Structural adiustment, the environment, and sustainable development

by David Reed

On 29 May, David Reed of the World Wide Fund for Nature (WWF) was in Brussels to present the results of a study undertaken by the WWF, with the support of the European Commission, the longterm consequences of structural adjustment programmes (SAPs) on the environment and the use of nature/ resources. Conclusions were drawn from nine country case studies from Cameroon, Mall Tanzania, Zambia, El Salvador, Jamaica, Venezuela, Vietnam and Pakistan. We publish here an abridged version of Mr Reed's general presentation.

SAPs, often implemented at the instigation of the international financial institutions, have responded to the pervasive economic problems of the 1980s and to profound changes in the economy in recent decades. The programmes have generally been successful in improving macroeconomic indicators in developing countries. The marketorientation of economies has been increased through liberalised trade and capital flows, privatisation, reductions in regulation and price setting, and cuts in government budgets and programmes. For most developing countries, these changes were essential to economic recovery and adjustment to the new global marketplace.

Sustainable development in the social, economic, and environmental sense, has, however, been ignored in SAPs. Many reform programmes have been accompanied by increases in poverty and unemployment, worsening income distribution, and the collapse of social services, environmental protection and state institutional capacities. These immediate costs of adjustment inhibit countries' long-term ability to expand productivity and employment opportunities, as natural resources are exploited indiscriminately to meet short-term needs.

Environmental impacts

The environmental effects of structural adjustment vary from country to country depending on the specific components of the reform package, the structure of the economy, and the implementation process. The WWF's country case studies reveal particular mechanisms through which structural adjustment has altered resource-use patterns. Some more general patterns also emerge from the studies. Everywhere, cuts in government institutions and funding have reduced the state's capacity to facilitate the transition process, to compensate for market failures, and to provide for long-term and social sustainability.

Many reforms associated with structural adjustment have the potential to improve both environmental and economic outcomes. However, the failure to implement complementary environmental policies or strengthen institutions and regulations, has created a very mixed environmental record. Increases in poverty, greater production incentives, and the loss of government regulatory capacity, have all aggravated patterns of poor resource use.

Extractive and agricultural economies generally increased production in response to greater exposure to global markets. Without proper policies in place, this increase has put a strain on fragile ecosystems. Environmental pressures include increased land degradation and deforestation for agriculture, livestock and timber production; increased production of non-renewables without long-term investment of the proceeds or environmental safeguards; and increased pollution and damage to the ecosystem from unregulated tourism.

The burden of fiscal retrenchment and price changes under structural adjustment have fallen most heavily on the poor, particularly women. The strong association between poverty and environmental degradation has been revealed, as efforts to maintain livelihoods have led to deforestation, land degradation, overhunting and other pressures on endangered species, as well as the unmanaged extraction of nonrenewable resources. Increasing poverty and unemployment associated with adjustment has also added to population pressures in urban areas with insufficient infrastructure exacerbating problems of pollution, disease and congestion.

The implications of disregarding the environmental and social impact of adjustment are examined in the various case studies. Structural adjustment has been sustained by the promise that market-orientation and export-led - growth will raise living standards. Evidence from the studies, however, strongly suggests that long-term productive capacity is being destroyed by short-term exploitation of natural resources. Not only environmental but also economic and social sustainability are threatened by the loss of environmental goods and services. Drawing down natural capital has been encouraged by government policies that promote exports and open resources up to international markets. And the process is accelerated by the growing population of poor and unemployed who rely on natural resources for survival.

Recommendations

Following its study, the WWF offers a series of recommendations to reduce the environmental costs of structural adjustment and economic integration, and to reorient structural adjustment aims towards sustainable development. Most urgently, environmental issues must be integrated into structural economic reforms - environmental assessments must become part of the programmes. A strategic vision of the role that natural resources and environmental goods and services could play in the transformation of developing economies is essential to designing appropriate strategies. Efforts to industrialise economies must include consideration of the environmental implications. Social services and environmental institutions must be maintained during the adjustment process to prevent increases in poverty and environmental degradation that have both short-term and long-term consequences for development. Essential services include credit and marketing support to small farmers, income-generating opportunities for women, food-assistance programmes, and promotion of distributional equity. The state's role in providing services which neither the private sector nor civil society can provide, must be maintained.

Given the great variety in economic structures and in the capacity of markets and civil society among developing countries, adjustment strategies and government roles must be tailored to each case. Everywhere, countries must implement national institutional reforms for environmental management. Civil society must be strengthened to allow participation in the adjustment process. International financial institutions promoting and designing SAPs must reform their policies and approaches to implementation in the light of the clear evidence that macroeconomic reforms are having a profound effect on the environment and on the possibilities for sustainable development. Continuing failure to correct these problems on a national level accentuates the concern for addressing issues of sustainability on a global level.

D.R.