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Chapter III - The economics of environmental degradation

The theory of land degradation
Land degradation
Erosion
Flooding
Reduced economic viability
Intensification of farming practice
A case study: agricultural intensification in a banana export industry

The theory of land degradation

In economic theory, land clearance or land reclamation involves a market failure. The market does not value naturally occurring resources in the production process. Nature's "capital" is not assigned a value by the market. The externalities that lead to private individuals cutting trees and the real economic costs and benefits to the nation of doing so arise because some of the biosphere's products, especially environmental protection functions, are neither produced goods nor do they have clearly defined ownership. As a consequence, they are regarded as free goods.

Destruction of forested areas, wetlands, grasslands and bodies of water arises because of the difference between the discount rate of the individual and the society as a whole. Poor people, who are responsible for a significant share of the losses because of their pressing current need for fuel, fodder, water and land for cultivation--assign a higher discount rate to these resources than does society as a whole.

The private interests of poor people and the social interests of the broader society diverge. The interest of poor, local people in using these lands and water resources is intense, immediate and focused--food, fuel, fodder, crop land, and irrigation water. They will (often unknowingly) incur almost any social cost to permit the immediate exploitation of these environmental resources to sustain their livelihood. The interests of loggers, commercial farmers, builders and others who exploit the forests, range and grasslands and water resources are equally intense, but driven more by immediate profit considerations, not by the need to survive.

Society, as a whole, traditionally, has not placed a monetary value on the benefits derived from these resources, as such benefits are not marketable. When society has recognized these resources as having value, it has assigned a diffused, nonspecific value to them and has not translated that assigned value into market signals, i.e., financial incentives for preservation or disincentives for destruction of these land and water resources embodied in the nation's legal and administrative system. Thus, the intense, focused private interests are permitted to discount the value of environmental resources to the detriment of the longer term benefits to society of investment in these areas because these resources have neither been given market values, nor a legal, enforceable means of translating value into market signals. The Costs of Land Clearance arising from the exploitation of natural resources for financial gain highlight the problems involved all too clearly, since these resources provide a myriad of functional processes which go beyond the clearly tangible areas of providing food and products for commerce. These functional processes are not merely essential to a sound ecological balance and, therefore, ideologies advocated and imposed on society by conservationists; they are naturally occurring systems, on which the economic wellbeing of societies at local, national and international level depend.

Land degradation

Forested areas are especially sensitive to population pressure and commercial exploitation. At a local level, once the trees are felled, the highly productive potential of that region is immediately threatened, since the quality of the soils is generally poor. It is in the mass of vegetation that the nutrients essential to fast growth are stored so that, if the vegetation cover is removed, organic breakdown is almost immediate and nutrients are quickly washed away. When large gaps in the forest canopy occur, the microclimate of the area is also likely to be changed and the forest floor becomes exposed to direct sunlight. Consequently, both air and soil become dry, to the direct detriment of the land's productivity. Because of these factors, not only has the forest's capacity to provide fuel, food, fodder and shelter been removed, but so has the land's capacity to regenerate them. Degradation is further increased through soil erosion.

Erosion

Around a quarter of a million tons of topsoil are washed from the deforested mountain slopes of Nepal alone each year. On a global scale, about eleven million hectares of arable lands are annually lost through erosion, desertification and toxification; processes which are greatly encouraged by poor resource management. ¹⁰ It is human activity that causes natural erosion rates to increase many times over. Steep slopes are cultivated without terracing, irrigation projects are poorly developed and livestock overgraze grassland.

¹⁰ N. Meyers, The Gaia Atlas of Planet Management, Gaia Books Limited, London, 1985.

Flooding

The socio-economic impact resulting from a decline in productive capacity due to ecological interactions does not remain localized, especially when forest cover is lost in a watershed. The soil's water retention capacity is lost and the release of rainfall becomes erratic; periods of floods followed by droughts become the norm. Farmers in the valley lands of Southern Asia are particularly vulnerable as rivers such as the Ganges, Brahmaputra and the Mekong no longer supply regular amounts of irrigation. Flooding in the Ganges Plain provides a graphic example of the associated costs of deforestation. As the foothill forests are cleared for agriculture, the 500 million people in the valleys become more vulnerable to flooding. During the 1978 monsoon, India suffered losses of $2 billion and hundreds of people drowned. ¹¹

¹¹ Ibid.

