Modelo de Freundlich

This section aims to reflect on the above arguments, critique current understandings of the relationship between PEN and private investment, and address the realistic issues faced by many developing countries. I start by arguing against poverty as a cause of environmental degradation, and then explore issues between economic growth and environmental

degradation, politics of resource use and degradation and, lastly, the many relationships inherent in PEN.

2.6.1 Poverty not the cause of degradation

While many studies have explained the linkages between poverty and environmental

degradation in many ways, questions persist regarding degradation of the environment by the poor. While they may pose many threats to environments in developing countries, they are not the only cause of environmental degradation (Pinstrup-Andersen & Pandya-Lorch, 1995). Environmental degradation, especially overgrazing, deforestation, over-exploitation of fuel- wood and water pollution can be attributed to both internal and external factors such as inadequate property rights, inappropriate government policies, lack of access to markets and credit, and inappropriate technology for agricultural intensification; and, these factors allow people who have administrative power and authorities – rather than the poor – to gain benefit by exploiting the resources and then pushing the poor into poverty (Pinstrup-Andersen & Pandya-Lorch, 1995; UNEP, 2010). In an interesting case study of the Bakas in a Congo rainforest, where property rights were low, the rural people felt that they owned the forest and did not want to harm it; but, outsiders came to Bakas and started damaging their livelihoods by destroying the forest and creating environmental degradation and associated risks (see Angelsen & Vainio, 1995, p. 174). Killeen and Khan (2001) question whether the poor should be blamed for environmental degradation because they often prove to be willing to explore and adopt new ideas and ways of organisation and work with the goal of reducing their poverty. Swinton and Quiroz (2003), who empirically applied multiple regression analysis of farm survey data from the Peruvian Altiplano in 1999, suggest that natural resource

sustainability did not correlate with the level of poverty; rather, it varied according to management activity.

Many studies have opposed poverty as a cause of environmental degradation. For example, the poor have been viewed as both agents and victims of environmental degradation

resource management that will preserve the natural resources in their areas, this traditional knowledge is often undervalued or ignored by top-down organizations (DFID et al., 2002, p. 28). From this perspective, the poor may do even better in the sphere of environmental management, particularly if incentives and information are made available to them. In

addition, it is argued that the poor are not the principal perpetrators of environmental damage: the rich are common polluters who render resources scarce for the poor (Jehan & Umana, 2003, p. 61). The non-poor commercial companies, state agencies and the rich are responsible for environmental damage on a broad scale through land clearing, agro-chemical use, water appropriation and waste. As a consequence, the poor become victims of the consumption levels and patterns of the rich. It would thus seem that most environmental degradation is caused by the non-poor rather than the poor (DFID et al., 2002, p. 28).

Population growth may not always degrade environments everywhere: the main causes of degradation may be found in the complex specific social, economic, environmental and governance of population growth currently taking place (DFID et al., 2002). In their recent empirical study undertaken in Pakistan, Khan, Inamullah and Shams (2009) found that population stress had little if any significant direct effect on all aspects of environmental status. They also note that any discussion surrounding the negative impacts of population growth tends to return to the potential dangers of population growth in the late 18th century, to Thomas Robert Malthus’ principle of population. Some studies consider population growth as a source of economic expansion, innovation and opportunities leading to greater wealth and better resources management (DFID et al., 2002). Furthermore, by illustrating a comparable case between rapid population growth and sustainable environment management among the Machkoks of Kenya, and drawing on a combination of technological change supported by a conductive policy framework and much local initiative, Jehan and Umana (2003) claim that while population growth may cause degradation at the outset, what happens next is context- specific. Boserup (1965) considered population growth as an independent variable, a major factor in determining agricultural development; e.g., when a population grows rapidly, it encourages a large number of agricultural fields to be cleared or provided with irrigation facilities, thus resulting in two harvests annually rather than one. Therefore, it seems important to emphasise that several factors can affect both poverty and the environment. In the main, the poor strive to preserve their local environment because their livelihoods are closely tied to their natural resources.

2.6.2 Many relationships among growth and degradation

As claimed above, natural resources may be increasingly exploited for export and for meeting local consumption in order to achieve high economic growth. However, this claim describes only one aspect of their relationships. In fact, there can be many relationships between

economic growth and environmental degradation, and these relationships can be explained by particular concepts. In this section, I will elaborate upon their relationships using the

following three concepts: the curse of natural resources, the ‘Dutch disease’ and the Environmental Kuznets Curve (EKC).

