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Growth Vs. Environment


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GROWTH VS. ENVIRONMENT

In 1972, Donella and Dennis Meadows set off a furor with their book Limits to Growth. They argued that the earth's resources and its ability to absorb pollution and regenerate are finite. Using computer models, they also predicted that population and growth would bump up against these constraints within a century. "Scientists warn of global catastrophe," screamed headlines. Parliaments and scientific societies debated the issue while economists attacked the authors' assumptions, methods, and conclusions. The book sold 9 million copies. But the subject was quickly eclipsed by more pressing concerns and derision of their Malthusian alarms.

Now, the Meadowses are back, with a sequel called Beyond the Limits. This time, they argue that human activity already has overshot earth's ecological limits, and that unless corrective steps are taken soon, their original scenario is more certain. "It's a much harder message to hear," says Donella Meadows, now adjunct professor of environmental studies at Dartmouth College.

In 1992, however, such views provoke more worry than ridicule. In only 20 years, global population has leaped 66%, to 5.3 billion, while world economic output has nearly doubled. In vast areas, the decline of nature is disturbingly evident. The Baltic Sea is dying from sewage and other pollution. Every year, 25 billion tons of topsoil are lost. In places such as Mexico City and Eastern Europe, millions breathe toxic air. China soon will have cut all its harvestable forests. The ozone layer is thinning, the globe may be warming, and more devastation lies in store.

Left unchecked, world population will double by 2030, the U.N. predicts. By then, some 84% of earth's citizens will live in developing nations, where just giving them the basics might mean quintupling world output. That is the catch-22. "We must renew economic growth in developing nations to address poverty and population increases," says John Sewell, president of the Overseas Development Council. "But if we do it on the same pattern as industrialized countries, the environment will be irretrievably damaged."

`CUTTING EDGE.' Now, in sanctums of power the world over, this escalating conflict between growth and environment has catapulted a notion called "sustainable development" into the limelight. This emotionally charged idea holds that future prosperity depends on preserving "natural capital"--air, water, and other ecological treasures--and that doing so will require balancing human activity with nature's ability to renew itself. It also recognizes that growth is necessary to eliminate poverty, which leads to the plunder of resources. "Sustainable development is what environmental protection should be about," says William D. Ruckelshaus, chairman of waste-hauler Browning-Ferris Industries Inc.

Although still more a vision than a strategy, the concept is emerging from U.N. agencies and think tanks to become "the cutting edge of social and economic reform," says Thomas N. Gladwin, professor of management and international business at New York University. In the past year, government, business, and academic leaders have scutinized the idea in 80 meetings in a dozen countries. More than 75 books have examined the subject, and dozens of companies are looking at what it would mean for them (page 74 50 ).

This frenzy grows out of a two-year buildup for the U.N. Conference on Environment & Development (UNCED), to be held in June. Heads of state and negotiators from 170 countries will converge on Rio de Janeiro to consider a controversial agenda to protect the earth's atmosphere and species, attack poverty, and foster less destructive industrialization. This could be the first step toward what Lester R. Brown, president of the WorldWatch Institute, calls a "fundamental restructuring of economies," that would require sweeping revisions in regulatory and economic policies, plus a new global compact between rich and poor nations.

The implications make a volatile brew. Industrial nations would have to shift from resource-intensive production systems and lifestyles to ones that consume vastly fewer resources and dramatically cut pollution. Developing nations would have to practice less destructive agriculture, industrialize with unprecedented care, and cut birth rates, with all that implies for improving women's rights. They couldn't do it alone: Rich nations would have to give billions in aid, while their industries shared the latest technology. The total impact "would be comparable to that of the Industrial Revolution," says Hardin Tibbs, a consultant at Global Business Network.

Not everyone agrees a revolution is necessary. Some scientists argue that environmental problems aren't as serious as the doomsayers insist. Other experts, such as David Pearce, an economist at University College in London, insist that market forces, plus doses of new technology, would be enough to curtail pollution so that if population stabilizes growth can go on. Others disagree--and say that given the ecological limits, the only way to provide for all of earth's people and avoid ecological disaster is to redistribute wealth.

