Adjusting the Environment

by Walden Bello

While some structural adjustment programs, such as those in Ghana, tried belatedly, though unsuccessfully, to address the social costs of adjustment, no structural adjustment program has explicitly been designed to take the environment into account. As a result, heightened environmental degradation and resource exploitation have often accompanied structural adjustment efforts.

Indeed, it is hard to see how structural adjustment can be made environment-friendly, since it usually contributes to impoverishment and more inequality, which are two of the key causes of environmental degradation. This is not to say that poor people harm the environment because they are poor. Many tribal and peasant communities have, in the past, developed ecologically benign systems of sustenance.

This equilibrium, however, has been disrupted in recent times by the dynamics of impoverishment triggered by the development of unequal control over land and resources, subjection of the economy to external forces, and rapid population growth. This mutually reinforcing relationship between impoverishment and ecological degradation is described by the 1992 World Bank Development Report:

Because they lack resources and technology, land-hungry farmers resort to cultivating erosion-prone hillsides and moving into tropical forest areas where crop yields on cleared fields usually drop sharply after just a few years. Poor families often have to meet urgent short-term needs, prompting them to 'mine' natural capital through, for example, excessive cutting of trees for firewood and failure to replace soil nutrients.

The Bank then uses Africa as an example of the vicious cycle of impoverishment and ecological disruption, overlooking the fact that, together with the IMF, it has been responsible for the policies that deepened the poverty of the continent in the 1980s:

Agricultural stagnation in Sub-Saharan Africa is a particularly clear example of the mutually reinforcing nexus of poverty, population growth, and environmental damage. Low agricultural productivity, caused mainly by poor incentives and poor provision of services, has delayed the demographic transition [to lower birth rates] and encouraged land degradation and deforestation, which in turn lowered productivity. Africa's forest declined by 8 per cent in the 1980s; 80 per cent of Africa's pasture and range areas show signs of damage; and in such countries as Burundi, Kenya, Lesotho, Liberia, Mauritania, and Rwanda [all of which were under IMF and/or World Bank programs] fallow periods are often insufficient to restore soil fertility.

The debt crisis and structural adjustment of the 1980s heightened the interaction between impoverishment and environmental degradation, as increasing poverty and the external debt drove poor people and poor countries to exploit lands and forests more intensively, either for subsistence or for export. For instance, most of the top 15 Third World debtors have tripled the rate of exploitation of their forests since the late 1970s, a phenomenon that is undoubtedly related to both the survival imperative of poor, landless people and the pressing need of nations to gain foreign exchange in order to make interest payments. Indonesia and Brazil, two heavily indebted countries that also happen to contain much of the planet's remaining forests, have seen their rates of deforestation increase by 82 per cent and 254 per cent respectively since the late 1970s.

But beyond poverty and indebtedness was another factor driving more intensive resource exploitation. This was the ideological bias of the standard SAP against any disincentives that might stand in the way of the operation of market forces which were seen as the e'lan vital of growth and prosperity. This translated into opposition on the part of the economic authorities to effective environmental regulation by the state. A close look at four countries - Chile, Costa Rica, Ghana, and the Philippines - reveals the dynamics of this vicious circle of poverty, structural adjustment, market ideology, and environmental degradation.


Intensified Resource Extraction in Chile

In Chile, ideological preferences, pressure to gain foreign exchange to make debt repayments, and the desire to attract foreign investment combined to prevent the government from imposing any meaningful environmental controls over the exploitation of natural resources on which Chile based its export drive during the 1980s.

Wood has been one of the mainstays of Chile's export offensive with exports doubling between 1983 and 1989. Increasingly, timber production comes from industrial plantations, but in the rush to make plantations the cornerstone of Chile's forest products industry much natural forest was cut down and replaced by pine monocultures. As Sandra Postel and John Ryan note, 'When a cathedral grove of millennia-old alerce trees in Chile - containing some of the world's oldest living organisms - is cut, no statistics can capture the world's loss.'

As for the fishing industry, the annual sardine catch in 1987 and 1988 was about 2.2 million and 1.5 million tons respectively, far above the 1 million ton limit to prevent over-exploitation. It is therefore not surprising that the total fish catch declined by 16 per cent in 1989 and another 22 per cent in 1990.

Over fishing was not, however, the only reason for the reduced catch. Other contributing factors were the runoffs from mining operations and pesticides which seeped into rivers and were then carried out to sea. El Mercurio, the conservative Chilean daily newspaper, notes that 'industrial wastes, primarily from the large mining companies, in the form of tailings or surpluses from the copper-refining process ... [have] seriously affected the coastal area of the Second and Third regions.' The problem is not the lack of environmental laws. Rather, as one study notes, 'The Chilean government has been particularly loath to force state-owned mineral operations to comply with the laws. At times, the prospect of major revenue from projects leads government officials to simply ignore environmental rules or studies.' As for pesticides, not only were runoffs contributing to the reduced fish catch, but their heavy use threatened the health of producers and consumers alike. So heavy is the pesticide-dependence of Chilean fruit exports that Chilean grapes, which account for one-fourth of grapes consumed in the US, were temporarily banned from entering the United States in 1990.

