Essay on Environment and Economic Growth!

As E.O Wilson has put it:

Environmentalism sees humanity as a biological species tightly dependent on the natural world. Many of earth s vital resources are about to be exhausted, if atmospheric chemistry is deteriorating and human populations have already grown dangerously large. Natural ecosystems the well-springs of a healthful environment are being irreversibly degraded.

Believers in this dismal picture argue that humans must practice “sustainable” economic growth and learn to live within the limitations of our scarce natural resources-or we will suffer irreparable consequences. Humans have been encroaching the physical environment for ages, over the years.


The major interventions occurred, when humans moved into settlements and convert forests into farmland and started to domesticate animals and plant trees. But this qualitative transformatic pales beside today’s massive bioengineering, deforestation and extracts of mineral and plant resources from the earth (in its Limits to Growth).

In this context the Club of Rome made the following predictions:

If present growth trends in world population, industrialisation, pollution, food problems and resource depletion continue unchanged, the limits to growth on this planet will be reached within the next one hundred years. The most probable results will be a rather sudden and uncontrollable decline in both population and industrial capacity.

As humans spread around the globe, they tend to displace trees, wolves and marsh weeds to make way for farms, cities and human settlements. Many of the Earth’s vital resources are about to be exhausted, its atmospheric chemistry is deteriorating and human population have already grown dangerously large [6.53 billion (= 653 crores) in 2006], Natural ecosystems, the wellsprings of a healthy environment— are being irreversibly degraded. Economic growth and industrialisation are roads to environmental ruin.


Growing degradation in natural resources is now a serious problem of LDCs. This is the result of the interactions between the traditional sector (due to strong population pressure on limited land resources) and modern sector (with increased capital intensity through technology borrowing). This has resulted in growing poverty and inequality in the early stages of develop­ment of today’s LDCs. The environmental problem may be defined as the problem of natural resources exhaustion resulting from exploitation at speeds beyond their natural recovery rates, which endangers sustenance of life.

Poverty and Environmental Degradation:

The root cause of environmental degradation in LDCs is the growing incidence of poverty. Most people in LDCs, particularly in rural areas, do not have any private property. So they have to depend on certain common property resources.

There is no clearly defined legal right on such resources. As-a result, someone’s tree-cutting significantly reduces other’s opportunities of forest use, more so in view of the fact that forests are becoming scarce owing to population growth and economic activities (industrialisation and urbanisation).


Environmental problems are really serious in LDCs because changes in technology and institutions lag behind changes in resource endowments. With rapid growth of population, resources become more and more scarce.

At the same time, institutions for conserving scarce natural resources have been slow to develop. These two developments conjointly led to the serious depletion of common-property resources. This lag in institutional adjustment tends to become larger in LDCs due to poverty. In other words, poverty is the main cause of environmental destruction.

Rural Poverty and Environmental Destruction:

The main force behind environmental degradation in LDCs is pauperization of the rural popu­lation due to population pressure. As the supply of fertile land becomes scarce relative to in­creased population in traditional agriculture, poor people are forced to cultivate fragile land for subsistence in hills and mountains. This results in a high incidence of soil erosion.

In addition, they are forced to cut forests for timber and fuel as well as graze animals on pasture lands, exceeding the reproductive capacity of these natural resources. It is quite obvious that, in such a situation, dire poverty or destitution typically becomes a vicious circle.

Poverty results in malnutrition and reduces the poor people’s capacity for work, precluding them from gainful employment opportunities. They are thereby forced to rely more heavily on the exploitation of fragile natural resources in marginal areas, to which property rights are not assigned.

In order to prevent such environmental destruction due to rural poverty it is necessary for the government to regulate the use of environmentally fragile areas. However, if regulations are effectively enforced, a means of subsistence for the poor would disappear altogether.

How­ever, the real solution to the problem lies in increasing employment and income by improving the productivity of the limited land already in use. This solution implies shifting from tradi­tional resource-based to modern science-based agriculture, as symbolized by the Green Revo­lution.

The Green Revolution, however, has been criticised for environmental reasons, e.g., di­rected against fertilizers and chemicals — that poison the soil and water causing ecological and human health damage. Furthermore, irrigation without adequate drainage facilities tends to result in soil degradation through salinity and water logging.


However, if for all these reasons the efforts to develop modern technology were abandoned then employment and income-generating opportunities for marginal farmers and landless agri­cultural labourers would gradually disappear in the face of growing pressure of population on land. As a result, many would be forced to push cultivation frontiers into ecologically fragile land, resulting in increased incidence of flood and soil erosion.

Therefore, it is necessary to overcome the defects of modern agricultural technology by strengthening scientific research. In addition, it is not in the Tightness of things to restrict the distribution of agricultural technology to favourable production environments with good irri­gation conditions. Instead, it has to be extended to both productivity increases and environ­mental conservation in fragile areas through such means as agro-forestry and complementary use of arable lands and grasslands.

