Wastes, the environment and the international economy

Wastes, the environment and the international economy

Nigel Harris

Growth of indutrial output in developing countries should continue at a high rate, and much of it will be traded inter- nationally; it will be energy and pollution intensive. Cities combine roles as fixed locations for production and as junctions in the movement of goods, people, finance, etc. The concentration of pollution sources thus implies considerable threats to the environment. Local, national and international agen- das of environmental action for cities are emerging, but remedies are more in the field of improved management and effective political action than new investment. This is clear in different public attitudes to pricing energy. Protect- ing the environment is thus an issue of macro-economic management as much as it is one of detailed supervision.

Nigel Harris is Professor of Development Planning, Development Planning Unit, Uni- versity College London, 9-11 Endsleigh Gardens, London WC1H 0ED. Tel: +44 71 388 7581.

1These issues are explored in detail in Nigel Harris, Of Bread and Guns: the World Economy in Crisis, Penguin, Lon- don, 1983, and Nigel Harris, The End of the Third World: Newly Industrializing Countries and the Decline of an Ideology, Penguin, London, 1987.

The international economy

The period since the early 1960s has seen more clearly than before the emergence of a single technically integrated world economy. The trends in this direction are of course much older, but it was hardly perceived earlier. Furthermore, countries are involved to different degrees, but the More Developed Countries as a group can be seen to be forming, in an important sense, a single economy, with linkages that directly or indirectly increasingly include, in different ways, much of the rest of the world. The old 19th century patterns of arms-length exchanges of capital and commodities (for example, of primary commodities for manufactured goods between less and more developed countries) are increasingly being superseded by a single manufacturing economy, with different specialized contributing points in different countries, but forming a single production process. It becomes impossible to identify accurately the national origins of a commodity (only the last place from which it came) or of capital, even though governments oblige those who collect data to classify both items by nationality. An increasing proportion of the output of each country is traded externally, and external conditions have become the key determinant of domestic activity.

In important sectors of manufacturing, part of this process of economic integration is associated with the decline in the comparative advantage of the older industrial countries of Europe and North America, and their increasing dependence on imports from a selection of developing countries. The demand for imports has moved in the past 20 years from labour intensive goods, or those with a low value relative to their unit weight (garments, electronic components, jewelry, etc), to include in the 1980s selected capital goods, electrical, electronic and telecommunications equipment, vehicles and transport equipment, etc. The manufactured exports of those developing countries which initiated the process in the 1950s and 1960s (the Asian Newly Industrializing Countries, Brazil, Mexico, Israel, Spain, etc), have been technically upgraded in value, skill and capital intensity. Simultaneously, com- panies in other developing countries have taken over the external markets for low value goods, producing extraordinarily high rates of industrial growth in the 1980s in South East Asia, China, Mauritius, Bangladesh, etc.

0264-2751/92/030177-09 © 1992 Butterworth-Heinemann Ltd 1 77

Wastes, the environment and the international

~Bela Belassa, Trends in Developing Countries" Exports, 1963-88, Policy, Re- search and External Affairs, Working Pap- er 634 (Development Economics), World Bank, Washington DC, March 1991.

economy

Despite three recessions in the More Developed Countries since 1974, the process of the relocation of world manufacturing capacity in selected sectors in favour of a growing number of developing countries has continued. This is so even though there has been increasing protectionism and more or less systematic efforts by many governments in the More Developed Countries to obstruct imports and defeat the spirit, if not the letter, of the G A T T regulations. Belassa: has shown that a 1% annual rate of growth of gross domestic product in the More Developed Countries has been associated with rates of increase in their manufactured imports from developing countries of 3.6% per year in the period 1963 to 1973, and 4.0% between 1973 and 1987. Furth- ermore, in engineering goods - where skill and capital intensity is in the middle industrial range - the annual rate of increase in developing country exports between 1963 and 1988 was 21% (raising the share of such items in the total manufactured exports of developing countries from 11.6% to 43°/,,). The evidence suggests that the process of relocating manufacturing capacity in favour of developing countries is now so deep rooted that it will continue for the foreseeable future. Indeed, it is not clear that the governments of the More Developed Countries are able any longer to exercise systematic control over their economic frontiers, even if they retain the capacity to inflict temporary damage on particular sectors.