The rape of Chile's environment that all these 'externalities' of unrestrained entrepreneurship added up to was noted in a government report cited by the New York Times which asserted that the economic growth of Chile has taken place at the expense of the environment ... [T]he so-called export 'boom' was based on the use and abuse of natural resources, permitting the degradation of the eco-systems greater than their ability to regenerate.


Adjustment and Deforestation in Costa Rica

Costa Rica was subjected to 9 IMF and World Bank stabilization and structural adjustment programs between 1980 and 1989. As in Chile, a key aim of the adjustment was to make the Costa Rican economy more efficient by opening up the domestic economy to imports and foreign investment and by boosting the country's export industries in order to gain foreign exchange. Two key export industries, in particular, benefited from adjustment policies: the banana industry and cattle raising. The accelerated development of these sectors, however, was achieved at a high environmental cost.

In the banana industry, expansion was encouraged by structural adjustment policies that not only produced deep tax cuts on banana exports but gave new banana producers generous subsidies 'to strengthen Costa Rica's international competitiveness.' This windfall triggered the expansion of both foreign-owned and domestic plantations, which in turn accelerated what was already an advanced stage of deforestation. Perhaps the most cogent description of the environmental consequences of these export-driven policies is provided by one of their key supporters, the World Bank:

Starting in 1986, plantations expanded again, at a rate of 2,000 [hectares] per year. More important, regarding deforestation, however, is that the banana growing area has shifted almost completely from the South Pacific to the Atlantic Region ... It is estimated that production will expand in this region by 5,000 [hectares] by 1993 at the expense of forest cover. This expansion, accompanied by land invasion by plantation workers, is said to constitute a major threat to the protected areas of Tortuguero [on Costa Rica's northeast coastline]. From an environmental point of view, aside from the issues related to banana production (pesticides, solid waste pollution, sedimentation), the expansion of banana plantations gives rise to concern because it threatens the area's biodiversity.

Deforestation was not the only form of environmental degradation triggered by the expansion of banana plantations. The industry is heavily dependent on pesticide use, leading, according to a study by the School of Environmental Sciences at Costa Rica's National University, to serious health problems for banana workers, including 'spells of vomiting, dizziness, headaches, eye lesions, skin burns, and allergies.' Moreover, once deforested areas were planted with bananas, soil degradation accelerated, since bananas rapidly deplete soil of its humus and nitrogen. To sustain banana production, the banana companies substituted huge amounts of chemical fertilizers for natural nutrients. These fertilizers then mixed with pesticides to form chemical runoffs that washed into rivers and eventually into the sea. The destruction of some 90 per cent of the coral reef in Talamanca, a region on Costa Rica's southeastern coast, is linked to these chemical runoffs.

Another key beneficiary of Costa Rica's SAP which has contributed to environmental damage is cattle raising, which services the international fast-food industry. To foster export expansion, a third of state-financed agricultural credit has gone to cattle ranchers. They have responded by turning forests into pasture land more rapidly. The proportion of the national territory under forest cover dropped from half in 1970 to 31 per cent in 1987, and 70 per cent of deforested land is now used for pasture. So intensely do ranchers covet forest land that in Costa Rica, 'ranchers practice 'fence-creeping' - literally edging their fences beyond their property lines into national parks.' Yet tropical soils without forest cover quickly degrade, leading the ranchers to abandon the land within a decade and generating constant pressure to bring new forested land into pasture.


SAP and Ghana's Environment

The focus of Ghana's structural adjustment program was to make cocoa production more profitable for farmers so that they could increase output, resulting in greater foreign exchange earnings for Ghana. Output rose, but, as pointed out earlier, precisely because of this, the price of cocoa fell on world markets because of finite demand. With the value of exports flat and imports inexorably rising, this led to a worsening of the current account balance from a deficit of US $43 million in 1986 to a deficit of $229 million in 1990.

To make up for the fragile state of the cocoa industry, the government moved to revive commercial forestry, with World Bank support. Timber production rose from 147,000 cubic meters to 413,300 cubic meters in the period 1984-7, accelerating the destruction of Ghana's already much-reduced forest cover. With deforestation proceeding at a rate of 1.3-2 per cent a year, Ghana's tropical forest is now just 25 per cent of its original size, and the country, according to a study of the World Watch Institute, will soon make the transition from a net exporter to a net importer of wood. Indeed, economist Fantu Cheru predicts that Ghana could well be stripped of trees by the year 2000.

