1 EXTERNAL DEBT AND ECOLOGICAL DEBT by Joan Martinez

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					      EXTERNAL DEBT AND ECOLOGICAL DEBT by Joan Martinez Alier – SUMMARY
(More texts available in Internet (Eng/Spn versions): http://www.cosmovisiones.com/DeudaEcologica/.
Additional information on Ecological Debt claims is available in http://www.ecej.org website of the
Ecumenical Coalition for Economic Justice. For a wider debate on environment and inequity in an
international context the article “Environmental Justice, Sustainability and Valuation” by Joan
Martinez Alier in is available in Internet: http://www.bu.edu/cees/jma.html)
EXTERNAL DEBT AND ECOLOGICAL DEBT
Any debtor country audience is easily impressed by the dollar amount which a child of that country owes
when born, but it is more difficult to awaken interest in the theoretical position of creditor, that the same
infant occupies in the Ecological Debt department. It is worth asking why the idea of the Ecological Debt
is new despite the historical sense of destruction and pillage of natural resources common in many post-
colonial countries. Ecological history is beginning to help with detailed research in this area, but
notwithstanding this, curiously enough, in politics more importance has been paid to financial issues than
to the loss of natural heritage. The idea of an Ecological Debt has had no political echo up until the
present time.
WHAT IS THE RELATIONSHIP BETWEEN THE EXTERNAL DEBT AND THE ECOLOGICAL DEBT?
The relationship has two principal aspects. The first is the claim for the Ecological Debt, on account of
both exports undervalued (as their price does not include the various local and global social and
environmental costs) and environmental services provided free. For example, knowledge of agricultural
or wild genetic resources (la chinchona officinalis, the potato, corn etc.) has been exported from Latin
America at zero cost, or at best very cheaply, while absorption of carbon dioxide by new vegetation or by
the oceans has been provided free of charge. And in a way, it is as if we the rich of the world had assumed
property rights over all the carbon dioxide sinks: the oceans, the new vegetation and the atmosphere. An
Ecological debt, of the North to the South, can therefore be claimed. It exists despite the difficulty in
quantifying it in financial terms, and then this debt can be see as a counterweight to the External Debt.
Whatever the case, to place the claim to an Ecological Debt on the international political agenda is in
itself the best contribution that the South could make to moving the economies of the North towards
ecological sustainability.
The second aspect of the relationship between the External Debt and the Ecological Debt is related to the
way in which the obligation to pay the External Debt and its interest has led (and leads) to depredation of
the environment (increasing in turn the Ecological Debt). In fact, in order to pay the External Debt and its
interest it is necessary to produce an exportable surplus, that is to say, production has to be greater than
internal consumption. This surplus might come in part from a genuine increase in productivity (more
production per hour worked) but also comes from the impoverishment of the people in the debtor
countries and the abuse of nature. While debts grow through interest, the natural world is not able to grow
at an interest rate of four or five per cent annually. Non-renewable resources such as oil, are not actually
produced, but were produced many years ago, and are now extracted and burnt, producing a variety of
negative effects. Renewable resources, meanwhile, have biological growth rates which are slower than
the economic pace imposed from outside.
If the interest rates are high and the weight of the External Debt is large, the future is undervalued, and
environmental questions are disregarded in favour of the present. On the other hand, if we give little
present value to future problems of resource scarcity, to loss of biodiversity, and to an increase in the
greenhouse effect, the level of exploitation of nature increases. These considerations are relevant for the
ecology of the debtor countries as Frederick Soddy pointed out eighty years ago. In contrast to the real
wealth, which is subject to the laws of thermodynamics, money debts (that is to say financial wealth or as
Soddy expressed it, “virtual wealth”) does no decay entropically with time, but in fact, grows according to
compound interest. Of course, the human economy is fortunately open to the entry of energy and
materials, and is “anti-entropic” in the sense that it achieves growing levels of complexity and
organisation. But real production cannot be confused with destruction or degradation. It is not possible to
pay a debt that grows at compound interest, with the sacrifice of humans and the natural world that must
also continually grow at compound interest.
EXPORTS FOR PAYING EXTERNAL DEBT: ECOLOGICALLY UNEQUAL TRADE
Black gold, which is exported without following the rule stated in 1936 by Uslar Pietri, of “replanting” to
generate a sustainable income, and also without worrying about the local environmental impacts, or about
the increase in the greenhouse effect; green gold, which has been stolen and is now the object of new bio-
prospection contracts which others call bio-piracy; white gold, from the hydroelectric plants which at


