0.12 Natural capital & Sustainable development introduction  (Page 10/12)

Sabah and Sarawak in East Malaysia had, if anything, an even richer natural resource base per capita than Peninsular Malaysia. But for Sarawak after the mid-eighties and Sabah from late 1970-2000, development was unsustainable. Sustainable development in Sarawak has been plagued by the scourge of rural poverty, while in both Sarawak and Sabah, natural forest endowments have been rapidly depleted by unsustainable practices, largely as a result of very serious policy failure, particularly through grossly misguided forestry policy.

In any case, the answer to the question: Can Economic Development Be Sustainable ? is yes, for any country that pays appropriate attention to resource scarcity, avoiding artificially cheap prices for natural resources and environmental services.

But the answer becomes much less certain when we consider global sustainability, for the entire planet. The Malthusians are still with us, insisting that growth cannot be sustainable.

Good economics offers hope. In the short term a portfolio of policies can make incremental progress in rectifying market failures leading to environmental degradation. And in the short and long term much can be done to reduce damages from policy failures. If so, one major feature of a strategy for global sustainability would be to move quickly towards more effective markets , so that real resource scarcities will be reflected in the prices people pay for all commodities and services. An end to underpricing and heavy subsidies on fuels, fertilizers, pesticides, water, timber, land clearing, and other destructive uses of resources would be major steps towards sustainability. Most countries are far from this ideal market environment. They could easily reduce resource wastage without jeopardizing economic growth, through better policies, better pricing of scarce natural resources, in some cases judicious reliance on privatization, and above all, measures to reduce poverty, especially in rural areas.

Principal causes of environmental degradation in emerging nations

The prime causes of environmental degradation in emerging nations fell into six broad categories. The six modern horsemen of this apocalypse are:

1. Poverty, especially rural poverty (as already noted)
2. Ignorance (scientific ignorance, economic ignorance)
3. Institutions (especially defective property rights)
4. Market failure, discussed generally earlier
5. Public failure, or policy failure, also discussed generally earlierand now a new one
6. Green backfires – unintended consequentials of some environmental policies.

We have and will often refer to these six categories. It will be helpful to examine briefly the role of each in stifling sustainable development.

Consider Indonesia and Brazil as case studies. Indonesia in 2009 had 230 million people, 4 ^th largest in the world, just behind U.S. and just ahead of Brazil. Brazil per capita income was $8,000. Indonesia GNP per capita in 2007 was $2,230 or 1/4 the world average of $8,741, and only 4% of U.S. per capita Y (47,240). Per capita income in Indonesia grew 8% year 1971-1996, then stalled, then recovered somewhat.