RIO PLUS 20

“An Institutional  Framework For Sustainable Development”

Alfredo Sfeir-Younis, President, ZIHT

(Cho Tab Khen Zambuling)

 

I.  Limitations Of The Conference Proposal To Date

In the Rio Plus 20 Conference, the definition and scope of this theme –“institutional framework”– has been explicitly outlined in the website of its Secretariat.

Having studied the proposal carefully, which, by now, it has travelled to all points around the world (and constitute the basic guideline for debate and discussions), one realizes that the proposal is basically all about the UN and some international organizations.  It is an extremely inward looking proposal, and no wonder why a new proposal like this may fail once again.

Indeed, the UN needs to be radically reformed, and I would support that wholeheartedly.  However, if an institutional framework developed with the view of advancing our world (the people) toward a sustainable society or a sustainable civilization, it is mandatory, in my view, to have a much broader scope and understanding of the term “institutions” and “institutional framework”.  I have no doubt about the importance of discussing in Rio Plus 20 the creation of a new “World Environmental Organization”, indeed, this is very much in the minds and hearts of many people.   But, both the reform of the UN or the creation of a new Organization must be inserted into a much broader framework like, for example, the needed reforms of governments, corporations, NGOs, and societies around the world.  Is this complex?  Yes, it is, but this is the nature of the challenge we face.  In other words, the UN alone will simply not do; proof of which is its own past history.

The present proposal to discuss only one side of the institutional framework for sustainable development will fail in the end.  As it has been said many times in the past: “think globally, act locally”.  If at the local level institutions are not adequate, then international reforms will have very limited impact.  The duality of seeing what is ‘international’ as separate from what is ‘national’, is the main cause of the environmental destruction we witness today.  National and international institutional frameworks must go hand in hand.

In addition, by the UN explaining to the public what the roles and functions of the General Assembly, The Economic and Social Council and the Commission on Sustainable Development are, the present UN proposal leads us to pay attention to the following important matters:

• To several agreements, including the Rio Declaration, Agenda 21, and the landmark “Rio conventions” (CBD, UNCCD, UNFCCC). It also created new international institutions, among them the Commission on Sustainable Development

• To the three mutually reinforcing pillars of sustainable development as incorporated into the 2002 Johannesburg Plan of Implementation (JPOI). The need to strengthen the Institutional Framework for Sustainable Development (IFSD) is addressed in Chapter XI.

• To the need to enhance the integration of sustainable development in the activities of all relevant United Nations agencies, programmes and funds, and the international financial institutions, within their mandates.

• To the necessity to step up efforts to bridge the gap between the international financial institutions (IFIs) and the multilateral development banks (MDBs), and the rest of the UN system

• To the proliferation of multilateral environmental agreements (MEAs) and fragmentation of environmental institutions as driven calls to strengthen the environmental pillar of sustainable development.

• To the Nairobi-Helsinki Outcome adopted by Consultative Group of Ministers or High-level Representatives on International Environmental Governance identified the following options for broader reform: (a) enhancing UNEP; (b) establishing a new umbrella organization for sustainable development; (c) creating a specialized agency such as a world environment organization; (d) introducing possible reforms to ECOSOC and the CSD; and (e) enhanced institutional reforms and streamlining of present structures.

I can imagine how little all of these mean to the people on the streets who see their rivers and oceans polluted and their forest and biodiversity depleted.  I know the jargon very well, because I was part of that system for 29 years, and my professional work demanded that I understood the arcane vernacular of the UN system.

• Will all the above amount to something?  How do we explain to the public the causes and conditions of institutional failures? Can this be done in simple words, so that they see the connection between the proposals the UN is making and the reality of their everyday life?

• What is the true yardstick we must use to address the proposed institutional reforms, so that the new institutional framework becomes truly efficient and coherent with the proposals to be debated in Rio?

• How will this institutional framework reign-in the International Financial Institutions?

• Who are the other important actors and their responsibilities, and how will the matrices of actors ensure proper environmental governance?

The whole proposal, or description of intent, is extremely loose.  Maybe it was purposely conceived that way; but, the people of the world deserve something much better.

II.  The Basic Meaning of Institutions: Going Much Beyond the UN

My whole PhD had a solid foundation in Institutional Economics.  One of the first baby steps we learned at that time was to recognize the complexity that exist in defining the term “institutions”.  The basic move was not to think that institutions are just equivalent to “organizations”.  These were only one important part of a conglomerate of elements embodied in the debate on institutions.  In reading the Conference website, it is evident that the major emphasis is on organizational issues and concerns.  But, it would be unfair to say that the site refers only to organizational issues.

