The Less Developed Countries in the Global Environment

By Alan MacKinnon

As the new millennium approaches, globalization is changing the nature of our planet at an ever-increasing rate. Trade barriers are being brought down, cultures are coming together, communication has shrunk the figurative size of the planet and people are beginning to realize that everybody shares a common plight when it comes to the environment. Impacts that were at first very small and localized, are now becoming significant at the global level. These environmental problems are not limited to the rich, the poor, or people of certain countries but will have important effects on everybody.

                As poverty in the less developed world (with the exception of China) is soaring, (McKenna, Barrie, 1999, pg. B1) the people of these nations are becoming more hungry for development in order to alleviate human misery. The type of development that occurs in the poorer countries of the world will have a great impact on the global environment. It is essential that decisions be made that consider all the variables, including environmental and social factors, when deciding what type of development is appropriate. The role that the less developed countries play in the future of the global environment will depend a lot on decisions made domestically, but also on those made in the developed world. The international community must work together in order to find equitable solutions to a problem that has implications for everybody.

There are several aspects that must be considered when examining economic development and poverty in the global environment. The perspectives provided by economics in regards to the environment must be explored, and the importance of merging environment and economics in decision-making must be understood. The effects of poverty on the environment also have to be appreciated. The unique nature of environmental degradation that is caused by the struggle to survive should be seen as a clear indication that economic development in the poorer places of the world is a prerequisite for environmental improvement. The development that does occur must consider all pertinent social, environmental and economic factors in order to be beneficial in the long-run; however, the inequities that exist must be weighed when devising solutions. The establishment of an environmental institutional framework along with the encouragement of responsible international investment can be considered as necessities in facilitating environmentally sustainable development. The fact that trade has the potential to be very beneficial in terms of environmental improvement and human development must be realized; however, it cannot be forgotten that a global economy requires global standards. The implementation of global environmental policies requires a great deal of political maneuvering. The new politics of a sustainable environment should be contemplated in terms of the benefits of setting aside differences and acknowledging inequities in order to tackle a problem that cannot be confined with boundaries and borders. The reality that the environment, the economy and humanity=s common well being are all strongly linked must be recognized. To do so allows people to interact with their environment in a manner that will be sustainable for generations to come.

 

THE ENVIRONMENT AND ECONOMICS

The environment is an externality in the economic system. It represents a market failure in that the costs or the benefits of production are not properly accounted for in the workings of traditional economic theory. This can be understood by examining any number of examples. Suppose there is a factory dumping effluent upstream from a municipality on a river. This effluent is causing health problems for the citizens of the municipality through a decreas


e in the quality of the drinking water. These health problems represent a cost to the community in terms of a decrease in productivity and personal well being. The factory, on the other hand, benefits from having a cheap and simple waste removal system. Without a link between the costs to the community and the benefits to the factory, the environmental problem that exists here will not be solved because the factory will have no incentive to improve the water quality of the river. In order to make responsible development decisions, the link between the environment and economics must be made.

During the latter half of this century, a great deal has been learned about the impacts that human activity can have on the environment. Societal welfare has been redefined as the consumer surplus + producer surplus + net revenue to governments + the quality of the environment; (Van Ireland, Ekko, 1994. Pg.153)  hence putting tangible value on the health of ecosystems.  Among other things, this has resulted in the recognition of environmental costs such as the decreased water quality in the example above.  Equilibrium levels have been re-calculated by including these costs in the production decisions of the firms. If the factory along the river had to consider the costs associated with dumping of the effluent, it would minimize those costs (in order to maximize profits) by limiting the amount of effluent dumped or by treating it. All too often, anti-pollution incentives and environmental regulation is inadequate in terms of achieving the socially optimal equilibrium level of pollution, particularly in the less developed countries where regulation or enforcement is lacking. The internalization of the environmental externality is something that is essential for responsible development, and is becoming more and more common in an age of heightened environmental responsibility, at least in parts of the world where such considerations are affordable.