No doubt rapid population growth in the face of low total factor productivity is the root cause of poverty in most LDCs. And growing incidence of poverty is the root cause of environ­mental degradation. In this context, W. Beckerman has made the following comment on the relationship among population, economic development and pollution:

“The important environmental problems for the 75% of the world’s population that live in developing countries are local problems of access to safe drinking water or decent sanitation, and urban degradation. Furthermore in the end the best and probably the only way to attain a decent environment in most countries is to become rich.


The economy and the environment are complex interdependent systems. Continued eco­nomic growth and even human survival depend on natural resources used in production and on the life-supporting services of natural ecosystems. But overuse of natural resources and discharging polluted waters into the environment may threaten those ecosystems.

Thus soci­eties require feedback mechanisms to signal the health of their combined economic and en­vironmental systems and to take timely corrective actions; otherwise economic growth will not be sustainable and the growth and life supporting services of the environment will not continue as economic activity expands.

Urban Poverty and Environment:

For both rural and urban areas the poor are the first to be endangered by environmental degradation. If this damage to poor people coincides with unequal income distribution, social and political stability—the basis of economic growth—will be severely undermined.


If left unchecked, environmental degradation due to pollution tends to progress cumulatively and will have devastating consequences in the long run. It is, therefore, of strategic significance for developing countries to lower the peaks of the environmental Kuznets curve in order to sustain their economic growth.

Pollution arising from industrialisation and urbanisation can be suppressed in developing countries to a much lower level than experienced by advanced economies in the past if technologies and know-how accumulated in the latter are effectively applied to the former.

It is not much difficult to counteract environmental degradation by designing the institutions and policies to promote adoption of anti-pollution technologies. The core of the environmental problem is the divergence between private and social costs in the use of the environment, which induces overuse of environmental resources or exploitation of such resources above socially optimal levels. Therefore, the environmental problem can be solved by raising the private cost of utilizing the environment (such as discharging noxious gas into the air) relative to social cost.

The Sustainability Issue:

The interactions between the economy and the environment prompt the question of whether over time continued expansion of economic activity is consistent with ecological stability — with continued functioning of the ecosystem on which all human activities and life system ultimately depend.

A growing economy will use natural resource inputs and discharge wastes, progressively changing the environment on which it depends. The resulting reduction in the quality and quantity of natural inputs, waste sinks, amenities and life support services will endanger continued growth and gains in human welfare, perhaps even human survival, unless timely corrective actions are taken.


How do we achieve continued compatibility between economic decisions and environ­mental service flows as economic activity expands? This is the genesis of the modern concept of sustainability.

For most economists, sustainability is:

1. Seeking to ensure that current economic decisions take full account of economy environment interactions, now and in the future;

2. Concern about the well-being of people in both present and the future, involving both meeting the needs of the present and preserving the capacity of the future generations to be no less well off than the present generation.

Two Types of Sustainability:

In the opinion of R. M., Solow, sustainability is achieved not by preserving specific natural resources, but by maintaining a broad aggregate of natural and created capital. This is the concept of weak sustainability.


Some environmental economists take the view that the ability of created capital to substi­tute for natural resources is limited, in particular, in the case of ecological life support services on which all planetary life ultimately depends. This leads to the concept of strong sustainability.

Strong sustainability requires the maintenance of an aggregate of natural capital or the protec­tion of special natural capital believed essential to the well-being of people in the future. Effective implementation of both strong and weak sustainability imposes additional infor­mation demand on planners; the need to value different items of natural and created capital and possibly in the case of strong sustainability, the ability to identify the specific natural capital essential to future well-being.

Other Views of Sustainability:

Ecologists identify sustainability with ecological resilience—the ability of ecosystems to main­tain their physical and biological functioning after disturbance. An ecosystem is resilient and, therefore, sustainable, if it can reestablish it, with its biological functioning, if not all of its constituent species—unchanged after a cyclone or a volcanic eruption or an oil spill.

Ecosystem resilience does not require stability or even survival of all the ecosystem’s con­stituent species, including humans. Humanity is just one species living in and deriving life support from ecosystems. The dissonance between economist’s and ecologist’s conceptions of sustainability brings into focus the important point that for most people, sustainability is a human-centred, rather than a nature-centred concept. The environment may change, but it should not change so much as to endanger human lives or living standards.

According to most ecologists, this type of stability is not a natural property of environmental systems; rather these are dynamic and evolve over long periods of time. Humans may be more comfortable with the notion of a stable envi­ronment, but, in reality, the processes of environmental change are chance driven, with no inher­ent stability. And, since we live in a world governed by chance, we cannot calculate what nature will throw up next; sustainability policies that aim at desired future states of the world are not necessarily in harmony with nature.


Empirical studies show that pollution trends tend to follow an inverse U-shaped curve across different stages of economic development. See Fig. 1. At low levels of income at E, subsistence agriculture generates hardly any pollution. Then, with initial stages of development, the growth of heavy industries increases pollution control, leading to higher per capita pollution at F.