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times (as with Tucuruí in Brazil) inundate forests zones, destroy biodiversity, displace human populations
and cause new diseases in order to produce kilowatts to process bauxite and produce aluminium for
export (Brazil subsidises Japan, by giving away kilowatts hour at 0,01US$); pink gold, shrimp exports at
the cost of mangrove destruction; and finally yellow gold, a product which requires the removal of huge
quantities of material in order to obtain a few grams, and whose amalgam is still made with mercury.
The turtle conundrum, and the call for a consumers’ boycott of farm-raised shrimps
The Earth Island Institute, through Todd Steiner of the Sea Turtle Restoration Project, successfully had put the turtle
issue in the U.S. trade agenda in the early 1990s. In May 1996 the U.S. government agreed that shrimp could not be
imported into the U.S. from countries whose trawlers did not use Turtle Excluder Devices (TEDs). Still three years
later, at the anti-WTO demonstrations in Seattle in 1999 there were many people disguised as turtles. Is it more
difficult to see the world from the perspective of a woman shellfish collector in a mangrove than from the perspective
of an ensnared turtle? As reported from Bangkok already in 1993, "An unlikely-sounding creature is deforesting
mangroves, despoiling coral reefs and leaving cropland barren across Thailand. The culprit is shrimp. This is bad
news for many who think that cultivating the succulent black tiger shrimp in man-made ponds is somehow more
ecologically sound than plucking them out of the sea, but Thailand is paying a high environmental price for its status
as the world’ largest producer of cultured shrimp".1
              s
Several Southern governments took the U.S. to the GATT (later the WTO) complaining against the requirement to
certify that shrimp were caught in turtle-safe nets. In 1998, the WTO unfortunately overruled the U.S. decision that
required wild shrimp imported into the U.S. to be caught in such as way that turtles were not killed.2 However, a lot
of progress has been made in imposing the use of TEDs in many countries. Not only in the North, also in the South
there are groups concerned with turtles, so it is not accurate to view attempts to stop the killing of turtles when fishing
shrimp (or the killing of dolphin when fishing tuna) as the foisting of Northern environmental values on Southern
peoples. Similarly, not only in the South, also in the North there are NGO and groups of people concerned with the
destruction of mangroves, though the strongest protests come from the South, where a number of people have lost
their lives directly (and many more have lost their livelihoods indirectly) while defending the mangroves against
shrimp farming. There was then a danger around 1995 which is today acknowledged by environmental groups North
and South, that the ban on wild-caught shrimp could lead to an undesirable expansion of the volume of farmed
shrimp around the world. In Ecuador, where 95 per cent of shrimp exported are farm-raised, local environmental
groups were baffled by the insistence of U.S. groups on banning imports of wild caught shrimp, while they
themselves were proposing at high local risk a Northern boycott of farmed shrimp imported from Ecuador and
elsewhere. More than half the mangrove forests of Ecuador have been destroyed by the shrimp-farming export
industry.
The Shrimp Tribunal in New York in April 1996 was convened by the UN Commission for Sustainable
Development. In October 1997, the meeting that set up ISANet (held in Santa Barbara, California, not in a Southern
country) did not call for a moratorium on shrimp-farming, as proposed in the Declaration of Choluteca in 1996, nor
for a boycott, as proposed from environmental groups from Ecuador since 1995. It called instead for a "shrimp break"
(whatever that meant) on farm-raised shrimp. Other Northern proposals have been even more shy. Consider for
instance the following statement. "Working with exporting countries, industry and citizens’ groups, (importing
countries) need to identify policy instruments that will build incentives for sustainability into the markets, through,
for instance, labelling and certification. Ideally, the consumer should pay the full cost of production - including
environmental costs which the producers inflict in others. Mechanisms for channelling back the revenues to restore
and repair the ecosystems and species impacted should also be set up".3 Notice here how environmental destruction
may be compensated and restored. Irreversible damages are not taken into account. The livelihoods of poor people
are brought into a money-valuation standard. The notion of "full environmental costs" is uncritically accepted.
An anthropologist working in coastal areas of Ecuador (Muisne and Olmedo, both in Esmeraldas) wrote in her thesis:
"Many of the people interviewed in this study expressed feelings of powerlessness towards the kind of society they
live in. They underlined the fact that there a few opportunities for them to find work and to make a living... "
(Handberg, 1998). That is, externalities that fall on poor and powerless people, are cheap, even when "internalised".
If poor people want to defend ecosystems on which they depend for their livelihood, they better appeal to other
languages of valuation.
Footnotes:
1
  Business Times, 1 June 1993.
2
  Ann Swardson, Turtle protection law overturned by WTO, Washington Post, 13 October 1998, p. C2, cited by Shabecoff, 2000:
163. Also, Hilary French, 2000: 121-3.
3
  CIEL, IUCN, WWF, Protecting marine and coastal biodiversity under the Convention on Biological Diversity, April 1996: 36-37.

