Development is sustainable if the rules of the game are transparent and the game
is inclusive.
Two billion people will be added to the world’s population over the next 30
years, and another 1 billion over the following 20 years. All of this increase
will occur in developing countries, and almost entirely in urban areas. Today,
2.8 billion people in developing countries live on less than $2 a day. The core
challenge for sustainable development is to ensure a better quality of life for
all these people while meeting everyone’s aspirations for well-being. This
demands substantial growth in income and productivity in developing countries.
At the same time, it is necessary to sustain critical ecosystem services and
strengthen the social fabric that underpins development.
World Development Report 2003 is about improving well-being and
protecting what people value and want to pass on to their children. Its
messages, in brief, are these: For people to thrive, assets must thrive. A
broad portfolio of assets—physical, financial, human, social, and
environmental—needs to be managed responsibly if development is to be
sustainable—because of thresholds and complementarities among assets.
Institutions such as property rights and the rule of law are essential for the
creation of human-made assets and the efficient operation of markets as a
coordinating institution.
Additional institutions are needed to coordinate and ensure an adequate supply
of the assets that are not spontaneously provided by markets: environmental
assets (clean water, clean air, fisheries, and forests) and social assets
(mutual trust, ability to network, and security of persons and property).
Competent institutions for coordination pick up signals about problems, balance
interests fairly and efficiently in formulating policies, and execute policies
in an accountable fashion. Such institutions enable societies to negotiate
paths to “win-win” opportunities—paths that can be elusive when the costs to
some groups go uncompensated.
The distribution of assets is critical in determining whom institutions serve
and how policies are formed. Institutions are often absent, or are flawed, when
interests are dispersed or when some groups in society are poor or in other
ways disenfranchised. Groups that lack assets tend also to lack voice,
security, and a stake in the larger society, hampering the ability of
institutions to perform their necessary coordination functions. This can result
in vicious, self-reinforcing circles as biased institutions implement policies
that lead to more unequal asset distribution and greater polarization. It is
difficult, but possible, to develop policies that increase voice and access to
assets, shifting development dynamics from vicious to virtuous circles and
toward greater sustainability (see figure 1). When more people are heard, fewer
assets are wasted. As the world comes to resemble a single community, these
lessons may apply even at the global level.
The implication for development strategies and development assistance is that
greater emphasis should be placed on:
Identifying the vicious circles that keep the pace of growth slow and the
distribution of assets unequal—and developing strategic interventions to break
these vicious circles
Investing in projects, programs, and initiatives that bring about better, more
inclusive institutions and ensure systematic learning
Supporting the evolution of an ecosystem of organizations that learn—and
applying that learning to improving policies and projects.
Development strategies that emphasize inclusiveness, shared growth, and better
governance will make great demands on leaders and communities in developing
countries. The introduction of more welcoming trade, aid, migration, and
knowledge-sharing regimes in industrial countries—to facilitate growth in
developing countries—will make great demands on industrial countries’ leaders
and voters. Overcoming the inertia that hinders tackling these difficult
problems—the fears and risks connected with unilateral action—requires greater
coordination. This coordination would be facilitated by a bold common vision
and a self-reinforcing, mutual, long-term commitment to a 50-year global
accord. Such an accord would promise additional, more appropriate, and
sustained assistance if reform deepens—and would provide assurance that reform
will deepen if assistance is forthcoming.
The Report takes a 20 to 50 year perspective, recognizing the long lead times
involved in social evolution and transformation. On this time scale, current
actions will shape the evolution of future technologies and future individual
and social preferences. This perspective allows analysis of the cumulative
impact of incremental changes that affect sustainability and recognizes the
longer time horizon required for institutional reform. Because the Report looks
at a longer time horizon, many policy parameters become variables. For example,
preferences and technologies that can be assumed to be fixed in the short run
cannot be assumed to be fixed in the long run. Similarly, allocation issues
(the subject of economics) and the bargaining over distribution problems (the
subject of politics) cannot be neatly separated.
The Report does not focus on specific policies or organizational designs, nor
does it evaluate projections based on different policy or organizational
scenarios. It recognizes the importance of economic incentives and policies in
changing behavior, but argues that appropriate policies have not been adopted
or implemented because of institutional weaknesses. For this reason, it looks
at the underpinnings of good institutions that can design, adopt, and implement
sustainable responses and at how such institutions emerge and adapt to problems
and opportunities. The premise for this institutional focus is that development
problems and solutions which are not even foreseeable today can be better, and
sustainably, addressed when institutional foundations are strong. The Report
draws on the many institutional innovations under way worldwide to illustrate
the opportunities and the catalysts. Durable solutions do not emerge from quick
fixes.
Significant gains in development, but at costs that cannot be sustained
During the past 30 years, 2 billion people were added to the world’s
population, mostly in developing countries. Substantial gains in human welfare
accompanied this growth. The infant mortality rate in low- and middle-income
countries was cut in half, from 11 percent of live births to 6 percent;
illiteracy among adults fell from 47 to 25 percent, and for women, from 57 to
32 percent. Real per capita income (in population-weighted 1995 dollars) rose
from $989 in 1980 to $1,354 in 2000. And many of the world’s people enjoy more
freedoms and greater opportunities to participate in democratic processes than
they did three decades ago.
There have also been success stories in reducing pressures on the
environment—for example, in protecting the ozone layer and curbing
transboundary acid rain. Urban air pollution is declining in Mexico City and in
many of China’s fast-growing cities. Most countries have phased lead out of
gasoline. In just the past 10 years, access to sanitation in low- and
middle-income countries rose from 44 to 52 percent.
But some social and environmental trends associated with past development
strategies in industrial and developing countries are not sustainable. There
are still 1.2 billion very poor people (those living on less than $1 a day)
despite the success in reducing this number by at least 200 million in the past
two decades, even as overall population grew dramatically. The average income
in the richest 20 countries is 37 times that in the poorest 20—a ratio that has
doubled in the past 40 years, mainly because of lack of growth in the poorest
countries. In the 1990s, 46 countries were involved in conflict, primarily
civil. They included more than half of the poorest countries (17 out of 33).
These conflicts have very high costs, destroying past development gains and
leaving a legacy of damaged assets and corrosive mistrust that impedes future
progress. More than 1 billion people in low- and middle-income countries lack
access to safe water, and 2 billion lack adequate sanitation, subjecting them
to avoidable disease and premature death.
Environmental conditions have also deteriorated in many places across the
planet and will worsen if present trends continue. Nearly 2 million hectares of
land worldwide (23 percent of all cropland, pasture, forest, and woodland) have
been degraded since the 1950s. Larger and thirstier populations draw on finite
freshwater resources, and local water conflicts and the loss of freshwater
ecosystems loom in some regions. By 2025, three-quarters of the world’s people
may live within 100 kilometers of the sea, putting immense pressure on coastal
ecosystems. Two-thirds of all fisheries are exploited at or beyond their
sustainable limits, and half or more of the world’s coral reefs may perish in
this century.
Every decade, another 5 percent of tropical forests is cleared. More than a
third of terrestrial biodiversity is squeezed into habitat fragments covering
just 1.4 percent of the Earth’s surface and could vanish if those fragments are
lost. Humans are changing the world’s climate, threatening coastal and island
populations with rising sea levels and residents of semi-arid areas with
desertification. And hundreds of developing country cities have unhealthy air,
causing premature deaths that would be preventable at a modest cost.
Seizing the opportunities for sustainable growth
The next half-century offers an opportunity to transform the global pattern of
economic growth so as to eliminate poverty and move to sustainable use of a
broader portfolio of assets.
For their livelihoods and well-being, people depend on assets—natural and
human-made; communal, individual, and public. All these assets need protection
and encouragement in order to thrive. The institutions that provide these
safeguards range from the social capital and norms governing grazing and shared
maintenance to such modern institutions as property rights, fishing quotas, and
forestry agencies. The soils, fish, and forests that benefit the poor directly
can be wastefully degraded when people lack security and a long perspective. In
the same way, investment in machines and human capital needs the support of
such institutions as credible laws and property rights to enhance confidence.
The restraint required involves important commitment problems, since thriving
assets are tempting targets for appropriation by individuals, firms, and
governments and their officials. No set of actors is perfect. Institutions must
compensate.
Drivers of change and transformation
Of the many interrelated drivers of socioeconomic change and transformation,
four stand out: scientific and technological innovation, and income growth,
(both of which are ongoing processes), and population growth, and urbanization
(both of which are one-time transitions).
Scientific and technological innovation.
Science and technology have the potential to enable developing countries to
learn faster from each other and from industrial countries—to improve the
health and productivity of poor people, and to mitigate climate change and
environmental degradation. Whether they will do so depends in large measure on
collective decisions about funding, implementing, and disseminating
technological innovation.
Income growth.
The projected growth of global income of 3 percent a year over the next 50
years implies a fourfold increase in world gross domestic product (GDP). This
growth will require major investments in new human-made capital to expand
capacity and to replace existing capacity as it ages. Making these investments
(many of which are long lived) more environmentally and socially responsible
through appropriate investment criteria will go a long way toward putting
development on a more sustainable path—an opportunity that must be seized.
Demographic transition.