Pollution and Economic Growth

The rising part of the curve occurs because urbanisation, accompanied by the growth of highly polluting industries, often replaces agriculture in the early stages of development. As steel plants replace subsistence farming, it is nearly inevitable that air pollution will become worse, particularly in low income countries which cannot afford much pollution abatement.

Finally, with pollution abatement and the trend away from industry and towards services in advanced countries, pollution decreases at G. As income rises, countries tend to invest in pollution abatement and their economic structures evolve towards services and away from heavy industries, reducing pollution. This can explain the inverted U-shaped pollution curve, also called Environmental Kuznets Curve.

The environment is vital for all of us because it provides a life support system. It provides inputs for production of economic goods and services. It also acts as a waste sink. However, in the last five decades there has been growing concern about the effect of economic activity on the physical environment.

It has been argued that economic growth has caused serious environmental damage and the current state of the environment will hamper future economic development. The poor in developing countries are often depending on the natural environment for their livelihood and even their continued existence. The damage to the environment and the relationship between the environment and the economy are often thought to be of more importance to developing countries.


Economic Growth and the Environment:

Environmentalists have argued that unconstrained economic growth will lead to the exhaustion of non-renewable resources and to levels of environment degradation that will seriously affect production of desirable goods and services and the quality and existence of life.

It has been suggested that in the early stages of economic development the level of environmental degradation increases, but after this phase the environment improves with economic development. This behavioural pattern is captured by the U-shaped environ­mental Kuznets’ curve, as shown in Figure 1.

Sustainable Development:

It has been widely held that present patterns of economic growth may seriously degrade the environment and may be unsustainable, as the environment cannot support economic growth forever. It is alleged that past and present economic policies have usually been concerned with providing the conditions for economic growth, as measured by standard national accounting methods.

Many environmentalists are concerned that these policies have not attempted to ensure the existence of ecological conditions necessary to support human life at a specified level of well-being through future generations.

This concern is of major importance in the concept of sustainable development. SD has become perhaps the most important approach as the relation between the environments on development is concerned. According to the Brundland Report (1987), “SD seeks to meet the needs are aspirates of the present without compromising the ability of future generations to meet their own needs.”

The concept of SD has become a standard model for thinking about the environment development and the economy. The concern for equity between and within generations is central to most interpretations of the concept.

Natural Capital, Equity and Environment:

For ensuring substantially, the stock of capital has to be preserved (i.e., it should be allowed to decline over time). A constant (increasing) stock of capital will permit consumption levels to be maintained (increased). In this context we may refer to two views on sustainability. The weak sustainability view treats all the different forms of capital (e.g., man-made, human, natural and social) as substitutes.

So they can be aggregated to form total capital. Thus, for example, degrading the natural fertility of the soil can be compensated for by using chemical fertilizers and modern scientific methods to maintain (or even raise) yield per hectare. This means that human and man-made capital are used as substitutes for natural capital.

The strong sustainability view takes the position that it is only natural capital that needs to be held constant or increased. The focus, according to this view, is often on critical natural capital which is either required for human survival or cannot be substituted for with other forms of capital. Thus one might take atmospheric carbon dioxide levels as critical natural capital as higher levels cannot be offset by other types of capital.

Preserving of increasing the stock of natural capital has important effects on inter-generational equity. If it is believed that present level of environmental degradation and resource use will substantially alter future human economic welfare, then just by preserving natural capital intergenerational equity may be improved. This is the strong sustainability view.

However, the substitution of this constraint by a more flexible approach that allows greater use of natural capital could, in all likelihood, raise economic welfare measured across all present and future generations. This is the weak sustainability view.

Many environmental effects are irreversible, for example, the extinction of a species. Irreversibility demands maintenance of the natural capital stock.

It is also suggested that the larger the stock of natural capital, the more resilient an ecosystem is likely to be. (The resilience of an eco-system is judged by its ability to maintain its normal functions often as external disturbance). And the diversity of the eco-system increases its resilience.

The constancy of the stock of natural capital could be interpreted as constancy of all types of natural capital. This means that any use of non-renewable resources would not be compatible with SD.

International Agents and the Environment:

Since 1990 the World Bank and other international agencies have a formulated environment related support programmes, i.e., programmes supporting development, while supporting the importance of the environment in economic development. The WB supports the sustainable development view.

First, it has highlighted the need for assessing all those projects which are expected to generate adverse environmental effects.

Secondly, poverty is found to be the major cause of environmental damage. The reason is that the poor people heavily depend on the environment.

The WTO has recognised the trade-off between trade and the environment and that environmental concerns could lead to protectionism. In spite of this the WTO supports the objective of SD and has been involved in assisting multilateral environmental agreements and increasing the awareness of links between trade and the environment.

The UN Conference on Environment and Development in June 1992—the Rio Earth Summit—leached agreements among 150 countries on reducing global warming by limiting atmospheric emissions by the year 2000 to their 1990 levels.

At the 1997 Kyoto Conference, greenhouse gas emission targets were fixed. The Conference also considered specific programmes to achieve SD in the 21st century. One of the underlying assumptions of the concept of SD is that poverty is an important cause of environment degradation. It is to this issue that we turn now.