 

THE ENVIRONMENT AND POVERTY

There is a substantial gap between the rich and the poor of the world. In 1995, the developed countries had an average per capita income of $24, 930 while the figure for the less developed countries was $430 (all in American dollars) (Seligson, et al., 1998, pg.3).  Unfortunately, this already massive gap is widening. In 1950, the income of less developed countries was 4.3% of that of the developed nations while in 1980 it was 2.5% (Seligson, et al., 1998, pg.3). In terms of environmental issues, this means that different problems will exist in the less developed world than in the developed world. In the richer nations, environmental problems are generally caused by high production and consumption, lack of incentives for proper environmental management and simply by lack of public support (Van Ireland, Ekko, 1994, pg.3). These countries can afford to pollute. Their citizens have the income to pay for a high standard of living that requires more resources and puts more strain on the environment.  In poorer countries, problems are often related to a lack of means to apply the proper technologies to production and the need to provide basic requirements for a rapidly growing population (Van Ireland, Ekko, 1994, pg3). These countries cannot afford not to pollute. The people here overuse and mismanage what little resources they do have just to survive. The solutions to environmental issues will have to reflect the differing nature of the problems as well as the inequities that exist.

The vast majority of developing nations face great economic pressure to overuse their resource base. This pressure can be domestic in terms of an impoverished populace demanding resource development in order to improve social well being. They can also be international, in that all too often developing nations must forgo investment and overuse current resources in order to pay creditors in financing large debt loads. One of the most severe examples of this problem is the situation in most of Africa. The impoverished countries of this continent rely on commodity sales to finance debts that they can not afford, forcing them to overuse their soils and essentially turn good land into desert (World Commission, 1987, pg.6). What is left behind after the land has been stripped of all its natural wealth is a hard substance called petroplinthite or desert pavement. As its name suggests, this is a rock hard substance that is agriculturally useless and almost impossible to reclaim, let alone use to feed a growing population. There is obviously a clear link between environmental degradation and poverty.

                While looking for solutions to the environmental problems of less developed countries, it is important to understand that economic growth here must be revived (World Commision, 1987, pg.49). The basic human needs in terms of water, nourishment, shelter, sanitation, employment, health and education are not being met for most people in these places. There is no point in trying to address environmental issues without dealing with these human needs and the only way that it will be possible to meet these basic requirements in the less developed world will be through economic development.

 

THE ENVIRONMENT AND ECONOMIC DEVELOPMENT

If development is necessary in order to alleviate both environmental and human problems, it is important that only projects and policies that take these same environmental and human factors into account be encouraged. This is the search for the social optimum. There is little point in building a factory that pollutes the drinking water of a town and hinders the productivity of its citizens when these citizens will be workers in that factory. To do so would be an inefficient allocation of resources in a place where these resources are very scarce. The true costs of production including environmental and human costs must be considered by making the link between the factory and the town downstream. All the benefits must be considered and all the costs accounted for so decisions that are good for all of society can be made.

In terms of the environment, problems arise with valuation. While it is easy to measure the benefits of development in terms of employment or expansion of national income, it is often difficult to put a dollar value on damages to the environment. What is the value of a rhinoceros in 1999 U.S. dollars adjusted for purchasing power? How much is an old growth tree worth to society? Do we define it in terms of the value of the lumber, as a home to numerous organisms, as a filter for our atmosphere or as an important contribution to bio-diversity? The issue of environmental valuation does not have an easy answer and often depends a great deal on societal values. To make things more complicated, there is a good chance that the environmental values of somebody who has a house with a two car garage in Toronto will be somewhat different from those of a squatter who has a cardboard box in Managua. 

While it is very hard to put a monetary value on the environment, it is much easier to put a value on the cost of keeping it clean. A factory can usually estimate the cost of installing a new waste treatment system and industries can usually figure out how much environmental standards or taxes will affect the bottom lines of their firms. Because of this, it is often the case that the environment is undervalued. This is a particular problem in the less developed countries where there are fewer resources to tackle environmental problems and a greater need for economic growth. If a project promises lots of jobs to a very poor region where there are virtually none, environmental considerations will usually take a back seat. This >grow first, clean up later= approach threatens sustainability in that cleaning up later is often costlier due to irreversible damage and health problems (Seligson, et al., 1998, pg.431). The impacts of such strategies can be felt quickly in dramatic environmental disasters such as the Chernobyl nuclear accident in the former Soviet Union or the Bhopal chemical spill in India, both of which resulted in thousands of immediate deaths and hundreds of thousands of very sick people. These costs can also accumulate slowly, such has been the case with the rapid development of the AAsian Tigers@. By choosing to ignore environmental protection in favor of rapid economic growth, these East Asian countries can now boast nine of the world=s fifteen most polluted cities (Seligson, et al., 1998, pg.430).  While in the short run it may appear advantageous, fast growth and human development at the expense of the environment is bad policy in the long run.  