It is likely that global population will stabilize in this century at 9 billion
to 10 billion people—85 percent of this growth will occur by 2050. This is an
historic opportunity. The slowing of population growth, and the growth in the
proportion of the working-age population, mean that governments that were
struggling just to keep up with increasing populations can move toward a focus
on enhancing the quality of life for all their citizens. This opportunity
depends, however, on ensuring that the people are educated and have employment
and investment opportunities.
Urban transition. By 2050, for the first time in history, the majority
of people in developing countries will be living in towns and cities (see
figure 2). Well-functioning urban areas are engines of productivity growth,
employment, and social transformation. The projected doubling of urban
populations will make it necessary to create anew the long-lived built
environment of cities. The investments in infrastructure and other capital will
affect land use, public space and energy, and the quality of life of both urban
and nonurban residents. The demographic and urban transitions will also provide
a major window of opportunity for reversing the expansion of agriculture into
terrestrial ecosystems—but they will create stresses on freshwater and coastal
ecosystems. Taking corrective action in anticipation of these known trends can
avoid future regrets.
Major challenges to be overcome in the next 50 years
Problems and opportunities arise wherever people live—in mountain villages and
dryland areas, in island and coastal communities, in rural and periurban
settlements, in towns and cities. The following are some of the key challenges
with local and global implications that will face the world population over the
next five decades.
Today, 1.3 billion people live in fragile and often remote rural
ecosystems—semi-arid areas, mountains, and forests—and their numbers are
growing faster than the populations in more favored rural areas. Will these
people be able to overcome poverty, improve their livelihoods, and adapt to new
opportunities—where necessary, by migrating out? Or will they be left to
languish?
Populations in cities and megacities in the developing world will more than
double. Will urban areas live up to their potential as dynamic engines of
growth and social modernization? Or will they become mired in poverty,
pollution, congestion, and crime?
Will renewable natural resources be managed as sustained sources of livelihood
and well-being, or will forests, soils, water, biodiversity, and fisheries be
depleted?
Will societies be resilient, forward-looking, and creative—able to promote more
equitable development and cope with unexpected shocks as they undergo sweeping
transformations in patterns of growth and migration? Or will they become
intolerant and hostile to new migrants, values, and ideas, or turn to fighting
over resources?
Will poor countries be able to accelerate their growth without creating
destabilizing social and environmental stresses? Will the prospective world GDP
of $100 trillion at midcentury generate fewer environmental and social stresses
than today’s much smaller global economy?
Action must begin now to deal with emerging problems that have long-lived
consequences.
Traditionally, institutions designed to protect assets and facilitate
transactions have developed over long time periods, often with lamentable lags.
Wasteful races for timber or fish—tolerable when stocks are abundant—become
imminent threats when depletion of trees or fish is in sight.
Urgent action is required to address acute environmental and social problems,
whether they have short or long horizons. Such progress is possible. Living
conditions in slums can improve rapidly if residents have secure tenure and if
governments and public utilities are willing to work with them. Industrial
water pollution can be reduced substantially and at relatively low cost if
monitoring and enforcement procedures are in place. Illegal deforestation can
be curbed if there is popular support for doing so. For none of these actions
is income growth a prerequisite, and for none is it a cure-all. In short, rapid
progress is possible if competent institutions are in place to enable public
action.
For other acute problems, action is urgently needed now precisely because of
the long lead time required to reorient poorly functioning institutions. Some
examples are the elimination of perverse subsidies and tariffs in industrial
countries on products in which developing countries have a comparative
advantage; the conservation of overexploited fisheries or forests; and
reduction of extreme inequality in developing countries. On each issue, strong
constituencies for unsustainable or undesirable outcomes have emerged over
time, leading to a political “lock-in” that is difficult to reverse. Trade
reform can take decades; so can peaceful reductions in asset inequality.
Some of the most difficult problems are not yet severe and have long lead
times, but they will be difficult to address if action is deferred until the
problem is glaring. For instance, water basin management authorities may come
into being only after all the water in a major river has been appropriated and
the river literally runs dry at its mouth. At that point, with strong
agricultural and industrial water user lobbies in place, it is difficult to
reallocate enough water to maintain riverine and coastal ecosystems. Climate
change presents a striking illustration of the need to think long term but act
now (see figure 3).
._._. and for problems that require commitments over longer time horizons
The tough problems are not subject to quick technological fixes or transfers of
ready-made solutions from one culture or locale to another. It is also sobering
that the gains of recent years can be forfeited, as is happening in the many
states in conflict. The challenge is to accelerate progress and to put in place
deep-seated institutions that can resist backsliding before it begins.
Major policy changes, especially those intended to reform education systems,
manage ecosystems, or change the use of urban space, unfold over decades. To
ensure that the institutions created today can support better outcomes in the
future, they must be durable and adaptable. Durability means that institutions
need to be endowed with the capabilities and incentive structures to replicate
their beneficial effects in the future. Because it is impossible to predict the
full range of problems, needs, and opportunities that will arise, institutional
structures must also be capable of learning, evolving, and adapting without
losing their core mandate. Greater productivity and prosperity depend on
improvement of the many dimensions of human well-being—both material wealth and
the nonmaterial aspects of personal and social welfare. Improving well-being,
so defined, requires management of a diverse portfolio of assets—physical,
human, financial, social, natural, and intellectual.
The reason for a diverse portfolio is that assets are often complementary.
Individuals with serious deprivations in education or health cannot take full
advantage of whatever natural or physical assets they may have. Urban housing
is devalued by dirty air, contaminated groundwater, or the loss of
flood-moderating wetlands. A country or region, even if it has educated labor
and finance at its disposal, cannot advance if social institutions are
devastated by enmities and conflicts that erode trust and cooperation.
Environmental assets are underprovided because of spillovers ...
Environmental and social assets often have common- property characteristics.
Individuals using such assets may fail to consider the spillover effects on
others. For example, someone who clears and burns forest may damage other
people’s fields (if fires spread), health (because of haze and smoke), and
water supply (as a result of siltation). The same is true for air pollution
from power plants and vehicles.
... and are prone to wasteful races for control
Traditionally, many natural assets have been viewed as though they were openly
available to everyone and were infinitely renewable. When assets such as
forests, fisheries, or land seem inexhaustible to all potentially interested
users, there may appear to be no need to assign and defend control rights to
manage their use. But as economic activities become integrated nationally and
globally, and the technological capability of human activity increases, even at
local levels, the pressure on natural resources and their regenerative
capabilities also increases. With the realization of growing scarcity, many
parties compete to grab assets and assert control through occupation or through
preemptive extraction of natural assets (timber, forestland, fisheries, urban
plots, and water). Even the use of environmental “sinks” for dumping waste (in
land, air, or water) is subject to a race for property rights—early polluters
leave fewer options, at higher costs, for later ones, as can be seen in the
global imbalance in carbon emissions.
Addressing these problems requires coordination
Cooperative solutions aimed at avoiding these spillovers and races would be
better for everyone. Some examples are agreeing to limit fish catches, or
maintaining an irrigation or drainage system so that all can benefit from its
good operation, or collecting and safely disposing of solid waste to reduce
environmental hazards for all village or urban residents.
Institutions that restrain the taking of assets—through norms or under threat
of punishment—are essential if assets are to thrive, whether the assets are
human-made or natural, and whether they are transacted in markets or not. For
example, restraint is necessary if forests and aquifers are to yield sustained
benefits when population density, changes in technology and preferences, and
other developments increase the demands on their use. Institutions that ensure
such restraint allow assets to thrive. But because the benefits they yield are
dispersed, these institutions do not emerge easily.
Protective institutions define and support control rights for access to and use
of assets central to human well-being—who is allowed to graze their cows where;
who controls a factory; who takes home the eventual profits; who is allowed to
discharge emissions, and when and where.
A special subset of protective institutions, private property rights, embodies
well-delimited rights of use and decisionmaking for an “owner” and typically
includes the right to sell or lease an asset. Such institutions entail a
commitment from society (extended family, neighbors, villagers, and
governments) to help protect these rights. In a modern state this commitment
requires an active obligation of enforcement by the government (police, judges,
and other authorities), and the government must respect the rights. For this
reason, the security of property rights is closely associated with the rule of
law, enabling people to make assumptions about what will be respected as
theirs.
Protective institutions also arise to manage assets not amenable to private
ownership. A pollution control agency defines and protects control rights to
the air. A central bank protects the integrity of a currency and financial
system. And, as the literature on common-property resource management and
social capital demonstrates, local communities can solve coordination problems
and allow assets to thrive.
Markets can play a positive role in many but not all circumstances
Where property rights are respected, the market works well as a coordinating
institution to provide certain types of assets, goods, and services, such as
food and clothing. Markets convey the dispersed preferences of individual
consumers, and balances supply and demand through the price mechanism and the
profit incentive. They work best when, in addition to clear property rights,
there is ready access to information, competitive forces are strong, and there
are no spillovers, such as pollution (see World Development Report 2002).
For many problems in the environmental and social sphere, however, these
conditions are not fully met. Nevertheless, parts of a problem can sometimes be
structured to permit the use of market instruments. For instance, by
establishing emissions caps and issuing pollution permits that can be traded, a
public institution creates scarcity in the emission of pollution and has to
enforce it. Once this happens, markets in the trading permits can function well
to meet the pollution cap at the lowest cost. But it is not always possible to
compensate for market imperfections, and then nonmarket institutions are
needed.