Extracted from Martinez Alier, J. (2000): “Ecological Conflicts and Valuation - mangroves vs. shrimp in the late
1990s”, submitted to Environment and Planning – Government and Policy.

This is a long history of the pillage of nature, something due not to the pressure of population on natural
resources, but because of the pressure of exports. More and more is exported in order to be able to pay the
External Debt, so much so that, paying no attention to the ecologically unsustainable nature of the
exports, it is normal to measure the importance of the External Debt as a ratio between the debt service



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payments and export income, concluding that the External debt losses importance as the quotient
diminishes.
Although a quantitative physical export index (i.e. the number of tonnes exported) does not reveal effects
such as either the toxicity of materials or the disappearance of biodiversity, it may indicate the impact of
these export economies on the environment.
                             Accepted for publication - Ecological Economics (2000)
                   Trade and the Environment: From a “Southern” Perspective
                               Roldan Muradian* and Joan Martinez-Alier**
                   Universitat Autònoma de Barcelona. Dpt. d’Economia i d’Història Econòmica.
                                       08193 Bellaterra (Barcelona). Spain.
                          e-mail: * rolmu@yahoo.com ; ** Joan.Martinez.Alier@uab.es
                                                    ABSTRACT
 The relationship between free trade and the environment is one of the main issues of contention between
environmental and ecological economics. Environmental economics assumes a positive relationship between free
trade, economic growth and environmental policies. Environmental externalities may cause important damage.
However, trade is not to be blamed for this. Instead, the fault lies with policy inadequacies at the national level. On
the other hand, some ecological economists criticize the assumptions of environmental economics, especially the
immobility of production factors and the positive correlation between income and environmental quality. They plead
for measures to prevent deterioration of "northern" environmental standards in a "race to the bottom" due to
"ecological dumping” from the South. In this paper, we argue that neither environmental economics nor "northern"
ecological economics take into account the structural conditions determining the international trade system. Based on
some new empirical evidence on material flows, we stress the notion of environmental cost-shifting. If physical and
political ecology perspectives are adopted, a “Southern” approach to the trade-and-environment issue may arise.
KEY WORDS: North-South trade. Dematerialization. Environmental Kuznets curve. Environmental cost-shifting.
Ecologically unequal exchange.
Full text available in Internet: http://ises.abo.fi/tren/esee_2000/html/theme_d.html
Another article related to the topic is: Muradian, R. and Martinez Alier, J. (1999): “South-North Material Flows:
History and Repercussions of the Environment” accepted for publication by Innovations. Full text article available in
Internet: http://www.univie.ac.at/iffsocec/conference99/htmlfiles/postersgreen.html