FEARFUL CONSEQUENCES. Either way, the obstacle at Rio and long after, says one U.S. official, is that "almost anyone can find something to hate or fear in the idea." Sustainable development threatens entrenched interests, and so faces high political hurdles. In April, Brazilian President Fernando Collor de Mello fired his Environment Minister, Jose Lutzenberger, who had angered business interests by opposing logging in the Amazon. In the U.S., critics fear the concept will boost regulation and government spending. This concern has prompted some Republican senators to urge the President not to go to Rio (page 71). Other resistance reflects the fact that "Americans don't like changes in lifestyle," says a top Administration official. Sustainable development "questions the purpose of society, the relationships between humans and nature, and demands social justice and equity," adds John D. Sterman, associate professor at MIT's Sloan School of Management. "This is why it's so controversial."

The reason it even gets a hearing is that "life as we know it is at stake," argues Maurice Strong, a Canadian businessman and secretary-general of the UNCED meeting. With the end of the cold war, population pressures plus environmental decay may lead to conflict among nations over food, water, land--and resulting migration. In fact, populations in 40 developing nations grew so fast in the 1980s that their per capita income fell. Though food output is rising in the developing world, food per person isn't. In the past 45 years, a variety of forces has degraded 11% of the world's land, an area larger than India and China, says the U.N. Environment Program. The status quo hurts rich countries, too. Pearce estimates that resource degradation plus the health effects of pollution cost them 1% to 5% of their GNPs.

`A BREAKTHROUGH.' These are radically different concerns than the worries over health that initially drove environmental protection in affluent nations. The idea that prosperity is at stake began to take hold in 1987 with the release of the book Our Common Future by the U.N.-appointed World Commission on Environment & Development. It found that environmental rules in industrial nations had a small effect on inflation, a neutral impact on trade, spurred innovation--and didn't necessarily impede growth. It also called poverty as destructive of nature as industrialization. The conclusions "were a breakthrough," says James W. McNeill, a member of the commission. Out of them came the Rio summit.

Since then, bridging the gulf between rich and poor nations has become the gospel of sustainable development. "In the destitution" of developing countries "and the overconsumption of industrial countries lie the seeds of all environmental problems," says Sir Shridath Ramphal, president of the World Conservation Union. The richest 20% of the world's people have 150 times the income of the poorest 20%. And industrial nations, with 25% of global population, consume 70% of all resources and spew out the most pollution. Just seven, including the U.S. and Japan, produce 45% of greenhouse gases, says the Intergovernmental Panel on Climate Change.

At the same time, limited access to global markets costs developing nations $500 billion in revenue annually, says the U.N. Development Program (UNDP). As growth struggles to catch up with population in these countries, more people push onto fragile lands. In tropical regions, some 380 million people, a number expected to double within 50 years, live by clearing land for farming that will be worn out in just a few years. Millions more flood already polluted cities.

Crushing debt exacerbates matters. As of 1989, developing nations owed $1.2 trillion, 44% of their collective GNP. To pay off these borrowings, they have exported about $50 billion in resources annually since 1983. This sell-off promises to be increasingly devastating, since farming, fishing, forestry, and mining account for more than two-thirds of employment and 50% of export earnings of these nations. Of 33 countries that exported tropical timber in 1985, some 23 are likely to run out within a decade. Yet in that time frame, developing countries will need to create 1 billion new jobs. If they industrialize without clean technology, as China, Brazil, and India are doing, they'll greatly boost global pollution and resource destruction.

Given these trends, "technology becomes the chief engine of sustainability," says Robert W. Fri, president of Resources for the Future, in Washington, D.C. Indeed, "eco-efficiencies"--slashing the resources used and pollution emitted per unit of output--is the way for industrial countries to curtail environmental damage. Advanced technologies could slash hazardous industrial waste in the U.S. by 75%, says the U.S. Office of Technology Assessment (OTA). With the proper infrastructure, industrial countries could recycle more than 50% of their paper, glass, plastics, and metals, according to studies by U.N. agencies.

New technologies also could head off the 75% increase in global energy demand the Worldwide Energy Conference projects by 2020. The newest air conditioners, furnaces, refrigerators, and lighting fixtures are from 50% to several times more efficient than their predecessors. At current rates of economic growth, installing cost-effective equipment alone could cut electricity demand in industrial countries 20% by 2000, says the International Energy Agency in Paris. And solar power could eventually provide 30% of the energy used in most countries, according to estimates.

