| Free trade, foreign aid and sustainable development (1993) |
Environment and sustainable development have recently risen to the top of international political agenda. The report of the World Commission on Environment and Development (WCED, 1987), "Our Common Future", was the first major international initiative that enhanced the awareness of policy makers about the complexity of relationship between environmental problems, economic growth, and needs of people - rich and poor. One of the follow up actions initiated by the United Nations to implement the recommendations of the WCED culminated into the United Nations Conference on Environment and Development (UNCED) held in Rio in June 1992. The UNCED has further heightened the global concern over deteriorating environment and the interest in the search for practicable strategies for sustainable development. It is, however, unfortunate for developing countries that developed countries prevented any significant move at the UNCED to address the underlying reasons for environmental degradation. The major underlying causes like unbalanced international trade, indebtedness of developing counties, environmental responsibilities of large industries, redistribution of development from overdeveloped to underdeveloped countries, wasteful consumption patterns of the rich, role of military, nuclear testing, trade in radioactive wastes, and so on were not officially discussed (Editorial Note, Development (3), 1992) : 3-4).
In an attempt to promote economic growth, the International Monetary Fund (IMF) and the World Bank are imposing structural adjustment policies (SAPs) on the Third World countries including India. Deregulation of industry, privatisation, liberalisation, removal of barriers to foreign trade and foreign investment are the core elements of SAPs. At the same time, the Third World countries are also being asked to conserve their natural resources and halt the deterioration of environment.
India’s New Economic Policy (NEP) announced in August 1991 is driven by a growth-centred development vision. Its underlying premise is that short- run stabilisation and medium - run structural reforms can attain faster and higher economic growth. It does not make any reference to such endemic problems of India as unemployment, poverty, illiteracy, ill health, environmental degradation, and so on. Its major emphasis is on deregulation of domestic industry, privatisation, liberalisation, increased competition, reduction in regulation of foreign trade, increased exports, and enhanced foreign investment. Unfortunately, the experience with such policies, particularly with SAPs has not been encouraging so far and there is no likelihood that it would be so in near future.
In this paper, I attempt to examine the likely impacts of two of the major elements of India’s NEP,i.e., unregulated foreign trade and foreign aid on sustainable development. I begin by defining sustainable development and sustainable livelihood and argue that the former is impossible to attain but latter is feasible and hence a better goal of development policy.
Sustainable Development versus Sustainable Livelihood
‘Development’ is a subjective and value-loaded concept and hence there cannot be a consensus as to its meaning. The term is used differently in diverse contexts. But generally speaking, development could be conceptualised as a set of desirable social objectives which society seeks to achieve. Some of the objectives that are usually included in the set are:
a)increase in real income per capita (economic growth);
b)improvement in distribution of income (equity);
c)political and economic freedom;
d)equitable access to resources, education, health care, employment opportunities, and justice.
All these and other similar objectives could be combined into an index by assigning an appropriate weight to each of them. Sustainable development is then a situation/process in which the set or vector of desirable objectives or the development index does not decrease over time (Pearce et al., 1990 : 2-3).
According to the World Commission on Environment and Development (WCED, 1987 : 43) "sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs". This definition, although a bit loose, emphasises the importance of meeting the (basic) needs of present and future generations and the (implicit) need to maintain the natural resources capital of this planet intact. It also implies limits to development imposed by technology, social organisation, and capacity of natural resources including environment to provide inputs for economic growth and to absorb its harmful side-effects (WCED, 1987 : 8). In these respects, it is very similar to the concept of sustainable livelihood. In this paper, I use the phrase "sustainable development" to mean sustainable livelihood. By sustainable livelihood, I mean secure access to basic necessities of life such as food, clothes, shelter, security, freedom, basic literacy, and health care on a long term basis. This concept of sustainable livelihood is almost synonymous with that of human survival with freedom and dignity, or human development which should, in my opinion, be the supreme goal of man kind. The Report of the Advisory Panel on Food Security, Agriculture, Forestry and Environment to the World Commission on Environment and Development argues that there are moral and practical imperatives for making sustainable livelihood the focus for analysis and action in the context of environment and development (Chambers, 1987 : 1). Few would dispute that sustainable livelihood (survival) as a goal is more environment - friendly and more globally acceptable than the (impossible) goal of sustainable development. This goal is attainable for a finite population within the carrying capacity of the global ecological system. On the basis of five case studies and other evidence, Chambers (1987 : iii) concludes that "the bio-economic potential for sustainable livelihood, even in marginal environments, may often far exceed the minimum to meet the basic needs of the current population".
On the other hand, although the term ‘development’ is used differently in diverse contexts, the focus of attention in economics literature has been on economic development a major element of which is economic growth. The most commonly used measure of economic growth is per capita real gross national product (GNP). A steady increase in per capita real GNP at a satisfactory rate is considered as an index of economic growth. Increase in per capita real GNP implies increase in the production of goods and services. For production of almost all the goods and services, natural resources are used as raw materials directly or indirectly. Besides, they also serve as the sink for dumping the wastes (bye-products) generated in the process of production. Since the global ecological system is closed, finite, and non-growing, there are ecological limits to the production of goods and services and assimilation of the wastes that are generated in the process of production and hence to economic growth. That is why sustainable "development" (economic growth) is impossible to attain even conceptually.
The present environmental crisis is the direct result of the pursuit of the goal of maximisation of economic growth using/exploiting both human and natural resources including environment. The SAPs are designed to promote economic growth at a faster rate in the Third World countries. Thus, it is clear that the prescriptions (SAPs) that have brought us to the brink of this environmental crisis cannot avert this crisis and help attain sustainable development. The failure to link the discussion on environment and development at the UNCED in Rio in June 1992 with those of the GATT Uruguay Round is an example of the unwillingness of the developed countries to confront these contradictions and this explains why the "solutions" being proposed under the theme of sustainable development will not work.
Now I examine the likely impacts of unregulated foreign trade and foreign investment on sustainable development. This is done on the basis of review of some of the recent literature available on the subject as well as a priori reasoning.