If this perspective is broadly correct, we can envisage the continuation from 1960 for the rest of the century of a process with several important aspects so far as environmental damage is concerned.

(1) There will be a very considerable expansion in the world's industrial output, much of it increasingly originating in developing countries (where the overwhehning bulk of new industrial employment will be created).

(2) There will be a continued change in the composition of this output, with, among other attributes, the following features.

First, as the energy intensity per unit of output continues to decline, the absolute level of energy consumption will increase very substantial- ly. Present estimates suggest the world consumption of energy is likely to increase by 50-60% from its present level of the equivalent of roughly 161 million barrels of oil per year. At present, average annual per capita consumption in developing countries is equivalent to one to two barrels of oil, compared to between 10 and 30 barrels in Europe and Japan, and 40 in the USA. The redistribution of manufacturing capacity and associated transport to move the inputs and outputs, as well as a 'catching up' process in consumption, will produce much faster rates of growth of energy consumption in developing countries, even to the point - if a greater share of the most energy consuming manufacturing becomes concentrated there - of the annual consumption being greater. Fur thermore, over two-thirds of the heat content of fossil fuel reserves derives from coal, of particular importance in China (with a third of the known coal reserves) and India. Thus, to the well known problems involved in energy production and consumption, are added the specific ones involved in burning carbon, disposing of coal ash, etc.

Second, the chemical composition per unit of manufactured output may also be increasing, both to improve the durability and other characteristics of the product, but also to reduce the average weight of the output to allow for lower costs of movement (since an increasing proportion of the output is likely to move long distances in a globally

178 CITIES August 1992

Source: Op cit, Ref 4. a 1952. bDDT.

3See Wil Lepkowski, 'The disaster at Bhopal: chemical safety in the Third World', in Charles S. Pearson, ed, Multina- tional Corporations, the Environment and the Third World, World Resources Insti- tute, Duke University Press, Durham, NC, 1987. 4B.B. Sundaresan, P.V.R. Subrahmanyam and A.D. Bide, 'India', in Industry and the Environment, United Nations Environment Programme, Nairobi, No 4, 1984, p 70. 5There are numerous sources here, but see in particular: Urban Policy and Econo- mic Development: An Agenda for the 1990s, World Bank Policy Paper, World Bank, Washington, DC, 1991; Nigel Harris, Urbanization, Economic Development and Policy in Developing Countries, DPU Working Paper 19, Development Planning Unit, London, January 1990; on a more elaborated basis, cf D.H. Henderson, Urban Development: Fact, Theory and Illu- sion, Oxford University Press, Oxford, 1988. 6Figures cited by Per Ljung and Catherine Farvaque, Addressing the Urban Chal- lenge: A Review of World Bank FY87: Water Supply Development Operations, General Operations Review, INU 13, World Bank, Washington, DC, March 1988. 7Figures cited in Report of the National Commission on Urbanisation, Government of India, New Delhi, Vol 1, August 1988.


Table 1, Growth in production of selected industries producing toxic or hazardous waste in India, 1950-80 (tonnes x 10).

1950 1960 1970 1980 Pesticides NA 1.46 b 3.00 40.86 Dyes and pigments NA 1.15 13.55 30.85 Pharmaceuticals 0.25 a 1.23 1.79 5.07 Organic chemicals 200 580 17 100 24 100 Fertilizers, nitrogenous

and phosphatic 18 153 1 059 3 005 Nonferrous metals:

Copper NA 8.50 9.30 18.8 Lead NA NA 1.88 11.4 Zinc NA NA 23.41 52.7

Caustic soda 11 101 304 457

integrated industrial system - see below). The rate at which new synthetic substances are produced in the chemical industry appears to be higher than the rate at which they can be tested for hazards to health and the environment - as shown in the disaster at Bhopal 's Union Carbide plant. 3 There are few systematic statistical indicators of the chemical composition of output, although there are data for some countries on the strikingly swift increase in the output of industries generating toxic or hazardous wastes. Take, for example, the position in India up to 1980, shown in Table 1.

