Tuesday, April 19, 2011

The Economics of "Sustainable" Development

Our discussion on Thursday raised a lot of questions about whether "sustainable development" — a term frequently touted by big environmental NGOs — is possible. From a Western perspective where we have the luxury of caring about conservation, so to speak, partnering conservation with development in third-world countries rich in natural resources is a laudable goal. A host of problems arise, however ...
  • How are people expected to care about the environment when it interferes with putting food on the table?
  • What good do conservation and development projects do if they simply replace one short-term neo-colonial industry (like logging, for example .. 2011 is the UN's International Year of Forests, and forest conservation is a big issue currently) with another in the form of an NGO?
  • NGO resources don't last forever. How can we make sure that conservation practices are sustained without falling into cultural imperialism or paternalism?
  • and many more.
No one has the answer to all these problems, as was made abundantly clear in class, but the World Bank is taking an interesting approach. Currently, they are trying to redefine the metrics by which development is measured. Instead of basing development status on GDP alone, "intangibles" like environmental and cultural capital are being taken into account and assigned a quantitative value. Here's a report on a new World Bank publication:

In 2005, the total economic value of natural assets was $44 trillion worldwide, or $7,000 per person on average while “intangible” capital accounted for the greatest component of total wealth–worth a massive $540 trillion worldwide in 2005.

The Changing Wealth of Nations – a follow-up publication to the 2006 book, Where is the Wealth of Nations? – extends the principles of wealth accounting to include dimensions that go beyond the standard Gross Domestic Product calculations undertaken by finance ministries. It presents, for the first time, a set of “wealth accounts” for over 150 countries for 1995, 2000, and 2005 which allows a longer-term assessment of global, regional and country performance in building wealth.


The book finds that intangible capital growth contributed close to 100% of the increase in total wealth in Sub-Saharan Africa and Eastern Europe and Central Asia from 1995 to 2005. This share was 80% in South Asia and 72% in Latin America and Caribbean.

It is the quality of institutions that enhances a country’s capacity to provide economic benefits,” said co-author Kirk Hamilton from the World Bank’s Development Economics group. “When a country has strong institutions that reaffirm the rule of law, ensure government accountability and help control corruption, investment follows and grows.”

The quality of institutions is especially important for the good stewardship of natural capital, the book concludes.

The use of the word "stewardship" and the (perhaps impractical, as Jordan pointed out Thursday) focus on education aside, if a major problem with sustainable development is money, would the resource valuation approach — partnered with community education and government regulation — help? This is a pretty hotly debated concept in the development world, from what I understand. Though the World Bank's literature is relatively new, there's a wide range of research on the field of environmental economics (perhaps some of you have tapped into it for other courses). There is clearly a sea change necessary for natural capital to hold actual development value; I'm nowhere near qualified enough to pass judgement, but I wonder if it would be possible in practice, and how helpful it would be for the implementation of conservation goals.


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