The impact of watershed degradation even extends into urban areas. In the hinterland of Panama City and Manila, deforestation has caused so much injury to the effective functioning of watersheds that domestic water supplies are being threatened, bringing risk of contamination and pandemics. Once the forests have been clear felled, the reduction or elimination of resultant flooding may require very heavy investment in compensatory measures such as channeling, damming, and diking. These measures to reduce the natural patterns of flooding have the potential to damage replenishment of alluvial soils and recharges of soil moisture. They may also damage the vegetation and wildlife on the floodplain, as well as riverine fisheries.

Reduced economic viability

The erratic flow of rivers coupled with the problems of erosion is effectively undermining the potential of irrigation projects, as is so evident in the Sri Lankan Mahaweli program. Several large dams were constructed for the generation of energy, as well as for irrigation and flood control downstream. However, the tree cover reduction in the relevant watershed areas has jeopardized the steady supply of water to the reservoirs, on which the success of the project is dependant. Projects are further undermined by siltation, a process that not only causes river basins to silt up (thereby reducing storage capacity), but also chokes hydropower dams and adversely affects coastal fisheries and sensitive coral formations.

Intensification of farming practice

Intensification of agriculture takes two forms. Clearly, the most destructive is putting former grass and marsh lands to the plow. These activities have dramatic and far reaching effects, both on biodiversity and on human communities. Animal and plant species may become extinct if deprived of the environment in which they survive. Human communities are affected by the removal of flood control areas and the land itself is subject to erosion and soil depletion, if not carefully managed.

Intensification on existing agricultural lands can and often does produce significant environmental degradation. For example, the conversion of grazing land into crop production often results in the expulsion of the grazers and their livestock into environmentally sensitive areas, in habitat reduction for wildlife species that coexist with grazing stock, in the felling of the remaining trees and the clearing of land for processing facilities. The introduction of machinery often produces a compaction of the soil, reducing its capacity to absorb rain water, thus speeding up runoff. Unless newly cultivated lands are carefully managed, erosion accelerates and the runoffs of agricultural chemicals contaminate waters. Frequently, when grazing lands are denuded of grasses, wind erosion begins. Soil salinization may result from inadequate irrigation practices. The destruction of adjoining areas is necessary to create the required infrastructure to support intensive agriculture (dams, roads, and plants for processing the product).

Large-scale production and processing of many tropical crops has an impact on the environment with the release of untreated toxic wastes. Tea, sugar, cocoa, coffee, rubber, oil palm and fibers such as cotton, require specialized processing facilities which produce effluent that, if not processed and recycled, pollutes the lands and streams adjacent to the processing facilities. Crops that require washing, such as coffee, produce highly toxic wash waters that must be processed before being released.

Agroindustries, including horticultural, forestry, and fishery industries, produce significant volumes of toxic wastes. In many cases, these pollutants are simply dumped into nearby streams or landfills without concern for the environmental consequences. Some industries require large quantities of poles (for stakes in horticulture, for example) or fuel wood. These needs are frequently met by stripping the poles and fuel wood from nearby forests.

In Sri Lanka, de Silva reports that the coconut industry releases large quantities of toxic hydrogen sulphide and organic compounds, which lower the dissolved oxygen in water, thus affecting lagoons and marine life. The rubber industry annually releases into streams the equivalent of 330,000 tons of rubber serum, which contains formic and acetic acids. ¹²

¹² G.M.P. de Silva, 1991.

The intensified use of agrochemicals presents an especially challenging problem of environmental degradation. High-yield tropical monocultures, without the benefit of rotations and fallows, require heavy doses of pesticides to control pest population buildups. Many of these pesticides are currently used as a preventive measure before an unacceptable level of pest populations has developed. The spraying often has wide-reaching effects on beneficial insect populations, as well as affecting the human inhabitants in the spray zones, unless the spray programs are very carefully managed as to the dose applied and the method and timing of application. As pest populations become resistant to the current pesticides, higher doses of more potent chemicals are required. Cotton is a good example of a crop that requires massive doses of pesticides to obtain profitable production levels and to meet acceptable quality norms.

Animal-based industries also generate massive quantities of toxic organic effluent. Discharges from poultry, swine and cattle production and processing facilities often pose serious dangers to human health; the organic discharges are a source of disease if dumped untreated into the environment.

Agroindustries present special problems as they affect both the environment and the human ecology. Not only is the environment altered, but the symbiotic relationship between man and the environment may change in unanticipated ways . As an example, the effects of a commercial banana production facility can show the wide ranging impact that an agroindustry may have on an entire region's ecology and human population. In the case study that follows, the facility is in the Caribbean region, but the effects would be similar for other tropical fruit and beverage production facilities in any part of the world.

A case study: agricultural intensification in a banana export industry

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