Policies can correct market failures but can themselves be flawed
Policies can correct for many market failures and imperfections, through taxes
or regulations to discourage negative spillovers or through subsidies to
encourage activities that have positive spillovers. But often, appropriate
policies are not adopted—or are not implemented. In other cases there can be
policy failures (such as perverse subsidies that favor narrow private interests
over society’s broader interests) when well-meaning decisionmakers lack the
necessary information or when institutions are captured. More generally, these
problems reflect the inability of the dispersed interests in society to have
their views heard and to gain support for adoption and enforcement of the right
policies. In other words, institutional mechanisms that could balance competing
interests between the few individuals who gain from the current situation, such
as those logging or dumping waste illegally, and the larger numbers who would
benefit from a cooperative arrangement are nonexistent or weak.
Thus, cooperative solutions that appear attractive to any objective
observer—such as “win-win” policies favoring both the environment and economic
efficiency (as described in World Development Report 1992)—are stymied. This
can happen because of distributional issues (who bears the cost, and who gets
the benefits), because interests are too dispersed to permit an articulated
consensus, or because a sensible agreement could not be credibly enforced.
Competent institutions are needed to perform key functions
Coordinating institutions are robust and competent when they perform three
interrelated functions well:
Picking up signals—sensing and anticipating problems and listening to messages
from the social and geographic fringes of society.
Balancing interests—mobilizing dispersed interests and providing forums in
which all parties can express their interests, assess options and strategies,
and work out mutually acceptable bargains. In some cases the agreements need to
be crafted so as to have winners compensate losers and to provide insurance for
risk-averse actors.
Executing agreements—following through on what has been decided. This requires
commitment, accountability, and learning.
Conversely, coordination fails when:
There are no means for actors to make credible long-term commitments
Dispersed interests have no means of channeling their views or of
counterbalancing focused interests
Some groups, lacking assets and voice, are excluded from participation in
society.
The collapses of the Newfoundland cod fisheries and of Enron, the giant U.S.
energy-trading company, illustrate, in their disparate realms, common problems
when protective institutions fail. Potentially renewable assets—fish in the one
case, trust in the other—were run down, to the short-run benefit of some but
the long-run loss of society (see figure 4).
Links between institutional quality and inclusiveness: voice and access to
assets
Cooperative agreements are difficult to reach in polarized societies. Extreme
inequality in access to assets, and social and economic exclusion, hamper the
emergence and growth of strong institutions that can pick up signals, balance
interests, and execute policies through credible commitments to ensure
long-term sustainability. Instead, institutions are impervious to signals from
poor or disenfranchised groups (who could be a majority) and indifferent to
their interests. Because poor and excluded people cannot develop their human
capital or other assets, their potential is wasted, and they fail to develop a
stake in the wider society, making the whole society more vulnerable to income
shocks and to conflict and crime.
Past patterns play out in vicious cycles
Past patterns of inequality—in access to land, education, or political
voice—tend to reduce economic efficiency and to trap societies into
perpetuating inequitable institutions that can be long lived. In the Americas,
the societies that began with high inequality in the ownership of assets (land
and money) at the outset of colonization generated institutions that
subsequently restricted the opportunities of the majority of the population to
advance through, for example, access to education. In most of Latin America
wide access to landholding, public schooling, and voting rights came about much
later than in North America, locking in highly skewed wealth and income
distributions for centuries. Similar long-lasting patterns linking inequality
in access to land and to education to reduced growth have been found in many
other countries.
There is recent evidence of this, as well. The more unequal are incomes and
assets in the rural sector (as an outcome of concentrated land ownership), the
less powerful is the effect of rural income growth on poverty reduction. In
urban areas where large segments of the population lack secure tenure, these
residents also lack recognized rights to urban services and formal political
representation—and to protections that would promote home improvement or
community engagement.
Bad habits can be broken, creating more virtuous cycles
Reversing social and economic exclusion can be a particularly powerful impetus
to institutional change. This reversal can occur through negotiated land
reform, as in Brazil, Colombia, and South Africa, or through greater support
for rural smallholders, as in the major Southeast Asian countries over the past
30 years. In Brazil and in many other countries, protecting residents of slums
and informal settlements from involuntary eviction without due legal process
provides them with the security they need to make private investments in their
homes and neighborhoods, and with rights and responsibilities as taxpayers
entitled to services. In Ait Iktel, Morocco, villagers—suddenly able to
articulate and mobilize responses to their demands for new assets, including
water, roads, electricity, schooling, and access to knowledge—created a
development dynamic that raised their confidence and capacity. Removing
informal and formal obstacles to women’s education and rights also opens new
opportunities, as in the semi-arid mountainous areas of Tunisia, where female
agricultural extension workers are able to reach out to women producers for the
first time.
Reversing social and economic exclusion can be a particularly powerful impetus
to institutional change. Mechanisms for change can build the deeper foundations
for sustainable institutions through expanded access to assets and influence
(see box 1). Catalysts for improving institutions include:
Empowerment through improved access to assets.
This can be accomplished by increasing access to education; providing
agricultural land to smallholders and enhancing their access to water, roads,
and agricultural technologies; and providing protection from arbitrary eviction
to urban slumdwellers. Removing the threat of summary eviction makes possible
economic and social transformation of informal slum settlements, giving
residents entitlements and responsibilities that change their relationships
with formal institutions and with each other.
Increased democratization.
Significant changes in governance to increase representation and accountability
include such moves as electing rather than appointing mayors (Mexico City),
replacing military with elected regimes (Cubatão), and increasing the role of a
free press.
Inclusion and participation. Deep institutional change occurs when
women, indigenous people, and other disadvantaged groups are given a new voice
and access to political power. Facilitating the private sector by removing
barriers to entry, and empowering local government through well-designed
decentralization reforms, can also have major institution-building effects.
Box 1
Expanding inclusiveness in Malaysia and South Africa
Highly unequal societies fail to value the potential in many of their people,
and assets that benefit these people lack spokespersons. This situation is
wasteful and possibly unstable.
First, the benefits of the status quo are concentrated. Expanding inclusiveness
benefits poor people who lack voice and ensures more widely distributed
benefits in the longer term. Second, the negotiating parties face credibility
problems. Can the excluded group commit to moderation once it is empowered? Can
people in either constituency trust that their leaders are doing what is best
for them? Can leaders trust each other and their ability to deliver?
In Malaysia, tensions—threatening at the time—galvanized a long-term
development strategy for using natural resource revenues for shared growth and
for building political stability through broad-based development, with an
emphasis on schooling and health.
In South Africa, as growing domestic conflict and global politics gave rise to
more effective pressures and sanctions, the need to move away from apartheid
and exclusion was clear. Leaders of vision saw the need for confidence building
and took steps to anchor trust—first, secret meetings; next, lengthy and open
participatory processes to build relationships; and then the creation of the
Truth and Reconciliation Commission headed by Bishop Desmond Tutu. A political
culture that emphasizes human rights and reconciliation was decisive.
In Malaysia the significant long-term benefits of shared growth are evident:
stability supported investment and employment opportunities, and poverty
reduction equipped many people to seize opportunities and realize their
potential. In South Africa the peaceful transition toward a more inclusive
society has been an impressive feat and an achievement in itself. In both
countries major but different challenges remain as they confront and balance
difficult choices.
Source: Sparks (1996).
IMPROVING LIVELIHOODS ON FRAGILE LANDS
A quarter of the people in developing countries—1.3 billion in all—survive on
fragile lands, particularly in arid and mountainous areas that present
significant constraints for high-yield commercial agriculture. People’s links
to these lands are critical for the sustainability of communities, pastures,
forests, aquifers, watersheds, and other natural resources. As shown in figure
5, East and South Asia have the most people on fragile land, and Sub-Saharan
Africa and the Middle East and North Africa have the largest shares, nearly 40
percent.
Populations on fragile lands account for many of the people living in extreme
poverty (on less than $1 a day). Although there has been some outmigration,
many people remain, and others are migrating in. The estimated population on
fragile lands has doubled since 1950. Countries with more than 30 percent of
their populations on fragile lands have had exceptionally high rural population
growth rates over the past 50 years and continue to have high growth rates
today (see figure 6).
A century ago, international migration was a major channel for improving the
opportunities of those living on fragile lands. Today, that option is
restricted. Wage rates reported for farm labor and unskilled construction
workers (two typical jobs for people migrating from the rural periphery) have
remained low and flat in many countries during the past decade.
Making the periphery visible
Improving the livelihoods of people living on fragile lands and increasing the
productivity of their portfolio of assets is essential for meeting many of the
United Nations Millennium Development Goals for the coming decades. These
people are vulnerable, but they do have a modest portfolio of assets that can
help bring them out of poverty: the land (albeit with
constraints), traditional social capital, human capital, and indigenous
knowledge. The potential of even these assets has not been fully realized by
either local or national institutions; for instance, women’s potential has not
been tapped. Living as they do in dispersed settlements and working in the
informal or subsistence economy, people on the rural periphery are largely
invisible to decisionmakers. Because it was assumed that they would move out of
these areas, few governments have taken the initiative to gather data about
their activities or needs. There is little information on their incomes, wages,
and job opportunities and little empirical scientific research on what is
happening to their lands, aquifers, forests, and other livelihood-sustaining
natural resources.