To identify some of the other dimensions of institutions we would have to consider for example, and in addition to organizations, the following:

(i)    formal and informal laws, rules and regulations;

(ii)   market and non-market incentives (prices, taxes, subsidies, eminent domain, property rights, traditional rights, customary rights),

(iii)  organizations and rules of governance;

(iv)   matrix of social actors;

(v)    government presence, governance, and public interventions;

(vi)   culture and cultural values and beliefs;

(vii)  all forms of rights and responsibilities (including traditional rights);

(viii) authority, empowerment and citizenship;

(ix)   technology and entrepreneurship;

(x)    management and administration; etc.

As you may know, when we are confronted with an environmental problem, and we decide to respond by solely creating a new organization, the map is very incomplete.  Let us say, for example, we have a major depletion of our natural forests.  This will never be resolved by just creating a ministry of forests, notwithstanding its potential contributions.  One must look also into the existing markets for forest products, the assignment of property rights over those forests, the existing legal structures and instruments to avoid depletion, the existing incentive structure (economic and non-economic incentives; to see the impacts of taxes, subsidies, closures, etc); and the like.

At the core of institutions is the human factor; yes, you and me.

All the instruments listed above have to do with our behavior and the possibilities to actually modify that behavior over the medium and long term.  Institutions have a face.  They are not something atomized.  Thus, it is essential to analyze and observe the behavior of people in relationship to the different dimensions of “institution” referred to above.

A few years ago, I wrote a book with Andrew Dragun.  It was entitled “Land and Soil Management : Technology, Economics, and Institutions”.  The principal aim of that book was to address many of the institutional arrangement that led to the erosion and depletion of soils; a mayor problem in all countries of the world.  A number of policy and program related suggestions were made with the view to arrest those processes that were understood as being mainly man-made.

A few years later, I was given the opportunity to review more than 2000 completed projects that had been partially or totally financed by the World Bank.  The main thrust of the review (published in 1987) was to unveil and understand what was the practical meaning of “sustainability” in socio-econoic development.  Of those 2000 projects, there was a statement on sustainability on or about 650 projects, with  more comprehensive  discussions on around 300 of them.  A so-called “revealed preference approach” was used to distill the data and information with the veiw to arrive at a definition of “sustainability”.  This approach simply means that you record what it is said, without projecting or imposing your views, and then use various forms of statistical analysis to group the data and see what unfolds in terms of correlations and other indicators of performance.

Thus, for example, one evaluator would record that such a project was not sustainable because the government did not make the needed financial contributions –this was recorded under financial capital.  Another would say that the fishery project was not sustainable because the scale of the operation was depleting the fishery –this was recorded under natural capital.  Yet another would state that such an operation was not going to be sustainable because the incentive structure ran against the main objectives of the project– this was recorded under institutional capital.  And so on, and so forth.

Using a “revealed preferences approach” and principal components analysis, it was revealed that sustainable development consisted of attaining a balance among all forms of capital participating in the development process.  Those projects revealed the following forms of capital: human, natural, physical, financial, institutional and cultural.  Specific patterns of sustainability were found within a sector, between sectors and within the economy as a whole.  This concept of sustainable development formed the basis for two major macro-economic studies, one in Nepal and the other in Bolivia.  These studies focused on 25-30 years of development and investment lending, with a natural resource management perspective.

The above-mentioned definition exalts the importance of a composite of capital in capital accumulation and wealth creation.  And, that the idea of sustainable development is not just about natural capital, but about the balance among all forms of capital participating in the development process.

Central to this definition is the world balance.  This means that the relationships among all those forms of capital were extremely important.  It was not just a matter of addressing environmental issues linked to our natural capital, but we needed to see how all the other forms of capital affected environmental sustainability.  This was an essential empirical finding.

Several years later the same framework was used to address more than 200 case studies on poverty alleviation, which were put together by the client countries of the World Bank.  What this study showed was that to alleviate poverty in developing countries it was essential to pay attention to their existing institutional capital. To make the analysis more explicit, institutional capital was disaggregated into the components as outlined above, and a statistical analysis was undertaken to arrive at some critical conclusions.  At the top of the list of strategic concerns was the immense importance that human rights and other forms of rights played in alleviating poverty.  In other words, and generalizing a bit, people are poor because they were not able to exercise their rights.  This finding was irrespective of the country in question.  It applied to all countries.

What my professional experience shows is that the debate on institutional issues in Rio Plus 20 must go far beyond what it is proposed now.  What is being defined as boundaries of the debate will demonstrate to be insufficient to address sustainability and, certainly, the solutions that will arise from within those boundaries will probe to be inadequate.

In the last 20 years I have added another very important form of capital, essential to economic and social development: the “spiritual capital” in sustainability analysis.  The relationship between spiritual capital and all other forms of capital has been explained in another note, also posted on the website for your information.

III.  Brief Account of Historic Institutional Landmarks: At A Glance

Although for many people the exchanges on sustainable development are of recent vintage, the debate on the ‘sustainability of the development effort’ dates several centuries.  Since the very beginning, economists have been writing about the fundamental  conditions of sustainability.  This is to say, what makes an economic activity sustain its benefits over longer periods of time (issues of inter-temporal welfare).