Third, some of the highest rates of growth in manufactured exports from developing countries are already in some of the more pollution intensive sectors and subsectors - for example, electronic components, basic metals, vehicle parts, plastics, some chemicals, leather products, printing, glass, paper and cellulose, cements and fertilizers.

(3) The geographical redistribution of the world's manufacturing capacity towards developing countries will require even greater increases in the movement of goods between specialized, geographically separate, contributing production points, and between producing and consuming areas. The movement will be enhanced, in so far as developing countries experience disproportionate increases in consumption per capita, in 'catching up" with consumption levels in developed countries, particularly in the field of consumer durables and goods with a relatively high use of energy. There are thus further implications in terms of the use of energy in transport and the disposal of wastes.

(4) The increase in the productivity of modern manufacturing and services appears to be in part associated with the territorial concentration of the workforce and of supporting facilities and infrastructure; that is, urbanization. 5 Although there are major problems in measuring the effects of population concentration, the World Bank has estimated that 60% of the combined gross domestic product of developing countries, and 80% of the increment, is generated in urban areas, indicating the relatively high current levels of average per capita productivity and the speed at which those levels are rising. 6 We also have figures on the urban contribution to gross domestic product for Low Income India, rising from 29°/,, in 1950-51, to 37% in 1970-72, 47% in 1980-81, with a projection for 1994-95 of 58%. v

Thus, implicit in the anticipated growth of manufactured output of developing countries is continued rapid concentration of population. We have seen something of the scale of this in the past period, with the urban population of developing countries (variously defined) growing from 300 million in 1950 to 1.3 billion in 1980, and a United Nations medium variant projection for 2020 of 4 billion. The highest rates of

CITIES August 1992 179

Wastes', the environment and the international

8From Prospects of World Urbanisation, United Nations, New York, 1987.

econortly

urban population growth are usually associated with those countries experiencing the highest rates of economic growth (and while there arc some cases of high urban with low economic growth, there are no cases of low urban growth with high economic growth). The following are some important special features of contemporary urbanization which suggest underlying economic peculiarities.

First, while at present over half the urban population of developing countries lives in smaller towns and cities where the provision of infrastructure and the quality of management are often considerably inferior to the larger cities, the urban population as a whole is tending to concentrate in a growing number of large cities. In 1950, there were 31 cities of one million or more people in the whole of the developing world (and five of four million or more people), whereas in 1985 there were 146 (and 28 of four million or more). The United Nations projects that by 2025 there may be 486 cities of the first type (and 114 of the second). It appears that the larger city is emerging as the most appropriate location for the developing functions of the pattern of production of modern industry and services. Unlike the developed world (where much manufacturing has relocated to green field sites), cities in developing countries still tend to combine the fixed locations of production in and around the urban areas with an increasing role as junction points in the flows of goods, finance and people (as in the developed countries). Thus, for example, three-quarters of India's organized manufacturing sector (including heavy chemical production) is located in and around the 12 largest cities. In terms of the degradation of the environment, the physical concentration of polluting sources (transport, manufacturing, domestic fuel burning, etc) w~stly increases the difficulties of dispersing emissions in water courses and in the air by natural means (currents and tides, winds, ctc).

Second, the increasing concentration of the urban population in larger cities is not the result of higher rates of growth of the largest cities. On the contrary, the largest cities everywhere are tending to grow rather slowly, and in some cases may lose population, particularly from the inner - and older - city areas (as has occurred with the older industrial cities in Europe and North America). The growth of the population of large cities arises from the increasing number of smaller cities which grow into large ones.