As a result, national institutions have not been picking up social and
environmental distress signals from the periphery, nor have these institutions
been able to balance interests (particularly dispersed interests) in setting
their development agendas. For the past 50 years, governments and the private
sector have focused most of their attention and agricultural spending on lands
that have commercial potential, even though much of the rural population
remained on marginal lands. National institutions have focused on developing
minerals and ecotourism in these remote areas but have often failed to share
the benefits with local communities to improve their capabilities and quality
of life.
This focus is beginning to shift. Boosting yields in fragile areas is becoming
a more pressing—and more feasible—task. New, more balanced institutional
arrangements for mineral development are emerging. But in order to address the
needs of people on fragile lands, more research on appropriate technologies and
services, and more information on the conditions of these people, are required.
Many households in these areas are headed by women and are constrained by poor
educational opportunities, little information, and absence of legal land
tenure. Population pressure, lack of knowledge, and simple fear of change lead
to destructive patterns of asset management. Understanding the problems and
finding ways to help these people out of the vicious circles that lead to
degradation of existing assets, damage to livelihoods, and blockage of the
paths out of poverty are major challenges.
Freeing these areas from the vicious circle of poverty and neglect requires
major transformations, led by bottom-up community-driven initiatives and
top-down national and international initiatives. People are more likely to
break out of vicious circles when the risks and benefits of change are shared
and when changes are introduced gradually but steadily over long periods.
Change is more likely when the risk factors are addressed openly, in ways that
make the costs less burdensome to those who have the most to lose. To mitigate
risks, advice and grant money for experimenting with innovative institutional
solutions should be part of the package. Countries can also benefit from
long-term partnering with experienced institutions from inside or outside the
country to help them think through the process. Successful strategies combine
outmigration by a few family members, organization of community associations,
and national programs that upgrade the community’s modest portfolio of assets.
Combining know-how, information, and grassroots understanding
Public, private and civil society (national and local) institutions can promote
better opportunities by:
Nurturing all the assets available to poor communities—sharing know-how,
upgrading the status of women, mobilizing local labor and family remittances,
applying research on special crops, and sharing revenues from mineral and other
assets that have national benefits.
Promoting voice and the inclusion of these groups in decisionmaking. Only in
this way can institutions pick up the signals on what is happening at the
periphery and design appropriate solutions.
Creating environments that enable and motivate entrepreneurial people to come
forward with ideas that address grass-roots realities—economic, social, or
environmental. Particularly important is the role of “cultural translators” who
can help reorient traditional social capital toward actions for community
development (see box 2).
Establishing long-term partnerships between the public sector, the private
sector, and nongovernmental organizations (NGOs) to promote transparency,
accountability, the transfer of knowledge, and solutions that balance
everyone’s interests.
Addressing population pressures in fragile areas by encouraging outmigration.
Steps in this direction include better preparing rural inhabitants to take on
nonrural jobs and improving the ability of commercial rural areas and urban
areas to provide them with more productive opportunities. For the people living
on fragile lands, as well as for those in commercial agricultural or urban
areas, developing human capital is critical for expanding options for improved
livelihoods.
Box 2
The role of “cultural translators” in building social capital in a Moroccan
village
The village of Ait Iktel is located in the High Atlas Mountains, about 100
kilometers from Marrakech. Its most valuable asset is its traditional social
capital, embodied in village elders who manage by consensus building and in an
equitable, shared distribution of limited resources (brush forest, water, and
communal grazing land). That social capital has enabled the community and its
social, musical, and religious traditions to survive over the centuries.
In 1995, when Ait Iktel faced a third consecutive year of drought, two
villagers—Ali Amahan, then director of the National Monuments of Fez, and his
cousin Mohamed Amahan, a mechanical technician at a phosphate mining company in
Casablanca—organized the village men in constructing a well, with the help of
pooled remittances from migrants. Assuming the vital role of cultural
translators—people who both understand modern management methods and are
steeped in local traditions—the two men noticed how the women spontaneously and
efficiently organized water distribution and the maintenance of the well and
decided that the community was ready to do more. The success of the water
project set off a development dynamic that continues today.
The villagers established an association, Ait Iktel pour Développement, that
functioned under the authority of the village assembly. The assembly, a
traditional patriarchal authority structure, brings together all the chefs de
familles, manages village affairs, resolves disagreements, and makes decisions
on the basis of unanimous agreement. The association mobilized the migrants’
remittances for community development projects and set up a village work bank.
Each family contributes five labor-days a year to projects.
After the well was finished, Ali and Mohamed asked the assembly about building
a school for girls, but the village’s priority was to upgrade the access road
and purchase an ambulance to help reduce maternal deaths. When these two
projects were completed, the two men again raised the possibility of setting up
a girls’ school. Again, the village assembly had another priority—electricity.
Mohamed designed a project that fit the income levels of the villagers: a small
generator for all the homes in the central village, and solar panels for more
remote locations. It was critical to the building of social capital that
everyone contribute to and benefit from the project. In 1997, on the night they
all celebrated lighting up the village, the assembly agreed to a school for
girls.
Source: Amahan (1998).
TRANSFORMING INSTITUTIONS ON AGRICULTURAL LAND
Approximately 2 billion people live in rural areas with commercial agricultural
potential, either in frontier areas where market-driven agriculture is newly
emerging or in areas closer to larger urban markets. Some of these people will
migrate to cities, and many live in areas that will be reclassified as urban as
population densities increase. Overall, the number of people living in such
areas is likely to remain stable during the next three to five decades. These
areas, however, will have to help feed a growing, more urban, higher-income
world population. Better management of the interaction between agricultural
development and the environment will be needed, and steps will have to be taken
to ensure that the poor receive better access to assets, giving them better
opportunities and a stake in society.
The smooth emergence of land and water institutions is of fundamental
importance because the rules for property ownership determine the character of
the state and society. Countries that have distributed rural property equitably
have developed more egalitarian and democratic societies than those that put
assets in the hands of relatively small rural elites.
Serious local and regional water and land shortages are emerging in some
regions, particularly North Africa, the Middle East, and South Asia (see
figures 7 and 8). Even though, throughout the 20 to 50 year time horizon of the
Report, land and water are projected to be adequate for meeting the needs of a
growing world population and for improving nutrition, there is a need to
improve policies and institutions for allocating increasingly scarce local
resources.
The food problem is a poverty problem
The world food problem stems from insufficient purchasing power in the hands of
poor people, not from global constraints on aggregate food production. Although
as many point out, annual increases in food production have been falling,
annual increases in demand are falling even more rapidly, depressing food
prices to record lows. Yet 820 million people do not receive enough food to
lead healthy and productive lives, and about 160 million children are seriously
underweight for their age.
Key rural development challenges
Eliminating rural poverty and preparing outmigrants. Urbanization has
been rapid over the past several decades, and in many countries rural migrants
have moved to the cities without the advantages of physical or financial assets
or adequate human capital. Nor have institutions evolved to include them in the
development process. In Asia and Africa most people still live in the
countryside. There, a strategy for strengthening the assets of rural people
would simultaneously strike a blow against rural poverty, generate an inclusive
orientation in institutional evolution, and prepare migrants to become
productive urban citizens. Rural areas on the urban periphery benefit
significantly from the opportunities generated in the urban economy.
The value of assets is enhanced through agricultural research directed toward
poor people and through better agricultural institutions. In Africa improvement
of agricultural institutions may depend on strengthening asset values first,
through creation of water control and transport infrastructure and a concerted
program to enhance soil fertility. A reasonable estimate for the cost of a
fertility enhancement program to scale up currently successful models is $100
million annually for 10 years.
Intensifying agricultural production. Intensifying agricultural
production is highly desirable for three reasons: it increases the food
available to the cities; it minimizes pressures on biodiversity and on marginal
agricultural areas; and it leads to dynamic rural-urban linkages. Higher
population density and strong rural-urban linkages make investments in rural
health and education more effective, increases the potential for off-farm
employment, and helps farmers accept risk and innovate. These arguments all
support a tenure policy which promotes the smallest farm that is economically
efficient.
The increasing scarcity of water will lead to the emergence of markets—formal
or informal; legal or illegal; established peacefully or through violence. The
tendency will be for water to go to its highest-value use, given the
infrastructure in place. If the settlement of rights is protracted, the
negotiation strategies of individual claimants will lead to a wasteful drawdown
of the resources, and to premature, uneconomic investment because of the
incentive to “lock in” water claims before other claimants do so—often years,
if not decades, before the infrastructure is justified by emerging demand.
The environmental use of water—that is, maintenance of flows adequate to
support healthy aquatic ecosystems—will not be protected unless there is
specific institutional intervention. In the absence of protective institutions,
the environmental use of water is priced at zero; every other use will have a
prior claim. If estuaries and freshwater ecosystems are to be maintained,
institutional solutions have to be put in place to take into account the
public-good nature of water.
Getting ahead of the frontier. In many countries the advance of the
agricultural frontier into woodlands and forests reflects a failure of land
tenure policy. The race for property rights leads to excessive farm sizes,
underutilization of land, and lack of opportunity in more favorable areas
nearer cities. It also creates incentives to open new land on the frontier.