 

It is important that we all feel we are making progress in Rio Plus 20, and do not rehearse the same themes of the past time and time again.  This is the main reason to bring up some of the key historic landmarks and lead the reader to deepen on what was attained and what needs to be done now.  The thematic priority here is arbitrary and, in many ways, it is the mirror image of the author’s most relevant professional experiences as an Environmental Economist.  These experiences cover a period of more than 40 years.  The presentation focuses mainly on the core issues at stake, and suggests possible implications for research and policy.  There will be some in-passing judgments with the view to provoke some further discussions.   All the experiences collected here also represent examples of different aspects of institutional development for an enabling environment.

The Ecological Movement. The only way one can understand the core ideas involved in the ways we conceive sustainable development today, is by starting this presentation with an explicit recognition of the great contributions of the ecological movement.  This is a movement that goes back several centuries.  From the beginning of the 1800’s it created very powerful organizational arrangements to establish its advocacy and visible presence.  At that time, nobody was proclaiming the ideas of sustainable development as they are presented and synthesized today.  But, there is little doubt that many of the ideas in today’s debates come from that era in the history of environmental policy.   For example, one could mention the ecological movement’s positions regarding:

• the number of broadly-defined nature conservation issues,
• the perils embodied in having a weak set of management practices for all our biodiversity resources,
• the importance of attending to all forms of water, air, space, and soil pollution,
• the critical debate on land and water management and distribution in agriculture and urban development, and
• the perils in forest protection of all forms of natural forest.

Then, there was clear dissatisfaction with the ways in which public policy was formulated, the limited scope of economic and financial evaluation methods, and the less than appropriate framework to address “inter-temporal choices” and “spatial decisions”.  The ecological movement was essential to raise awareness, organize civil society, raise a number of key issues, and make the public aware of a number of principles.  For example, one of these principles was that of the maximum sustainable yield.  This principle is still very important in the context of today’s debates.

The Initial View Of Some Developing Countries. Within the context of developing countries, there was little interest on that ecological movement, notwithstanding the existence of some important activists and advocates.  The priority was mainly on attaining certain forms of economic growth and with establishing the conditions necessary for the ‘take-off” (using Walter Rostow’s terminology).  Thus, most of the investments resources –nationally and internationally– were allocated into infrastructure, renewable energy resources, roads and highways, railways, big dams for hydro power and irrigation, and into necessary ingredients for a rapid process of industrialization.  Many environmental considerations were seen as an interruption, or a hand brake, to economic growth.  And, in this context, many policy makers argued that accelerating growth was a necessary condition to gain on the environmental quality front.  The lament was “go for growth first and environment later”.  However, there are no cases of significance whereby countries came to address the environmental damages later.  In some cases this was a contradiction in terms –e.g., the use of non-renewable resources. This was something that seldom became a reality.

The idea of most policy makers was to exploit the vast and sometimes, believed, to be inexhaustible natural resources available and then transform those resources into goods and services.  These directions were seen as essential for many developing countries.  The theory of comparative advantage was to be applied to the letter in regions that were relatively abundant in natural resources.  Most of the revenues generated from the exploitation of those resources were to be allocated into urban industrialization and only some into agriculture.  At least, that was the pattern followed in Latin America and Africa.  Land was not sought as a source of economic growth but rather as a social asset to be distributed and redistributed all along the political reshuffling of elected parties and government officials.  Land Reform became a major instrument of social policy rather than of productivity and competitiveness enhancements.  It was not a key instrument for economic growth.

Minerals were seen as important contributors towards the “take-off”.  However, almost all the strategic interventions, in the exploitation and management of those minerals, were in the hands of a foreign sector.  And, this sector expressed no interest in engaging into matters related to environmental management and sustainability.  The outputs resulting from these resources were exported mostly to developed countries and little of the overall value added was left in the countries of origin.   Those who wrote about the theories of dependency illustrated very well most of those cases.

None of the traditional economic books focused on natural resources management and the environment as we do now.  In some cases, some reference was made to natural resources within the context of capital theory and economic growth (Arthur Lewis as an example).  But, there was nothing more than that.  Certainly, not much was taught in schools about the negative external effects of industrialization.  In fact, many argued that pollution and environmental destruction represented a needed cost to be paid for advancing on the human welfare front.

Those who express doubts on the above should read the detail proceedings of the First World Conference on Development and Environment, Stockholm, Sweden, 1972.  Even countries like India forcefully argued that ‘not to increase the rate of exploitation of existing natural resources was to condemn poor countries to remain poor’.  Furthermore, many developing countries argued that the actual development of the USA, for example, was the result of the over exploitation of the prairies and other environmentally fragile regions.  The same approach was thus advocated by representatives of developing countries at that conference.  One still hears these arguments today.

