Arresting renewable resource degradation in the third world

THE WORLD BANK SECTOR POLICY AND RESEARCH STAFF Environment Department Arresting Renewable Resource Degradation in the Third World" Edited by Duane Chapman December 1990 Environment Working Paper No. 44 This papr has been prepared for internal use. The views and interpseations horin are those of the author(s) and should not be attributed to the World Bank, to its affiliated organizations or to any individual actingon their behalf. This paper has been prepared by Duane Chapman, a consultant in the Director's Office of the Environment Department, in collaboration with D. Southgate, J. arford, V. Cruz, J. Sanders, S. Ehui, Z. Partow, C. Gibbs, D. Bromley, and P. Crosson. The paper reports on findings that are particularly significant in the context of the overall work program of the Environmental Policy and Research Division. Acknowledgement and thanks are given to Olivia McNeal and Rebecca Martin for their secretarial assistance. Environment Working Papers are not formal publications of the World Bank. They present preliminary and unpolished results of country analysis or research that are circulated to encourage discussion and comment; citation and the use of such a paper should take account of its provisional character. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. Because of the informality and to present the results of research with the least possible delay, the typescript has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. * ii - ABSTRACT Resource degradation in developing countries is common and increasing with respect to land and water resources, especially for agriculture and forestry. Southgate, Sanders, and Ehut review this situation as it is evolving in the Sahel, the Amazon, and tropical Africa. Cruz and Gibbs analyze the Philippines and Nepal. Taken together, these two papers span the developing country continents and make a persuasive case for the need to reverse this process of resource degradation. Warford and Partov examine the available policy instruments and analytical methods. They define macroeconomic policy as including prices, subsidies, and ;and ownership as well as financing. All three papers note the interaction between poverty, population growth, and resource degradation, and emphasize the desirability of sustainable paths to development. Bromley's discussion agrees with the importance of land ownership as affecting incentives for sustainable land use. However, he raises two additional points. He does not agree with the degree of emphasis given to population growth in the papers, and he argues that institutional performance is a major factor affecting the efficiency of private and public rights in framing incentives for resource enhancement. Crosson's discussion raises a new problem: where are the data characterizing the magnitude and severity of soil loss, water problems, and deforestation? He challenges us to enhance the empirical dimension of our - understanding of the subject. Arrestin Renevable Resource Degradation In The Third World CONTENTS ABSTRACT . ... . . . . . . . . . . . .. LL PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v THE AUTHORS .. . .. .. .. .. .. .. ... . .. .. .. . .. ... vi RESOURCE ".'RADATION IN AFRICA AND LATIN AMERICA: P01 -ATION PRESSURE, POLICIES, AND PROPERTY ARRANGEMENTS by Douglas Southgate, John Sanders, and Simon EbhuL . . . . . . . . NATURAL RESOURCE MANAGEMENT IN THE THIRD WORLD: A POLICY AND RESEARCH AGENDA by Jeremy J. Warford and Zeinab Partow . . . . . . . . . . . . . . 16 RESOURCE POLICY REFORM IN THE CONTEXT OF POPULATION PRESSURE: THE PHILIPPINES AND NEPAL by Wilfrido Cruz and Christopher Gibbs . . ... . . . . . . . . . . 30 ARRESTING RENEWABLE RESOURCE DEGRADATION IN THE THIRD WORLD Discussion by Daniel W. Bromley . . . . . . . ... . . . . . . . . 44 Discussion by Pierre Crosson . . . . . . . . . . . . . . . . ... . 4 -iv PREFACE In 1989-1990, Douglas Southgate organized the session at which these papers and discussion were delivered. This was the Joint Invited Paper Session at the 1990 Annual Meeting for the American Agricultural Economic Association and the Association of Environmental and Resource Economists' Annual Meeting in Vancouver, in August. This session is also published by the American Journal of Agricultural Economics in its Proceedings issue, and thanks go to the Journal for allowing this publication in order to reach an increased audience. My role has been limited and rewarding: chairing the session and organizing this publication, during my temporary assignment at the Bank. My only regret is that the audience participation could not be included as well, because interest in the papers and the ensuing discussion was lively and articulate. Finally, it is interesting to note that these papers and discussion are raising questions which are appropriate to the theoretical bioeconomic growth model of sustainable yield of renewable resources. But here ths population is human, and sustainability is of critical interest. Duane Chapman *V* THE AUTHORS Daniel Bromley, Anderson-Bascom Professor of Agricultural Economics and Editor. of Land Scoatculs, Uiversity of Wisconsin, Madison. Duane Chapman, Professor of Resource Economics, Cornell University, Ithaca, F.Y., World Bank, June-December 1990. Pierre Crosson, Senior Fellow, Resources for the Future, Washingt9n, D.C. tlfrido Crus, Economist, World Resources Institute and associate Professor, University of the Philippines, Washington, D.C. Simon Ehmi, Agriculture Economist, International Livestock Centre for Africa, Addis Ababa, Ethiopia. Christopher Gibbs, Rural Devolopment Program Officer, Aga Rhan Foundation, Geneva, Switzerland. ZeInab Partow, Researcher, The World Bank, Washington, D.C. John Sanders, Professor of Agricultural Economics, Purdue University, West Lafayette, Indiana. Douglas Southgate, Professor of Agricultural Economics, Ohio State University, Colombus. Jeremy Warford, Senior Advisor, The World Bank, Washington, D.C. Chapter 1 UZ8O8R0 DNOAMDATON IN ARIICA UD LATIN AMORICAs vOyULATION RSURIe, 9OwCe8s AND PROERTY AANORM by Douglas Southgate, John Sanders, and Simon Ehui Degradation of renewable natural resources in the developing world is taking a serious toll. Deforestation threatens biologi- cal diversity and could alter global climate. Soil erosion reduces the capacity of many countries to satisfy expanding demands for agricultural commodities. It also jeopardizes the benefits of water resource development. Deposition of eroded soil in reservoirs, for example, diminishes hydroelectricity production and reduces irrigation water supplies. In spite of widespread concern over these environmental problems, analysis of resource degradation in poor countries is rudimentary. Simple Malthusian explanations, in particular, are widely circulated. Other than the general recommendation that human fertility be controlled, these explanations offer little guidance for the design of conservation strategies. In this paper, a broader perspective is taken on the causes of depletive human interaction with the natural environment in Africa and Latin America. We find that the impacts of rural population growth and increased demand for agricultural commodities depend greatly on government policy and property arrangements. Examination of environmental problems in the Sahel, equatorial Africa, and Amazonia reveals that the causes of resource degradation are similar in each of these regions. The Causes of aviroamental Degradation As every student of economics knows, strong assumptions underpin the writings of Malthus and his contemporaries. One is that population growth is reflexive, accelerating whenever living standards rise above subsistence levels. In addition, the idea that agricultural technology never changes was widely shared two itries ago. Together, these assumpt±te imply that shifts in the agricultural frontier are the only possible response to market or demographic "shocks." Investigation of social realities in Africa and Latin America reveals that the behavior of rural people is much more complex than classical economists thought it to be. Demographers find that increased rural population density induces various reactions. Fertility rates tend to fall as incomes rise. Relocation to urban areas or the agricultural frontier is also a possibility (Bilaborrow). 2 Similarly, the assumption that technology for crop and livestock production never changes has been rejected. In various ways, agricultural land can be used more intensively as rural populations rise or as demand for agricultural commodities increases (Boserup; Pingali etLal.). Intensification often begins with a decline in fallowing cycles, which usually diminishes soil quality. However, other options (e.g., increased employment of non-land inputs and a switch to new crops), which can enhance output without accelera'ing resource depletion, are also avail- ale. The central point of this paper is that government policy and property arrangements have much to do with the countryside's reaction to market and demographic shocks. In many parts of the developing world, deforestation is a prerequisite for formal or informal land tenure and conversion of forests into cropland and pasture is directly or indirectly subsidized. In addition, research and extension needed for sustainable land intensifica- tion are inadequate in many countries. Under these circum- stances, population growth and increased demand for agricultural commodities usually induce excessive migration to hinterlands as well as depletive forms of land intensification. Resource degradation is acute in the three parts of the world that are the geographic focus of this paper. The Sahel, humid tropical Africa, and the Amazon Basin each feature unique natural and cultural conditions. Nevertheless, the causes of depletive human interaction with the environment are similar in each region. Population growth is a primary catalyst for expan- sion of agriculture's extensive margin as well as the abandonment of fallowing and other practices that maintain soil fertility. Inadequate investment in research and extension, governmental interventions that keep food prices artificially low, and other policies hindering agricultural development also accelerate the depletion of renewable natural resources. In addition, formal and informal tenurial regimes often discourage the adoption of conservation measures, encourage excessive land clearing, or both. The Babels The Challenge of Oustainable Development of Bemi-Ari4 Ume World attention has focused on the region lying between the Sahara Desert and the coastal nations of West Africa since 1968, when an extended period of drought began. A classic Malthusian disaster has seemed to unfold in the Sahel. Populations have grown and soils with limited potential for agriculture have been brought into production. Resulting land degradation may have exacerbated harsh climatic conditions. Always marginal, living standards have failed to improve (Landell-Mills etpg.). 