0.12 Natural capital & Sustainable development introduction  (Page 9/12)

Many other nations subsidize kerosene. Pakistan, on the author’s first visit (1977) I said to my host on the way in from the airport – I see that you subsidize kerosene heavily. He replied, “How did you know?” My response: Billows of sooty smoke from truck engines using subsidized kerosene instead of the much more expensive (unsubsidized) diesel fuel.

In Chapter 18 the issue of energy subsidies is taken up in more detail. We examine these subsidies for Ghana, Philippines, India, Iran, Egypt, Indonesia, Mexico and many other nations.

Mistaken energy policies are principally, but not wholly, to blame for very high per capita rates of domestic energy consumption in countries like Colombia, Bolivia, and Venezuela. As late as 2014, Venezuela priced gasoline at less than 10 U.S. cents a gallon. The environmental consequences of underpricing of energy were particularly notable in such formerly communist command and control countries such as Poland, Bulgaria, Hungary, Czechoslovakia, and Romania where markets played very little role in resource allocation, until quite recently. Consequently, air and water pollution in these nations were among the worst in the world. As we noted, in Poland the Vistula River was too polluted to use water for industrial use, well water in rural Czechoslovakia was so toxic that bottled water had to be brought in for the population.

Another example of policy failure affecting the environment is many agricultural subsidies . These have not only been expensive, but strongly, and strangely , counterproductive. This was the case for very heavy pesticide subsidies in Indonesia in 1980s. The pesticides were intended to kill the brown-leaf hopper which ravaged rice crops. Not only were overused pesticides damaging the environment, but also they were ineffective. The big crop there is rice. But, heavily subsidized pesticides actually increased infestations of the brown leaf hopper. Why? Because of the greater effects of the pesticides on the natural predators of these pests. The Indonesian rice crop failed in 1979 because of pesticide subsidies. Predators of the hopper were all killed.

In the face of ongoing market failures and ubiquitous policy failures, is sustainable development in poor nations an attainable goal? The answer is, a qualified yes, provided attention is strongly focused upon rectifying both market failures and policy failures that corrode sustainability, and upon measures to reduce rural poverty.

The Malaysian case is instructive. This is a country that contains ample contemporaneous examples of both sustainable and non-sustainable development. West Malaysia is separated from East Malaysia by nearly 400 miles of ocean, in the South China Sea. West Malaysia consists primarily of the Malaysian Peninsula, while East Malaysia includes the two states of Sabah and Sarawak, on the Northern part of the island of Borneo.

After an inauspicious, largely wasteful start earlier in the 20 ^th century, West Malaysia has enjoyed mostly sustainable development for nearly five decades, because it finally successfully capitalized upon its initial natural resource base. Real economic growth was in excess of 3% annually from 1965-1990 and has been nearly 5% since. This rapid growth has virtually banished rural poverty as a cause of deforestation and other environmental degradation. Moreover, the environment in Peninsular Malaysia has suffered only lightly from policy failures.