Interest-Based Debt and the Environment 
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Indebted countries have not just borrowed money — they have mortgaged the future. Nature puts up the collateral. The environment is a little-noticed victim of the debt crisis in the Third World, yet one day we shall all pay for the damage this crisis does to ecosystems.

Our economies have short-time horizons at best: bottom lines register quarterly or yearly profits; budgets are annual; and, for a banker, three months can be a very long time. Each nation-state has a license to inflict damage on the planet as a whole, and global mechanisms for costing (much less stopping) this process do not exist. National economies, both socialist and capitalist, proceed, for the most part, as if there were no long-term costs for anything. There is no sense of solidarity with the future. Many neo-classical economists still flatly deny even the theoretical possibility of limits to growth and refuse the notion that pollution and environmental destruction should figure in their equations. Anything difficult to quantify simply gets left out.

Since the IMF and the World Bank are peopled with neo-classical economists of strict observance, it is not surprising that their loans and adjustment programmes pay scant attention to ecological costs. It will be a long time before anyone can fully estimate exactly what these costs are (and by then it may well be too late), but there is already enough evidence to show clearly that the present road is not only wrong but stupid even in economic terms. The price of cleaning up the mess now being made in the Third World is going to be horrendous, and it can only be added to the present debt bill. In all too many cases damage will be irreversible.


There are two debt/environment connections. The first is borrowing to finance ecologically destructive projects. The second is paying for them — and all the other elements of debt-financed modernisation — by cashing in natural resources. The two are necessarily intertwined. Many of the grandiose projects that helped to put Third World countries on the debt treadmill to begin with are environmental disasters in their own right. Mega-projects are part of the standard development model; they pay no heed to future penalties for present recklessness. Large dams and hydro-projects are typical examples, now admirably documented by Edward Goldsmith and Nicolas Hildyard.

No one is against irrigation or power. Successful societies must find appropriate ways of improving agriculture and providing energy or perish. Unfortunately, huge dams do neither of these nearly as efficiently as a series of smaller, less costly, ones could, and they create a flood of ancillary problems into the bargain. Nor, perhaps, is ‘bargain’ the mot juste in this context - for example the Tucurui dam in Brazilian Amazonia, begun in 1976, is expected to cost easily $8 billion.

This figure reflects not its true costs, merely those of the cement, steel, labor, etc. Real costs are systematically masked by so-called ‘cost benefit’ analyses. These include losses of silt and fertility downstream, flooding of agricultural land and forests, destruction of wildlife, increased salinisation of soils. Those are just a few of the physical effects, which have, of course, an immediate impact on people and their livelihoods.

(Source: “A Fate Worse Than Debt,” Susan George)


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