The Water Resources Council:  An Important Landmark. In the early seventies, the guidelines that came out of the USA Water Resources Council represented a major landmark for those studying environmental and resource economics.  They had precious gems in terms of economics, natural resources management, conservation, valuation, and more.  What came from them was a required reading for PhD students and many carried out doctoral dissertations addressing one or many aspects of those guidelines.

This was the time when the USA had gone into a more quantitative/rational public budgeting system (R. McNamara).  Thus, many public officials became accountable for certain decisions and for the monitoring the overall country’s environmental quality (creation of The Environmental Protection Agency, EPA).  If one is to lecture on environmental management and resource economics, the guidelines are a major source of inspiration and content for teaching.  At that time, there was also a genuine attempt to bring a number of mathematical programming techniques (optimal control theory) to evaluate public investment programs and to integrate economic decision-making techniques and engineering/scientific models (the RAND Corporation).  Examples of those models were the Universal Soil Loss Equation (USLE), sedimentation management models, water flow programming techniques, traffic counts, biological modeling to predict yields, and so much more.  Several books in Engineering Economics came out at that time, mostly as an outcome of major consulting firms that were engaged in natural resource management projects in developing countries.

One of the great merits of this era was the integration of technical and engineering methods with economic decisions, particularly in the public sector.  However, many of these models were run with rather poor data, as research was little or almost non-existent.  Thus, these models were as good as the data used by the modeler (“garbage in garbage out”).  In addition, there were several methodological issues then, that today have yet to be resolved.  A good example of this is the value of the “discount rate”, or what many economists call “the value of time” in decision-making.  It was customary to read countless articles on such an issue.

Finally, this was the era of many manuals on Benefit Cost Analysis (BCA).  PhD students had to be experts on those manuals and recite the differences and possible contradictions.  It is worth noting the one by Little and Mirless, the manual by the United Nations (UNIDO Guidelines), and the one by the World Bank (authored by Lynn Squire and Herman Van der Tak, with Amanda Ray).  There was little or nothing in those manuals on sustainable development or the environment.

Trade-Offs Between Economic Growth and Environmental Quality. In the seventies, one of the major public debates was under the rubric of the trade-offs between economic growth and environmental quality.  The attainment of economic efficiency and different levels of environmental quality were seen as opposites.  Thus, it was stated that in order to create one extra percentage point in favor of economic growth it would require one to give up some percentage points in environmental quality.  And, vice-versa.  Only many years later one came to realize that this was a rather false proposition (a fallacy).  Or, at the least, it was a proposition that could be conceptualized in various different ways.

Optimal Control Theory offered a large number of methods to carry out general assessments with regard to those trade-offs.  In particular, linear programming, linear goal programming, quadratic programming, lexicographic programming, etc. were used to evaluate national investment plans, fiscal allocation of resources, and more.  Such methods were able to show a large number of possible solutions, to analyze the principal binding constraints, and to simulate present and future scenarios. These methodologies and procedures were quite useful to those in private and public decision making.

The idea that there were major trade-offs between economic growth and environmental quality is still haunting many national and international debates.  One example is that of global warming, where the countries that pollute the most argue on the side of competitiveness and thus to move away, for example, from the Kyoto Protocol.  The tenor of this debate is also present at the UN Commission On Sustainable Development.  In many ways, such a problem arises from the absence of “natural capital” in wealth creation models and in the theory of growth and capital accumulation.  If such forms of capital were sought to be embodied in growth, then such negative trade-offs would not be present all of the time.

The recent debates on the “quality of growth” show the critical importance to incorporate the notion of natural capital as a determinant of all forms of capital accumulation.

The Formulation of Sectoral Policies: A Functional Approach. In the seventies and early eighties, international organizations addressed many environmental issues and concerns through the drafting of sectoral policies.  This was a rather functional way to integrate traditional categories of policies with the environment.  An interesting example of such an approach was The World Bank Forestry Policy issued in 1978.  In this policy, the Bank made quite explicit the economic, environmental, and social dimensions of forest management and project implementation (see sustainability triangle below).  It was in this policy paper where notions of “environmental forestry” and “social forestry” were promoted, in addition to bringing-in other traditional forms of forestry (e.g., industrial forestry).

Many other sectoral papers were written: rural development, basic needs, fishery sector, water management, renewable energy in agriculture, land reform, land management, and more.  All of them addressed some aspect of environmental management and conservation.  But this approach did not break the glass ceiling needed to genuinely bring, for example, ecological, environmental, and natural resource management concerns.  The emphasis was more on efficiency and productivity at the margin than to address heads on the many issues in environmental conservation and management.  For example, the attention was more on the productivity of water and land than anything else –i.e., measured in terms of land/water use per unit of output—and not on their sustainable use and conservation.

These policies were mainly drafted to expand investment lending in developing countries, and to identify a hand full of economic instruments to funnel large quantities of money to those countries.  The transfer of those monies materialized via project lending.   Behind those policies there was also an advocacy from the part of many senior managers of those international organizations.  Many wanted to advocate larger levels of investments in agriculture and rural development.  And, those policy papers made the case for agriculture!