3 Social conditions and te physical landscape are not uni- formly bleak in the Sahel. A little more than one fourth of the region's crop land lies in the Sudano-Guinean climatic zone, where rainfall exceeds 800 mm nine out of every ten years (Gorse and Steeds). Where soils are good, French development efforts involving agricultural research and extension, use of pesticides and fertilizers, and cotton price guarantees have yielded posi- tive results. In southwestern Burkina Faso, for example, cotton and cereal yields and rural incomes have risen dramatically during the 1980s. Demands on renewable natural resources are growing in the Sudano-Guinean zone. As control of river blindness has improved, for example, farmers have immigrated from drier areas. In addi- tion, research is needed to improve conservation of soil organic material as well as the efficiency with which chemical inputs are used. However, sustainable development in the zone serves as a model for what can be accomplished elsewhere. The challenge of sustainable development is considerably more daunting in drier areas, farther to the north. Slightly more than half the crop land in the Sahel lies in the Sahelo- Sudanian and Sudanian climatic zones (Gorse and Steeds). In the former zone, where there is a 90 percent chance that total preci- pitation will be between 350 mm and 600 mm in any given year, soil fertility is low and it is difficult to retain water around plant roots. Also, cutting trees to plant millet accelerates wind erosion and aggravates sand blasting problems. Dregne (1985) recommends that forestry and grazing be the primary activities in the Sahelo-Sudanian zone and similar areas. Nowhere in the Sahel is resource degradation more acute than in tne sudanian cilmat.L aoze, wht4 taiLal1l is between 600 m and 800 mm nine out of every ten years. Rural population densities are high. Soil fertility is declining because land is being given less time to recover between cropping cycles. As a result, millet (which grows better in poor soils) is being planted in place of sorghum, marginal grazing areas are being converted to crop land, and emigration is taking place. In addition, fuel wood is becoming scarce, which means that women are obliged to go great distances to gather it. Sustainable development is possible in the Sahele-Sudanian and Sudanian climatic zones. Unfortunately, resource conserva- tion and income growth are difficult to achieve under current policies. The region's governments maintain low food prices for the benefit of urban consumers and ignore marketing bottlenecks responsible for price instability, generally, and the collapse of farm-gate prices at harvest time, specifically. In addition, agricultural research and extension are not strong. Incentives to adopt high-yield, sustainable crop production systems, then, 4 are weak. Farmers opt instead for extensive production, generally on fragile lands. Fina)1ty, some property arrangements discourage environmental conservation. Under communal tenure regimes that prevail in the Sahel, a family wishing to plant crops is entitled to temporary use of a parcel. However, planting trees or even perennial crops is often regarded as an attempt to assert permantit individual rights in communal land. Under these circumstances, an institu- tional constraint on reforestation exists. Hamid Tropical Africas Agricultural Expansion and Timber Extraction Nearly one fifth of the world's closed tropical forests are found in a belt that runs along the Gulf of Guinea and extends eastward to Lake Victoria. Changes in tree cover are modest in much of central Africa. Farther west, however, deforestation is very high, approaching 5 percent a year in the Ivory Coast and Nigeria (FAO). All major catalysts for agricultural growth are at work in humid tropical Africa. The region's rural population is increas- ing, as is urban demand for food and fiber. Global market condi- tions are also appropriate for the establishment or expansion of export crop plantations. As in the Sahel, the sequence of adjustments caused by population growth and increased demand for agricultural com- modities often begins in equatorial Africa with diminished fallowing. Land formerly lay idle for two decades between cropping cycles. In recent times, fallow periods have contracted to a few years. Continuous agricultural production is now the norm in some places. In most of the region, there are natural resource con- straints on land intensification. Since soils tend to be thin and not very fertile, diminished fallowing often causes yields to fall off substantially. Applying ferti14-ercftn compensates for only part of this decline (Lal). As land deteriorates, farmers colonize marginal hinterlands or migrate to urban areas. A major threat to the forests of equatorial Africa is the extraction of commercial timber. In and of itself, logging alters the natural environment. For example, using heavy equip- ment to remove commercial timber results in secondary losses. Logging is also a catalyst for agricultural land clearing. Roads originally constructed to bring in equipment and to haul out timber enhance access to tree-covered hinterlands. Furthermore, a logging site is relatively easy to clear for crop and livestock production. Because of these two positive impacts on rents 5 captured by settlers, timber extraction accelerates colonization. The strength of population growth, logging, and related catalysts for resource degradation in the countryside is enhanced by government policies. As in southeastern Asia, the terms of timber concessions generally do not encourage sustainable, inten- sive management of small forested tracts (Gillis). Similar to what occurs in the Sahel, extensive crop production on fragile lands, rather than sustainable land intensification, is the norm because research and extension are weak. Governments also accelerate resource degradation by attempt- ing to supplant local tenure regimes. Ignoring the distinction between common property (res commniy) and open access (resa-llius), they have failed to offer legal mechanisms for protecting communal land rights. Instead, attempts are often made to con- vert common properties into government lands and private proper- ties even though the public sector's capacity to manage "its" resources and the legal infrastructure needed to enforce private tenure are both poorly d%;veloped. Weakening traditional property arrangements without providing a viable institutional alternative diminishes the incentives tor forest dwellers to conserve natural resources (Bromley and Cernea). The amason Basin: An Ideal Policy Rnvironment for Deforestation Appeals to save tropical forests take on special urgency when South America's Amazon Basin seems to be threatened. Satel- lite images from 1987, when the dry season was unusually pro- nounced, showed that agricultural land clearing and re-clearing were widespread in Brazil. Fearing that the "lungs of the earth" were going up in smoke along with many plant and animal spocies, 6nvironmentalists, politicians, and rock stars called for quick action. The true nature of environmental problems in Amazonia is not well understood by many expressing concern for the region. For ae thing, the region's sheer size tendo to be ignored. Since the nations of the European Economic Community could fit in Brazil's Norte Region (comprising six northern and northwestern states and territories), it should come as no surprise that vast stretches of forest remain intact there. Agricultural land clearing is significant primarily along roads penetrating the Basin's margins. For example, one fourth of Rondonia state, in the southern reaches of the Norte Region, has been settled by farmers (Mahar). Deforestation is also extensive in western Amazonia, just downhill from densely populated Andean highlands. Just as it is erroneous to think that all land in the Amazon Basin will soon be cleared, explaining deforestation in the region in simple Malthusian terms is a mistake. The Brazilian government estimates that 8.6 million people (6 percent of the 6 country's population) live in the Norte Region. Of those 8.6 million, 4.7 million reside in cities and towns. Both intra- regional migration and immigration from other parts of Brazil are directed primarily toward Manaus (which is a duty-free zone with substantial manufacturing), Belem, and other urban centers. The Region's rural population rose at a 2.7 percent annual rate between 1987 and 1990. During the same period, its urban popula- tion grew 3.8 percent per amm. A causal analysis of deforestation in the Amazon Basin, then, cannot concentrate on population growth. In addition, diminished fallowing on the part of an indigenous population of farmers is not a predominant form of land degradation