Rio + 20: the search for a new economic development model to help Least Developed Countries

Discussions about the final document for the Rio meeting are mired in ill-temper and misunderstanding. This paper argues that the reason is that much of the conflict between developed and developing countries during negotiations is because the parties are arguing about the wrong things – separating ecology and economics.
While the arguments continue, the main losers from the lack of progress will be the Least Developed Countries (LDCs, the 49 most vulnerable countries in the world (as defined by the United Nations), based on a comparison of living standards, life expectancy, literacy, education, etc, says Daphne Davies, LDC News editor
The environmental effects
Least Developed Countries, most of which are located within the Tropics, will be worst affected by climate change and resource depletion, although they share very little responsibility. As Pa Ousman Jarju, Chair of the LDC group of countries, said at the beginning of May “Our countries cannot wait. We are already feeling the effects of climate change”. Over two-thirds (33) of LDCs are in Sub-Saharan Africa, where possible effects of climate change are: less rainfall, an increase in desertification in the dry sub-tropical regions, and a reduction of rivers and water supplies in Angola, DRCongo, Malawi, Mozambique, Tanzania and Zambia. There will also be a strong threat of flooding in East Sub-Saharan Africa.
Financially, these weather patterns will directly affect LDC food production for domestic consumption or for export. It is estimated that there will a 50% reduction in rain-fed crops by 2020 , with a resultant 90% reduction in crop revenues. Scientists say that global production of key staples such as wheat and corn has fallen by 3.8% and 5.5% respectively over the last 10 years as a result of climate change.
An additional problem for many LDCs is the growing number of ‘climate refugees’ – those displaced as a result of environmental disasters: in 2010 and 2011, this figure stood at 42 million people in Asia and the Pacific alone. As Bindu Lohani, Asian Development Bank Vice-President confirmed, “the environment is becoming a significant driver of migration in Asia and the Pacific as the population grows in vulnerable areas, such as low-lying coastal zones and eroding river banks”.
The economic effects
An additional challenge for LDCs is their marginalisation from the global economy. While in 2009 they represented 12% of world population, their contribution to global output remains below 0.9% – lower than in 1970. While some LDCs have vibrant economies, clocking up levels of growth just below 6%, the share of the world’s extreme poor living in LDCs increased from 18% in 1990 to 36% in 2007.
This has occurred as while the value of exports increased by 500% from 2000 to 2008, the volume of exports only increased by 97%, because of the costs of commodity prices. Added to this, the substantial increase in fuel and food prices has affected many LDCs, with a widespread famine that affected around 9 million people in 2011.
One problem bedevilling LDCs is the level of external debt they pay on loans, many secured over 20 years ago. For the world’s 60 poorest countries, $550 billion has been paid in principle and interest over the last three decades, on a total of $540 billion, yet $523 billion in outstanding debt still remains. This prompted Nigerian President Obasanjo after the G8 summit in Okinawa in 2000, to describe the situation in Nigeria (too large a country to be classified as an LDC): ”In 1985 or 1986 we borrowed around $5 billion, and so far we have paid back about $16 billion. Yet we are told that we still owe about $28 billion, which came about because of the foreign creditors’ interest rates”.
Recent forecasts indicate that while average GDP in developing countries, including LDCs will grow, much of this will be in urban agglomerations leaving rural areas in significant poverty.
Resource rich or resource curse?
At the same time as these drawbacks, some of the Least Developed Countries are also the world’s most resource rich countries. For example DR Congo has an estimated $24 trillion’s worth of deposits of raw mineral ores, including the world’s largest reserves of cobalt and significant quantities of the world’s diamonds, gold and copper. Niger, a very poor LDC, is one of the richest sources of uranium. In 2010 it was reported that Afghanistan, also an LDC, had over $1 trillion’s worth of cobalt, gold and iron.
Thus in order to finance their debts, LDCs are being forced to sell off their assets – whether minerals or land, depleting a long-term source of revenue. For example, the Ghana-mining website, drawn up to encourage investors, carries the message “NOTICE TO PROSPECTIVE GOLD & DIAMOND BUYERS – Ghana is endowed with mineral deposits such as gold, diamond, manganese and bauxite. ……We welcome all prospective investors including persons who wish to deal in gold or other precious minerals in Ghana and are indeed prepared to offer the necessary assistance”. But it is not only minerals, but the land itself which is up for sale: a very recent report tells how a Jordanian investment bank is negotiating to buy 500,000 hectares of high quality forests in DR Congo.
