If six billion people enjoyed US standards of living would it spell environmental disaster for the planet? As the economies of China and India take off, this is no longer an academic question. Vincent Cable, senior research fellow at Chatham House, argues that-with one big reservation-the eradication of poverty around the world is environmentally sustainableby Vince Cable / December 20, 1995 / Leave a comment
Published in December 1995 issue of Prospect Magazine
Nothing is more calculated to send a shiver of unease through an environmentally concerned audience than to conjure up a world in which over a billion Chinese or Indians enjoy a western family lifestyle: a car (or two), a fridge, central heating (or air conditioning), a dish washer, an automatic washing machine-and 2.4 children. The prospect may seem remote. However, China’s living standards are doubling every seven years if their own figures are to be believed (and certainly, even if they are treated with scepticism, every ten years). India is poorer and less dynamic but there is already a “middle class” of 200 million which has access to motor scooters, if not cars, and a wide range of modern conveniences. Well before the middle of the next century, China and India will have populations of over 1.5 billion, twice the present population of Europe and north America combined. Moreover, if present trends are extrapolated-always a hazardous assumption-they will enjoy average living standards much closer to those of the rich world today. It is possible to quibble about particular numbers and purchasing power equivalents, but the prospect is emerging of a world economy in which production and consumption is many times today’s levels. To those of us who were brought up to believe that the extinction of poverty was among the greatest of human projects, this prospect of economic multiplication and technological advance inspires great hope and enthusiasm. For those who see the planet as a delicate, fragile organism, the prospect is less cheering. The difference is not just philosophical and aesthetic; the interplay between these contending attitudes is already beginning to shape policy in the fields of trade and international business. The polarisation between them is also growing. In the late 1980s it was politically as well as intellectually respectable to argue both for growth and environment. The whole concept of “sustainable development,” as set out in the Brundtland report among other seminal texts of the time, was that economic growth is both necessary and feasible: necessary to overcome poverty and feasible because of technology. Rising living standards would contribute to a moderation of population growth (as is already apparent in the falling birth rates of Asia) and a reduction of many of the environmental hazards associated with poverty: contaminated water supplies; excessive tree destruction for firewood; the breathing in of particularates from primitive domestic cooking and heating methods. Since then there has emerged a more sceptical view about the ability of the environment-the soil, the atmosphere, the sea-to repair and replenish itself. In parallel with this strand of scientific pessimism has grown a more extreme approach to environmental politics based on direct action and, at the wilder fringes, eco-terrorism. Although environmental concerns have seemingly slipped down the political agenda in many countries-Germany perhaps being a conspicuous exception-the shrillness of protest has increased. A big gap is opening up between pragmatic environmentalism and what has been called “eco-fundamentalism.” The former is guided by a rational, cost benefit approach, which seeks some insurance against future disasters; the latter requires industrial civilisation radically to overhaul its values and lifestyles. In western societies, the conflicts between the two approaches are not yet so obvious. Lifestyles are already adapting, at least at the margins, through changing tastes and modest environmental regulation and taxation. There is a consensus that certain trends are to be encouraged on sustainability and other grounds: telecommuting; dematerialisation in industrial processes; more fuel-efficient cars; and healthier eating. Moreover, some western populations-as in Italy-are no longer replacing themselves. This is not to save the planet, but because women prefer work to child raising, (from an environmental point of view the effect is the same). Large percentages of the British population value the countryside and parks and animals and worry about the extinction of whales, elephants and rhinoceroses but would not consider themselves green, let alone Green. but in the developing world, and especially the giant emerging economies of Asia, the “lifestyles” question poses much harsher choices. The transition from traditional rural subsistence-which usually means great poverty and dependence on the weather for survival-to modern, increasingly urban, middle-class, western living standards involves a quantum leap in the consumption of energy. The first is in dietary form: more starch from foodgrains, more protein from livestock and fish, more vitamins from water-hungry fruit and vegetables. The second is as commercial energy: petrol and diesel for mobility; oil, gas and coal for heating, cooking and lighting. It is here that the environmentally concerned and the developmentally minded part company-with growing acrimony. The latest annual report of the World Watch Institute, State of the World-which is to environmentalism what Wisden is to cricket; a bible and annual encyclopaedia rolled into one-leads with a feature on the threat of the “China factor.” It is prompted by the current surge in wheat prices-a 70 per cent increase in the past six months. The institute projects that demand for foodgrain imports in China will grow to 400 million tonnes in 2030, against current total world exports of 200 million tonnes. It claims that it will be impossible for the global system to meet such demand (especially as it will be augmented by growing import demand from Africa, the Indian sub-continent and elsewhere). Global famine is threatened among the poor who will not be able to afford higher prices. Such demand growth, it