The Economy

Al Gore wants to be President so he can save the rainforest. Actually, I would be happier if that were a joke, but it isn't. Gore raised quite a fuss in Davos, Switzerland, a few weeks ago, suggesting that the International Monetary Fund (IMF) sell some of its gold to accomplish precisely that goal. The way this would work, according to Gore, is that impoverished Third World nations would have some of their foreign debt canceled in return for pledging to save "priceless" endangered natural resources. Some people think that was a new idea for Gore, but actually it has been around for years. Just for fun, I went back and reread his book Earth in the Balance (1992, Plume), and right there on Page 345 our presumptive future President claims: "One of the best development ideas of the last 10 years is . . . the so-called debt-for-nature swaps. Debts owned by developing countries to the industrial nations are forgiven in return for enforceable agreements to protect vulnerable parts of the environment . . . everybody wins [as we reduce] the insanity of our current bizarre financial arrangements with the Third World." The trouble with Gore is that he really believes all this stuff. If elected, we will all have to shift from a President who believes none of what he says to one who believes everything he says. Some of these ideas are harmless if goofy, such as redefining GDP (called GNP in the book) to include the negative implications of environmental destruction. The main thrust, however, is to raise taxes on fossil fuels and "virgin materials," boost mileage requirements for motor vehicles, and discourage utilities from building new generating capacity. Additionally, the government should purchase longer-lasting light bulbs, and workfare recipients should be required to plant trees. The best way to keep these harebrained schemes from being implemented is to keep Al Gore out of office. If he is elected, we all know how his term will start: "moderate" tax increases to achieve these goals. When they turn out not to be as effective as Gore expects because people still want to drive and keep their homes heated in winter and cooled in summer, the next step will be to raise taxes even further. Admittedly at some level, people would use rickshaws instead of cars and trucks, and real-estate prices would soar in San Francisco, where homes need relatively little heat or air conditioning. But the major effect will be to wreak economic havoc on our currently efficient economy. Am I just being an alarmist about all this? The last time such a plan was tried was during the Carter Administration, when the inflation rate rose from 4% to 13% and the unemployment rate jumped from 6% to 10.7%. But wait a minute, you say. Those increases resulted at least in part from tremendous increases in oil prices, whereas the Gore program, whatever else it may or may not accomplish, will reduce the use of energy. And there's the rub. The Carter program also was expressly designed to reduce energy consumption. Remember MEOW, the "moral equivalent of war" -- and Carter personally ordering the removal of all the hot-water faucets in government buildings? Carter also convinced the IMF to sell gold to pay off Third World debt, so even that idea isn't original with Gore. Yet somehow, nothing worked. Energy and gold prices, along with a great many other commodity prices, rose to record levels. Commodity prices didn't plunge until the Reagan Administration decided to ditch these patchwork approaches and let the free market operate. However, one fellow, who just happens to be a step away from the Oval Office, doesn't believe market forces can do the job. If you think this is an exaggeration, read the whole book. History is littered with the remains of people who did not believe what their elected leaders had written. If Gore is victorious, no one can say they weren't warned. Michael K. Evans is president of the Evans Group and professor of economics at the Kellogg School of Business, Northwestern University, Evanston, Ill. His e-mail address is [email protected].