Third, the slower growth of the largest cities is very frequently associated with the increasing spread of the urban population over larger areas (so that decreasing population densities come with increasing absolute size). In some cases very large metropoplitan regions are formed, with rapidly growing smaller cities within or on the edge of the metropolitan region. There arc striking examples of this in Latin America. For example, the relationship between S/io Paulo city, Greater S/io Paulo and S/io Paulo state, or in Mexico between the Federal District, the Metropolitan Zone of Mexico City and the Central Valley of Mexico. Within such large urban regions, there are emerging patterns of territorial specialization - as in the larger world economy - which entail increased movement of manufactured parts between different production points, increased movements of workers between these production points, and increased movement between increasingly separate residential, working and specialized shopping areas. Some of the environmental implications of this process in terms of increasing volumes of traffic are already only too painfully apparent in the big


9See Nigel Harris and Sergio Puente, 'En- vironmental issues in the cities of the developing world: the case of Mexico City', Journal of International Development, Vol 2, No 4, October 1990, pp 500-532.


cities of the developing world. In Bangkok, where it is said 35 000 cars are added to the city's stock annually, there is the familiar combination of poor management and inadequate road space (exaggerated by street parking, mixed traffic, etc) producing the end of rush hour congestion, since traffic standstills exists throughout much of the day. Standing vehicles with indequately serviced engines running throughout the hours of daylight contribute to the fact that 60% of Bangkok's air pollution (and all of the carbon monoxide) is produced by vehicles. In the Metropolitan Zone of Mexico City, 80% of pollution is now produced by vehicles, the problems being exaggerated by the altitude and the physical configuration of the valley, as well as an aging and poorly serviced vehicle stock, inappropriate gasoline, etc. ~J The decline in public investment in the 1980s. following structural adjustment prog- rammes, can have done nothing to improve this situation in many countries.

(5) The shifts in economic activity and movement between developed and developing countries are also movements to areas where mechan- isms for the detailed supervision of production and mobility in the interests of the environment are weaker. The inadequacy of the infrastructure, the generalizing of knowledge among the population at large and the difficulty of implementing regulations with relatively weak public authorities, frequently frustrate public commitments to cope with threats to the environment. Until relatively recently, governments in developing countries were very much more preoccupied with expanding employment than with protecting the urban environment, and such attitudes may persist beyond the point where financially tolerable means can be put in place to guard against the damage. Furthermore, the much greater volume of movement of goods entailed by the emerging international economy means that freight passes through the areas which are not officially supervised - in the air and sea - so that the potential for dumping wastes in uncontrolled areas rises.

(6) Hitherto, world tourism has been heavily concentrated in developed countries. In the future, however, the highest rates of increase are most likely to be in developing countries. Most of this movement will take place through the major communication junctions in the large cities. Without timely expansion of the capacity to receive, accommo- date and generally handle this increased movement, the environmental problems already enumerated can only worsen. Outside the big cities there is often a lack of basic services, with the result that new hotels use inadequate waste disposal processes, discharging untreated wastes and thereby swiftly degrading local human and natural resources - for example, water courses, including the sea - to the loss of local agriculture and fishing as well as water, land and vegetation.

(7) The changing age structure of the world's population may also affect patterns of movement and energy consumption. The aging of the population of developed countries increases the numbers of those with time and income to travel abroad on short visits or to live abroad in warmer climates for longer periods. Aging also increases the demand for labour intensive services at a time when the supply of locally born labour in developed countries is becoming increasingly restricted because of the changing age composition of the population. This conjunc- ture is thus likely to increase the movement of the elderly to developing countries (where the population is still on average growing younger) and increase the migration of young workers to developed countries (on the



assumption that migration controls in developed countries will ultimate- ly have to be relaxed). There is no need to repeat the implications of this for energy consumption and waste production.

The increase in the potential for damaging emissions in the cities of the developing world as a result of the emerging patterns of the international economy does not, ot course, occur in situations which are already adequately protected against environmental damage. On the contrary, there is a substantial backlog of severe deficits. Thus, the dangers are only too apparent .

~°Exp(ored relative to Mexico City by Ser- gio Puente, 'La Calidad Material de Vida en la Zona Metropolitana de la Ciudad de Mexico', in Sergio Puente and Jorge Legorreta, eds, Medio Ambiente y Calidad de Vida, Colleci6n Desarrollo Urbano, DDF y Plaza y Janes, Cd. de Mexico, December 1988. ~Lepkowski, op cit, Ref 3. ~21ndustry and Environment, op cit, Ref 4, January-March 1988; see also B.I. Castle- main, 'The export of hazardous factories to developing countries', Intemationa! Jour- nal of Health Sciences, Vol 9, No 4, 1985, pp 569-597.

