The Rule of Law; Recycling … Garbage-in, Garbage-no-longer-out*

The Rule of Law

Strict adherence to the Rule of Law has been America’s differentiator. It’s what has made America great. It’s the reason why American democracy is history’s most durable and why America has the world’s free-est press and most successful economy. Americans live by the Rule of Law and not by the Law of Rulers.

Only a relatively few countries observe the Rule of Law in the same way as America. Many honor it only in the breach or simply give it lip service. America strictly adheres to it. For those in power in other countries, all too often the Rule of Law is ignored or undermined. Senior government officials outside the U.S. often view themselves as being the law, monarchs rather than elected officials. They have little respect for the Rule of Law. Therefore, although democracy and the Rule of Law have flourished in France, Israel, Peru, South Korea, Iceland, Brazil, and South Africa, each of those countries has had one of its 21st Century leaders indicted for criminal activity. Those countries’ leaders have honored the Rule of Law only in the breach – when there’s been an independent judiciary. That’s not to say that corruption hasn’t existed or doesn’t exist in American government. What it does say, however, is that respect for the Rule of Law is paramount in America – it’s adhered to not only by America’s courts and judges, but also by its elected leaders – and is the reason for the success and durability of its institutions.

The Rule of Law means that all people, whether inside or outside government, are subject to laws that are fairly applied and enforced. It requires observance of the principle that the law of the land is supreme and leaders are not – they can be indicted or insulted on the same basis as ordinary citizens (there is no lese majeste) –, that the laws are applied evenly by prosecutors and judges, and that every person is held accountable for his actions – there are no free passes. Laws are clear, publicized, stable and fair. They protect fundamental rights, including property, contract and human rights.

In America, the Rule of Law means that Congress and the President together must enact laws. The Supreme Court oversees those laws to ensure their fairness. The Executive – police and prosecutors – enforces those laws impartially, without selectivity. And everyone has access to the Courts where judges make their determinations impartially and in accordance with the law-as-written.

America’s success has depended on a belief in the Rule of Law. American and foreign media have emphasized its validity and the world has validated that belief by looking to America for guidance and precedent in ensuring the durability of the Rule of Law. Does American law always work perfectly? Of course not. Americans are human beings. But America’s institutions are structured to follow the Rule of Law and Americans rely on that fact.

The Rule of Law, however, does not have the same historical force elsewhere. Populist leaders in a number of countries have placed themselves and their political parties above the Law. Their goal is little different from monarchs of the past. The lust for power has corrupted them. Venezuela, Turkey and Poland currently lead the way in this regard, although Hungary, the Philippines, Italy and Brazil appear to be following in their footsteps (in contrast to Slovakia which recently moved to restore the Rule of Law).

Each provides examples of how the Rule of Law can be undermined … and the consequences that follow. The world accordingly has become a more dangerous place.

Recycling … Garbage-in, Garbage-no-longer-out

Industry-wide changes in the waste-disposal industry began on January 1, 2018 when China stopped being the dumping ground for the recycling of American plastic, paper and cardboard. Prior to 2018, it had been the world’s biggest scrap importer and the major destination for American recyclables. Recycling in America now requires that the process of collection, sorting and recycling all begin and end onshore.

Initially, the impact of China’s ban fell solely on waste-disposal companies. Without China as an inexpensive purchaser of scrap, costs went up, hitting margins and, in some cases, generating operating losses. Companies took the opportunity to reset pricing. Local governments are continuing to struggle to adapt to this new reality, creating an unanticipated burden on already-stretched local budgets. Although all residential recycling programs are not in free-fall, the industry is going through a significant transformation. Small and mid-sized municipalities have been particularly hard-hit by price increases. A clear path forward has yet to materialize. The costs of recycling, which once were nominal, are rising. This has led some localities to end, or consider ending, their recycling programs. Others are electing not to adopt such programs.

Recycling faces capacity issues. Huge ones. Landfills are limited and highly regulated. In time, they’re likely to be legislated away in many regions and localities. Although there are existing incinerators, too few domestic ones exist, new ones are expensive to build, and incineration creates environmental issues that will delay and, in certain localities, prohibit further construction. Finally, most materials recovery facilities in the U.S. are ill-suited to current American sorting practices. Existing technology permits them to process only well-sorted recyclables. That high level of sorting requires manual labor that is far more expensive than their prior costs with Chinese recyclers. Automated sorting technology has not yet been able to plug that gap.

This comes at a time when sustainability is the watchword for conservation and climate change discussions. There are daily reports of plastics in the oceans, toxic debris being consumed by birds, fish and mammals, and a variety of recyclables contaminating the soil. All five of the earth’s major oceans have been inundated with plastic pollution, the largest of which has been dubbed the Great Pacific Garbage Patch, an area containing ~1.8 trillion pieces of plastic weighing an estimated 80,000 tons. Ocean pollution threatens America’s food supply and its health.

Despite these issues, there is no consensus for a national anti-pollution policy. Washington is not incentivized to enact a standard for the use of sustainable materials or for the recycling of products. These issues will continue to be addressed by local governments on a catch-as-catch-can basis. Wastedisposal companies will be forced to deal with a patchwork of local regulation, which will increase costs to consumers. Although there are localities dotted throughout the country with significant landfill and/or incinerator capacity, the costs and regulatory burdens of moving recyclables from locality to locality and region to region makes transportation impractical. This all leads to industry and regulatory fragmentation and will continue to do so absent Federal coordination. The result is that some areas of the country will be able to dispose of waste and recycle at a relatively lower cost than other localities. Some simply will cease doing so. These disparities will enhance regional competition with a consequent social impact.

Waste-disposal industry consolidation was significant in 2018. That trend is likely to continue with smaller, localized operations being gobbled up by larger regional and national organizations. That consolidation is likely to enhance technological innovation. With proper focus, the American wastedisposal industry could be poised to dominate innovation.

This is where central government standards on sustainability, conservation, and environmental protection could create value. Standardization of waste-disposal infrastructure would have immediate national benefits. With compromise between Republicans and Democrats, it should be possible to craft laws that would have that effect. In their absence, America will become both more polluted/less able to deal with environmental consequences and less able to competitively innovate.

A Reader’s Comment on “A Financial Transaction Tax?”

“Paul Krugman has made the argument that the revenue raised by taxing the rich could be used for social purposes such as education. The effect of taxing the rich is a somewhat different issue from government ÔÇÿinterference in the market.’ Although my family benefits from its class position, there is merit in the view that capitalism is committing suicide.”

Phishing Alert!

Beware of an emailed letter from “Blackstone Group LP” (or a similar reputable investment management firm) attaching a bogus Form K-1. The “Blackstone” cover letter funnels questions to a bogus website and a telephone number. Be careful out there!

Finally (from a good friend)

Life is an opportunity, benefit from it.

Life is beauty, admire it.

Life is a dream, realize it.

Life is a challenge, meet it.

Life is a duty, complete it.

Life is a game, play it.

Life is a promise, fulfill it.

Life is sorrow, overcome it.

Life is a song, sing it.

Life is a struggle, accept it.

Life is a tragedy, confront it.

Life is an adventure, dare it.

Life is luck, make it.

Life is life, fight for it.”

~ Mother Teresa

*┬® Copyright 2019 by William Natbony. All rights reserved.

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