The sectoral policy approach slowly disappeared when project-based-lending slowly vanished.  This happened in the late seventies after the two energy crises (1973 and 1979). The price of oil went up so high that a major liquidity problem was created for developing countries and some developed countries as well.  Thus, there was a need to create more liquidity, and this was done through “program lending” and “policy lending”.  One example of the instruments used to expand lending was “Structural Adjustment Programs (SAPs)”.   The SAPs were put together at the macro level with huge price tags, whereby countries got easy money in exchange for policies and conditionalities. Such programs completely derailed the early efforts on environment and natural resources management.

Benefit Cost Analysis: Issues of Valuation and Public Choices. During the same period of the seventies and early eighties, and because of project lending, major emphasis was given to the applications of Benefit Cost Analysis (BCA).  However, the classic BCA had little or nothing to offer to the valuation of environmental goods and services.  Thus, traditional economists began to learn about “Extended Benefit Cost Analysis (EBCA)” where a major effort was made to provide methods and procedures for environmental valuation in decision-making.  There were many examples: the general valuation of a free-standing forest, the value of wildlife, the value of scenic views, the value of biodiversity, and much, much more.  Several new manuals were written and hundreds of case studies came to publication.  There were a variety of methods (e.g., option demand, proxy valuation) that proved to be extremely useful in demonstrating the importance of capital investments in improving the environmental management of natural resources.

Concomitantly, Institutional Economics made a major contribution to the above mentioned debate by bringing a special angle where incentives, processes, human interactions, and organizational arrangements did matter.  All such areas like norms, laws, rules and regulations; assignment of property rights; management of public goods; and social justice contributed to a number of important public choices.  An interesting debate was about the “Tragedy of the Commons”.  Another one was the delineation and protection of national parks and protected areas.  These were complex and difficult choices to make and where they should not be based just on an economic criterion.  The view was that public policy had to go beyond basic economics.  Therefore, that was a great moment of debate on the environmental calculus versus the economic calculus in public policy making.   Clearly, the use of BCA was then discredited and there are very few BCAs done in a rigorous and comprehensive manner.

Energy Crises: Embracing Macroeconomics. As stated earlier, the two energy crises were a land mark in environmental policy.  It accelerated a move away from both environmental projects and dictating policies embedded within investment projects.   At the time of those crises, environmental policy had to be moved and mainstreamed in macroeconomic policy.  This move was a totally new way of dictating policy and, as we know, environmental policy per-se got completely lost.  The energy crises led to a major debt crisis in Latin America that it lasted around six years.  Research showed that the debt was redeemed via the over-exploitation of natural resources.  These became to be known as negative net savings over time.   Thus, these countries changed their inter-temporal choices in favor of short term gains.  Such an approach implied a great acceleration in the exploitation rates of both renewable and non-renewable resources.

The crises also showed the great contradictions that existed between the evaluation made at the project level –with the use of BCA or EBCA—and the evaluations made at the macroeconomic level, in particular, with the evaluation that led to the choice of macro policies in developing countries.  These contradictions were sharply revealed as those countries got involved in the design of National Environmental Action Plans (NEAPs).  Those who wrote the NEAPs saw a great deficit in terms of capital expansion and asset enhancement in the environment area (under investment on natural capital), while those addressing national economic plans saw the opposite!  In the end, the latter form of plan won and little was really invested in areas of environmental relevance until the nineties and after that.

It was in this period when a few economists brought the idea of Debt For Nature Swaps (DFNS).  Several of these were implemented in Latin America, but their degree of success and impact over the quality of the environment were very limited.  The cases of Bolivia and Ecuador are good examples.  Just before the Rio Conference, several attempts were made to mainstream environmental concerns into macroeconomic policy making.  A good example was the position paper drafted by the UN Economic Commission For Latin America (ECLAC).  Their report intended to address environment and sustainable development issues from a purely macroeconomic point of view.  This was a major contribution to economic thinking.

However, this position was defeated by a more political position supported by, at that time, the new ministers of the environment.  They drafted a very popular report entitled “Our Own Agenda”.  It was popular among activists, NGOs, and some at the political level.  It got much more attention than the one from ECLAC.  The mainstreaming of environmental concerns into macroeconomic policy making remains to be done properly.  This is a major area of research and key in addressing global issues.

The Emergence of Single Issues Politics. It was single issue politics that brought back a serious debate on a number of environmental issues.  However, in spite of its merits, single issues politics fragmented the agenda and was responsible for some serious mis-allocation of resources.  Priorities were dictated by the most outspoken power groups and not based on a long term environmental management strategy.  Thus, aspects of that management (like forestry management) came in and out of the screen of policy makers depending on how single issues politics decided on the matter.  The NGO community was largely responsible for this fragmentation.  Even the structure and governance of some international organizations were put in place to become coherent with that form of politics.