The agenda

The agenda of environmental issues facing the cities of the developing world is already clear, particularly with regard to disposal of wastes, the provision of safe water, the control of industrial emissions in the air and water, the growing problem of vehicle generated air pollution and issues of social inequality.~° To these will be added the effects of growth and change in the world economy, exaggerated where the speed of urbanization and industralization is rapid and the local administrative capacity, experience and knowledge poor. The issues raise impossible dilemmas precisely because the concentration of the workforee is so important in raising output and productivity, particularly the poorer the country. A determined effort to reduce poverty thus coincides with the most severe threats to the environment. Even if the desire to redirect or even frustrate economic growth exists, it is probably a utopian objective - as Lepkowski notes:

One can question, as proponents of appropriate technological development do, the social utility of intensive chemical-based development, especially in agriculture. But the express train has long since begun its journey. It won't be stopped as long as the technology of health and safety can keep pace with the technology of what is known as progress. II

A pattern of increasing global interactions generates a different range of specific issues that may occur outside the existing purview of official regulation, or that requires high levels of inter-governmental collaboration. For example:

(1) Many governments and groups of people - arc unwilling to accept the disposal of wastes, particularly hazardous or toxic wastes, within their own borders; they may even be unwilling to accept wastes generated within their own borders. It is often uncertain how such wastes should be disposed of safely, what happens to them over long periods of time, and how they react with other substances where they are stored. The volumes inw)lved are also frequently large and growing quickly. For example, the existing stockpile of spent fuel from nuclear power stations is currently put at some 80 (100 tonncs, with an estimated initial disposal cost of US$100 billion, and annual recurrent costs of something of the order of US$10 billion. There are growing difficulties in finding disposal sites, and there is little effective monitoring of the international movement of wastes 12 (although it is known that at least 15 governments in developing countries have been approached at one time or another to allow wastes to be stored on their territory). Given the role that cities play as junctions in the movement of freight by land, sea and air, it is likely that hazardous wastes do pass through densely populated areas, with all the at tendant risks.

(2) Many developing countries are reasonably suspicious that stricter

182 CITIES Augus t 1992

13Charles S. Pearson, Implications for Trade and Investment of Developing Countries of U.S. Environmental Controls, UNCTAD, New York, 1986. 1all. Jeffrey Leonard, Pollution and Multi- national Corporations in Rapidly Indus- trializing Countries, The Conservation Foundation, Washington, DG, 1984; on the US-Mexico border, see Roberto Sanchez and John Gaventa, 'Movilazacidn interna- cional establecamiento maquilador y medio ambiente', in Bernardo Gonzalez- Arechiga and Rocio Barajas Escamilla, eds, Las Maquiladoras: Ajuste Structural y Desarrollo Regional, El Colegio de la Fron- tera Notre y Fundacion Friedrich Ebert, Tijuana, 1989. 15See the short account in Finance and Development, Quarterly Journal of the In- ternational Monetary Fund and the World Bank, Washington, DC, March 1991, p 24.


pollution controls - and the resulting higher costs confronting manufacturers - induce the relocation in polluting plants to developin b countries, where the regulations may be less stringent or implemented with greater laxity, creating what have become known as 'pollution havens'. In fact, there is little systematic evidence at national or global level that this is so - evidence, for example, of the increasing relocation of capital in polluting industries, or a rise in the import of pollution intensive goods by developed countries.~3 Nor is it clear, in the range of changing costs per unit of output facing manufacturers, how significant are those arising from tighter environmental regulation; it seems unlikely that on their own they would induce systematic relocation. However, as standards rise and regulations become tighter - as for example, with the 1990 US Clean Air Act - it could be that the costing picture will change. Certainly, the complaints of manufacturers in selected sectors (vehicles, chemicals, electricity generation, coal mining, steel production) have become increasingly bitter. Furthermore, at the local level - for example, in the US-Mexico border region - there seems to be some evidence of relocation in asbestos, textile and building materials manufacture, l~ Establishing parity of regulations to reduce the incentive for manufacturers to relocate to escape pollution controls requires close cooperation between governments, a cooperation which hitherto has been most difficult to achieve. However, limited measures to secure greater uniformity do exist. One element in such efforts is the attempt to establish a 'level playing field' in trade, since variations in environmental regulations between countries are often used as a measure to obstruct imports, thus becoming an instrument of protectionism.