It is clear that economic, social and environmental problems are all closely linked. Economic growth and human development in the less developed countries of the world can be environmentally sustainable if all the variables are considered in order to make the socially optimal decisions. For these decisions to be made properly, the necessary information must be available. One of the first priorities should be building the data systems that will be required in the future. In less developed countries, basic information such as precise maps, census data or soil surveys is all too often non-existent. It is very difficult to determine the type of treatment system that is appropriate when building a factory on a river if nothing is known about the geography and ecological nature of that river or about the people who live nearby.

With these data systems in place, it is important that the proper organizations and institutions exist in order to use this data to make environmentally responsible development decisions. Appropriate government institutions, consulting agencies, citizens groups and business groups must exist so that development can proceed in a manner that considers all the relevant issues and variables. Due to low income levels, which lead to low skills and education, many less developed countries simply do not have such organizations and hence do not have the store of knowledge and skills required to manipulate the data and information that is available. Stakeholders in these societies are not represented in the decision making process because the proper non-governmental organizations or other such groups do not exist. Partnerships programs between developed and less developed nations must be established in order that the institutional and organizational framework that is required to make environmentally responsible development decisions can be shared.

Much can be done in order to establish these institutions and organizations in the less developed world. Environmental consultants can be engaged in the training of people in the less developed countries to recognize what factors to consider and what steps to take in order to do an environmental impact assessment or cost-benefit analysis. Partnerships between governments can help to establish the appropriate departments, institutions and legislation that make environmental and social assessment a required aspect of development in the poorer nations. Non-governmental organizations consisting of environmental agencies, business groups and concerned citizens groups must be formed in the less developed countries to ensure that the people who have an interest in or are affected by proposed developments have a voice at hearings, round table meetings and negotiations involving the projects. All these things are necessary in order to make the proper development decisions.

When considering all of the institutional and organizational requirements of environmentally responsible development, it is important to note that these necessities are almost useless without one another. For example, it makes no sense to have trained environmental consultants prepared to do environmental impact assessments when there is no legislation or enforcement body that requires firms to do these assessments. However, if all these components can be established, development in the poorer countries will lead to improvements in the quality of life and the quality of the environment, which are both interdependent.

Finally, it is essential that the people of these nations be educated to understand the environment and the impacts that humans can have on it. An environmentally aware society is better equipped to exert political pressure and make proper decisions concerning development.  

 

ENVIRONMENTAL REALITIES AND INTERNATIONAL INVESTMENTUnfortunately, the institutional and organizational framework for making responsible environmental decisions concerning development is severely lacking or almost non-existent in most less developed countries. The reality is that this framework cannot be established all at once; it is a lengthy and sometimes tedious process. Despite this, and to encourage the establishment of this framework, economic development is an immediate necessity in the developing world.

The driving force of economic development in most of the less developed countries is the inflow of foreign capital. Development projects in these nations are financed through loans, aid and foreign direct investment. The environmental implications of this capital import process are seen in terms of whose imperatives are used when it comes to establishing criteria for environmentally responsible development. Considering that many governments of less development countries lack appropriate domestic environmental legislation, the fact that the money is coming from abroad means that environmental policy is also developed abroad. This results in a wide variation in the environmental sustainability of development, depending on the source of the funds for the project.

One of the most important sources of development funds in the poorer countries is the World Bank. This institution has an environmental assessment policy so that environmental factors are considered in the development process where World Bank funds are concerned.  For these assessments, the breadth, depth and type of analysis depend on the nature, scale and potential environmental impact of the proposed project.  The potential environmental risks and impacts in the area of influence of the project are examined along with project alternatives. Means of improving project selection, sighting, planning, design and implementation by preventing, minimizing, mitigating, or compensating for adverse environmental impacts and enhancing positive impacts are examined. This includes the process of mitigating and managing adverse environmental impacts throughout the implementation of the project. Preventive measures are favored over mitigatory or compensatory measures when feasible (World Bank, 1999).