The first concept is based on the resource curse phenomenon, which emerged in the 1980s to support the notion of an economic curse on natural resources. Auty (1993, p. 1) used this concept to explain the inability of countries rich in natural resources to boost their economies and lower their economic growth compared to how other countries with small natural

resources handled their economies. Their inability was caused by many factors, including inefficient government policy and foreign exchange constraints; but, in the case of mining economics, Auty (1993, p. 3) indicated that causes included small linkages with local production, immediate profit flowing overseas, and substantial rents. Sachs and Warner’s (1995) study of economies with a high ratio of natural resource exports to GDP confirmed this negative relationship. Thus, based on the concept of resource curse, one may suggest that abundant resources do not always guarantee economic growth: nor do they cause resource degradation.

Similar to the issues of resource curse but from different perspectives, the second concept derives from the ‘Dutch disease’, which Auty (1993, p. 15) refers to as an economic

phenomenon that gains revenues from resource exports, e.g., revenues from the mining sector. It damages a nation's productive economic sectors by causing an increase in real exchange rates and wages (Davis, 1995). The main argument is that high investment and its revenue in the resource sector render a given nation's currency stronger compared to that of other nations. As a result, exports become more expensive for other countries to buy, the manufacturing sector loses its comparative advantages, and economic growth suffers as exports decrease. For example, Kyophilavong and Toyada’s (2008) examination of foreign capital investment in the natural resource section in Laos in relation to Dutch disease issues found both positives and negatives vis-à-vis foreign capital inflows and the Dutch disease syndrome in the Lao economy in the long term. Thus, the Dutch disease syndrome tends to suggest that utilisation of resources may harm rather than help economic growth.

Finally, the EKC may explain the above complex relationships. According to the EKC, environmental degradation would initially increase in a country along with economic growth until higher income levels led to higher investment in the environment; then, degradation would reduce (Reed, 2002; Stern et al., 1996). Jha and Murthy (2006, p. 31) describe the EKC as the relationship between environmental degradation and an income level that is non-linear –positive up to a point, and negative thereafter, implying that the income elasticity of demand for the environment is higher than the level of income. The environment struggles to reach economic growth until the average income reaches a certain point over the course of

development as an inverted U-shaped curve. Thus, in the long run, economic growth may not degrade the environment. Jehan and Umana (2003) also observe that particular pollutions, such as air pollution, water pollution and solid waste, have been found significantly related to income in the EKC concept while other pollutants from natural resource use or biodiversity, energy, land and resource use may not be related to income levels. In addition, they argue that the EKC can be changed or influenced by government policies and institutions’ strategies (Jehan & Umana, 2003). For instance, the removal of perverse subsidies, the

internationalization of externalities and the identification of property rights can change the relationship between income levels and levels of environmental degradation. Therefore, the relationships between economic growth and environmental degradation are various and rooted in multiple sources.

2.6.3 Politics of resource use and degradation

Economic growth is often seen as the key policy for achieving poverty reduction in

developing countries, growth that can be achieved through the use of their natural resources. The fact that decisions to use these resources for growth are politically researched by their respective governments or states, meaning that the countries’ political and economic interests are likely interrelated to shaping sustainable use of their resources. This view is important when considering political intervention in critiques of the relationship between PEN and private investment.

A number of controversies surround the ways in which politics play a role in resource use and degradation. First, politics can influence government decision-making and the policies

implemented in developing countries to exploit the local resources in the interest of economic growth and poverty reduction. In this sense, politics may be clearly used to deplete resources as a means of pursuing a country’s development programs. At the same time, governments may be requested to implement specific environmental policies to improve resource

degradation and maintain environmental sustainability. If such policies prove successful, the strength of PEN may be either reduced or totally dissipated. However, it is still questionable whether the politics of resource usage and degradation will achieve such positive results because the success of the policy implementation is likely to depend upon many factors such as the ability of governments to enforce their policies, rules and regulations in the wider sphere.