BACTERIAL POWER. The possibilities go far beyond that. In the U.S. and parts of Europe, conservation, new tilling practices, crop rotation, and more efficient irrigation are stemming erosion, water waste, and agricultural pollution. Biotechnology promises to create nonpolluting pesticides, crops that need less water, and pollution-fighting microbes. Less wasteful, less energy-intensive biological processes could increasingly replace chemical-based systems. Already, bacteria are used to produce 30% of U.S. copper. They release the metal from minerals--and avoid the sulphur dioxide emissions of smelting.

Even ecosystems could be harnessed for industrial chores. Instead of spending $30 million on a chemical-treatment plant for wastewater and sewage, the city of Arcata, on Humboldt Bay in Northern California, has laid out $5 million to create 95 acres of marshes. Their plants and organisms absorb heavy metals and pollutants in the wastewater. The wetland is a bird sanctuary now, and fish in the bay are edible.

Along with better technology, less developed nations need a new model for growth, says Brazil's Lutzenberger. In the past, this has been geared toward dam and road projects, ranches and commodity agriculture, and mining--all of which destroy ecosystems and do little to help the poor. The emphasis needs to shift, he says, to creating small businesses and sustainable farming, forestry, and wildlife management.

The techniques and knowhow also exist to make farming less destructive. There's a good example in Guinea, West Africa, on a high plateau called Fauta Djallon. Five years ago, decades of destructive agriculture had denuded its steep hills, causing erosion that polluted nearby rivers and lowered harvests. In 1988, the Guinean Agriculture Dept. and the UNDP enlisted 100,000 people in 20 villages to plant trees to conserve and enrich the soil and sow a hardy, high-yield corn. They drilled new wells and gave villagers efficient stoves. Today, crop yields are up 50%, villagers trim trees for fuel rather than felling them, and erosion is declining. So is infant mortality.

The bigger challenge is conserving tropical forests, which house 50% of the world's species and soak up the greenhouse gas carbon dioxide (CO). They are being destroyed at the rate of 42.5 million acres a year, up 50% since the late 1970s. As a result, some biologists estimate, up to 20% of the world's species will disappear within 50 years, with undetermined effects on the environment. Already, atmospheric CO has risen 20% in a century. The irony is that forests are often worth more standing than cut. In Brazil, converting them to pasture produces about 220 pounds of meat per acre a year. Standing, the forest can produce 2,750 pounds of food. And the value of fruits, nuts, and other products harvested each year can reach twice the one-time logging revenue.

To reap that value, says Robert Goodlund, an economist with the World Bank, developing countries need to "create local economies with an interest in maintaining the forests." Colombia and Brazil have ceded control of some forest land to Indians because, he says, "jungle dwellers know how to use the forest sustainably." Costa Rica, meanwhile, has launched INBIO, a nonprofit group that collects forest samples to see if they have commercial value. Last year, drugmaker Merck & Co. paid $1 million to look at INBIO's store, and will pay royalties if it develops a product.

Making such changes on a large scale is another matter, however. "Sharing well-being between present and future people is something markets, governments, and societies don't do well," says Nobel laureate Robert M. Solow, an economist at Massachusetts Institute of Technology. Indeed, NYU's Gladwin has tallied some 60 social, political, regulatory, and fiscal changes that would be needed for sustainable development. "This would have to be driven by a coherent set of local, regional, national, and international policies, and the best foresight science can provide," adds Ruckelshaus.

A key would be treaties and agreements, such as those on the table at Rio, to protect common resources and ecosystems. One example is the 1987 Montreal Protocol, a global treaty with timetables to phase out chlorofluorocarbons (CFCs), the chemicals that destroy the ozone layer. It was in no one's interest to ban the chemicals--nor would it have made much difference--unless most nations did it. To make that happen, industrialized countries set up a fund to help poorer ones switch to costlier substitutes.