Focusing On Natural Resources Management. The integration between micro and macro opened good useful spaces to address the area of natural resources management.  This area played a very important role in the design of investment projects, macro-adjustment operations as well as on the choice of economic instruments.  Through these lenses there was a better understanding by economists of the rationale involved in environmental management.  It was better than the previous situation in which ecological principles were advocated.

Addressing the Negative Environmental Effects of Economic Growth/Policies. The selection of many economic policies was heavily criticized by the negative external effects they produced on the environment.  An example is that of industrialization and air and water pollution.  Institutional Economics developed a very powerful set of instruments and practices via the so-called Theory of Externalities.  In this context, several market and non-market instruments were selected to correct those negative external effects.  Examples of market-based instruments are taxes (the polluter pay principle) and subsidies (on renewable energy products).  Examples of non-market based instruments are the assignment of property rights, eminent domain, and quotas.  The literature is flooded with theory and case studies demonstrating the benefits and costs of those instruments.

Sustainable Development: An Issue of Inter-Temporal Choices. In its pure essence, the domain of sustainable development has to do with the form and functions we use in addressing inter-temporal choices.  Who will benefit and when?  The debate on these issues begun long ago with the problems encountered in the use of discount rates that were greater than zero.  In fact, some guidelines advocated discount rates closer to ten percent!  At this high discount rate, future benefits were worth little or nothing, in present value terms.  Thus, the bias of the discount rate was against investment for the future.  It was biased against investment that yield results far in the future (plantation of oak trees).  This debate was later on accompanied by a major exchange on inter-generational equity issues.  This debate was impregnated with ethical and moral issues as well as issues from the realm of spirituality and religion.  This is something that this paper addresses later on in a very brief fashion.

Principles of justice (J. Rawl) were often brought into the economic and social calculus.  Many corrections to welfare economics begun to appear including those that had to do with the compensation criteria (Pareto, Hicks, Kaldor-Hicks).  This was a fascinating time for those who like a theoretical debate on those issues.  Furthermore, addressing issues of inter-temporal choices required some form of “supra objective function” that would bring alternative solutions to those making the public choices.  Many of these supra objectives were advocated.  One of them was to leave the Earth at least as well as it was given to us as a generation.  Another was portrayed by the Precautionary Principle, which would advocate to having forms of replenishment whenever one extracts resources from the ground.  This precautionary principle has been successfully applied in forest management and in the management of the Carbon Fund, linked to global warming.

The Sustainable Development Triangles. To facilitate the debate on sustainability, economists resorted to all sorts of ideas.  The simplest one was to tell the public that there were at least three dimensions of sustainability: economic, social and environmental.  This idea was handy as it helped to justify what economists were doing in the areas of economic and social policy.  The above provided the rationale for the creation of the known Sustainability Triangle.   Many triangles were brought to light. An important one was that which distinguished man-made capital, social capital, and natural capital.  And, all sorts of research were made around each of these three topics.  I believe, the most seminal research and studies were on social capital.  Even today, research and policies in the area of social capital tends to capture most of the attention.

In fact, the NGO community, which was so vociferous in the advocacy of environmental and ecological issues, has moved away to address mainly social issues.  Unfortunately and independent of the sustainability triangle one creates, there was not a theoretical framework to address the whole triangle as such.  Most of the time one addressed the trade offs between the corners of the triangle, and went on a one-to-one basis analyzing policies and problems.  An interesting triangle to note was that of institutional capital, natural capital and human capital.  This triangle assumes that man-made capital depends on the level and quality of human capital and, thus, leaves it as a subsidiary form of capital.  Also, it dis-aggregates social capital into human capital –the subject of development—and institutional capital –the processes involved in development (incentive structures).  And, the third is natural capital –the object of sustainable development.  Naturally, all of the above are teaching or didactic constructs to show other aspects of sustainable development and distill some important policy matters.

Sustainable Development and Theory of Capital. The connection between sustainable development and the theory of capital came later on.  It was the result of research and studies done on ex-post evaluation of projects and programs.  A sample of 2200 completed projects were reviewed, 650 of which had some statement on sustainability of the development effort, sustainability of development and on sustainable development proper. Using a “revealed preferences approach” and principal components analysis, it was revealed that sustainable development consisted of attaining a balance among all forms of capital participating in the development process.  Those projects revealed the following forms of capital: human, natural, physical, financial, institutional and cultural.  Specific patterns of sustainability were found within a sector, between sectors and within the economy as a whole.  This concept of sustainable development formed the basis for major macroeconomic studies, one in Nepal and the other in Bolivia.  These studies focused on 25-30 years of development and investment lending, with a natural resource management perspective.  The above-mentioned definition exalts the importance of a composite of capital in capital accumulation and wealth creation.  And, that the idea of sustainable development is not just about natural capital, but about the balance among all forms of capital participating in the development process.  There is a lot to be said and debated but there is little time in this presentation to do so.

