almost 100,000 Chinese plants have closed this year, putting millions of people out of work, and, indirectly, killing the US market for recycled paper.

So what is the moral here? Should we start buying foreign made consumer goods again to put people back to work and keep our old newspapers out of the landfill? Sorry, folks, I don’t have the answer, but these consequences of a global economy raise more intriguing questions. One of the primary side effects of our current financial crisis is increasing unemployment in all sectors of the economy. President Elect Obama plans to address this with a depression-era style stimulus package, investing heavily in infrastructure to create jobs, get Americans back to work, put money in their pockets, and get the economy going again. While deficit spending is complicit in what got us where we are right now, unfortunately, we will need to expand the deficit to keep from falling into a deep depression. I agree with the general consensus that the recovery will be long, slow, and painful, but the alternative is much worse. Thankfully part of the stimulus package includes investing in improving our buildings, putting people to work to make them more efficient, reducing energy use, saving money, and, ultimately helping improve our air and water quality from reduced power plant emissions. What I like about these projects is that they keep money in our local economies. When we spend money on power and fuel, we send it to multinational businesses that mine, refine, and generate power all over the world. When people are working to improve existing and build new buildings that are energy efficient, that work is happening right were we live and work. Workers buy food, clothes, and tools, go to movies, eat out, pay rent or mortgages, and invest where they live. Of course, many of the materials are purchased from other regions, but this work is labor intensive, keeping much of the investment in the local and regional economy. Once the work is complete, the occupants of these efficient buildings pay less for their energy - forever. Every dollar not spent on energy consumption can be invested or spent locally, invigorating the economy. Or they can be spent on a new TV or Ipod, requiring a Chinese factory to reopen, making more boxes from waste paper, restoring our recycled paper market, keeping last Sunday’s New York Times out of the landfill. Think about it.