MISSING FACTORS. Far-reaching changes in national regulatory and economic policies also are part of the prescription. Every nation has a web of subsidies, government policies, and taxes that undervalue natural resources, encourage pollution and waste, and deter environmentally sound behavior. To boot, the economic benefits of ecosystems--a forest that protects soil from erosion, for instance--and the costs to society of pollution aren't reflected in the prices of goods and services. Few of the tools economists or investors use consider such factors, either. And resources don't count as assets--or debits, if they're destroyed--in calculating national wealth.

Increasingly, policymakers and economists think the best answer lies in changing the economic ground rules. Phasing out pernicious subsidies is one key. So is revising the calculation of GNP. Norway and France already keep separate accounts for some resources. Similarly, the U.N. Statistical Commission is looking at revising the System of National Accounts, the basis for GNP.

A more fundamental change would be a system of market incentives to pollute less--a tax on fertilizer, for instance. OECD countries have some 50 such taxes. And recently, EC countries agreed in principle to a tax on the carbon content of fossil fuels. Eventually, says economist Robert L. Stavins at the Kennedy School of Government at Harvard, these could replace existing tax systems.

Economic and policy changes alone won't turn the tide in developing nations, though. Just as crucial, says the U.N., would be massive aid and debt relief from industrial countries, plus investment by multinational companies. Agenda 21, the action plan to be considered at Rio, would cost $125 billion or more a year until the turn of the century--vs. the $54 billion rich nations give in aid now. Much of that could be raised if rich countries doubled their contributions to 0.7% of their GNPs--by diverting less than 3% of defense spending.

Proponents say, too, that aid should be redirected. Instead of dams and roads, they add, it should largely fund soil conservation, reforestation, family planning, improved agriculture, technology transfer, and poverty reduction. Debt-for-nature swaps, where debt is forgiven if the borrower invests in conservation, could become major incentives. So far, only $100 million in such deals have been arranged worldwide.

Whether even these changes would lead to sustainable development isn't clear. The limits-to-growth argument is that it won't. "The real issue is the scale of the overall economy relative to ecosystems," says Herman E. Daly, senior economist at the environment department at the World Bank. Directly or indirectly, humans now consume 40% of earth's production on land, according to biologist Peter Vitousek of Stanford University. That leaves 60% and dropping for land-based plant and animal species and ecosystems, which need enough to support their own functions and to purify air and water and regulate climate. This might not be alarming if pollution-control equipment or other lavish technologies could create clean air or control the atmosphere and climate.

`NO NET LOSS.' They can't, Daly argues, so it's better to make sure development doesn't exceed the rate at which nature regenerates. At some point, that means setting limits to the "the scale of human presence and the use of resources, according to some optimal scale," he adds, then letting markets allocate resources within them. In theory, that would be the point where the marginal costs of growth just equal the marginal benefits after all environmental costs and benefits are tallied. Society has already set the scale with CFCs, by deciding their benefits don't outweigh such costs as skin cancer and crop damage that occur as ozone disappears. The same type of trade-off is being discussed in negotiations to cap CO subscript 2 emissions.

For the most part, however, the optimal levels for pollution or resource use aren't clear. Until that's known, Daly and others propose a few simple rules. One is "no net loss" of natural capital. That would preclude projects that destroy forests, drain wetlands, dam rivers, or pave over croplands unless a compensating resource is replenished. Another is to err on the side of caution. Since irreversible damage to ecosystems may not be evident until it's too late, "you have to anticipate problems, assume the worst, and start making adjustments," says Robert Costanza, president of the International Society for Ecological Economics.

Daly contends that eventually, societies will have to "develop" instead of grow, like a library that keeps the same number of volumes but improves by replacing worn-out books. Such an economy would improve the quality of life--educational levels, the stock of buildings, human health--without constantly increasing the flow of materials, resources, and energy through the world economy.

The Meadowses have a view of what this would mean. Their latest scenarios show that with hefty investments in technology, the resources used and pollution emitted per unit of output could fall 80% and 90%, respectively, within a century, and the earth could support 8 billion people without irreversible damage. The catch? World output of consumer goods per capita would stabilize at a level comparable to that of Western Europe in 1990--and below that of the U.S. UNCED's Strong describes it as a lifestyle of "sophisticated modesty," more dependent on public transportation, smaller houses, fewer gadgets, and less conspicuous consumption.