Return To A Regulatory Approach: EIS. During the last few years, there has been a tendency to bring back a regulatory approach to environmental management, once again.  Many of the international organizations have professionals assessing the state of the environment as a screening device, to see whether decisions comply with agreed standards, and the like.  This is a ‘negative approach’ to management and, in the end, the view is simple: to shape up or ship out projects from a given stream of lending.  Little has been done in the area of policy.  These types of assessments are extremely rare.  Much more is to be done.  One of the most popular techniques is that of the “Environmental Impacts Assessment (EIA)”, as a matrix of options regarding what to do in terms of approval or in terms of monitoring while in implementation.  These assessments have been complemented with the “Social Impact Assessments (SIA)”.  These are more popular than the ones above as more attention is being paid to the social dimensions of sustainable development (impacts on indigenous peoples).

Who and Why People Pollute: Human Consciousness in Sustainability. Regulation is not very effective if it does not have a human face.  It is essential to know who pollutes.  The emphasis on who pollutes has brought important information about the various economic activities, the behavior of actors including countries, and the nature of many decision making processes.  Many non-governmental organizations have put a face on negative external effects and confronted heads on those who are responsible for environmental degradation.  This approach has generated lots of political opposition as existing power structures tend to block bad press and negative images.  Putting a face on global warming, for example is essential.  People must know that it is people who pollute.  Factories are people, policies are people, and so on.  To depersonalize the process of environmental degradation only benefit those who bear the benefits but not the costs of that degradation.

The ultimate question and perhaps the most interesting of all is “Why people pollute?”  It is essential not to trivialize the answers.  However, experience shows that there are at least two important reasons why people pollute.  One, because of the inability to self realize the values that lead to sustainable development, like solidarity, interdependence, and the respect for nature (to name just three).  Until and unless these values are self-realized, people will continue destroying nature.  Two, because of the very high levels of toxicity.  This toxicity numbs our senses and we become less connected with the genetic codes of nature and, thus, insensitive to environmental destruction.  In addition to the above there are other possible reasons:

 

• The wrong value system in relation to the uniqueness of nature (less intelligent, inert, and material).
• The culture that says that the Earth is an infinite sink of waste and, thus, people may pollute without any major consequences.
• The view that humans are so intelligent that technology will save them no matter what level of environmental destruction takes place and, thus, all one needs to focus on is on technological change.
• The paradigm promoting the idea that we need to grow first and clean later, although no experience shows that one comes back to clean later (this is changing).
• The fact that people have very low levels of consciousness and collective coherence and, thus, we do not really have the strong energy needed to act.
• The inability of governments to manage the public good nature of our resources and the environment.

 

In the end all is about human consciousness.

 

From Sustainable Development to Empowered Development. It is the inner minds and souls of people that need to be changed.  It is the inner minds and souls of those actors who are responsible for environmental degradation and sustainability that need to be changed.  The type of change suggested here is not something societies will attain by fiat.  Human transformation processes need to shift and through such shifts people will behave differently.  The future of sustainable development lies on the creation of a collective consensus about the quality of life we want to have as a collective.  This consensus will be attained out of empowering people.  In turn, this will be attained out of meaningful participation and representation in decision and policy making.

Thus, the next paradigm shift will be “Empowered Development”.  This is not just political power.  But, it is a composite of inner and outer power, so that people become sensitive to the values of nature, over space and time, and to the contributions nature brings in terms of both material and spiritual transformation.

Sustainable Development as an Issue of Human Rights. Sustainable development may also be sought as a human right.   As most people know, international conventions have been advocating that humans have a right to a clean and decent environment.  This is not just a legal issue per-se, but a very profound and subtle normative issue in our societies.  It opens a series of questions like who is responsible for the realization of those rights and how are these rights to be enforced and sanctioned.  For example, if we have the right to clean air, who is to sanction countries that are heavy polluters?  For the moment, there is not a powerful and effective form of collective and global organization that will deliver those rights to people.

IV.  A New Institutional Framework: The World Environmental Organization (WEO)

The proposal to create a WEO is not new at all.  We find several proposals floating even in the seventies; at that time, there was a lot of debate about the creation of a global environmental organization.  Then, in the nineties and early in this century, the debate got even more precise and elaborate.

What is interesting to note is that these proposals have not been supported in the various Rio Conferences.  Governments seem to like only moves at the margins and, thus, they have tinkered around the edges with language and supporting only the strengthening of what exists here and there, and leave the proposal for a WEO behind.  Will they change their minds this time?  At least the website of the Secretariat of the Rio Plus 20 Conference has brought the issue to the fore.

I am in favor of a WEO, as the vision of a sustainable society will never see the light of the day if one expects this vision to arise from a  summation of all the diverse and dispersed forms of environmental governance structures and rules for sustainable development.  To me, a WEO does not mean that other organizations do not address their own environmental issues.  On the contrary, they must do so.  What is important here is to send a signal that issues of sustainability are not just residuals to economic development concerns, as has been so prevalent in the past.  This organization must be on equal footing to the UN and all the Bretton Woods Institutions –The World Bank and the International Monetary Fund– and the World Trade Organization.