Despite the merits of having a system to evaluate the environmental aspects of development, there are some important weaknesses in the World Bank=s assessment policy.  Projects financed by the Bank are rated on the potential environmental impact of the proposed development using a system of letter categories ranging from A (most serious) to D (least serious). Environmental assessment reports for category A projects must be submitted to the Bank prior to appraisal; however, such a requirement does not exist for categories B through D (World Bank, 1999).  Hence, appraisal may go ahead before the submission of the assessment meaning that by the time it is finally submitted, the project may be so far down the road that the findings are downplayed in order to avoid turning back on any investment already made. Another criticism is that while all category A and B projects proposed for International Bank for Reconstruction and Development (World Bank) or International Development Agency (related to the World Bank) financing require that the borrower consult project-affected groups and local non-governmental organizations about the project's environmental aspects, no such requirement exists for category C and D projects or for projects financed by the International Finance Corporation (also related to the World Bank) (World Bank, 1999).  There are also questions concerning the quality of the assessments due to the fact that the onus to conduct the assessment lies with the borrower. With the lack of skilled environmental consultants and auditors, the borrowers often have to either import the appropriate organizations with the proper skills and training to conduct an assessment, or try to cut some corners in the assessment process.

Despite some of the weaknesses that exist in its assessment policy, the World Bank deserves praise for adopting a stronger environmental ethic. Hopefully, by requiring environmental assessments of proposed projects, the Bank will help to set a standard in the less developed world and demonstrate the importance of considering environmental factors in development.

Another significant source of capital inflow is through foreign direct investment. These funds are subject only to the environmental criteria established by the governments of the applicable nation or to the corporate standards of the investor. Due to a lack of jobs and economic activity, governments, which are hungry for any development, not quality development, all too often sidestep environmental assessments and standards in order to attract foreign investment. Beggars can not be choosers. Companies that are usually large multinational corporations seldom impose significant environmental standards due to a lack of long-term commitment to the area as well as the costly nature of imposing such measures. Without appropriate action by local governments to impose proper environmental practices on both local and international firms, this problem will not be solved.

 

INTERNATIONAL TRADE AND INTERNATIONAL INVESTMENT

As globalization effectively shrinks our planet, trade between nations is constantly rising. Trade has a tremendous potential to improve human as well as environmental well being, assuming that proper international standards exists. As barriers drop and markets are freed up, the free flow of goods, labor and knowledge means that corporations have more flexibility in the choice of location as well as easier access to foreign markets.

This has already had severe implications for the global environment. As competition becomes more international, there is the Arace to the bottom@ where companies look for the country with the laxest environmental (as well as labor) standards available while still having access to important markets with higher standards, thanks to freer trade. This means that poorer countries often try to spur development by wooing corporations with lower and lower environmental requirements, meaning lower costs to the firm. This results in industries setting up in a country with lower environmental standards in order to produce goods at lower costs and then sell them at a higher price in the country with higher environmental requirements. While many less developed countries provide a market where the true costs of production (including environmental, social costs) are not being considered in order to encourage development quickly, the long term results will be negative in that environmental problems always catch up, sooner or later. There are very high costs associated with winning the race to the bottom.

Despite the drawbacks, free trade is an excellent way of bringing the world together and encouraging economic development. What is needed are environmental requirements within trading blocks and even global standards to ensure that the development that does occur is responsible and sustainable. International standards in terms of such things as forestry practices, wilderness protection and fossil fuel emissions are crucial, but seldom have substantial force in existing international agreements. A good example of such a measure would be a global standard for carbon dioxide emissions, a task that is just beginning with the Kyoto agreement. A standard can be established considering the socially optimal level of emissions for the world as a whole and limits enforced on a global basis. Measures such as the creation of a market for transferable discharge permits could help to eliminate inequities by allowing the poor to sell their permits to the wealthy. This concept is not without flaws (such as the issue of larger companies being the only ones that can afford to purchase pollution rights) but is a good place to start. The fundamental point is that in the same way that a global production system makes everybody better off by considering efficiency in the economic system as a whole, global environmental standards will make everybody better off by considering environmental quality in the ecosphere as a whole. It is essential to understand that the global economy requires global environmental initiatives for the protection the global environment. 

Trade is important in making environmental quality affordable. As national incomes rise due to trade, nations (particularly less developed countries) will be able to afford more environmental protection (be able to pay for standards and assessments). However, a drawback of this would be that more pollution would also become affordable (carbon dioxide emissions, for example, increase with income). Freer trade would also help to reduce protectionism that exists in industries such as agriculture, resulting in a shift away from chemical intensive and environmentally harmful production in Europe and Japan to countries that would have a comparative advantage in agriculture, meaning less net environmental degradation (Hogendorn, 1996, pg.592).    