in the region, as it is elsewhere in the developing world. To under- stand environmental change in Amazonia, one must examine how government policies and property arrangements influence the behavior of immigrants. To date, economists have ccacentrated on government policies' contribution to deforestation. Subsidies for agricul- tural land clearing have been scrutinized. As Mahar (1989) points out, cattle ranchers converting forests into pasture used to receive cheap credit and other financial assistance. In addition, making it easy for all Brazilian farmers to avoid taxes has encouraged small holders from the southern part of the country to sell off their land and move to the frontier (Binswanger). Part of the blame for excessive encroachment on tree-covered hinterlands must also be assigned to low investment in th6 scien- tific base underpinning agriculture oure-1de of the Amazon Basin. In Brazil, research and extension are strong. The same cannot be said of neighboring countries. As a result, crop and livestock yields in areas bordering Amazonia are low, which means that growing demands for agricultural commodities tend to be satisfied through shifts in agriculture's extensive margin. Furthermore, settlement of Amazonia causes excessive damage to the environment because the information base needed for rational colonization has not yet been developed. Resource inventories are incomplete and, although there has been success- ful experimentation with rice production on hydromorphic soils and with perennial crops, research and extension services avail- able to farmers in the Amazon Basin are generally meager. Along with subsidies and inadequate research and extension, inappropriate tenurial arrangements contribute to excessive land clearing throughout the Amazon Basin. As in equatorial Africa, a classic open access problem arises wherever public sector claims on resources outstrip the government's capacity to manage its properties, "illegal" settlement of the region's "paper parks" being a prime example. 7 Recognizing the consequences of an institutional vacuum, national governments grant settlers property rights. However, land clearing is often a prerequisite for tenure in a frontier parcel. This arrangement encourages degradation of existing farm land as well as excessive encroachment on forests (Southgate). Even though they sometimes resist, indigenous groups and other long term inhabitants of Amazonia, who long ago developed viable resource management regimes, have had to accommodate themselves to the outside world's wasteful property arrangements. Conclusions Population growth explains a large part of depletive human interaction with the natural environment in the developing world. To appreciate the importance of demographic pressure, one only needs to travel through Haiti and parts of Central America, where burgeoning populations are picking the countryside clean. Accepting a simple Malthusian analysis of resource degrada- tion, however, does not leave much room for optimism. Poor countries' populations are overwhelmingly young. With numbers of women capable of bearing children expected to rise for many more years, continued population growth is inevitable, even with the decline in fertility rates currently taking place in parts of Latin America and Africa. It is fortunate, then, that simple Malthusian explanations of resource degradation do not entirely suffice. As pointed out in this paper, government policies and property arrangements have much to do with the use and management of natural resources in the developing world. Intervention in agricultural markete is widespread and research and extension are weak throughout Africa and Latin America. As a result, extensive agricultural produc- tion on fragile hinterlands, instead of sustainable land inten- sification, is the principal response to demographic and market shocks. In addition, existing tenure regimes often discourage tree planting and encourage deforestation. Our analysis suggests that, before the long term benefits of fertility control can be realized, policies and property arrange- ments can be changed in order to foster environmental conserva- tion. The difficulty of reform should not be underestimated. Powerful interests support many of the policies that discourage conservation. In the Sahel, for example, urban dwellers benefit from artificially low food prices, which diminish the profitabil- ity of local cereal production and discourage the efficient management of environmental inputs to agriculture. 8 Reform is also a challenge because piecemeal changes in policy and property arrangements can be ineffective or even counterproductive. For example, if food and timber markets are deregulated but tenurial disincentives for resource conservation remain in place and no investment in research and extension is made, then wasteful exploitation of the countryside is likely to worsen. The chances for environmental conservation are significantly better when all policies and tenurial arrangements are reformed simultaneously. As indicated in this paper, resource degradation is caused by similar factors in the Sahel, equatorial Africa, and the Amazon Basin. Accordingly, many countries face the task of developing an integrated conservation strategy -- one involving population control in the long term as well as policy reform and the development of suitable property arrangements in the near future. References Bilsborrow, R. "Population Pressures and Agricultural Development in Developing Countriess A Conceptual Framework and Recent Evidence.* orld Development 15(1987): 183-203. Binsvanger, N. "Brazilian Policies that Incourage Deforestation in the Amason." Environment Department Staff Paper No. 16. World Bank, 1989. Broley, D. and N. Cernea. "The Management of Common Property Natural Resourcest Some Conceptual and Operational Fallacies.* Discussion Paper No. 57. World Bank, 1989. Boserup, N. Conditions of Agrigultural Growth: The HoageAcs of Ararian Chane under PopulatIon Pressure. London: Allen and Unwin, 1965. Dregne, N. "Aridity and Land Degradation." Xnyironment 27(1985): 16-33. 9 Food and Agriculture Organisation (nAO) of the United Nations. Forest Resources of Tropical Africa. Rome: 1981. Gillis, M. "West Africa: Resource Management Policies and the Tropical Forest." Public Policies and the Misuse of Foreg esouroe, ed* R. Repetto and M. Gillis. Cambridge: Cambridge University Press, 1988. Gorse, J. and D. Steeds. "Desertification In the Sahelian and Sudanian Zones of West Africa." Technical Paper No. 61, World Bank, 1987. Lal, R. "Soil Erosion Problems on Alfisols in Western Nigeria." Goodera 25(1981): 215-230. Landell-Mills, P., R. Agarvala, and 8. Please. Sub-Saharan AfricaL From Crises to Sustainable Growth: A Long rezu Perspenetive Study. Washington: World Bank, 1989. Nahar, D. "Government Policies and Deforestation In BrasIl 's Amazon Region." World Bank, 1989. Pingali, P., Y. Bigot, and N. Binsanger. Agricaural MeghgnUo tIon and the Evolution of Famin Systems in Sub-Saharan ArIca. Baltimore: Johns Hopkins University Press, 1987). Southgate, D. "The Causes of Land Degradation along Spontaneously* Expanding Agricultural Frontiers in the Third World." Land Economics 66(1990): 93-101. 10 Chapter 2 Natural Resource Management in the Third World: A Policy and Research Agenda by Jeremy J. Warford and Zeinab Partow Zntroduction That proper stewardship of natural resources is of central importance to agricultural and economic development has become indisputable. This is especially true for developing countries where natural resource depletion is of immediate economic and social consequence. Poor countries are typically dependent on agrarian and pastoral activities and are thus often most vulnerable to the effects of environmental degradation. This is due in part to shortages of human and financial capital that severely limit countries' abilities to turn to other economic activities when the resource base can no longer sustain them. In many developing countries, the combination of poverty, unequal distribution of land and other resources, and population growth is creating incentives for people to over-exploit existing resources in order to survive. Exacerbating this is the fact that economic systems do not always contain the automatic self- regulating mechanisms for ensuring the perpetual environmental sustainability of current economic development paths. Under such conditions, it is no longer possible to address systemic problems through piece-meal actions. Although the dependence of sustainable economic development on sound environmental management is increasingly recognized, to daL, eQu"omisLa attention to the macroeconomic implications of environmental matters has been somewhat fragmentary. The tradi- tional approach to environmental management has been to invest in discrete projects with environmental objectives, or to ensure that project components contain elements to mitigate adverse environmental impacts. Although this emphasis on individual projects is important and will undoubtedly continue, it is clearly inadequate alone, and should be supplemented by a strategy that integrates environmental and natural resource I Both authors are staff members of the Environment Department, World Bank. The views and interpretations in this article are those of the authors and do not necessarily represent the views and policies of the World Bank or of its executive directors or the countries they represent. The authors wish to acknowledge the comments and contributions to this paper made by colleagues in the Environment Department and in other parts of the World Bank. 11 management directly into economic and social policy. A trend along these lines can already be observed in the recent evolution of policies in development institutions, notably those of the World Bank. In attempting this integration of environmental issues into the