Our data tend to refute the hypothesis of a “dematerialisation” of the world economy which some studies
on “industrial metabolism” in rich economies have prematurely believed to have discovered.
Ecologically unequal trade appears as a result of two facts. On the one hand, the strength necessary to
incorporate negative local externalities into export prices is often lacking in the South. Poverty induces
selling local environmental quality and human health cheaply, even though this does not signify a lack of
environmental awareness, but simply a lack of economic, social and political power. On the other hand,
the natural time necessary to produce the goods exported by the South is frequently longer than the time
required to produce the imported manufactured goods and services from the North. As the North has
profiled from ecologically unequal trade, this is one of the elements that has to be accounted for in the
Ecological Debt.
EXPORTS FOR PAYING EXTERNAL DEBT: “CONDITIONALITY” AND ECOLOGICAL AJUSTMENT
“Conditionality” is a concept that generally refers to the conditions which are imposed by the World Bank
and International Monetary Fund before making a loan or re-negotiating the External Debt. When such
financial stabilisation programs are imposed, the idea is not only to slow inflation sometimes suppressing
brutally subsidies and freezing income, but also to lower the internal consumption, to increase export
volumes needed to pay part of the External Debt and re-finance the rest. In order to escape from the
poverty (due to a reduction of internal salaries and the increase of basic goods prices) that the
“adjustment” plan imposes, one option is to increase the export of natural resources.
Should the South now also accept that the North imposes an “environmental conditionality” on its loans
or on access to Northern markets? This question has a complex answer if one takes into account that the
greatest threat to the environment is over-consumption in the North. An over-consumption encouraged by
an ecologically unequal trade and by the free use of unilaterally appropriated environmental services,
which has given rise to an Ecological Debt. And so, rather than unilaterally imposing its “environmental
conditionality” on the South, the North ought to pay its Ecological Debt, and should “adjust” its own
productive economy. But the question remains. Who will put the “environmental conditionality” bell on
the cat of the rich economies? Maybe the only way to impose an “ecological adjustment” on the North



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would be by means of higher prices of oil and other raw materials, and in general perhaps through
international environmental regulation controlled by a more ecological and democratic United Nations.
IS A TAX ON FOSSIL FUELS A GOOD IDEA?
Let us examine the question of the BTU-tax or the eco-tax on fossil fuel consumption in the North from
the point of view of the oil, gas or coal exporting countries, many of them poorer than the United States,
Western Europe or Japan. Such taxes are seen negatively, due to their distributive impact. By lowering
the demand through an increase in taxes, exporters would be forced either export the same at a lower
price or to export less in order to maintain the price. Their income would be lower. An international tax
system could be designed in such a way as to recycle the ecological taxes to the oil, gas or coal exporting
countries in order to improve their social situation (of those that are poor) and to subsidise energy
efficiency and renewable energy (in all). Or the fossil fuel exporting countries themselves, instead of
opposing and even boycotting, as they have up until now, any negotiations on the greenhouse effect,
should impose “natural capital depletion taxes” and other “eco-taxes” at source.
Naturally, in order to implement such a tax there would be the need for a collective agreement, within the
framework of OPEC or another similar group. However, for the governments, and perhaps also public
opinion, in fossil fuels exporting countries, it has been more convenient not to confront the North and to
deny the increase in the greenhouse phenomenon, and lamentably divide the countries of the South. This
division of the South facilitates inaction in the North, even though a number of Southern countries such as
Bangladesh or some small islands, will be in danger as a consequence of climate change. These countries
are therefore subject to a real external aggression to their environmental security, while others such as
India will have a lot to gain with an immediate equal distribution of carbon sinks rights per capita
together with commitment to emission reduction from the countries which produce the most per person.
QUANTIFYING AND CLAIMING THE ECOLOGICAL DEBT
If in the South a portion of public opinion, and at least some governments, adopt the perspective of the
“environmentalism of the poor” it would then be possible to move forward in a claim on the North for the
Ecological Debt. This does not imply exchanging debt for nature (as happened in some cases which taken
together have not even involved one per cent, in financial terms, of the Latin American External Debt).
On the contrary, it implies taking the External Debt to the North as paid on account of the Ecological
Debt owed by the North to the South. Exactly how much is owed? The argument does not depend on an
exact quantification, which is impossible: how must the non-catalogued biodiversity losses due to tropical
rainforest wood exports be priced? But although it is not possible to make an exact monetary accounting,
it is necessary to establish a set of main categories to be accounted and certain magnitude order to
stimulate discussion.
The consensus represented by the IPCC (the International Panel on Climate Change) is that present
trajectories are leading to a large increase in C02 in the atmosphere, at least double. If the objective of
reduction was, for instance, to maintain present concentrations of atmospheric C02 (which would signify
an annual reduction of approximately 3,000 million tonnes of Carbon, with respect to actual emissions,
i.e. a reduction by half) then the marginal cost of the reduction achieved thanks to technological changes
or an economic decrease (or the cost of additional absorption by new vegetation) would be much higher
than in the present “joint implementation” experiments.
By not reducing the emissions and exposing the rest of the world to the impacts of an increase in the
greenhouse effect, and by exercising de facto property rights over all the carbon sinks, we, the citizens of
the rich countries, have been saving money whose amount can be more or less calculated; this is a part of
our Ecological Debt.
Other environmental services, nutrient recycling, soil formation, defence of coastal zones, evaporation of
water, purification of water in wetlands etc., have also been outside the market, and, fortunately, have
been free. But not all humans have equal access to these services. This lack of equity has been evident in
terms of access to the genetic resources of the South (where the original centres of agricultural diversity
held and where there is also greater “wild” diversity). The South’s unpaid support to the mercantile value
of agriculture and medicine could actually be calculated, even though in this case the greater value is still
in the future, and therefore discount rate applied due to the present “genetic erosion”, becomes an issue in
the calculation. The claim for Farmers’ Rights (recognised by FAO, although without practical effects)
that is, the compensation to traditional peasants for their work conserving and innovating plants through
the centuries, is a part of the Ecological Debt. But the handing over, voluntarily or otherwise gratis, of
knowledge, which is not later used commercially, should not imply rights.