 

INTERNATIONAL POLITICS  AND THE GLOBAL ENVIRONMENT                As our world prepares itself for the next millennium, one thing becomes clear concerning environmental problems: everybody is in this together. Greenhouses gases, aqueous pollutants, migratory birds, fish, airborne pesticides and natural disasters do not know anything of political boundaries. The development practices of one country will undoubtedly have an effect on many others and what happens in the less developed countries should be of great concern to the developed nations, or vice versa. These are global environmental issues that will require global solutions.

Any international action on the environment always involves a great deal of international politics. While almost everyone seems to agree that cutting greenhouse gas emissions is an important imperative considering the threat of global warming, there is a great deal of squabbling on how to do it. China has adopted a policy dictating that any action taken to curb global warming must not interfere with its economic development (Schreurs, Economy, 1996 pg.31).  The fact that preparing for the possibility of climate change may be economically beneficial in the long run is not considered. The ideas of carbon credits and carbon taxes have been floated around the international political scene with a great deal of enthusiasm but no shortage of disagreement over implementation. While North America insists that carbon absorption by agricultural soils be considered worthy of carbon credits, the European community considers such an idea a cop-out on reducing emissions. Many poorer nations have also pointed out the regressive nature of carbon taxes. In an American study of such taxes, it was revealed that this policy would consume 2.3% of the spending budgets of the richest 10%, while consuming 3.7% of the budgets of the poorest 10% (Roodman, 1999, pg. 187).  In this light, it is also interesting to note who contributes what to global warming. The less developed countries have approximately 80% of the world=s population while emitting only 20% of the world=s carbon dioxide emissions (Kaiser, 1998, pg.1309).  Considering these facts, would a regressive tax scheme be an equitable solution to global climate change?

The quality of our future depends heavily on the ability of our leaders to make environmentally and socially responsible decisions at the international level today. This is well illustrated when considering population growth.  The net costs of one extra person on the planet for today=s society is close to zero; however, if considered eight or so generations down the road, the costs skyrocket to $2500 in the developing countries and $100,000 in the richer nations due to diminishing returns as land and capital are divided up among descendants.[A] More people means more stress on the environment and fewer resources to share.  In order to alleviate environmental problems that arise from things such as population growth, birth control and the empowerment of women is essential, particularly in less developed countries where these things are lacking. Such imperatives require setting aside religious and political differences in order to have a sustainable society for eight or eighty subsequent generations. 

One of the most important requirements for improving the global environment is to take an international approach that is equitable and considers all the variables in order to make decisions that are beneficial to the planet as a whole. All externalities must be internalized and to do so, political boundaries will have to be minimized. Environmental problems that occur in Papua New Guinea and emanate from Canada must be considered in decisions that are made concerning production and development in Canada. Economic growth must not occur in one region at the expense of another region, or for one generation at the expense of the next. New international institutions that deal with environmental concerns must be established and existing institutions must strengthen their environmental imperatives. As globalization brings down cultural, political and trading barriers so must it bring down environmental barriers as well.

 

THE FUTURE OF THE GLOBAL ENVIRONMENT AND THE COMMON GOOD

When considering the issues that will have to be dealt with in the new millennium, it becomes clear that environment, economy and human development are all tied together. In a world where the quality of life and quality of the environment are interconnected, decisions must be made that consider the costs and benefits associated with all aspects of development and environmental barriers must be eliminated. Whether the effluent emitted from a factory is having an impact on water quality down the road or across the border, these impacts must be considered in order to make responsible decisions for the common good. Globalization is shrinking the planet as well as the environment we share and if proper action is not taken now, the future costs may be too large to bare.                                                                                                                           

When looking for solutions to these environmental problems, the differing circumstances that people face in their environment must be considered and inequities must minimized. It is not fair for a wealthy Europe to simply insist that an impoverished Brazil stop cutting down the tropical rain forest when the virtual elimination of the European temperate forest has helped to establish the high level of development in that continent. The proper institutional and organizational framework must be established in the less developed countries in order to ensure environmentally responsible and sustainable human development. This is essential for the present and future health of the planet and all of its inhabitants. Action must be taken at the international level in order to regulate trade and encourage development that is beneficial to everybody and not just to one country, region or generation.  The institutions, governments and people of the world must work together in order to make decisions for the common good of the global environment and those whose survival depends on it.

 

 



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