core of economic policy-making, a number of central issues for further work arise. This paper will outline some of these issues, in an effort to present a series of promising research avenues for the future. The Valuation of Natural Resources and Cost-Benefit Analysis Conventional economics has undoubtedly made a significant contribution to the understanding of natural resource issues. Yet it is often unable to address a host of emerging concerns. A major limitation of conventional approaches to natural resource economics is their concern with only those resources which directly provide economically valuable productive services, to the exclusion of environmental services such as waste absorption and ecological and life-support mechanisms. In response, alternative views have emerged that see resource depletion and waste generation by the economic system as integral to the whole rather than relegated to the margins under the umbrella term nexternalities". By demonstrating the physical dependence of economic activity on the sustainability of crucial natural-resource systems and ecological functions, alternative views seeks to highlight the economic costs resulting from the failure to preserve sustainability and environmental quality. Nevertheless, a bias against sound environmental management has been encouraged by the difficulty of assessing the monetary values of environmental goods and services. Although the con- tribution of conventional economics to these challenges has been important in promoting the use of a systematic means of addres- sing resource allocation decisions, the available analytical means have not been very effective in addressing some of the more intangl'J'e services provided by the environmcnt, or in handling specific problems in real world cost-benefit studies. The desire to assign mohetary values to environmental consequences of project and policies has so far resulted in either trivial exercises in which easily identifiable monetary values are assigned to cost or benefit streams, or in the in- ability to establish adequate criteria for valuation -- as has been the case in the failure to place values upon the welfare of future generations, or on the extinction of species. The chal- lenge which faces economists is to devise a more comprehensive approach to cost-benefit analysis in which rigorous attention is paid to the non-monetary consequences of investments. 12 Although there is a growing recognition that efforts in these areas are important and need to be expanded, cost-benefit analysis and valuation of resources are relatively well-trodden fields with as yet unresolved questions that do not promise substantial advances in knowledge in the near future. More significant improvements in environmental management are likely to result from efforts to integrate environmental concerns into macroeconomic and other government policies. macroeconomic Policy Large-scale development projects are typically subjected to cost-benefit analysis and environmental assessment by concerned public agencies. In contrast, the impacts of the vast numbers of small-scale individual resource users, each of whom has only a small effect on the environment, can rarely be subjected to analysis at the individual level. The combined consequences of such activities have to be managed at the broader policy level. The individual resource user can be reached effectively only by the use of macro-level policies and incentive systems such as price policies, subsidies or taxes, or land reform. No single policy or set of policies is correct or always applicable. Some policies require direct intervention to imple- ment while others rely on market signals. Indeed, the pendulum, which over the past decades has swung from a position favoring government intervention to one supporting complete reliance on free-market mechanisms, appears to now be in mid-path, with . research focussing on providing a balanced prescription between the two extremes. The centrality of macroeconomic policy to environmental management has nevertheless remained clear. In altering the level or rate of change of economic activity, macroeconomic policy inevitably impacts upon the environment, although often in ways that are unanticipated. Many developing countries, for example, maintain overvalued exchange protection to home market producers. The discrimination against exports in an economy based on agriculture can be expected, for example, to influence the types of crops that are grown. The implications for sustainability may be beneficial or adverse, but they have traditionally not been considered in establishing macroeconomic policies. Existing studies on the relationship between government policies and environmental management only serve to underline the importance of the linkages. Binswanger and Mahar, in separate studies, describe how massive private investment in the expansion of beef-cattle production in fragile ecological conditions in the Brazilian Amazon has been supported by domestic governments in the form of tax concessions and provision of infrastructure. 13 The plans to construct 15,000 km of roads in the region have perhaps been the most visible of the government's interventions, not least for the environmental damage they generated. The impact of government fiscal and tax incentives has been perhaps less readily identifiable though not necessarily less dramatic. Some of the most powerful of the incentives have allowed Brazilian corporations to take up to a 50 percent credit against their federal income tax liabilities under certain conditions, or provided access to subsidized credit lines for cattle ranching and other activities. Livestock projects approved in this way have probably been the single most important source of deforesta- tion, accounting for up to two thirds of the deforestation in Amazonia. Not only have these projects been environmentally damaging, but they have largely been unjustified in social cost- benefit terms, although they may have yielded considerable private prot ts. Since 1980, the volume of official rural credit has been drastically reduced and the subsidy element was eliminated in mid-1987. The approval of livestock projects in rain forest areas has also been officially prohibited since 1979, but this rule has been difficult to enforce. In the long run, reversal of long-standing policies will surely have beneficial macroeconomic, sectoral and environmental effects. Similarly, in Indonesia, Barbier shows how government agricultural pricing and subsidy policies encourage inappropriate land-use and thus contribute to environmental degradation. Rigid import controls and a heavily protected domestic pricing struc- ture may provide indirect disincentives to soil conservation. As the average returns to highly commercialized and input-intensive cropn such as vegetables increase, share tenancy and absentee ownership become more common. This can reduce the incentive for long-term investments in improved land management if tenancy arrangements are insecure and if the objective of absentee owners is short-term profit maximization or land speculation. The increased profitability of vegetable crops also encourages farmers to cultivate on steeply sloped volcanic soils, where water run-off, and therefore soil erosion, are greater. The lack of adequate marketing facilities is another key factor that contributes to environmental degradation and low productivity on marginal uplands in Indonesia. The ability of farmers to undertake improvements and investments in agroforestry and livestock-based systems relies in part on the returns to their marketing efforts. Government policies regarding subsidies to agricultural inputs have resulted in the overuse of fertilizers, particularly in lowland irrigated areas. Fertilizer subsidies may discourage farmers from facing the full economic costs of declining soil fertility and from responding with sound land-conservation measures. 14 In view of the potential environmental impact of policy reforms at the macroeconomic level, one of the major instruments used by the World Bank to address the policy-environment link is policy-based, or structural adjustment lending. Adjustment lending has recently begun to consciously incorporate measures to protect natural resources and to improve their management. In addition to institutional and economic reforms, adjustment loans contain a number of conditions that may benefit the environment. These include elimination or reduction of subsidies for pesticides full cost recovery in pricing energy or water services, and improved land distribution policies and tenure arrangements. It must however be added that generalizing about the effect of economic adjustment on the environment is difficult. Policy interventions that have a benign effect in one country may have exactly the opposite effect in another. Reforms such as the elimination or reduction of subsidies, or the substitution of cash crops for food crops can result in either positive or negative environmental consequences. Better understanding is therefore required of the chain of causality leading to severe environmental problems in order that remedial policies can be identified. The difficulties arise because of the complex interactions between natural events and human activities that characterize the environmental problem. To improve its knowledge in this area, the Bank is investigating the relationships between geographic data, including remote sensing, and various kinds of socioeconomic data. The purpose is to see if recent advances in the processing of geographic information can be used to identify the impact of changes in key economic and social variables in order to improve the basis for policy intervention. Research needs in this area are massive: they include better understanding of the impact on the various forms of environmental degradation of a range of variables, including