Mainstream economists still dispute these ideas--but some don't totally reject the underlying arguments. MIT's Solow, a stern critic of the limits-to-growth idea, concedes that right now environmental issues and waste disposal rank high as potential limits to long-run growth. But until more is known about the carrying capacity of ecosystems and the extent to which technology can substitute for resources, "you can't equate sustainable development with no growth," he says.

If sustainable development ever does take off, it could offer huge opportunities--and pose big challenges--for industry. Demand for environmentally sound technology could unleash innovation, open new markets, create jobs, and give companies opportunities not only to save resources but to lower costs and boost profits in the process. The Business Council for Sustainable Development, a U.N. affiliate chaired by Swiss entrepreneur Stephan Schmidheiny, will deliver a report at Rio that endorses sustainable development.

HUNDRED-YEAR PLAN. Japan and some European nations see that potential. They have made commitments to limit CO emissions, in part because "they are using environmental policy to force their industries to invent new technologies," says McNeil. In 1990, Tokyo unveiled a 100-year game plan for sustainable development and launched the Research Institute of Innovative Technology for the Earth, backed this year by a $37.5 million budget. "In the future, access to international markets will depend on who has the most environmentally sound technologies," says Tsukasa Sakai, senior managing director of JGC Corp. "If U.S. companies don't move aggressively, we will see the same conflict in environmental technology that we see today between GM and Honda."

Japan already has one edge, in fact. Its gains in efficiency during the '70s and '80s were so great that it now uses just 50% of the resources--materials and energy--that the U.S. does to produce one unit of GNP. On many products, says consultant John Elkington, director of Sustainability Ltd., a London-based consulting firm, that translates into a 5% cost advantage on many products.

What everyone is shy of bringing up, however, especially the delegates to UNCED, is how sustainable development might change the dynamics of world growth. One study by Royal Dutch/Shell Group indicates that ending government subsidies for everything from agriculture to oil drilling would free up capital for other investments. And developing countries could save $1.4 trillion over the next 20 years by using energy more efficiently, according to the Council for Energy Efficiency in Washington. Still, one-third of the activities that contribute to about 75% of current world growth--including logging, mining, and energy use--are polluting. If these were no longer ascendant, industrial economies would feel some pain.

One study by the Electric Power Research Institute forecasts that the U.S. economy in 2020 would be 2.2% smaller, a reduction of $230 billion in 1990 dollars, if the U.S. cut CO emissions by 20% from 1988 levels. Under those circumstances, tax relief and other compensation schemes would become essential to overcome the political opposition of the groups, industries, or regions that might be most affected.

Trade poses other kinds of conflicts. Free trade is essential so that developing nations can export more value-added products to spur development. But it also has the potential to push environmental standards to the least common denominator or encourage industries to migrate to countries with lax environmental laws. And freer trade, which sends buyers to where goods are cheapest, could spur more commodity agriculture in developing countries at further environmental cost. Resolving such conflicts would pose huge challenges for sustainable development.

BLAME-SHIFTING. Another barrier is the radically different perspective of nations. Developing nations blame wealthy ones for excessive consumption and pollution--and bristle at the idea that they should do otherwise unless the rich want to help pay. Officials of wealthy countries insist that corruption and poor management are often to blame for lack of capital and poverty in developing nations. They add that developing nations must show proof of the changes they'll make before they can expect an influx of aid. Nor are industrialized countries united on the urgency for sustainable development. Compared with the U.S., "the Europeans are further along in their understanding of the idea," says Elkington.

It's no wonder, then, that as the final preconference meeting broke up in April, many key issues were unresolved. Nevertheless, supporters of sustainable development believe that their vision will eventually win out. "We are all partners in the same boat," says Brazil's President Collor. Rio, Strong adds, is proof that "we are inexorably moving ahead." Already, Holland, Norway, Germany, and Sweden have approved long-term plans for integrating economic activity and environmental protection. Denmark expects to cut its CO emissions 20% from 1988 levels by 2000.

It may take generations before development is reconciled with nature, if ever. "We're at the foot of a steep and rocky path," says Schmidheiny. Still, poisoned rivers, lost forests, fouled skies, and the poor will be constant reminders that sustainable development, by whatever name, may be a life-saving quest.Emily T. Smith in New York, with bureau reports


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