(3) The problem of ~spillovers' between countries - where a poor environment in one country affects its neighbours - also raises difficult issues. Winds carrying air pollution (as between the UK and Norway), tides fouling the beaches in one country with the oil spillage of another, etc, mean that the potential beneficiary of environmental control is not necessarily the country paying to implement the control; the incentives for the polluter to change are therefore weak. As is well known, there are considerable efforts to establish common international standards and targets for pollution reduction (for example, the UN Economic Commission for Europe convention on Long Range Trans Boundary Air Pollution, 1985, on sulphur dioxide emissions). Too often, however, comparable agreements do not include developing countries. The differences in cost sharing have prompted efforts to establish funds for transfer between countries to cope with this - for example, to compensate developing countries for conforming to the standards of developed countries (as in the Global Environmental Facility to assist developing countries to phase out the use of chlorofluorocarbons, or rearranged debt servicing provisions).15 Nevertheless, these measures are still far from covering all the issues involved, let alone affecting the immediate ones of environmental degradation.

Issues and options

The picture of future patterns of growth, concentration and movement rightly encourages considerable anxiety. Yet the means to mediate the processes and reduce the risks already exist and costs are not necessarily prohibitive. Thus, in the most elementary sense, there can be no sustained population growth in the cities of developing countries, nor


W~tstes, Ihe em, ironment and the international e('onomy

expansion in trade and output, without increasing employment and incomes. Thus, in principle, the financial means to compensate , to appropriate standards, for the negative aspects of growth arc created simultaneously with the growth itself. The most difficult problems lie not so much in the technical area of managing the environment as in the field of financial management ; in gaining access to this growing stream of income. Technical inmwations are useless without the social capacity to implement them, Managing the environment includes a wide range of public issues, from macro-economic policy to policies in the fields of energy (particularly electricity production), transport and so on. In the area of environment regulation proper , formal standards tire often the same in developing as iq developed countries. ! lowcvcr , national and local governments in developing countries are either unable to implement the rules, or politically unwilling to press policies where the costs are clear and immediate , but the benefits unccrtain, or so long-term, that they are politically remote. (This is particularly so where thc pos tponement of remedial action has no immediate deleterious effects. ) The political issucs inw)lvcd in implementing cnvironmcntal managc- ment are much the most serious obstructions to action. For example, the unwillingness of succcssive Mexican administrations to raise the price of gasoline has had notorious consequences in tcrms of air pollution in Mexico City (where still in 1990, at the official exchange ratc, the price of gasoline was US$0.56 per US gallon}.

The incentives of a market system frequently collide with the priorities of protecting the environment. In general, agents arc rewarded for increasing supply, without close attention to the difference between inputs which are renewable and those which arc not. Environmental economists argue that the real cost to the world of the depletion of scarce raw materials is not adequately rcflecled in market priccs, so that they are excessively used (and produce negative cffccts in terms of environmental damage). Indeed, the World Bank has sponsorcd the development of a methodology to assess what arc seen as the real costs here, and in some cases this suggests that positivc ratcs of growth of national ouput arc illusory, i(~

Leaving aside this issue, however, the pattern of prices maintained by public authorities is quite often an important source of the damage to the environment. Reducing this damage through changes in pricing may thus bc a low- or no-cost policy option to improve matters. For example, in many developing countries, governmcnts seek to stimulate industrial expansion by under-pricing electricity. The World Bank estimates that the electricity tariff in developing countries is, on average, about half that in developed countries (in India the tariffs tire on average 40% of the world level, and m China, half the Indian level). This encourages the cxtraw~gant use - and waste - of energy, over-investment in electricity generation, and a rangc of associated pollution. In Eastern Europe, where for many years both oil and coal supplies (both domestically produced and imported from the USSR) were under-priced as a