The results are nearly all negative. First, because of distance, cost, and the
transience of settler populations, the government’s ability to provide for
human development on a frontier is extremely limited—and frontier people are
the big losers. Second, the low cost of land on the frontier leads to extremely
extensive agriculture. If biodiversity and carbon values are not taken into
account in the farmer’s decision to open new land, the environmental costs will
be high. Third, there is a high probability that marginal frontier land being
opened up today will be abandoned as uneconomic in the future. This is becoming
truer now than ever, as global food projections indicate little need in most
places for additional land to meet the anticipated growth in population and
incomes.
Getting ahead of the frontier by establishing parks, reserves, and production
forests helps end this cycle of transience and conversion of low-value land. It
stabilizes the frontier economy. It provides incentives for more intensive
development nearer to cities. And it reduces needless loss of biodiversity (see
box 3).
Box 3
Putting institutions in place ahead of the frontier: Brazil’s experience
The race for frontier property creates a sharp disparity between what is good
for an individual landholder and what is good for society. First, the rancher
or farmer opening new land is unlikely to take into account the loss of
biodiversity and of carbon storage capacity. Second, holdings at the extensive
margin tend to be associated with low density and transient communities,
raising the costs and lowering the quality of government services and creating
little opportunity for building human and social capital. In an extensive,
predatory agricultural economy, either the state incurs sharply higher costs
for providing human services equivalent to those in other areas, or services
are poor, leading to a corresponding loss in human potential.
In the Brazilian Amazon, 140 million hectares (28 percent of the area) have
been removed from frontier agriculture through the creation of protected
areas—national parks, biological reserves, extractive reserves, and indigenous
reserves. Analysis based on satellite imagery and on field surveys, to detect
signs of occupation and to identify forestry potential and high biodiversity
values, shows that without competitive use, 46 million new hectares (9 percent
of the Brazilian Amazon) could be put into biodiversity protection and 70
million hectares (14 percent) into national production for sustainable
forestry.
If this were to come about, more than half the Amazon would be dedicated to
either preservation or to sustainable forest use. The government has pledged to
put a representative 10 percent of the Amazonian forest (41 million hectares)
into new protected areas through the World Wildlife Fund (WWF)–World Bank
Forest Alliance. It is also developing a national forest program to strengthen
the forestry system and establish new national forests. The long-term goal is
to create a mosaic of land use to control the advance of the agricultural
frontier, build sustainable communities through sustainable activities, and put
in place a strategic buffer for areas of high biodiversity value.
Source: Veríssimo and others (2000).
Creating off-farm opportunities. In areas closer to cities, nonfarm
rural employment will be a power-ful force for diversifying income, thereby
allowing greater risk taking and investment. It can also act as a stepping
stone for rural workers to enter productive urban employment. Rural areas on
the urban periphery benefit significantly from the opportunities generated in
the urban economy. Smallholders with assets develop voice and become political
players. History shows that this generates an inclusive development path that
helps countries face later challenges. But getting assets into the hands of
smallholders requires good land and water policies.
GETTING THE BEST FROM CITIES
Cities in the developing world face formidable tasks, given the expected rapid
rate of growth and the sheer numbers of urban residents to be employed, housed,
and provided with services. Cities are sources of productivity and innovation.
Industrial and service activities emerge in cities because entrepreneurs and
small firms can share markets, infrastructure, labor, and information. But the
presence of large groups of people and activities in close proximity also
generates negative externalities—waste, pollution, congestion, and crime. This
puts a premium on the quality of institutions, both formal and informal, and on
their ability to promote the positive and cope with the negative.
Urban areas can stimulate the development of rural areas by providing markets
for rural products, subcontracting activities that expand nonfarm rural
employment, and offering employment in the city itself. Cities and towns
facilitate society’s transformations in knowledge, institutions, and economic
activity. By bringing together diverse people and activities, they offer great
opportunities for improving the quality of life. If cities and towns are to
realize the promise of a better life—especially for poor people and for
migrants from rural areas—they need stronger institutions to provide wide
access to assets and to balance interests in ensuring the provision of public
goods.
Some key urban development challenges
Anticipating and providing for urban growth: guiding new settlements to prevent
future slums. Cities and towns in developing countries will need to
accommodate a projected doubling of the urban population over the next
generation, by 2030. The required massive new investment in the capital stock
of cities will be critical to environmental outcomes. Urban land use patterns,
right-of-way arrangements, and building standards will affect energy and water
use. Local governments have often shied away from acknowledging the need to
anticipate and facilitate the growth of low-income settlements, instead letting
these areas fend for themselves. Providing infrastructure networks after the
fact is costly, especially for very dense settlements with irregular layouts or
where resettlement is required. In Bogotá the urban development agency
estimates that installing drainage networks is about three times more expensive
in informal settlements than in planned neighborhoods.
Valuable experience in planning low-income settlements has come from
sites-and-services programs, usually initiated by local governments or their
agents, that provide basic plot layout and minimal infrastructure such as core
sanitary facilities in advance of spontaneous development. A program of this
kind in Lima aimed at preventing the growth of squatter areas by anticipating
demand.
Empowering the poor through access to assets: security of tenure. Security
of tenure is defined as “protection from involuntary removal from land or
residence except through due legal process.” The emphasis is thus on preventing
forcible and arbitrary eviction of individual households or of entire
settlements. By confirming the rights and responsibilities associated with the
occupation and use of land, regularization of tenure status removes a major
source of economic and political insecurity for households and for communities.
It reduces some of the risks that discourage residents from investing in their
houses and shops, and it gives them a greater stake in urban society and an
incentive to work with local officials to obtain services.
A growing commitment by governments at the city, state, and national levels in
Brazil to regularize slums (favelas) has put in train a process of
transformation (see box 4). For decades, the favelas were home to a
hard-working labor force, constituting one-fourth of the city’s population, yet
government institutions withheld recognition of these neighborhoods as an
integral part of the city deserving of urban services. In Brazil, as in other
countries, security of tenure triggers a virtuous circle of equitable access to
urban assets, as well as political and economic inclusion, giving residents
rights and responsibilities as citizens with a stake in the city’s future.
Box 4
Inclusive policies for the poor in Brazil’s favelas
In many cities in Brazil, large shares of the population—a quarter of the
residents of Rio de Janeiro and 40 percent in metropolitan Recife—live in
informal or illegal settlements, often on public land. Beginning in the early
1980s, a number of cities initiated efforts to regularize or integrate these
favelas into the urban fabric and to give them legal recognition.
In Rio the state government gave up its resistance to favelas, providing
finance for building materials for residents without requiring collateral. In
Belo Horizonte and Porto Alegre the favela programs place a strong emphasis on
participatory budgeting and planning for investments in the settlements. A 1998
study by the Brazilian Institute for Applied Economics indicates that at least
794 municipalities have a favela-upgrading program; about 506 of these programs
include some form of land tenure regularization.
Where tenure regularization policies have the goal of transferring full
individual freehold titles to the occupiers of public or private land, as in
Belo Horizonte and Rio, this aspect of the program has been problematic to
implement and less successful than physical upgrading and service provision.
Porto Alegre and Recife, among other municipalities, have used an innovative
alternative legal instrument to promote individual and community security of
tenure. The “concession of the real right to use” is a leasehold that confers
private property rights to publicly owned land for a period of up to 50 years,
for an individual or for a community. In combination with the designation of
settlements as zones of social interest, the concession protects residents from
eviction and gives them broad property rights.
This instrument permits the state to protect access for low-income communities
to land they occupy in order to promote socioeconomic integration of the city.
It also helps preserve scarce public land for current and future social uses.
Settlements granted such use rights have gained physical improvements from
private and public investment in housing and infrastructure and increasingly
take on the appearance of working-class neighborhoods that are physically
integrated with adjacent areas.
Source: Brakarz, Greene, and Rojas (2002).
Stimulating urban investment and job creation. Cities will need to
provide employment and services on a scale sufficient to take care of current
residents and new arrivals. Productive employment is critical so that the fall
in demographic dependency ratios projected in most developing countries over
the next 20 to 30 years can translate into increased savings and investment.
Urban employment and services benefit from the economies of agglomeration—from
cost savings and other advantages that accrue to firms when they locate near
others in the same industry, or simply near other economic activities, to share
markets, services, infrastructure, labor, and information. The productivity
advantage means that urban investment has strong multiplier effects in
stimulating other high-value activities. As a rule, larger urban areas are the
most productive, since they allow for greater specialization in labor use,
better matching of skills and jobs, and a wider array of consumption choices
for workers and of ancillary services for producers. As long as this greater
productivity outweighs higher costs for land, labor, housing, and other
necessities, the city can thrive.
For cities to fulfill their potential as engines of national economic growth,
they need to ensure that the labor market is not only deep but also well
integrated and inclusive, with accessible workplaces and residences. Cities in
general can improve the national investment climate if their overall legal and
regulatory framework complements the national framework to minimize risks,
uncertainties, and transaction costs to investors. This is especially important
for small and informal sector enterprises, which provide most urban employment,
rely heavily on publicly provided infrastructure and information, and are
particularly vulnerable to institutional and policy failures.
Building informed constituencies to address spillovers and anticipate risks.