The big question is whether RIO Plus 20 is the best milieu to debate and support this proposal.  I hope it is.

If a new institutional framework is to be adopted globally, we must break from the traditional approaches of the past.  Otherwise, more of the same will yield more of the same.

Specifically, in my view, this global organization should not be dominated by governments.  If in the end this is the case, it is better to do nothing at all.  This organization should be a collection of assemblies and councils including, for example, civil society, indigenous peoples, spiritual organizations, corporations, universities and research institutions, governments, unions, etc.  To bring coherence to these councils, there should be a legislative body, like a General Assembly, where all these groups of actors will be represented in proportions with voice and voting powers.  If the WEO is not an open organization, then, again, its is better not to have it.

The proposed WEO should be equipped with the best information gathering and dissemination technologies so that all corners of the world can be reached and participate.  In the WEO, the notion of leadership will be mostly to serve programs and ideas coming from the different councils.  In the past, most international organizations have assumed that they are more capable than the clients they are suppose to serve.  Thus, they have imposed programs with no traction in the end and we know that there is a large cemetery of development projects everywhere.  One case in point is that of poverty alleviation programs, where it has been assumed that poor people do not know what they want and, thus, they have been injected with ideas and programs that have been bound to fail.  There has not been a sense of ownership.

It is central that all the above-mentioned actors be at the table with equal powers.  Today, governments must be open to this idea of the above mentioned assemblies of different social actors.  To be even more categorical: if it were not for the active role played by civil society on all  themes related to the environment and ecology, we would be light years behind the curve. Civil society has shown initiative, capacity to deliver, maturity and vision.  Thus, it should not be simply marginalized.

V.  Final Remarks

Sustainable Development is about how the natural environment supports people, and how people support nature both over space and time.  This is a relationship of multiple forms of interdependence and interconnectedness, as well us of multiple levels of refinement and sophistication.  In particular, what we see at the “gross level” maybe just one aspect of many subtle layers explaining how we transform and how we are transformed in exercising this interdependence.  It is not only one form of interdependence.  Human beings are more than matter.  Nature is also more than just matter.

Thus to make the best out of these mutual interactions, several things must happen.  The first is that we must consider the impacts interdependence has onto both our material welfare and our non-material welfare (spiritual welfare).  Otherwise, our understanding of the many forms of mutual interdependence will be truncated, and we will simply focus on the limited role of nature in the accumulation of just material wealth, as any other merchandise or asset.  The second is that we must change our view and understanding of nature.  Nature is not an inert entity.  The earth is alive, the earth is life.  If it were not life itself or alive we should not feed ourselves with products coming from nature.  Nature is infinite intelligence and, thus, our mutual interactions must tap and protect this intelligence, and by not destroying nature, foreclose our options for the future.  This idea is different from what has been advocated in the past, as human beings being superior, or being stewards, protectors, developers, etc., of nature.  Yes, in our vision, intent, language and actions, we must act in ways that enable sustainability to take place.  Third is our need to experience more subtle levels of nature’s existence.  To be able to do that we have to experience more subtle levels of human experience.  Otherwise, what is said here will remain just a proclamation or a very abstract idea.  For that, our system of education must change and devote more time to elevate our sensitivity, so that interdependence is not a proposal but a way of life.  Fourth is that there is no human activity of relevance that does not happen in nature, or that it is not dependent on the availability and quality of our natural environment.

In defining the new world institutional framework to peacefully protect nature, we must include a matrix of components and instruments at the international and domestic levels.  Both bundles must be totally in sync, otherwise the results will continue to be limited at best.

Institutions are people.  Thus, new institutions must be populated by people with higher levels of consciousness and sensitivity about the fundamentals of nature and our many forms of interdependence.  We have to put a face on pollution, so that we know who pollutes and assist in stopping that pollution.  We must seek a new corporate core, so that these corporations do not continue destroying the environment and debilitating our existing institutions.   There is no point in enacting legislation or signing treaties, if no one is going to comply or apply them.  The shelves of the UN and of governments are full of these treaties, full of dust awaiting for some future action.

It is imperative to come up with a set of institutional and organizational arrangements that bring new forms of human interactions with nature.  This is the essence of the debate on institutions and proposals for a new WEO.  Rio Plus 20 must create the necessary spaces and give the needed political support for a debate of the above-mentioned nature to take place.  In the past, these conferences have discriminated explicitly against the participation of certain groups in society.  I have seen this discrimination with my own eyes.  I have been there myself trying to assist, for example, many indigenous people who were left out of the last Rio Conference.

To have an all inclusive institutional arrangement is not only necessary but it will be the only way to ensure a dignified collective future for humanity.

With love and to the service of humanity.

Cho Tab Khen Zambuling