0.12 Natural capital & Sustainable development introduction  (Page 6/12)

The point: so called “solutions” to tropical deforestation that do not take into account the needs of the poor and the landless are no solutions at all; rather they are further cruel jokes on the poor. In forestry, or in fishing, or in agriculture, or natural resource extraction, poverty is, of course, far from the only culprit in natural resource degradation.

Let us look again at two prime shortcomings undercutting sustainable development. Market failure and policy failure has both been important. Here is a little recognized source of market failure affecting the environment. Market failure with environmental degradation arises when valuable services provided by an ecosystem are not traded in markets. For example, intact tropical forests provide a wide range of vital, but non-traded ecological services . These include watershed protection through control of runoff, soil protection, micro climate control, and protection of animal habitat. But these vital services are not priced , in any existing market. So, as you would expect, are over-used (wasted). There is no market for them. This is market failure.

But market failures, whether due to monopoly, externalities , free riders or transaction costs, now involve few mysteries. They have been studied for many decades by economists, at mind-numbing length. While it has been long recognized that market failure accounts for an important part of environmental degradation, it is now much more widely appreciated that policy failures, or government failures, have also loomed quite large in destruction of the environment.

Also Note Well: one does not solve environmental problems only with environmental policies. One of the prime causes of policy failure leading to needless ecological and economic damage has been a widespread tendency of policy-makers to ignore the environmental consequences of non-environmental policies . It is still not widely recognized that policies intended primarily to attain non -environmental goals often have very large impacts upon the environment. Non-environmental policies, as we noted, include tax policy, exchange rate policy, industrialization policies, credit policy, and agricultural and food price policies. In much of Africa, Latin America, and Asia a by-product of pursuit of agriculture, energy urbanization, and industrial policies has been significant, corrosive effects upon soil endowments, watershed management, water quality, coastal fishing, and coastal reefs. So, it is not enough that nations follow sensible environmental policies. Greater attention to the environmental impact of non-environmental policies and development projects is required as well, not only for more efficient resource use, but also for equitably distributed growth. Ecological disasters are almost always economic disasters too; in low-income countries the reverse is often true as well. Economic disasters leading to ecological disasters are well illustrated by the experiences of Rumania, Bulgaria, Hungary and Albania from 1945-1993 when they were Socialist states.