fiscal and trade liberaliza- tion policies, income distribution and poverty, and population growth. Awareness of the macroeconomic importance of environmental problems has not been facilitated by the well-known shortcomings of national income accounts. It is increasingly recognized that conventional measures of national income give misleadingly favorable estimates of economic well-being and growth. Prudent accounting of national income should reflect sustainable income as closely as possible. Under the current conventions, however, no account is taken of the reduction in national wealth through the depletion and degradation of natural resources. In addition, expenditures incurred in protecting society against unwanted environmental side effects are counted as income rather than as intermediate expenditures needed to sustain actual income. Growth built on resource depletion is clearly very different from that obtained from productive efforts and may be quite unsustainable. If compensating investment is not made, growth 15 based on such a process is not sustainable, and will send false signals to policy-makers. The World Bank is conducting a series of country studies in this area to create an awareness of environmental issues at the macroeconomic level, and equally important, to identify areas where sound policies require more information. Population, Poverty, and Environment Ultimately, many of the environmental problems in developing countries harken back to the fundamental issues of income dis- tribution and poverty, and include concerns regarding equity within and between generations. While the poor and disadvantaged certainly tend to suffer disproportionately from environmental degradation, and while poverty is an obstacle to bringing about environmental improvement, it is difficult to generalize about the extent to which poverty is itself responsible for environmental problems. Indeed, some of the most pressing environmental problems facing the planet are those that originate in the wealthy countries. While the link between poverty, population, and degradation of natural resources in many countries is certainly important, the complex factors that make environmental abuse the most logical short-term strategy for people to pursue need to be better understood. Examined as cumulative regional phenomena, deforestation in Haiti, and desertification in the Sahel are much more than the result of poverty-stricken people trying to eke out a living. Invariably, deeply rooted political and administrative structures and economic incentives induce the poor---and the not- so-poor---to cut trees or to abuse the earth's soil. Corrupt officials, bureaucracies, inequitable land tenure patterns, or pressures for short-term successes and projects may make reckless use of the land quite rational and often lucrative. Future research faces the challenge of clarifying the linkages between poverty, population and environmental management, and shedding light on the intervening variables in the equation. A clarifica- tion of the impact of environmental degradation on equity over time is another promising research avenue. Avenues for Research and Policy There continues to be a pressing need, in both industrial and developing countries, to use increasingly scarce natural resources more efficiently. The means of so doing will depend on a vastly improved understanding of the long-term consequences and the underlying causes of environmental degradation. Increased effort is needed to identify appropriate social, economic, and other policy measures for sound environmental management. Tracing through the chain of causality is important but often difficult---as in the case of unravelling the effects of popula- 16 tion and poverty on the environment---and environmental work aimed at developing this understanding is a priority. The greatest research needs lie in the application of existing knowledge rather than in searching for new concepts and theories. Although additional research in areas such as the valuation of environmental goods and services may be required, deficiencies in information should not be an obstacle to action. There are already economic techniques that make substantial improvements possible to the way in which environmental degrada- tion is handled in economic planning. On the other hand, the difficulty of generalizing about the impact of policies has made the reliance on multidisciplinary, country-specific inquiry a necessity. Multidisciplinary analysis is becoming increasingly important at both the project and the macroeconomic policy levels. In addition to issues well within an economist's range of expertise, such considerations as improved institutional analysis and policy incentives need to be addressed. Experience shows that good economics is typically good for the environment. There are innumerable opportunities for invest- ments and policy reforms that meet both environmental and economic objectives---and this fact is consistent with the growing evidence that environmental degradation is undermining sustainable development in many countries. However, there will always be important instances in which economic and environmental objectives conflict to some extent. For example, limits may exist to the environmental benefits that can be derived from trade liberalization. Market mechanisms will not cover the full environmental agenda unless they are supplemented by government interventions of various kinds. In particular, the role of "green taxes," possibly substituting taxes on income or capital, should be carefully considered. Finally, institutional problems in their many forms--- including inefficient public agencies, inadequate legislation, and cultural factors---are another area of special concern. Research is needed to uncover means of better understanding how local institutional structures help or hinder environmental management, and to help in the design of institutions that respond to local needs. The range of researchable activities is massive. However, the areas in which knowledge needs to be improved tend to be more empirical than conceptual; the division between environmental research and more policy-oriented or operational work should thus become increasingly blurred. This holds great promise for the applicability and contributions of future research to the resolu- tion of today's pressing environmental problems. 17 References Sarbier, Zdward S. eonomics. Natural-Resource ScarcIty and Develoment: Conventlonal and Algernative View. London: Earthscan Publica- tions Limited, 1989. Sinevanger, B. "Brazilian Policies that Encourage Deforestation in the Amazon.0 Environment Department Working Paper No. 16. Washington, D.C.: World Bank, 1989. Kahar, Dennis J. "Government Policies and Deforestation in Brazil's Amazon Region.v Washington, D.C.: World Bank, 1989. 18 Chapter 3 RESOURCE POLICY REFORM IN TES CONTET OF POPULKTION PRZSSURM: THE PHILIPPINES AND NEPAL by Wilfrido Cruz and Christopher Gibbs Introduction The degradation of renewable resources in the developing world now threatens not only the economic prospects of future generations but the livelihoods of current users as well. For example, in many countries over-cutting has so depleted timber stocks that the traditional contribution of the forestry sector to income and employment is starting to decline. Shifting cul- tivation in marginal lands leads to soil erosion and declining productivity. Watershed deforestation, due both to logging and energy-generation potentials of water resources. While pricing and taxation reforms can be critical ingredients in reducing the damage in commercial sectors where large communities of individual resource users exploit common property or open access resources, institutional changes are also required. This paper presents a framework to incorporate the role of population growth and institutions in understanding the pressures for resource over-exploitation. The problem of resource degradation is elaborated in the context of two Asian countries - - the Philippines and Nepal -- where population pressure on forestry and agricultural resources is substantial. The discus- sion shows that there has been a shift from a pattern of agricul- tural intensification and development to poverty and resource degradation. The last section suggests that the assessment of resource degradation must recognize this pattern and that policy reform must focus on the problem of population growth and inap- propriate institutional structures. The Role of Population and Institutions in Resource Degradation The role of government policy in %lt!ring thW tructure of incentives to reduce resource degradation can be substantial. Such reforms focus on tax or pricing policies where market institutions are fairly well-developed and where resources are commercially exploited. However, in many rural areas of the developing world, the lack of well-defined property and market institutions and the presence of substantial population pressure on resources require that policy reform should also address changes in rules governing access to and use of natural re- sources. The institutional problem is most apparent in forest lands. While most governments consider forest lands as part of the public domain to be kept under forest cover, their limited 19 enforcement capabilities make these de facto open access resources. Such forest lands have therefore been rapidly con- verted to non-sustainable agricultural uses, causing severe erosion impacts. On-site production potential is reduced, and downstream siltation of waterways and agricultural lands is increased. Because of the environmental externalities associated with upland farming, simple privatization solutions are not efficient. Also, because of population pressure problems, exclusion of the neediest from large areas of the public domain is neither equitable nor feasible. The need to recognize the role of migration and population growth in this context is especially important in South and Southeast Asiat where conditions of population pressure and increasingly tight land constraints prevail. Agricultural assessments show that Asian countries have higher population densities, compared with other parts of the world where economic policies -- such as tax breaks for forest land clearing -- may be the more important factor in resource over-exploitation (FAO 1984). The Philippines: Economic Stagnation and Resource Degradation In the Philippines, the pattern of population pressure on marginal resources include: unchecked population growth, declin- ing absorption of labor in both industry and lowland agriculture, and widespread poverty. With an area of only about 30 million hectares, the Philippines' population is now about 62 million, with a growth rate of 2.5 percent (Conception). The economy has had increasing difficulty in absorbing population growth so that unemployment and poverty is widespread. In agriculture, expansion occurred in the accessible low- lands, first with rainfed cultivation and farmer-developed irrigation up to the early 1960s, followed by public investment in irrigation systems. Public irrigation development coincided in part with the arrival of green revolution technology in the MA .