'6Mohan Munasinghe and Ernst Lutz, En- deliberate act of policy, there has been a notorious squandering of v i ronment - E c o n o m i c Evaluat ion o f Pro- energy, with severe effects in terms of air and soil degradation (most [ects and Policies for Sustainable Develop- ment, Environment Department Working extreme perhaps with the burning of brown coal in former East Paper 24, World Bank, Washington, DC, Germany). Some calculations suggest that industry in China uses twice January 1991; and Yusuf Ahmed, Salah El as much energy to produce a unit of gross domestic product as in the Serafy and Ernst Lutz, eds, Environmental Accounting for Sustainable Development, USSR, and four times as rnuch as in Japan. Thus, there is enormous World Bank, Washington, DC, 1991. scope for economies before new investment is considered; many of the


17See Juan Manuel Ramirez Saiz, 'Turis- mo y medio ambiente: el caso de Acapul- co', in Estudios Demograficos y Urbanos, El Colegio de Mexico, Vol 2, No 3, September-December 1987, pp 479-512. 18See Nigel Harris, Environmental Issues in the Cities of the Developing World, DPU Working Paper No 20, Development Plan- ning Unit, London, August 1990, p 26 ft.


power shortages characteristic of developing countries are the product of policy, not inadequate capacity. Some governments have used low energy prices as an anti-inflation instrument, but have then been obliged to cover the resulting deficit in the electricity corporation through an increase in the public deficit, with resulting inflationary effects. Low energy prices not only distort the incentive to invest, they also sap the drive of managers to recover the full costs of production and to pursue economies. Estimates of excessive potential demand because prices are too low also encourage excessive external borrowing (some 30 to 4(1% of the cumulative debt of developing countries is said to be related to investment in power generation), and impose a heavy burden on public investment (power generation takes between a quarter and a third of public investment in developing countries), Where the energy source is the burning of coal, often in old and poorly maintained furnaces, the negative effects in terms of air pollution and the degradation of water courses and soil (through the dumping of wastes) becomes extreme.

If macroeconomic policy - and pricing - is a key area of reform, sectoral policies are also of great significance. Given the increasing role of vehicles in damaging the quality of air, transport po l i cy- particularly, the selection of different modes of transport for mass transit, the pricing of movement, road investment, and traffic management - becomes an important element of any environmental policy. The numbers of urban vehicles are apparently increasing faster than road space or management capacity, and the increasing role of private cars, carrying relatively few people at high energy cost per person moved, compounds the problems.

Thus, the existing practices of public authorities are an important component in the damage inflicted on urban environments - damage set to get considerably worse as the global economy evolves unless remedial action is taken. Governments alone, however, cannot fully counter the trends. At local levels, the emerging collaboration of government, non-government organizations and individuals is a necessary means of monitoring the local environment in detail. For that to work there has to be much less public secrecy, much greater information, and access to the means of making individual action effective (for example, by resorting to the courts). National governments need to ensure that local authorities have a real incentive to take the questions seriously; for example'in Acapulco where authorities were obliged to take up the environmental issue because tourist arrivals started declining.~7 However, in general this discussion is not pursued here since the issues and priorities have been covered elsewhere.tS

Improvements are slow, cumulative and piecemeal. Environmental risks are being reduced, even if much more slowly than those most aware of the problems would wish. Measures of international collaboration are slowly establishing a network of controls and a set of common standards. The enormous growth of output which is required to give all the world's population a tolerable standard of living will considerably increase the risks, but not necessarily more quickly than the capacity to cope. Certainly, people are now aware of many of the dangers in a way they were not in the past, and governments are, with whatever hesitations, increasingly aware that the environment has become a political issue. In these changes lies the hope that the more pessimistic scenarios are inappropriate.


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Wastes, the environment and the international economy