Second, debates surrounds whether the resources in developing countries are politically used to benefit politicians rather than in the countries’ developmental interests. In general,

government exercise their authority or power to formulate policy, to control, use or conserve the natural resources for their desired outcomes. Peluso (1993, p. 210) argued that “a state generally allocates rights to extract or protect resources in ways that benefit the state itself.” If this is the case, politicians can use their authority to exploit the resources in ways that will benefit them personally. In some cases, while the benefits of resource usage may target for a country’s development, exploitative politicians can still gain benefits for themselves,

especially in the context of political corruption. For example, UNESCAP (2003, pp. 293-294) claimed that massive deforestation in Indonesia during the 1990s was the result of a corrupt political and economic system that regarded natural resources as a source of private revenue. Finally, variations in property rights and the lack of stability of a political system may result in resource use and degradation. Deacon and Mueller (2004, p. 4) claim that “political

institutions affect property rights, and property rights in turn affect resource use.” This means that weak property rights to resources may result in weak or ambiguous use or ownership claims to resources, particularly in countries where the rule of law is not well-established. Additionally, the stability of politics directly relates to the use of resources. Deacon and Mueller (ibid, p. 41) argue that “the stability or instability of a country’s political system is a specific political attribute that has been shown to have significant effects on natural resource use. Where political systems are volatile, individual ownership claims to the future returns to resource conservation actions tend to be uncertain.”

Drawing upon the points listed above, politics can intervene in resource use and degradation in many ways and for different purposes in developing countries. As regards the degradation of resources, political intervention can benefit either the country’s development or politicians or both. Nevertheless, to some extent, political intervention needs to be taken into account when considering the relationship between PEN and private investment.

2.6.4 The many nexuses of PEN

Many of the above studies tend to agree that the concept of PEN is rational for understanding issues surrounding development in developing countries. However, some scholars have claimed that the concept of PEN is too simple an explanation of the linkage between poverty and the environment. They further claim that many realistic issues tend to be hidden behind the nexus. For example, Angelsen (1997), who suggested going beyond this simplistic explanation, offered four critical and dynamic viewpoints:

First, one could question whether low income does indeed cause environmental destruction, and – as a corollary to this – higher income (economic growth) will reduce the problem. Second, the relative importance of poverty-driven degradation could be questioned. Should one instead focus on, for example, degradation resulting from exploitation by powerful (rich) groups and misguided government policies? Third, the coexistence of poverty and environmental disruption could be understood as the outcome of the same process and as having similar causes. A key word in this connection is environment entitlements or resource rights. And finally, higher income can both help and harm to the environment, and it is dependent on particular problems and contexts (Angelsen, 1997, pp. 136-137)

Based on empirical studies, Angelsen also provided an insightful argument in his conclusion (1997, pp. 150-151). He saw a strong correlation between poverty and environmental

degradation occurring as the poor live in or move into these vulnerable areas because they are poor, rather than causing a linkage between poverty and degradation. It is important to

understand the factors creating and maintaining the vicious circles of PEN, which should be seen as the joint consequence of limited opportunities for some groups: uneven progress of development, unequal distribution of rights and power, and misguided policies.

Nadkarni (2000) claims that the vicious circle of PEN is vulnerable to criticism on many counts: these criticisms are summarised below:

First, the simplicity and exaggeration of the vicious circle can be a misleading thesis, particularly in the context of an overall generation. For example, the poor have a concern for the future and are conscious of their take in the sustainable use of their resources, but lack incentives, appropriate institutions and clear property rights. Second, in the vicious circle, not all environmental degradation is due to pressure from the poor; for example, deforestation due to pressure for expanding railway network, wood requirement in urban areas, and the Second World War. Third, not all poverty can be attributed to environmental degradation, but due to a history of colonial exploitation and continuing feudal structures, and corruption on the part of political leaders and officialdom. Finally, in a limited area, the circle of PEN is only one of the multi-fold diversity of patterns and situations. The other patterns may include a trade-off between poverty alleviation and conservation of the environment; necessary conservation which hurts the poor, at least in the short run; development which aggravates both poverty, and

environment degradation; and persistent poverty helping the cause of the environment (Nadkarni, 2000, pp. 1184-1186).

Drawing on the arguments of Angelsen and Nadkarni, one could simply view PEN as a vague concept given that it has presented ambiguous issues surroundings itself and left many gaps in these issues to be further debated. While Angelsen has raised many questions regarding the validity and usefulness of PEN, Nadkarni suggests viewing PEN as a many – patterned nexus rather than as a single perception of vicious circle. Besides identifying PEN as an ambiguous concept, this research will take advantage of the complexity of PEN to further investigate its ambiguity. Focus will be upon Laos, whether PEN exists in Laos, and on internal factors, like private investment in the resource sector, that stimulate PEN. To this end, a nexus describing the relationship between private investment (PI) and PEN will be modelled (PIPEN, see Figure 2.5 below). PIPEN will be the core subject used to further analyse the remainder of this study.

Figure 2. 5: Relationship of Private Investment and PEN (PIPEN)