%&. When the area that tuild ha Pasily converted was exhausted, attention turned to dispersing green revolution technology more widely, and to improving water management. However, the limits of both lowland expansion and intensification have now been reached, and farming has been moving to upland areas, resulting in deforestation. Forests now cover only about- one-fifth of total land area vs. an administrative target of 40 percent. Extensive agriculture and grasslands cover 40 percent of land area (World Bank 1989b). Actual cover differs from the jurisdictional classification which places about half of total land area under one government department. Both upland farming and commercial logging areas are in- volved in the conversion of forest lands to extensive cultiva- 20 tion. Undervaluation of timber and rent-seeking promote logging; in turn the expansion of logging concessions encourages migration and shifting cultivation. The charge for timber is about $1.50 per cubic meter when international log prices are in excess of $100 per cubic meter. Thus rents were $60-140 per cubic meter for 1987 (Deles Angeles and Lasmarias). This economic surplus motivates the continuing demand for logging concessions although forest area has already declined and is now concentrated in inaccessible locations. Current area under concessions (or Timber License Agreements) has declined since 1970 and has been claimed as part of the success of reforms. However, as a propor- tion of actual forest cover, loging concessions have increased from 42 percent in 1970 to 125 percent in 1987 (based on forest inventories and timber license data of DEAR 1988). The expansion of logging promotes upland farming by reducing the cost of migration and settlement. Two factors normally discourage the colonization of forest lands by upland farmers; their relative inaccessibility and the difficulty of land clear- ing. Land clearing may require as much as 60 percent of the total labor associated with upland production. While some studies assert that upland farming is the main cause of defores- tation (FAO, 1981), the link with logging is important because it reduces the two constraints mentioned above; (a) logging roads make forest lands accessible, and (b) logging itself reduces the work required to clear the forest for farming. Once roads are built most forest lands become effectively open access since neither the timber concessionaires nor the government have the resources to police these lands. The result has been high migration and population growth rates in forest lands. The latest official estimate of detected squatters in the forest zone was 1.23 million in 1986 (DEAR 1986), when total population was 56 million. This grossly underestimates upland population, implying that only 2.1 percent of the population inhabit more than half cf the country's 30 million hectares. In fact, it has been shown with census data that in 1987 close to 18 millon, or 30 percent of the Philippine population, are in the uplands, with 8.5 million occupying forest lands (C. Cruz et al., World Bank 1989b). Aggregate Resouros Scarcity and Patterns of Degradation in Nepal Nepal is extremely poor; only Ethiopia has a substantially lower per capita gross domestic product (World Bank 1989a). Between 40 and 60 percent of the population live at levels below the minimum food threshold. Population growth critically affects Nepal's development prospects. Ninety percent of Nepal's work- force is engaged in agriculture, and agricultural land is already fragmented into uneconomic parcels and over-used. Thus the 21 problem of poverty is one of an aggregate shortage of resources, rather than their redistribution. Current population is about 19 million with a land area of 13.7 million hectares. Between 1952 and 1981, the growth rate increased from 1.6 percent in the 1950s, to 2.7 percent in the 1980s. New public efforts to expand agricultural production initially focused on about 1.8 million hectares potentially irriqable with gravity systems, almost 75 percent of which are in the Terai, Nepal's lowlands. However, constraints to further irrigation development are already substantial, especially in the Hills where most new development will require suitable power to raise water to elevated terraces (World Bank 1990). Irrigation performance has been very poor. Less than 30 percent of committed area actually gets water in the summer and winter, limiting the application of green revolution technology. Thus between the mid-1970s and the late 1980s, agriculture grew at only 2.4 percent per year vs. the 2.7 percent population growth rate (World Bank 1990). Nepal's forests were nationalized in 1957, upsetting centuries of tradition of local control of forest use, and shifting the locus of control from the village to the center (Wallace). However, while government assumed legal ownership of forests, it was unable to effectively manage them. Thus, forests became do facro open access resources, capable of being privatized if they were cleared. There were recent efforts to return the forests to local control, but significant damage has already been done. Population growth, combined with open access, reduced the forest and pasture area available per household and per livestock unit. Inadequate fodder reduced manure production and application to crops. Consequently, yields stagnated or declined. Existing terraces were over-worked, and agriculture shifted to more marginal lands in the Hills, including areas too steep to support farming without being destabilized. The result was significant seasonal and permanent migration to the Kathmandu valley and the Terai. The 1981 census showed that 61 percent of migrants originated from the Hills, and 75 percent had the Terai as their destination (CBS). Exacerbated by immigration from India, the population of the lowland Terai, originally the most sparsely populated region in the country, grew to 42 percent of total population, equal to the Hills' popu- lation (World Bank 1989a). The Terai represented Nepal's outlet for the over-populated uplands, but the pace and mode of development mean that the sustainable potential of the Terai is rapidly being used up -- forests, soil, and water resources are being depleted or degraded. More than half of holdings are now less than one hectare in size, and 45 percent are less than half a hectare 22 (IDS). In the Hills, 73 percent of holdings are less than a hectare, with 54 percent less than half a hectare in size. Nepal's very small farms would not provide even a poverty line income for the majority of rural families, even if they were to erploy state-of-the-art technology. In the absence of sig- nificant growth in industrial and service sector employment, most Nepalese will continue to live in poverty. A Framework for Assessment and Policy Boserup (1965) originally proposed the role of population growth as the stimulus for technical change in agricultural development. Interpreting population growth as the key factor behind long-term changes in relative factor scarcities relates the Boserup theme to models of induced technological innovation (Hayani and Ruttan, 1971). According to the induced innovation framework, declining land-labor ratios determine the path of technical change, leading to the mix of technology and new inputs associated with the "green revolution." In Philippine agriculture, output expanded initially through increases in cultivated area up to the early 1960s. When lowlands that could be easily converted into agriculture were exhausted in the mid 1960s, output expanded through yield increases associated with the green revolution. In contrast, in Nepal the demand to expand agriculture came from the Hills. The movement into Nepal's lowlands is relatively recent, following the large-scale eradication of malaria in the 1950s and 1960s and the clearing of much of the Terai forest. Also, because environ- mental constraints limited the adoption of high yielding varie- ties in the Hills, the green revolution and irrigation develop- ment pattern of agricultural intensification has been largely confined to the Terai. With population growth and limited employment in lowland agriculture and in industry, the development pattern has gone beyond the green revolution framework. In the Philippines, population pressure has shifted to marginal resources, to forests and unlands for alternative livelihoods. rconomic stagnation in the early 1980s exacerbated this process and promoted migration from the lowlands to forestlands. In Nepal the upland population continues to expand very rapidly and cannot be