Deforestation has triggered a vicious ecological cycle, leading, according to Development GAP, to regional climatic change, soil erosion, and large-scale deforestation. Moreover, deforestation also threatens household and national food security now and in the future. Seventy-five per cent of Ghanaians depend on wild game to supplement their diet. Stripping the forest has led to sharp increases in malnutrition and disease. For women, the food, fuel, and medicines that they harvest from the forest provide critical resources, especially in the face of decreased food production, lower wages, and other economic shocks that threaten household food security.

Forest destruction, however, is but one of the many dimensions of environmental destruction wrought by structural adjustment. Charles Abugre calls attention to the fact that the rapid mining of environmental resources as evidenced by fast depleting forests, bush-fires ravaged savanna lands as well as open cast mining without land reclamation plans, deep sea over-fishing and the reckless dumping of toxics from mines and industries are undermining the main assets of the poor-land and water resources.


Intensifying the Philippine Environmental Crisis

Like Ghana, the Philippines has been one of the most structurally adjusted countries, as it has been 'on the cure' almost continuously since 1980. Structural adjustment, in fact, has been one of the threads of continuity between the newly elected government of Fidel Ramos, the recent government of Cory Aquino, and the dictatorship of Ferdinand Marcos.

There appears to be a strong consensus that the stabilization programs of the IMF and the World Bank during the 1980s had a strong negative impact on the environment. A World Resources Institute locates the problem in the sharply escalating pressures on the country's fragile natural resource base that were brought about by the economic contraction triggered by the SAP. Adjustment created so much unemployment that migration patterns changed drastically. The large migration flows to Manila [the capital] declined, and most migrants could turn only to open access forests, watersheds, and artisanal fisheries. Thus the major environmental effect of the economic crisis was over-exploitation of these vulnerable resources.

While exploitation of natural resources for subsistence needs increased during the 1980s, resource exploitation for commercial purposes, both for domestic consumption and export, declined. This was due to a combination of an overexploited resource base and lower demand owing to global economic stagnation in the middle of the decade. Nonetheless, the IMF-World Bank pressure on the country to gain foreign exchange in order to service the external debt still resulted in a substantial outflow of natural resources, accounting for almost US $23 billion of the $50 billion worth of products exported by the Philippines between 1981 and 1989. And it discouraged serious government efforts to impose environmental controls on resource use.

The staggering consequences of the vicious interaction of impoverishment, adjustment, export-orientation, and environmental degradation included the following:

1) the portion of the country covered by forest declined from 34 per cent in the mid-1960s to 21 percent in the mid-1980s;56

2) coastal fish resources were depleted, as the annual fish catch rose to an average of 374,000 tons a year in 1980-4, from 311,000 in 1970-4;

3) 70 per cent of coral reefs, have been destroyed in the last 15 years thanks to a combination of situation from denuded mountains, tailings from mines, and harmful fishing techniques [including] gargantuan drift nets used by foreign fishing fleets, dynamite blasting by fisherfolk in search of quick and easy catches, and cyanide squirted into the reefs to stun and catch the exotic tropical fish about half of which will end up inhabiting aquariums in US homes...;

4) and of the Philippines' original 500,000 hectares of mangroves, the coastal breeding grounds of fish, only 38,000 hectares remain, much of the rest having been converted into fish or prawn farms geared mainly to producing for foreign markets.

Prawn farming in the Philippines, in fact, provides a good illustration of the devastating environmental impact of debt-driven, export-oriented production. With World Bank encouragement, the Philippines went into prawn farming in a big way in the 1980s, with the value of prawn exports, most of which are exported to Japan, growing eight fold between 1980 and 1987. Intensive prawn farming necessitates a mix of fresh and salt water, which explains why prawn ponds are located on the coast: vast quantities of fresh water are pumped from underground aquifers and mixed with salt water from the ocean. However, as Robin Broad and John Cavanagh point out, the parched underground aquifer begins to suck in water from the sea, raising salinity levels. This inland water migration ... left unchecked ... will eventually ruin the land for agriculture - and, ironically, for aquaculture too. Experts claim that it would take a generation after the prawn farms stopped operating to flush out the salinity.

By the end of the 1980s, the Philippines had indeed been reduced to a 'plundered paradise,' to borrow Broad and Cavanagh's description, and a not insignificant factor in this had been the seemingly endless adjustment process.


from the book
Dark Victory by Walden Bello

published by
Institute for Food and Development Policy (Food First)
398 60th Street, Oakland, CA 94618

Environment watch

Dark Victory