Mobilizing for action to solve the problems described above requires that the
affected parties gain access to credible information on costs and benefits and
that they perceive a common interest in finding a solution. Building an
effective constituency can be difficult where the impacts are uncertain and
infrequent, as in disaster mitigation. Advances in technology and knowledge are
helpful, and local and national governments need to play important leadership
roles in both areas.
Urban communities, like their rural counterparts, often work through informal
social networks to solve some of their common needs, such as waste collection.
Residents’ associations in Pune and Mumbai (India) and in Santo Domingo
(Dominican Republic) canvassed neighbors to assess demands for services and
local public works and used this information to obtain additional support from
other agencies in meeting their needs (for latrines in Pune, resettlement in
Mumbai, and disaster-mitigating infrastructure improvements in Santo Domingo).
But many environmental problems that transcend the neighborhood, such as
drainage, solid waste disposal, and protection of water quality, require
support from the larger collective and from more formal institutions. Because
of the physical interdependence and scale of urban settlement, most issues of
sustainable development that have a citywide impact—including environmental
services, transport, land use planning, and public safety—require intervention
by local government, and often coordination among multiple municipalities
across metropolitan areas, as well as support from the national government.
Inclusion makes a difference
Institutional innovations that provide forums for participatory planning and
networking among practitioners to share ideas and experiences can be useful for
encouraging creative forward thinking in support of urban development and
poverty reduction strategies. Increases in democratization and other reforms
that provide greater voice and wide access to information can also help build
constituencies to address externalities affecting urban populations today and
in the future. In Cubatão, for example, civil associations paired with
government officials to overturn a legacy of environmental damage.
STRENGTHENING NATIONAL COORDINATION
Many opportunities can be realized only by improving coordination at the
national level. Political boundaries, currencies, trade policies, safety
regulations, and much private sector activity is national in scope. Since many
externalities spill outside municipalities and regions, the nation is often the
level at which interests can be balanced, either directly or by facilitating
negotiations among localities. National actors are better placed to organize
the provision of public goods and to take advantage of scale economies when the
beneficiaries extend beyond subnational regions. The national government must
also find a delicate balance between maintaining authority and giving other
actors—including lower levels of government, civil society, and the private
sector—freedom to perform their critical functions in improving coordination.
Such distinguishing features make the nation, as a conglomeration of interests
and actors, an important unit of analysis.
Eliminating poverty requires growth and investment. Efforts to generate a
strong investment climate—including sound macroeconomic fundamentals, good
governance, and basic infrastructure—need to be strengthened at the national
level. How they are designed and implemented will affect management of the
environment; for example, dismantling perverse subsidies, husbanding forests
and fisheries, and curbing air pollution.
Management of natural resources can seriously test coordinating institutions
and their ability to perform the key functions of picking up signals, balancing
interests, and executing. Heavy reliance on natural resources for public
revenue can hurt growth by weakening government accountability and
retarding the emergence of strong institutions that are important for the
creation of a continuous stream of new opportunities and economic performance
in the long run. Ensuring that aid does not have similar effects is
a major focus of the current efforts to improve aid effectiveness. The tragedy
of violent conflict is also more likely to visit countries with lootable
natural resources and lack of sustained growth (see figure 9).
Emerging institutional solutions offer some hope for addressing these difficult
national problems. Strides are being made in increasing inclusiveness by
expanding educational access and basic health services. The falling costs of
communications and the deepening of democracy are strengthening voice and
accountability. The importance of a sound investment climate as a core
component of sustainable development is becoming widely recognized, as
exemplified by the prominent position of governance on national agendas and by
the progress over the past decade in confronting corruption through the
concerted efforts of governments, civil society, and the private sector to
change the rules of the game.
New models for dealing with these issues are also emerging. They rely on
government partnerships with civil society, the private sector, and
international organizations to ensure greater fairness and accountability.
Institutional reforms in the management of forests hold the promise that such
environmental resources will be better husbanded in the future (see box 5). The
wider impact of projects is increasingly recognized, as exemplified by the use
of a revenue-monitoring board in connection with the Chad-Cameroon oil
pipeline.
Box 5
Creating a platform for dispersed interests in Cameroon’s forest policy
Forests are important to Cameroon—Africa’s largest wood exporter—but also to
the world, because of the biodiversity they contain. As in some other
forest-rich nations, logging has been poorly regulated. Until the mid-1990s,
logging permits were awarded through an opaque administrative process linked to
deep-seated patronage.
After years of policy dialogue with donors, in 1994 the executive branch
introduced in parliament a new forestry law providing for the auction of forest
concessions on the basis of per-hectare bids by prequalified bidders. The law
was intended to increase transparency, discourage unnecessary expansion of
logging road networks, and encourage high value added industrial activity. The
law also required management plans and allocated half the revenues from logging
to local governments and communities.
After three years of little movement, a flexible framework for debating and
supporting the implementation of the forestry law was put in place. Progress
was due in part to the emergence of constituencies for reform, including a
strong team of reformers in the government and in the communities that began to
benefit from increased revenue sharing.
Consultations among stakeholders have intensified. Transparency has increased:
newspapers publish the details on which companies are authorized to operate in
which locations, thus helping local residents identify illegal operators. Also
important is the widespread formal use of independent observers. Respected
Cameroonians are hired to observe the concession allocation process.
Cameroonian and international NGOs are contracted to assist in verifying
concessionaire compliance with logging regulations, through both on-the-ground
inspection and use of satellite imagery. This helps ensure that the bidding
system does not encourage overexploitation of the forests.
The results so far include:
Clarification and simplification of forest management regulations, resumption
of field inspections, and prosecution of illegal logging, with fines up to $15
million being levied on a single company
Gradual exit of short-term speculators and increase in long-term investors,
with a positive impact on high value added industry and local employment
Enhanced revenue capture in the interests of the nation and rural communities;
annual forest revenues increased from less than $3 million in 1995 to more than
$30 million in 2001 (excluding timber export taxes and duties). Fiscal revenues
accruing to local communities increased from negligible levels in 1998 to $8
million in 2002.
The program is still evolving to address new challenges, but the benefits of
increased transparency are already being considered in other sectors.
Source: Essama-Nssah and Gockowski (2002).
Efforts to avert conflict will benefit from nondiscriminatory policies that
emphasize shared growth. International aid agencies may be able to contribute
in a similar way by providing a base of assets for poor people and poor
countries that enables greater participation. In addition, the international
community can help overcome the serious commitment problems associated with
removing perverse subsidies, disarming them by helping to guarantee agreements.
SOLVING GLOBAL PROBLEMS AND ADDRESSING LOCAL CONCERNS
Social and environmental problems often spill over national boundaries. Dealing
with them requires much the same kind of institutional apparatus at the local
and national levels as described above: problems must be detected and
diagnosed; interests must be balanced within and across borders; and agreements
need to be implemented. But there is a big difference: at the global level,
commitment is a more difficult problem, and there is no central authority to
enforce agreements. Nations have to devise ways to keep themselves on agreed
paths.
Innovations in institutional design for transnational problems
Picking up signals of the problem and agreeing on its nature. Among the
institutions that are providing a credible, legitimate forum for fostering
consensus on diagnosis and action is the Intergovernmental Panel on Climate
Change (IPCC), set up to foster political buy-in to scientific findings. Over
the past 10 years, the IPCC’s work has contributed greatly to promoting
consensus on the nature and causes of climate change. Other examples include
the Transboundary Diagnostic Analyses, sponsored by the Global Environment
Facility (GEF), which convenes stakeholders to draw up strategic action plans
for tackling international management of freshwater and coastal ecosystems.
Learning and adapting. The diagnostic process is most effective when it
feeds into an adaptive process of balancing interests, setting goals, taking
action, and learning from results. The Convention on Long-Range Transboundary
Air Pollution, described in box 6, illustrates such adaptive learning.
Box 6
An adaptive, learning institution for reducing transboundary air pollution
The Convention on Long-Range Transboundary Air Pollution, although it has North
American signatories, has concentrated mainly on mitigating pollution in
Europe. Its first substantive agreement, the Helsinki Protocol of 1985,
required parties to reduce sulfur emissions by 30 percent from their levels in
1980. Many observers consider this a modest goal, but it established a track
record of cooperation that has so far resulted in six subsequent, and
increasingly more ambitious, protocols on emissions reduction.
In setting, refining, and implementing reduction targets, the convention has
been aided by the Cooperative Programme for the Monitoring and Evaluation of
the Long-Range Transmission of Air Pollutants in Europe (EMEP) and by the
acid-rain modeling group at the International Institute for Applied Systems
Analysis (IIASA). The EMEP has worked to compile data on emissions and air
quality and to model atmospheric transport of pollutants. Several reviews by
political scientists have pointed to the EMEP as catalytic in promoting better
understanding of pollution problems and facilitating agreements on more
stringent emissions limits. Over more than a decade, the EMEP has worked to
ensure consistency in data collection and reporting methods among its diverse
members.
By 1990, the data were deemed good enough to support a credible simulation
model, RAINS, for assessing the costs and impacts of alternative emissions
reduction scenarios. This model, developed at the IIASA, was used by
negotiators in setting commitment levels for the Second Protocol on Sulfur
Reduction. It and subsequent analyses showed that the near-term cost of fully
meeting environmental goals was unaffordable, and this led to agreement on
achievable interim measures.