absorbed by agriculture in the degraded Hills. The impact therefore of population on resources has been to force the cultivation of increasingly marginal lands in the Hills and to clear and colonize the Terai very rapidly, eliminating much of the Terai forest in the process. For both countries, the result has been conuinulng poverty for the pogulations of both the source and destination argas. To comprehend this shift from agricultural intensifica- tion and development to poverty and resource degradation, the 23 problem of population pressure and inappropriate institutions must be explicitly incorporated in the assessment framework. The framework for policy reform follows this assessment. First, a conventional economic reform effort should remove price and tax current policy biases that lead to over-exploitation and inefficient use of resources. Examples include timber under- pricing (Repetto and Gillis, World Bank 1989b), and implicit iubsidies for extensive or inefficient use of land and water resources (Binswanger, Repetto). Beyond conventional economic reform, institutional change needs to be considered. Resource management agencies will have to recognize that, given the magnitude of the resource degrada- tion problem, central administration is not appropriate. Manage- ment efforts will have to be supported by collective action from communities of resource users. For example, legislation in 1977 officially put much of the control of Nepal's forests under the village panchayats, the local political leaders. But these leaders were not democratically elected, did not represent individual villages, and did not correspond to the user groups who had previously managed the forests as common property. More recently, the government has recognized the need for effective local management and is attempting to transfer forest management to direct-user groups. In the Philippines, the government has not made the necessary transition from a regulation- and enforce- ment-oriented approach to one that focuses on establishing tenure and providing extension support. A social forestry program initiated in the early 1980s allocated long-term use-rights to upland farmers, but coverage is limited to a small fraction of public lands that can sustain agriculture. A more promising effort to chanqe the open access situation in some areas has been to call for the recognition of ancestral rights for an estimated 6 million indigenous peoples in the uplands (Lynch and Talbott). However, in spite of support from many non-governmental organiza- tions, the bill that would accomplish this is not progressing in the legislature. Finally, the economic development strategy itself will have to incorporate resource management objectives. Direct focus on reducing population growth is, at best, a long-term proposition. Thus, in the near-term, general economic development strategies will have to carry the burden of reducing population pressure and resource depletion. This will mean added emphasis on employment generation vs. industrial policies that promote capital and intermediate input use. In addition, the traditional view of extracting resources to finance development must be supplanted by the recognition -that disinvestment in natural capital, unless accompanied by productive investment elsewhere, reduces a country's capacity for sustainable growth. 24 References Binawanger, R. "Brazilian Policies that Encourage Deforestation in the Amazon." Environment Dept. Staff Paper No.16. Washington, DC: World Bank, 1989. Boserup, E. The Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure. New York: Adline Publishing Company, 1965. CBS. Population Census 1981. Kathmandu, Nepal: Central Bureau of Statistics, 1985. Conception, M. Population of the Philippines: Current Perspectives and Future Prospects. Manila: National Economic and Development Authority, 1985. Crus, C.J.; I. Sosa-Yeranil; and C. Goes. "Population Pressure and - Migration: Implications for Upland Development in the Philippines." Journal of Philippine Development. Vol XV. No. 1. 1988. Deles Angeles, M.S., and N. Lasmarias. "A Review of Philippine Natural Resource and Environmental Management 1986-1988." Philippine Institute for Development Studies Working Paper No. 90-08. Manila, 1990 DEAR. Philin2ine Forestry Statistics. Quezon City, Philippines: Department of Environment and Natural Resources, 1986 and 1988. PRO. Land. Food and Peole. Rome: Food and Agriculture Organiza- tion, 1984. Hayami, Y. and V. Ruttan. Agricultural. Develoment: An .nternational Perspective Baltimore: Johns Hopkins University Press, 1971. IDS. The Land Tenure Sstem in Nepal. Kathmandu: Integrated Develop- ment Systems, 1986. Lynch, 0., and X. Talbott. "Legal Responses to the Philippine Defores- tation Crises." Journal of International Law and Politics. Vol. 20. 1988. NSCB. Ph11ipne Statistical Yearbook 1989. Manila: National Stat- istical Coordination Board, 1989. Repetto, R. Skimming the Water: Rent-seeking and the Performance of Public Irrigation Systems, Washington, D.C.: World Resources Institute, 1986. Wallace, M. "Managing resources that are Common Property." Journal of Policy Analysis and Management, Vol. 2, No.2, 1983. World Bank. ?hepal: Social Sector StrategX Review, Washington, D.C.: World Bank, 1989a. ---------------PhEllines: Environment and Natural Resource Management Study. Washington DC: World Bank, 1989b. --------------- Xepal: Agrcultural Segor Review. Washington, D.C.: World Bank, 1990. 25 Arresting Renewable Resource Degradation in the Third World: Discussion, by Daniel W. Bromley The three papers approach the problem of resource degrada- tion from similar angles. Rather than comment upon any one of them in detail, the brief space calls for general comments that would seem to apply to each. I will make four points. First, I will argue that the blame for resource degradation that is laid on population growth is largely misplaced. Second, I will remind the reader that policy reform is precisely the essence of institutional change. Third, I want to emphasize the role of property regime in natural resource policy. Finally, I will close with a few observations on the relevance of our concepts and maintained hypotheses about development, sustainable develop- ment, and wise natural resource use in the tropics. On Population Growth Population growth figures prominently in all three papers, as well as in the common perception of important causes of resource degradation. While I certainly do not wish to suggest that population growth is unimportant, it is my view that this issue has been overdone (Bromley 1989a). Blaming population growth allows inept or corrupt governments to shift the blame for either their behavior on their inaction, as the case may be--to "promis- cuous" peasants. It further allows governments to appear help- less in the face of forces beyond their control. And, it allows them to attract international assistance for projects to correct certain resource insults, the better to appear more beneficent to their citizenry. The very essence of the state, and its sole justification one might argue, is to design institutional arrangements to address new contingencies and new scarcities faced by its citizens. To blame the masses, to plead helplessness, and yet to engage in--or to promote many of the resource-use patterns we observe, is disingenuous at best. Resource policy in the evlpng world would do well to move beyond the bedroom. Policy Reform and Institutional Change The papers variously talk of policy reform and institutional change as if to suggest that these are fundamentally different things. In fact, institutional change, by altering rules, conventions, and entitlements, is the very essence of policy reform. It is institutional arrangements that map (transform) policy pronouncements into choice sets from which individual maximizing agents will select preferred actions (Bromley 1989b). One cannot talk of policy reform without addressing institutional 26 change and I would have been happier had the three papers been more clear on this. Property Regimes and Natural Resources The papers offer welcome relief from the mischief that holds open access regimes (res nuillus) to be indistinguishable from common property regimes (res Connws). There are really three general classes of property regimes in natural resource manage- ment: (1) state property regimes; (2) common property regimes (private property for a group); and (3) individual property regimes. Open access regimes (unhappily confused with common property), are in a class apart from the three property regimes for the simple reason that there are no Property rights in open access (Bromley and Cernea). Common property and individual property share the trait that the users (or managers) are also the owners; in state property regimes (such as a national forest) neither the users nor the managers are the owners. Common property and state property share the trait that the number of users (or managers) is often large. By definition, group size in individual property regimes is usually thought of as being one. But of course much individual private property (personal dwel- lings and automobiles) is co-owned by spouses. Given these aspects of property regimes, I suggest that natural resource policy would benefit if we were to pay more attention to the literature focusing on the separation of owner- ship and control (Cheung; Famao Grossman and Hart; Jensen and Meckling). In this regard, much of the resource problem in the developing countries arises because national governments have created an ownership structure (state property regimes) without the attendant capacity to control individual user behavior. As a result, many natural resources are characterized as open access available to any and all claimants. It is natural resource management by proclamation and it does not work. The conceptual View Much natural resource