Commentary

Tech Central Station
September 24, 2002

Making People and Environment Better Off in India
By Michael De Alessi

In many places around the world, the gains in environmental quality in the last few decades have been astounding. People are living longer, the air is cleaner, and agriculture is more productive, freeing up land for wildlife and forest growth. At the same time, however, many in the developing world continue to suffer from poverty and environmental degradation.

Conservation and development are inextricably linked - when people are poor the environment suffers, and when the environment is poor, people suffer - yet they are often viewed as diametrically opposed. One must sacrifice the environment for development, it is argued, or else it must be the other way around. While there are certainly examples of environmental degradation in the wake of development (think of the soot wafting around London at the dawn of the industrial age), this need not be the case, especially considering the clean technologies available today. In fact, development and the wealth that it generates may be the environment's best friends.

As Peruvian economist Hernando De Soto recently pointed out on TCS, free-market institutions - in particular the rule of law and clearly defined private property rights - offer the greatest hope for improving the lot of the world's poor by empowering them to use the capital already available to them to generate wealth and prosperity. These institutions are also the environment's best friend, for the same reasons. Once a resource becomes a legally recognized asset, people will tap into its value to both protect and enhance that resource, whether a farm or a forest.

A recent trip to India highlighted how important development will be to environmental quality and biodiversity in that country. India today is developing rapidly (it experienced 6.8 percent growth per annum from 1993 to 1997), but has slowed recently and still has a long way to go. For those concerned that the environment will suffer as a result of further development, consider that 70 percent of Indians today defecate in public, and many rural Indians rely on dung as a source of fuel. The faster India develops, the sooner sanitation and clean fuels will reach the average Indian. Can there be any doubt that 'wealthier is healthier'?

The impact of wealth on sanitation and air quality is easier to recognize that its impact on wildlife and biodiversity. There is no doubt that India's dense and growing population is increasing pressure on its natural environment. Environmental degradation and human/animal conflicts are common. But many people in India, and the world over, depend on the natural environment that surrounds them to sustain themselves, and hungry people will not hesitate to sacrifice the environment for development if they are forced to make that choice. The real question is how to find a way to make both people and the environment better off, and the answer lies in secure property rights.

Just as property rights are at the crux of wealth generation, they are also at the crux of environmental protection. If property rights are privately held, then an incentive exists to protect resources. In other words, it is the lack of private property rights - not development per se - that leads to environmental degradation. The reason that development and environment are often viewed in conflict is that property rights have so often been trampled by the state in the drive for development. Soot in London, for example, was only legalized by the subversion of private rights that had protected ordinary property owners from noxious pollution.

Fortunately, today's developing countries do not have to reinvent the wheel as technologies exist that would allow them to leapfrog the early industrial pollution of the United States and Britain. The question is how quickly they will be allowed to develop, which includes whether they will have the capital to invest in acquiring technology. A recent report by the McKinsey Global Institute concluded that "India's economy could be the fastest growing in the world - and the country's citizens twice as well off - if its policy makers embraced a deeper, faster process of economic reform." India's growth rate has slowed in recent years, but the McKinsey report predicts a growth rate of at least ten percent per annum "with certain reforms in product and land markets, along with accelerated privatization."

The size and scope of India's government is staggering. In a country of one billion people, there are only about 28 million salaried jobs, over seventy percent of which are in government. In addition, many government restrictions cause economic and environmental harm. Duties on automobiles, which are over 100% for domestic autos and much higher for imports, price out the average Indian and mean that older, dirtier cars remain in service. In addition, ownership of land is stuck in a legal morass - 90 percent of litigation in rural India concerns property disputes that can take decades to settle. Consequently, there is little investment in agricultural enhancement or new housing, despite India's growing population.

There is no doubt that Indians, and humans in general, are ingenious and adaptable when given something to work with. For example, because automobiles are so expensive, a common site outside of Agra in India is a form of transport truck driven by a water pump. It is just this kind of amazing ingenuity that is will make both people and the environment better off in places like India, if only legal and property reforms will allow it.

Michael De Alessi is director of natural resource policy at Reason Foundation