The process of data gathering, model building, and model application
facilitated communication among scientists and policymakers, fostering a
virtuous cycle of building trust and continual refinement of data and models.
This has helped the convention tackle additional pollutants and provides a
basis for all stakeholders to monitor nations’ compliance with the protocols,
increasing mutual confidence in the convention.
Source: Jäger and others (2001).
Building local capacity for assessment, negotiation, and action. Bolivia
and Costa Rica have countless pressing domestic concerns, yet they have taken
the lead in pursuing biodiversity conservation goals which have global
implications. In both countries, research organizations linking national and
international scientists nurtured a group of policy entrepreneurs who could
blend scientific knowledge and international financial resources with the
domestic political skills and experience needed to usher in and implement major
policy reforms. Attuned to ideas from abroad but deeply immersed in domestic
social movements and policy debates, these policymakers have been at the
forefront of an impressive record of environmental policy innovations and have
helped stimulate national dialogues on environmental quality and sustainable
development.
Inducing socially responsible behavior. Various initiatives are
beginning to publicize information about environmental and social performance,
and there is some evidence that firms are responding. Government-sponsored
public disclosure programs, which report publicly on firms’ pollution levels,
have been effective in influencing polluters’ behavior in Colombia, Indonesia,
and elsewhere. Nongovernmental evaluation and certification systems such as
those in forestry are developing quickly. Several private investment firms have
developed “triple bottom line” rating systems to assess firms’ social,
environmental, and financial performance. And the Global Reporting Initiative,
sponsored by the United Nations Environment Programme, is developing auditable
standards for environmental and social reporting analogous to those for
financial reporting.
Conserving biodiversity: maintaining current services and future options
Because the services stemming from biodiversity do not yield revenues, it can
be difficult for local constituencies to protect their environmental assets.
The challenge is to find ways to ally domestic and global interests that
support conservation and sustainable use while facilitating a substantial
improvement in the well-being of poor people.
Balancing interests in biodiversity for the public good will require a new
breed of ecosystem management institutions. For the most part, problems of
biodiversity loss cannot be solved on individual farms or on local fishing
grounds. Solutions need to consider entire ecosystems and social systems, for
three reasons. First, the incentives driving biodiversity loss must often be
addressed at the market level or at the political level that governs access to
land and water. Second, actions in one part of an ecosystem can affect a
distant part, as when water pollution harms a faraway reef. Third, to reduce
potential conflict, efficiency is necessary, requiring incentives that keep
agriculture on land with high economic value and low ecological value.
Ecosystem management institutions will take quite different forms depending on
the biodiversity involved and the prevailing systems of tenure and governance.
For instance:
Aquatic ecosystems, whether marine or freshwater, often extend over
national boundaries. A wide variety of stakeholders, including industrial and
municipal polluters and fishing interests, must be coordinated. Institutions
for integrated coastal management and for river basin management are beginning
to emerge.
Frontier forests
are sparsely settled sites of conflict and exploitation, as both corporations
and individuals rush to seize rents and claim property. Biodiversity
conservation here is an outgrowth of the more fundamental need to establish
governance and rationalize land use. Examples of promising institutional
responses include Cameroon’s reformed system for forest concession auction and
monitoring (see box 5) and the program for monitoring and enforcing land use
regulations in Mato Grosso State, Brazil.
Commons in transition
are areas, often with fairly high population densities, where traditional
community management of forests, rangelands, or fisheries has broken down,
frequently as a result of government appropriation and mismanagement of the
commons. The breakdown is exacerbated in some cases by population growth.
Sustainable use of biodiversity depends on resolving disputes among
communities, and on clarifying community and government rights and
responsibilities. This effort is currently being made in many parts of South
Asia and Africa, with varying degrees of success, through joint forest
management, and com- munity forest management programs.
Fragmented habitats with less disputed tenure pose difficult policy
questions. These tend to be mosaics of agricultural land and natural habitat
where both the private opportunity cost and the social benefits of sustainable
use are high. They include some of the “hot-spot” areas where the risk of
losing an entire ecosystem is greatest. Mechanisms for achieving and
efficiently realizing consensus visions for regional development and land use
are essential here. Costa Rica’s Program for Environmental Services Payment is
one illustration of having beneficiaries pay to protect environmental services.
Mitigating climate change and adapting to its risks
Change in the planet’s climate is quintessentially a global problem because
greenhouse gases mix rapidly in the atmosphere and have the same impact on
climate change regardless of where they are emitted. The problem is a long-term
one because the great inertia in social, economic, and physical systems means
that it would take decades to moderate substantially the rate of change.
The impacts of climate change are already here. Low-lying islands and coastal
areas everywhere will be exposed to flooding and storm damage. Arid and
semi-arid areas in Africa and Asia will probably face higher temperatures.
Feedback between vegetation loss and reduced rainfall could result in more
rapid desertification.
These impacts, if unchecked, are predicted to intensify, posing risks of
varying kinds for different countries. The effects will fall heavily on many
developing countries, including those that have not contributed to climate
change. Impacts on industrial countries are thought to be mixed but may be
generally negative. And there is a risk of catastrophic consequences of climate
change that could be irreversibly set in motion during this century.
Three points are essential for understanding the problems of balancing
interests and executing agreements. First, emissions per capita in industrial
countries are much higher than in developing countries and are likely to remain
higher for some time. This raises questions of equity. On average, citizens of
industrial countries are imposing higher damages than others on the world at
large. Second, developing countries will nonetheless emit substantially more in
the aggregate than industrial countries and therefore must be involved in
implementation. Third, to mitigate climate impacts by 2100, it is essential to
start now.
A mitigation strategy. An adaptive strategy for mitigating climate change would
enable midcourse corrections in light of new information and provide incentives
for taking action now to reduce greenhouse gas emissions over the near term
(5–10 years), the medium term (10–20 years), and the long term (20–50
years). What needs to be done now is to take action
whose impacts will play out over three time horizons:
Vigorously pursue current options for cheaply abating greenhouse gas emissions,
thus reducing the possibility of triggering catastrophic climate changes and
buying time for longer-term, more fundamental actions to take hold. This
includes, among other things, finding ways to deter wasteful deforestation that
does not contribute to sustainable development and to promote instead more
intensive but sustainable agriculture.
Set up incentives to ensure that the next generation of long-lived capital
stock (trillions of dollars worth of transport infrastructure, generators, and
buildings over the next 50 years) is energy-efficient; to encourage
agricultural intensification and the maintenance of carbon stocks in forests;
and to shift urban structures toward lower energy use.
Start now on research and development to ensure that zero-emission energy
technologies can be developed and widely deployed by midcentury.
Building on current efforts, create adaptive international institutions for
fostering cooperation and burden sharing.
Adaptation. The climate system has considerable inertia. Even if
greenhouse emissions were magically halted today, the effect of past emissions
would continue to raise temperatures and sea levels for centuries to come.
Adaptation efforts are therefore necessary and will need to be assisted by
those who created the problem and have the ability to pay now. But the
adaptation agenda has only begun to be addressed.
There is growing recognition that developing countries, especially, are not
dealing optimally with current weather-related risks, let alone future ones.
Efforts to reduce current vulnerabilities will thus not only have immediate
payoffs; they will also increase countries’ capacity to deal with increasing
vulnerability to climate change.
The most general and effective way to help vulnerable poor countries adapt to
climate change is to promote rapid and sustainable development. Over the coming
decades, more vigorous growth rates and accelerated investments in human
capital will shift these countries out of climate-sensitive sectors and improve
their capacity to cope with climate-related risks.
PATHWAYS TO A SUSTAINABLE FUTURE
At a modest 3 percent annual rate of growth, the global economy in 50 years
will be four times the size it is now. Will that larger economy generate less
environmental and social stresses than the much smaller economy does today?
Most of the physical capital required for the economy 50 years hence has not
yet been created. This provides an opportunity to incorporate inclusiveness and
sustainability criteria in current investments. The potential is there to shift
development paths, provided institutions that adopt and implement better
policies can be put in place.
The Report shows that rising income can facilitate but not guarantee better
environmental and social outcomes; for instance, countries do not simply “grow
out of” pollution or civil conflict. The Report also shows that low income does
not condemn people to a deteriorating environment or a worsening social
climate. Actions can be taken now to improve the ability of institutions to
identify, adopt, and implement policies that facilitate growth while addressing
critical environmental and social issues.
Innovative institutional approaches can be built on—now
Many, if not all, of the institutional innovations cited in the Report already
show signs of being replicable and capable of being scaled up to meet the
challenges ahead. For example, the pilot experience with security of tenure in
favelas in Brazil is being extended to hundreds of thousands of households. The
multi-stakeholder pollution disclosure programs in China have moved from 2
pilot municipalities to 13, and countrywide implementation is under discussion.
The village initiative in Morocco is being replicated in a dozen other
villages. The forest concession program in Cameroon has created a constituency
for its expansion to other sectors. There is much creativity under way with
initiatives emerging from the public sector, the private sector, and civil
society. An enabling environment nationally and globally is needed to encourage
such initiatives, facilitate partnerships, and help mobilize the resources
needed to scale up promising activities within and across countries.