activity in the developing world is still driven by the colonial (and precolonial) view that resources are for extractive purposes to earn revenue for the state. We must begin to recognize that not all national leaders are as interested as we in "development", and wise natural resource use. I note that the recent fascination with sustainable development misses the point by asking about the meaning of sustainability, while ignoring the meaning of develop- ment. Recall that development means change, and that all change threatens some vested interests. However, many governments view their country rather like family-owned firms with the objective 27 of maximizing revenue in Miami, Zurich, or Singapore bank accounts. Improved modeling of natural resource policies awaits the incorporation of this unfortunate objective function into our work. I urge that we not continue with the idealistic view that governments are innocent bystanders in the process of squandering natural capital. Otherwise, our models are behaviorally naive and little progress will occur. References Bromley, Daniel W. "Natural Resource Destruction in Asia and Africa: The Policy Response ZI Economic Issues", University of Wisconsin Madison: Department of Agricultural Economics, No. 110 (May), 1989a. Bromley, Daniel W. "Economic Interests and Institutions: The Conceptual Foundations of Public Policy." Oxford: Basil Blackwell, 1989b. Bromley, Daniel W. and Michael M. Cornea. "The Management of Comon Property Natural Resources: Some Conceptual and Operational Fallacles." Washington, D.C. The World Bank, 1989. Cheung, S.N.S. "The Contractual Nature of the Firm." Journal of Law an Economics. 26 (1983);:1-21. PaMa, Eugene P. "Agency Problems and the Theory of the Firm." Journalo Political. Ecnomy 88 (1980): 288-307. Grossman, Sanford J. and Oliver D. Hart. "The Costs and Benefits of Ownership: The Theory of Vertical and Lateral Integration." International Journal of Political Economy 94 (1981): 691-719. Jensen, Michael C. and William H. Heckling. "Theory of the Firm: Managerial Behavoir. Agency Costs. and Ownership StructUre." Journal of Financial Economicp 3 (197G): 305-3G0 28 Arresting Renewable Resource Degradation in the Third World Discussion, by Pierre Crosson Concern about degradation of renewable resources in develop- ing countries is deep and widespread in the countries themselves, in development agencies such as the World Bank and the U.S. Agency for International Development, in the world environmental community, and among academics interested in economic develop- ment. I share this concern. But I note that the evidence of resource degradation on which it is based is fragmentary and anecdotal. Soil erosion is widely believed to be a major threat to agricultural productivity and water quality in the developing countries. The fact is, however, that we have very little reliable information about the amount of soil erosion in these countries and even less about its productivity and water quality effects. Aquifers are being mined in many developing countries and crop productivity is lost to saline and waterlogged soils in irrigated areas, but the economic significance of these situa- tions on a country or global scale is obscure. Tropical defores- tation is troubling, largely because of fears that the associated loss of biological diversity will in time impose high social costs. But with great uncertainty about how much tropical deforestation is occurring, and estimates of the total number of species in the world varying between 4 and 30 million, we have only the vaguest notion of the magnitude of the threat to biolog- ical diversity and not a clue as to the social costs of possible losses. Despite the skimpy information about renewable resource degradation in developing countries it has become virtually an article of faith among the interested groups and institutions mentioned above that the degradation is severe and demanding strong and quick public action to deal with it. The papers here under discussion reflect this view, and I wish it were not so. Southgate et al. begin their paper with the assertion that "degradation of renewable natural resources in the developing countries is taking a serious toll", and in various places they use "excessive" to describe, e.g., encroachments of farm land on forests in Amazonia and damage to the environment in that region. Nowhere, however, do the authors attempt to give any sense of the magnitude of the various threats they perceive nor do they provide any standard by which to judge whether damages are "excessive". Cruz and Gibbs introduce their paper with the statement that "The degradation of renewable resources in the developing world now threatens not only the economic prospects of future genera- tions but the livelihoods of current users as well". Elsewhere they assert that cleared forest lands have been turned to "non- 29 sustainable agricultural uses, causing severe erosion impacts. on-site production potential is reduced, and downstream sedimen- tation and siltation of waterways and agricultural land is increased". We are given no basis for judging the severity of these impacts, however, nor are we told the meaning of "non- sustainable agricultural uses". Partow and Warford are less concerned with specific instances of resource degradation than the authors of the other two papers, but their paper reflects the same implicit acceptance of the conventional wisdom that degradation is general and severe throughout the developing world. My point here is not to deny that natural resource manage- ment currently imposes high social costs in many developing countries. Nor is it to argue that the authors of these papers should have produced quantitative evidence for the various damages they identify. My concern, instead, is that if we are to make progress in understanding and dealing with the problems the authdrs discuss we must find criteria for distinguishing among the problems according to their social importance and suscep- tability to treatment through public action. Making such dis- tinctions is the essence of analysis aimed at ameliorating conditions of the sort the authors deal with. The conventional wisdom ignores such distinctions. This is understandable where the "wisdom" is used to mobilize political support for action to address problems of resource degradation. But the intellectual effort needed to understand and deal with the problems requires that distinctions be made. I would be happier with the papers presented here if their respective authors had recognized the importance of this point and had devoted some attention to it What I am asking for is acknowledgement of how little we know ,dwuL the present and future social caOts of renewable resource degradation in the developing countries and some discussion of how we might use the little knowledge we have to devise workable strategies of research and policies for dealing with the problems of degradation. Such material could be fit quite neatly with the real substance of the papers presented here. And despite these rather negative comments, the papers do, in fact, contain much of real substance. Space precludes a full account, so I emphasize some high points. Both the Southgate At &L and Cruz-Gibbs papers make an important point which, in my judgment, generally gets insufficient attention: attempts to eliminate overuse of open-access resources by bringing them under state ownership or privatizing them often flounder because governments lack the administrative capacity to enforce the newly established property rights. Economists--I have been guilty of this myself--routinely prescribe secure property rights as the solution to the open-access problem, taking the security of the rights for granted. But where government administrative capacity 30 is the limiting resource, security is not guaranteed, thus under- mining an otherwise promising attack on the open-access problem. Southgate at al. and Cru.-Gibbe do valuable service in emrphasiz- ing this important point. That national fiscal, monetary, and foreign trade policies can have unintended, and undesirable, effects on renewable resource management is not a new idea, but too often it gets insufficient attention in discussion of these policies. The Warford-Partow paper thus is on target in featuring the idea and giving examples of adverse resource and environmental effects where it has been ignored. I come away from a reading of the three papers asking this: what are the conditions for achieving patterns of renewable resource management in the developing countries which are sus- tainable in the sense of indefinitely providing adequate income to the people using the resources? None of the papers directly addresses this question, but they provide some clues to an answer. Southgate etal, and Cruz-Gibbs suggest that easing population pressure on the resource base is a necessary, although not sufficient, condition for sustainability in the above sense. Southgate et al. imply that research to develop technologies suitable for the soil and water endowments of the developing countries is critical; and Cruz-Gibbs, also by implication, indicate that in extraordinarily land-scarce countries such as Nepal, expansion of off-farm job opportunities is the only way to maintain, or increase, the incomes of those who remain in farm- ing. Finally, all three papers emphasize the too often perverse effects of government policies on incentives of renewable resource managers. The papers make clear that correcting this is much more complex than getting the prices right, important though that is. Governments must look also to the resource management consequences of fiscal, monetary and trade policies and they must contrive institutional reforms to establish and enforce clear property rights in open-access resources. These papers succeed in conveying some of the flavor of this most formidable set of tasks.