claims, is unsustainable. Similar extrapolations, leading to equally dire conclusions, have been made for the energy sector. China is becoming an importer of oil and, within a couple of decades, the equivalent of a new United States could be added to the global oil market. India could become another Germany over that period in terms of import demand. For those who worry about middle east oil security and about oil supplies running out, this increase represents frightening arithmetic. Even if supply and demand could be made to balance at a much higher level, there is the prospect of a more energy intensive China and India pushing up carbon emissions. Per capita carbon emissions in China are currently about a tenth of those in the US; a developed China would inevitably raise them towards levels which could, in turn, make the problems associated with global warming far more acute. It is not too difficult to see where these fears are heading. China, India and the rest cannot expect to achieve developed country living standards; either ecological constraints will exercise their own disciplines or disciplines will have to be invoked to stop them. We may now be at the very early stages of a conflict between western environmentalism and the economic aspirations of the rest of the world. But before drifting into an acceptance of diverging values and interests it is important that the west examines more critically the assumptions about “limits” which underpin the debate. Part of the problem in countering them is that they do indeed proceed from valid observations about environmental degradation, valid insights about the fragility of some eco-systems-such as ocean fishstocks-and valid worries about some potential global hazards such as global warming. However, the baby of environmental wisdom is being drowned in the bath water of questionable economics and technological pessimism. There are three fallacies in particular, some of them of long historical pedigree. The first is the fallacy of ever diminishing returns: the assumption that fertiliser use and irrigation in China, for example, must be increasingly ineffectual, leading to a widening gap between declining production and rising demand for grain. Such predictions formed the basis of Malthus’ economics and have been endlessly and wrongly repeated ever since by people who, unlike Malthus, had the evidence of rapid technological change in front of them. There was, for example, a copious literature predicting dire Malthusian catastrophe in India up to the mid-1960s and later in Bangladesh, though both countries have been consistently and reliably self-sufficient since. In China there has been a steady expansion of rice yields, more than doubling since 1960. There is a new rice variety available, with the potential to raise yields by a further 20-25 per cent. Even in areas where ecological constraints are more pressing, there is needless pessimism about supply. Fish stocks, for example, are now being expanded by aquaculture, especially in China, and it now supplies 14 per cent of the world’s demand. Yet the World Watch Institute (among others) proceeds to make the extraordinary assumption that no further advances can occur (despite the fact that many biotechnological methods are still in their infancy). Previous experience of economic history tells us this is simply nonsense. Unnecessary alarmism about supplies is compounded by a second fallacy: the fallacy of price pessimism. While it is true that economists have often neglected environmental concerns, environmentalists have often been guilty of the opposite failing: ignoring the way in which prices can often have a radical effect on supply and demand behaviour. The farm surpluses of the European Union are a tribute to the power of price incentives (indeed, if it were the case that Chinese and other Asian demand were to spill over into very large imports, this would give an incentive to European and US producers to expand output without subsidy). The underperformance of Russian, Ukrainian and eastern European agriculture bears witness to the absence of such incentives, as does the present (but not inevitable) dependence of many African countries on imported foodstuffs. Part, at least, of the current difficulty of Chinese agriculture lies in the neglect of peasant agriculture since the mid-1980s: including poor prices, unsatisfactory tenure rights and government defaults on its IOUs to farmers. There is, clearly, much more to agricultural economics than prices, but the eco-pessimists’ extrapolation of endlessly rising food deficits assumes them away. There would of course be income distribution implications if incentive structures, globally, moved to favour farmers (and fishermen) but, taken in the round, they would not necessarily be regressive. Billions of peasants could benefit as well as millions of larger landowners. Such a shift may well be politically problematic but it would not be a staging post on the route to ecological disaster. The same is true of the increased demand for non-renewable raw materials. To be sure, rapidly growing giant Asian countries, notably China, will increase greatly the call on world supplies of oil, coal, metals and much else. But periodic bubbles of pessimism on this score are easily deflated (the last notable bubble found its apotheosis in the mid-1970s Club of Rome report, which provided an injection of environmental panic to reinforce western fears of Opec). Such pessimism is inspired by the third fallacy: the fallacy of fixed reserves. This is the popular but misguided idea that because there are, for example, 30 years’ supply of oil reserves, the world’s last oil wells will splutter to the end of their lives in 30 years’ time. In fact, there have been about 30 years’ supply of oil reserves for most of the last century-and there will be for many years to come, because new reserves are constantly being found. If new reserves start to fall significantly below incremental demand, prices will rise (again) in real terms, making marginal fields worth developing and also moderating demand growth by encouraging conservation and greater energy efficiency (in China and India, especially, the savings from this source are potentially huge). If