So what is the answer? As Bernard Lietaer has noted in Money and sustainability: the Missing Link: “Environmentalists often try to address the ecological crisis by thinking up new monetary incentives, creating ‘green taxes or encouraging banks to finance sustainable investment”.
Green economy a diversion?
There has also been concern among the G77 group that the ‘green economy’ is a ploy by northern countries to restart their stalled economies through technology and service transfers to the south, and that developing countries which sign up to this will be spending money on technologies they cannot afford. Thus while for the G77 group, poverty eradication is the overriding goal, green development could end up impoverishing developing countries.
Another argument is that cutting emissions in developing countries is not a major concern, as according to forecasts carried out by Jorgen Randers, and discussed in his recent report 2052: A Global Forecast for the Next Forty Years, emissions in poorer countries will stagnate, because of increasing energy efficiency and more renewable energy, so CO2 emissions will be 1 tonne of CO2, per person-year. This would be half of the annual per capita emission allowable if the principles of sustainable and equal emission for all humanity are implemented . This would mean that people in developing countries will be living sustainably in terms of climate change, while remaining in relative poverty compared to the rest of the world – obviously not the answer to reducing climate change.
A new form of economics
A number of thinkers have argued that part of the problem lies in the fact that the economy has always been considered as operating separately from the environment, guided by its own internal rules. In conventional thinking ‘economics’ is one system, working in a parallel, but essentially separate sphere from the ‘environment’. This is also what prompted the organisers of the 1992 Rio Conference to stipulate that any solutions must not involve a change of economic approach.
The view that economics operates autonomously from economics is now considered unacceptable for two reasons: firstly it has discriminated against the poorest nations, as the wealthiest nations have drawn disproportionately on the planet’s finite natural resources. Secondly, the current economic system is predicated on unlimited growth, which cannot be possible in a world with finite resources – today we use 1.4 times the earth’s resources than can be regenerated each year.
Attempts to fix a greener economy onto the current model are likely to fail, as in a finite planet consumerism that is not constrained by environmental concerns cannot be sustainable. Given the paucity of this approach, it has been suggested that what is needed now is a form of ‘ecological economics’, in which economics is embedded within the social and environmental sphere.
Brice Lalonde, Executive Coordinator of Rio + 20 put this clearly when he said, “There was a time during the 70s, when one said it was important to protect the environment. Today, the environment is part of the economy. Economics is not just a case of calculating how much things cost, but of asking whether it is good for society”.
In 2000 OECD offered an alternative framework , which substituted the idea of two separate blocks: a) economics and b) the environment, with a framework of three circles of activity: economic, social and environmental, which overlapped in certain relevant areas. However, this framework still accepted that there were some aspects of economics which operated autonomously from social or environment concerns, allowing economics to be geared to unlimited growth, increasing consumption and thus unlimited production.
More recently, there have been calls for ‘ecological economics’ (not to be confused with ‘environmental economics’), in which economics is fully ‘embedded’ as a subsystem within the social field, and all of this is a subsystem of the biosphere. This model has been called a ‘donut’ by Oxfam), in which all activity takes place within ‘the environmental ceiling, or a ‘nested hierarchy’ in which in which the economy only exists thanks to its social infrastructure and human society, which is sustained by a healthy biospherical environment.
This approach would also help to ‘rebalance’ living standards round the world. It has been estimated that providing additional calories needed for the world’s population which currently goes hungry would require just 1% of the current global food supply, and ending income poverty for 21% of the global population on less than $1.25 a day would require just 0.2% of global income.
The environmental ceiling has already been crossed for nitrogen use and biodiversity loss, and without a change in economic approach, resources will be further depleted within the next forty years. At the same time, the climate has been predicted to rise to 2.8C by 2052 . So will Rio + 20 be the moment, when, as Brice Lalonde put it “when the international community understands that human capital and natural capital are more important than financial capital.”

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