Wednesday, May 4, 2011

External costs, protests in Peru, and ecological debt

Litter in Huaraz (not quite an external cost, but still carelessness)
Last semester in an anthropology class I first learned of the concept of external costs, or the costs of production that aren't included in the price that the consumer pays. For example, when you buy a good in most cases you aren't paying for the environmental and human cost involved in the production of the good. Inevitably, the production of the good impacts the environment in some way (waste dumping, fossil fuel emission, deforestation, etc) and probably human health by extension. However, the producer and the consumer don't pay that cost.The local community does. In many cases an unaccountable multinational cooperation causes the damage abroad and the local communities (which are often poor) are forced to incur them. As a consequence, the community suffers from a debilitated environment and poor human health (external costs) AND, if it has the resources, must use its own money to attempt to correct for the damages. I wish that I had learned about this consequence of manufacturing in Econ 201 OR 202. I guess it didn't fit the (blatantly obvious) neoliberal agenda of my hotshot professors.

"Yes to agriculture/ No to mining" Foto from CNR
For the past few months protesters in Islay, Peru have been protesting the Tía María mining project because of anticipated external costs of the project. Mexican transnational Southern Copper Corporation was scheduled to mine in the area and even "cared enough" to do a Study of the Environmental Impact of it's proposed project. However, the protesters did not trust the authenticity of the results of the study, claiming that it underestimated the costs- specifically that the project would contaminate the water of the agricultural town. For 17 days, protesters striked. During the protests 3 people were killed by the riot police and 50 were injured. However, the protesters were successful in the end and on April 4th the Ministry of Energy and Mining cancelled the project (right before the first round of national elections on the 10th).

In the case of Tía María, extensive external costs were prevented thanks to a successful social movement. However, that is not the norm. In Martínez Alier and Roca Jusmet's article "Economía ecológica y política ambiental" they introduce the concept of ecological debt (dueda ecologica)- or the idea that the unpaid external costs of production have built up and, like all debt, must be paid back. In the context of Latin America, this ecological debt is largely a consequence of multinational corporations and policies by the IMF and the World Bank. They tell how Latin American incurred massive amounts of external debt in the '70s and '80s which summed up to $700 billion by 1999, and then explain how the IMF and World Bank intervened with economic programs to "help" Latin America pay back the debt. These programs depended on increasing the number of exports from Latin America to the West- a rapid acceleration of manufacturing that simultaneously created vast environmental external costs. The authors argue that while Latin America paid off it's external debt, it build up ecological debt. Or rather, the demand by the West for cheap resources from Latin America built off a ecological debt that they now owe Latin America.

Some of these costs materialized last February in a court case in Ecuador. Ecuadorian court recently ordered oil company Chevron to pay $9 billion in damages and to issue a public apology for the environmental costs of its projects in the Ecuadorian Amazon. Of course, Chevron is rapidly protesting the decisions (and did some ethically questionably things during the trial), but this is a huge step in realizing ecological debt. Yet as I am typing this I commercial came on TV touting all the "good" that Chevron is doing for the economy (which is much more important than the environment, right?).

However, the Chevron case is only one of the few instances where the external costs have materialized into a debt that must be paid off. Imagine if all companies were taken to court to be held accountable for the external costs of their business. Better, imagine if the external costs were already included in the price of an item (something fair trade is on the way to addressing). One thing that has struck me most about Peru is it's ecological beauty. I have never seen a place so I beautiful and inspiring in the world. I hope that the demand for cheap technology and pretty things doesn't destroy it.

1 comment:

  1. I came into college as a fairly strong conservative, and I genuinely believed that nothing could change my political beliefs, which revolved around the notion that a free market solved all problems.

    I think learning about the concept of externalities was the first of many of the experiences that I had that shattered my beliefs and exposed the ignorance of the free-market philosophy.

    It really is a shame that environmental impacts are almost impossible to handle in any natural economic framework, but it's good that the world is slowly but surely starting to take notice of the problem and think about solutions - that's at least the first step.