real prices were to stay relatively high for a significant period, it would become profitable to exploit on a much larger scale alternative energy sources such as solar and wind power, which are already becoming cost competitive in many locations and are expanding rapidly. Then there are unconventional hydrocarbons such as oil shales. There is, to be sure, the politically inconvenient fact that the world’s biggest concentration of low cost oil is in a handful of Arabian Gulf states which are of doubtful political stability. No doubt Chinese and Indian long-term strategists are already considering options for ensuring that large long-term supplies at low cost are available to them, and will as a consequence become as active in the region-politically, commercially and, possibly, militarily-as the west already is. But this problem has nothing to do with the world’s “running out of oil” or other vital energy sources. One other area of concern is that China and other emerging Asian giants will generate so much pollution in the course of becoming “developed” countries that the global environment will be threatened. There is currently some alarm in Japan about Chinese acid rain from coal-burning and sewage in the China Sea (only 15 per cent of Chinese waste is treated). But as China, and the rest of low income Asia, becomes more affluent, sulphur emissions and sewage treatment will improve as they have in other richer countries. There is a clearly demonstrated relationship between rising income and reduced per capita emissions for many of the more noxious pollutants, because economic development brings with it a growing sensitivity to environmental pollution and a greater capacity to deal with it. Because environmentalism often thrives on righteous indignation it is rarely pointed out that many environmental problems are being solved by greater affluence. The lead added to gasoline has fallen 75 per cent world-wide since 1970, and it has been phased out completely in Brazil and South Korea as well as in the US. Global CO2 and NOx emissions are now falling. And while newly industrialising countries have appalling examples of environmental neglect, there are cases-such as Cubat?o in Brazil-where the position has been strikingly improved very quickly. The necessary technologies are available. The use of pricing to ensure that users bear the full cost of resources they consume and pollution they generate will act as a spur to conservation. It is true that there is a transitional period in which development makes a heavy call on resources. This is similar to-indeed, related to-the demographic transition when population shoots ahead before stabilising with lower birth rates. Neither the environmental nor the demographic burden can be avoided in these transitional periods, but such periods can be shortened by prudent policies. there is, as I have already indicated, one important area in which rising numbers of increasingly affluent Chinese and other Asians could present a challenge to the global eco-system: this is the global warming problem. If the hypothesis about the warming effect of man-made greenhouse gases proves to be correct, then there is legitimate concern about any new, large-scale, emission sources for CO2 and NOx as growing electricity and vehicle use would imply. China already accounts for 12 per cent of world fossil carbon emissions. However, given the continuing uncertainty about the science and, even more, about the impacts of global warming, there is no immediate rationale for action beyond sensible conservation measures and incentives to increase energy efficiency. What this means for countries such as China and India is that they should charge more for power supplies, road use and the commercial use of forests-policies urged on them in any event by development agencies such as the World Bank, for economic as well as environmental reasons. A point may come at which more severe restraint is called for. In that case, a precedent has been set through the Montreal Protocol governing ozone damaging chlorofluocarbons (CFCs) to which China and India have subscribed on certain specific understandings: that there will be technical and financial help; and that restraints should be phased in recognising that the greatest burden of adjustment rests on richer countries which have already made disproportionately large per capita emissions. Schemes have already been designed which would meet ecological concerns while permitting rapid development to take place in countries that are currently poor. One example is the auction of carbon quotas: countries would, in effect, buy the right to emit carbon, with financial help provided for low income countries. Country quotas would depend not just on present emissions, but future requirements to sustain higher living standards in poor countries. The scheme reconciles economic and environmental objectives, but would raise in acute form the issue of equity between countries. It would operate by penalising the use of fuels contributing disproportionately to greenhouse gas emissions, leading to fuel switching in the power sector (more gas and renewables), more energy conservation and more use of public transport in cities. Some lifestyle changes may thus be required, but the changes are specific and their rationale is already reasonably well understood in most western countries. The idea that China and other poor countries cannot realistically aspire to western standards of living-of mobility, nutrition and comfort-is technologically and economically unjustified. It is also offensive in its assumption of a fossilisation of existing economic inequalities. Their rapid growth may lead to a shift in relative prices to favour the world’s food and energy producers, but there is nothing inherently problematic about that; nor does it necessarily have adverse implications for global income distribution. There are-or may be-specific problems such as global warming for which there are specific remedies. While prudence is certainly required, there is absolutely no call for environmental panic over the inevitable, and desirable, multiplication of incomes and consumption which technology and efficient economies could help to make possible for everyone.