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Environment plays a significant role in any economy. The world has become increasingly conscious about environmental issues since the 1970s. The Brundlandt report, “Our Common Future”, published in 1987 by World Commission on Environment and Development was a landmark publication that helped promote consciousness about environment. Another landmark event was the ‘Earth Summit’ convened in Rio de Janeiro in 1992 by the United Nations Conference on Environment and Development (UNCED). In this conference the Heads of States from all over the world adopted ‘Agenda 21’ - a list of concrete actions. Many of these promised actions have not been implemented yet. There is still much controversy about how to proceed. One fundamental controversy surrounds the relationship between economic development (growth) and environment.

Development and Environment: The anti-growth view

One school of thought believes that the quest for rapid economic growth is a fundamental cause for environmental damage and therefore not much can be done to save the environment unless people become less materialistic and learn to be satisfied with less economic growth. There are several types of environmental damage. The two most important are: resource depletion and environmental pollution. Common sense seems to suggest that there is indeed an antagonistic relationship between development and environment, for two reasons:

• More growth means more production, which in turn means more use of resources, and hence resource depletion. Examples: power stations are burning up fossil fuels; consumers and factories are using up forest resources; extension of cultivation into fragile lands is causing soil erosion and desertification; extensive irrigation in modern farming is drying up water reservoirs, etc.

• More production also means more pollution since pollution is usually the by-product of production. Examples: acid rain, hole in the ozone layer, air pollution, water pollution, etc.

Both kinds of environmental damage - depletion and pollution - endanger the prosperity, and even the survival, of future generations. Resources are of two types: renewable (ex. trees) and non-renewable (ex. oil). Depletion of non-renewable resources is seen clearly to endanger future prosperity, because whatever is used up today will not be available in future. Depletion of renewable resources is also thought to endanger future prosperity because it is argued that we are now depleting these resources much faster than they are able to regenerate themselves in the natural process. Thus, ‘environmental capital’ is rapidly depreciating, in respect of both renewable and non-renewable resources. Pollution also obviously endangers the future generations, by threatening to damage their health, their productivity, and in extreme cases, their very survival. So, economic growth is seen to be benefiting the present generation at the cost of future generation.

The new demand is for restraining growth. In some quarters, this demand takes the extreme form of turning the clock back on modernisation and returning to traditional life-styles. In less extreme form, this demand is expressed as a demand for ‘sustainable development’. This phrase was popularised by the Brundlandt report. There is a good deal of controversy on exactly what the phrase means. Roughly speaking, sustainable development means maintaining a kind of inter-generational equity: trying to meet today’s basic needs without seriously jeopardising the basic needs of future generations.

Development and Environment: A False Dichotomy

The other side of the debate argues that it is wrong to blame development or growth for environmental damage. Rather, development is said to be essential for protecting the environment and for protecting the poor from the worst consequences of environmental damage.

The argument proceeds along several lines.

Population pressure, environment and development
According to this line of argument, much of the environmental damage in the developing world is being caused by population pressure; and economic growth is essential to prevent this damage.

Example 1: Shifting cultivation. This form of cultivation uses up lots of land and burns up lots of plants and trees. When population density was low and land was plentiful, this system was justified. But as population growth has intensified, this system is causing unprecedented pressure on land leading to soil degradation and desertification. This is hurting the poor farmers themselves.

The solution lies not in clinging on to the traditional life style, but in adopting modern agricultural practices - intensive agriculture on limited amounts of land using modern technology i.e., to produce more and more food from the same piece of land - in other words, we need growth. Furthermore, growth is needed because only with higher income will come demographic transition, lower fertility and hence lessening of the population pressure that is causing the problem in the first place.

Example 2: Tragedy of the Commons. Traditional societies used to have ‘common property resources’ (CPR) i.e., properties owned by the whole community rather than individual persons or families. Ex. common grazing land, common water resources for fishing, common woodlands for collecting wood and fruits, etc.

The use of CPRs creates negative externality. When I use up these resources, only I gain from their use, but the loss of resources is shared by everybody. In pursuing my own gain, I inflict a loss on others - that is the negative externality. Social cost is thus greater than private cost. So, CPRs tend to be used up more than is socially desirable. In traditional societies, this tendency was curbed by imposing some kind of social sanctions on those who behaved selfishly. But as population pressure increased, competition for resources increased, social discipline broke down. CPRs began to be depleted rapidly - ‘tragedy of the commons’.

The solution lies in part in population control, but that is not possible with economic growth.

The poverty-environment nexus
This line of argument says that just as poor people are suffering the most from environmental damage, their poverty is also acting as a cause of environmental damage. There is a vicious circle here: poverty - environmental degradation - more poverty - more environmental damage, and so on. Growth is needed in order to break this circle. How does poverty cause environmental damage?

Example 1: Resource depletion. Poor people typically do not have enough land to earn a living, nor do they have the resources to invest modern inputs (such as fertilizers) heavily on their land to produce more food from the same plot. So, they look for new land. When the best lands are taken up, they move on to ‘marginal land’ i.e., fragile land which is not suitable for cultivation. The result is soil erosion, desertification, etc.

Also, they begin to exploit forest products, cutting trees, to build houses, to use as fuel and to sell to the market. Result is deforestation, soil erosion, desertification.

Example 2: Pollution. Poorer people have poorer facilities for clean water and sanitation. As a result, environmental hygiene is very bad in the localities where the poorest people live. This is responsible for many diseases, malnutrition and death. People talk of urban pollution from cars, factories etc. But the fact is that more people die of air pollution in rural areas than from air pollution in urban areas. In rural areas, air pollution takes the form of indoor pollution resulting from the burning of wood, dung, crop residue etc. for cooking and heating. These fuels emit toxic matter; cause respiratory diseases - a major cause of death in developing countries.

So, economic growth is needed to avoid these types of poverty-induced environmental degradation.

Environmental Kuznets Curve
This line of argument points to the fact increasing environmental pollution is not a necessary consequence of economic growth. It is true that initially pollution may rise with economic growth; but eventually growth itself will provide the resources required for controlling pollution. In other words, there is an environmental Kuznets’ curve - an inverted U-shaped curve: pollution first rises and then falls with economic growth. That’s why, the streets and the air of rich countries are much cleaner than those of say, China or Brazil.

The fact is that the rich countries can afford to take measures that limit the amount of pollution emitted by a given amount of resource use, while the poorer countries cannot. For example, waste disposal from chemical factories can be processed in such a manner that only a tiny amount of pollutants will be released into air and water, but such processing costs money. Poor countries cannot afford it. So, according to this line argument, the solution of the pollution problem lies not in stopping growth, but in accelerating growth so that the poor countries can move over to the falling side of the Kuznets curve. Modern research has shown that the idea of an environmental Kuznets curve is too simplistic. The relationship between pollution and growth depends on the type of pollution. For some types of pollutants (ex. the amount of sulphur dioxide in the air), there does seem to exist a Kuznets curve.

For other types (ex. urban sanitation), however, the relationship is downward sloping all throughout. For yet other types (ex. carbon dioxide emission), the general relationship is upward sloping. This last type is especially worrisome, for it cannot be reduced automatically with rising income. Conscious policies will be needed to curb it.

The basic lesson is: There is no inherent conflict between economic growth and environment. Nor can it be assumed, however, that economic growth will automatically take care of the environmental problem. Some environmental problems, such as those emanating from population pressure and abject poverty, will indeed be reduced by economic growth, but others will be exacerbated.

Economists and governments will have to think up policies that can strengthen the complementarities that exist between growth and environment and also policies that attenuate the conflicts that exist between the two. This is an active area of current environmental research.