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If it were also possible to achieve cancellation of the External Debt on account of the Ecological Debt,
this could diminish the pressure on natural resources, at the same time as improving the situation of the
poor. But the issue that should be placed on the agenda of the debtor countries themselves, and included
in international political discussions, is not only how to help the debtor countries environment but also
how to use the claim for the Ecological Debt that North owes to the South in order to force the North to
put into practice its “ecological adjustment”.


THE COMPONENTS OF THE ECOLOGICAL DEBT expressed in money terms would be the following:
•   Regarding to ecologically unequal trade:
       • The costs of reproduction, or maintenance, or sustainable management, of the
           exported renewable natural resources (which have not been paid). For example, the
           replacement of the nutrients incorporated into agricultural exports.
       • The actualised costs of the future lack of availability of destroyed natural resources.
           For example, the oil no longer available, or the biodiversity destroyed. This is a difficult
           figure to calculate.
       • The costs of reclamation (not paid) of the local damage produced by exports (for
           example the sulphur dioxide of the copper smelters, the mine tailings, the health effects of
           plower exports, the pollution of water by mercury in gold mining) or when no reclamation
           is possible, the actualised value of the damage (what is sometimes known as
           “environmental liability”).
       • The value (not paid until now) of the information and knowledge on genetic resources
           given freely, when commercial use has been made of it.
•   For lack of payment for using global environmental services:
        • The costs (not paid) of reclamation of the impacts caused by importing solid or liquid
            toxic wastes.
        • The value of the gaseous wastes deposited without cost in the atmosphere up until the
            present (mainly C02 ), supposing equal rights to the worlds carbon sinks. This can be
            calculated according to the costs of necessary reductions not carried out, or alternatively
            with a calculation of the present value of the damage that would be produced (this being a
            more difficult calculation). If the necessary annual reduction is estimated to be around 3,000
            million tonnes of carbon (in order not to continue increasing the level of carbon in the
            atmosphere), and if the average costs of the reduction is estimated at only US$20 per tonne
            then a figure of approximately US$60,000 million per year is obtained (a tenh of the
            External Debt of Latin America). An amount that the excess CO2 producer countries owe to
            the rest of the world each year.




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