Sustainable development requires action across many sectors and disciplines,
including water, energy, health, agriculture, and biodiversity. The Report
takes an approach that is intended to complement and support the sectoral
perspectives. Its message is that many of the problems are inherently
intersectoral and their severity varies by location, so proposing and endorsing
a set of action plans are important first steps, but realizing them requires an
institutional apparatus that cuts across sectors. Achieving all the broad
sectoral goals will involve problem diagnosis, decisions with distributional
consequences, and coordinated and sustained commitments to action. These
functional capabilities require that institutions for coordination within and
across countries be improved. The Report shows that even with imperfect
institutions it is possible—indeed, imperative—to build now on the many
institutional innovations already present and to show the way forward through:
Creation of information for constituencies and constituencies for information
Transparency, performance reporting, and accountability (certification systems
for commodities, and reporting systems for private firms and public agencies)
Forums and networks for negotiation
Compensation and incentives
Enhancing capacity building and problem solving in the developing world through
research-policy-action organizations and networks that promote learning and
problem-solving abilities and nurture policy entrepreneurs
Think-and-do tanks
Scientific research organizations, based in the developing world,
Learning networks for sharing knowledge,
Nongovernmental organizations for monitoring and evaluating government and
corporate performance.
Mainstreaming of monitoring and evaluation functions inside government
agencies.
Expansion of the scope of global assessment institutions to address emerging
issues
Increased voice—an expansion of substantive democratization and participation.
Better distribution of access to assets. Dynamic growth and development
processes create more assets and new types of assets. It is much easier to
increase inclusiveness when the poor and disenfranchised, who may even be in a
majority, have greater access to these newly created assets.
Ongoing dialogue: a global vision and accord
Overcoming the barriers to solving collective action problems faster and more
systematically requires much stronger institutions, as well as mutual
commitment by developing and developed countries to a bold global vision and
accord to eliminate poverty and to protect and manage a broader portfolio of
assets that will ensure the well-being of future generations. This vision is
ambitious, but achievable.
History teaches that: (1) prosperity and well-being, like peace, are
indivisible and must be shared if they are to be maintained. (2) And two
generations—50 years—are enough to eliminate all poverty and move to a more
sustainable development path.
Balancing interests and forging credible commitments are difficult at the
national level, and even more so at the global level. Yet a credible global
commitment is necessary because national action is increasingly insufficient
for dealing with the scale of demands and spillovers generated by a more
interconnected world and global economy. Recent initiatives (MDGs, NEPAD,
Global Deal, Monterrey,…) show that there is growing recognition of the need
for mutual commitments and for accelerated improvements in key development
indicators.
In the spirit of these initiatives, and to maintain the momentum of the
Millennium Development Goals beyond 2015, the Report calls for extending the
goals to include:
Eliminating global poverty completely
Putting the global economy on a more sustainable development path by the middle
of this century,
And for this to be followed up by a long-term, mutual commitment and accord.
Two features are added to supplement existing initiatives: a deeper target over
a longer time horizon and a greater focus on institutional development. It will
require 10 or 20 years—starting now—to build up the institutions that can help
shift trajectories from unsustainable to sustainable paths over the next 50
years. Many of these long-horizon initiatives will yield benefits in the medium
term in support of the Millennium Development Goals. But capacity building
requires patient investment, because its large payoffs take time to be
realized. Fundamental reforms require improved institutions, which evolve
slowly.
For development strategies and development assistance, this means placing a
greater emphasis on the following actions:
Identifying vicious circles, which keep the pace of growth low and the
distribution of assets unequal, and developing strategic interventions to break
these vicious circles.
Investing in projects, programs, and initiatives that bring about better, more
inclusive institutions and ensure systematic learning.
Supporting the evolution of an ecosystem of organizations that learn—and
applying that learning to improving policies and projects. These are long-term
efforts that will bear fruit over a decade or two as the institutions train
people and build dense networks of trust and knowledge. Funding by donors and
multilateral development banks must be committed over periods much longer than
traditional projects, and donors must accept that the impacts of these
investments, though potentially enormous, will be deferred and difficult to
quantify.
The tasks ahead
The global accord is the device to commit all parties to making this global
vision a reality. It requires commitments to action by developing countries and
developed countries, individually and jointly, by civil society, and by the
private sector. The main responsibilities of each of these groups can be
encapsulated as follows:
Developing countries must strengthen their institutions, promote greater
inclusiveness in access to assets, and ensure greater transparency in managing
a portfolio of
resources (including aid) more effectively.
Developed countries must increase aid and make it more appropriate; reduce the
burden of debt; open agricultural, industrial and labor markets; and implement
incentives for the development and transfer of technologies to developing
countries—including technologies for disease prevention, agricultural
development, and energy efficiency.
Developing and developed countries together must establish a global partnership
and set the frame-work for rule making and the modalities of burden sharing.
Civil society organizations
can help aggregate the voices of dispersed interests and provide independent
verification of public, private, and nongovernmental performance. Academia
needs to be recognized as a key player in learning, monitoring, and evaluating.
The private sector can help by constructing a framework that provides
meaningful and appropriate incentives for firms to advance economic,
environmental, and social objectives simultaneously.
Some open questions
If such an accord makes sense, then the outline above will require more careful
work over the next few years to develop an implementable program that can
adjust to contingencies without undermining the promise of the accord. Many
global issues of sustainable development remain the subject of heated debate.
Here are four important and controversial topics for which progress in
international consensus is needed:
When is consumption overconsumption?
Concern is often expressed about “overconsumption” in wealthy countries and
about the threats to sustainability from increasing levels of global
consumption. But what kind of consumption qualifies as overconsumption? Why is
it harmful? And what should be done about it? Is the problem fundamentally
related to aggregate consumption, or is it more closely linked to production
technologies and the mix of consumption? One view of overconsumption is that it
refers to environmental externalities associated with the consumption typical
at higher levels of per capita income—for instance, greenhouse gas emissions
from energy-intensive housing and transport. For these, there are known
solutions in public finance. Another interpretation, much more difficult to
document, has to do with social externalities. People judge the adequacy of
their own consumption—clothing, automobiles, housing—in part by comparison with
the norms set by others. If this is true, consumption takes on some of the
aspects of an arms race. But greater understanding of the nature and extent of
these externalities is needed before there can be any consensus on the
desirability and nature of actions for dealing with them.
What is the future of agriculture and of genetically modified organisms?
Despite great promise for improving the agriculture of the poor, biotechnology
in general, and transgenic research in particular, have barely begun to be put
to work to address the problems of the poor. Applying the precautionary
principle—balancing risks to food safety and the environment against prospects
for development and poverty alleviation—will be a difficult task, requiring a
broader debate on credible information.
How can interests be balanced to avoid the race for property rights at the
intellectual frontier?
Intellectual property rights (IPRs) represent a compromise in balancing the
interests of users, owners, and creators. The Trade-Related Aspects of
Intellectual Property Rights (TRIPS) agreement, a World Trade Organization
(WTO) instrument, represents a global strengthening of the rights of producers
over those of users. Its immediate effect will be to increase payments of
royalties to IPR holders, who are overwhelmingly in the industrial world.
Whether the emerging IPR regime will be detrimental to the long-run interests
of developing countries is hotly debated. In principle, TRIPS affords wide
latitude for a developing country to fine-tune an IPR system appropriate to its
needs. In practice, developing countries’ room for maneuver may be more
limited, and the potential for unequal outcomes is worrisome.
What are the prospects for international migration? Global inequality,
combined with demographic trends, will create ever more pressure for migration,
with a growing supply of and growing potential demand for immigrant labor over
the next half-century. Dealing with this pressure is a challenge worldwide.
There are many reasons to support both more long-term and circular migration
but migration remains an extremely sensitive political issue in receiving
countries. The problem cannot be ignored.
Conclusion
In many areas, developing countries are doing more to address environmental
externalities than industrial countries at comparable stages of development.
But limited internal resources are forcing unnecessary tradeoffs, generating
environmental stresses.
Unless action is taken now, the planet will face predictable challenges that
will increase in intensity over the coming decades. There will be more
environmental stresses on air, water, and land. There will also be more social
stresses as poor people’s income and hopes lag behind those of the rich. There
will be increasing inability to deal with known and unforeseen problems as
interests diverge and tradeoffs appear steeper.
This need not happen. The Report shows how institutions can detect and diagnose
problems requiring coordinated action, balance interests fairly, and take
effective action. The foundation of this ability is enhancement of the assets
and voice of poor and excluded people at the local, national, and global
levels. But there are also specific institutional mechanisms for promoting
information flows and transparency that can be replicated and scaled up.
The key is to act now to initiate virtuous rather than vicious circles—to
create constituencies for sustainability, not for environmental degradation and
social polarization. Much will be possible if we plant now the seeds of
adaptive, durable institutions that respond to the interests of all citizens.
Cities can evolve as beacons of hope and growth. People on fragile lands can
claim improved and more sustainable livelihoods. Water and land can be fairly
and efficiently allocated before scarcity and conflict erupt. Climate changes
can be anticipated and managed. And the trajectories of energy production and
consumption can be shifted in a benign direction. With vision and broad
participation, we can bring about the transformations needed to put our planet
on an inclusive and sustainable path. The more people heard, the less assets
wasted.
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