A major shift of economic power (21 April 1995)



There is a major shift of economic power away from governments, of which the widespread movement towards privatization is but one manifestation. As we approach the limits of government, a wide variety of new actors are emerging within civil society who are becoming primary agents of change.



Remarks by Maurice Strong, Chairman, Ontario Hydro and Chairman, The Earth Council, to the Annual General Meeting of the American Philosophical Society, held at the Benjamin Franklin Hall, Philadelphia, USA on 21 April 1995.

It is a special privilege and pleasure to appear before this distinguished group of fellow members and guests of the American Philosophical Society under the aegis of Gerard Piel from whom I have derived such great inspiration and enlightenment over the years. And my appreciation is compounded by the eminent company in which he has placed me.

The Earth Summit in Rio de Janeiro in June 1992 made clear that to develop and secure a sustainable way of life on our planet we must learn to manage the forces that are shaping out future in an integrated, systemic way. And it produced agreement on a set of principles, the Declaration of Rio, and a program of action to give effect to them, Agenda 21, which provides the basis for doing this. I will focus my remarks today on the main questions: "What are the prospects for implementation of the Rio Agreements?" "Why does it matter?"

Agenda 21 called for what the Swiss Industrialist, Stephan Schmidheiny, and his Business Council for Sustainable Development referred to as a "change of course" to a new eco-industrial civilization based on fundamental changes in economic behaviour and in relationships between rich and poor.

This change of course is something that we must undertake wilfully as we are now the primary agents of our own evolution. The Rio Agreements provide the basis for this change. Of course, as critics are quick to point out, there are deficiencies in them -including weakness in the provisions relating to population, to energy and to patterns of production and consumption, as a result of concessions made to governments with special interests in these areas in order to achieve consensus.

Despite these deficiencies, the Rio agreements represent the most extensive and comprehensive program of action for the future of our planet ever agreed by governments. And the fact that they were agreed -word by word - by virtually all of the nations of the world, most represented at the highest levels, provide them a unique degree of political authority. Neither the Declaration of Rio nor Agenda 21 were intended to freeze the state of international agreement on these issues at the level of the consensus achieved in Rio. That process must be a continuing one. As I said to the world leaders gathered in Rio in my final statement to them: "What is important now is to get on with the job of implementing those agreements while continuing the process of negotiations on the many areas that need strengthening. "



Progress

 

As you might expect, one of the questions I am asked most frequently these days is how far have we actually moved since Rio and what are the prospects for implementation of the agreements reached there and realization of the hopes and 'visions to which Rio gave-rise. Less than three years after the conference, it is clearly too early to pronounce final judgement. After all, the changes called for by the Rio agreements are fundamental in nature, and fundamental change does not come quickly or easily.

There have been some encouraging moves on the part of governments. China has launched its own National Agenda 21 - one of the most extensive and comprehensive of any nation. Many other developing countries have taken similar initiatives even though the additional financial resources they had anticipated have not been forthcoming. Particularly noteworthy is the creation by the Presidents of the seven nations of Central America, led by Costa Rica, of a Central American Alliance for Sustainable Development based on Agenda 21.

Despite progress in a number of areas, ithas to be said that overall there has been a recession in political will since Rio. While the first meeting of the Parties to the Climate Change Convention in Berlin recently did manage to patch together agreement that will keep the process of implementation and further negotiation alive, it highlighted the continuing differences that exist, particularly as between industrialized and developing countries, and the degree to which political will has receded since Rio.

Pre-occupation by governments, and people, with more immediate and pressing economic pressures and budgetary constraints at home and persistent international conflicts such as those in Bosnia, Somalia and Rwanda with their accompanying humanitarian needs, have diverted attention from the environment and sustainable development. On this 25th anniversary of Earth Day, environmental journalist, Gregg Easterbrook in his new book "A Moment on the Earth" strikes a responsive chord in many when he makes the case for environmental optimism. Certainly he is correct in citing the advances made in the United States and other industrialized countries in reductions of air and water pollution levels, significant improvements in waste disposal and pollution control technologies, the growing movement towards recycling and greater efficiency in the use of energy and materials. But, as Easterbrook concedes, these advances have come about largely as a result of government regulations and incentives and confirm the importance of these rather than supporting the arguments for their recision or relaxation.



Evidence

 

Of own experience confirms the evidence of the scientists and statisticians as to the progress made during the past twenty-five years on what you might call the "close-in" environmental problems which have produced observable reductions in air and water pollution and improvements in the quality of life in our cities and in much of the countryside. But these welcome improvements at home provide no basis for complacency. Developing countries are now experiencing these close-in environmental problems in even more acute form than we did. And their cities are growing at unprecedented rates. At the same time, developing countries are contributing more and more to the larger global risk such as those of climate change, ozone depletion, degradation of biological resources, loss and deterioration of arable lands. These are issues somewhat more removed from our own immediate experience and it is therefore more difficult to maintain the levels of public interest and commitment required to support the actions needed to deal with them. Yet these risks continue as the forces that drive them persist. It is sobering to remind ourselves that all of the environmental deterioration and risks that have arisen to date have occurred at levels of population and economic activity that are much less than they will be in the period ahead.

The current tendency to complacency is reinforced by mixed and often confusing information that people receive through the media. In some cases, this is based on objective skepticism and differences of opinion. But it is too often motivated by special interests or prejudices, exaggerating the degree of scientific uncertainty in respect, for example, of the evidence as to the risks of climate change. Contributing to this confusion is the widespread assumption that measures designed to foster environmental improvement through sustainable development run counter to job creation, economic opportunity and competitiveness. In fact, the evidence is, on the whole, to the contrary.

During the past two decades, Japan has reduced domestic air and water pollution levels and increased the efficiency of energy and materials used more than any other industrialized nation while maintaining high rates of economic growth and improving competitiveness. There are some impressive examples, too, in the experience of Germany where more people are now employed in environmental industries in the Ruhr Valley than in the steel industry. There are, of course, good examples too in the United States and in my own country, Canada, but overall the rate of improvement is less. Nevertheless the United States still spends a greater proportion of its GNP on environmental protection than any other country.



Complacency

 

The principal reason we cannot afford to be complacent is that the new round of growth in the world economy is taking place primarily in the rapidly developing countries of Asia and Latin America. A recent survey of the global economy by The Economist points out that if current growth patterns continue by the year 2020 nine of the fifteen largest economies in the world will be what we now call developing countries. On this basis, China. would replace the United States as the largest single economy, India would replace Germany as the fourth largest and Indonesia would replace France as the fifth. It is always dangerous to extrapolate the future from current trends, and there will certainly be setbacks in the growth of developing countries, as we have seen recently in Mexico. But there is little doubt that The Economist will be correct about the general direction to which these indicators point.

Despite all of the talk about a new "world order", we in the west have not yet really begun to come to terms with the immense goo-political implications of the shift of economic power to the south. But of even greater importance in terms of the human future are the environmental implications of this shift.

For if the developing countries follow the same growth pathway taken by the more mature industrialized countries, their impacts on the larger global environmental risks we face will undoubtedly move us beyond the thresholds of safety and sustainability. Our environmental future will be largely determined by what happens in the developing world. Yet we who have largely created these risks, and benefitted most from the processes of industrialization that have given rise to them, can scarcely deny the right of developing countries to grow. Nor would it be fair or reasonable for us to act unilaterally in imposing constraints on their growth in the name of environment.

What, then, is the answer? To retreat into a domestic shell of complacency and apathy, however tempting, would be ultimately self-defeating. Surely we must continue to build on theenvironmental improvements we have effected during the past twenty-five years, with a greater emphasis on incentives which complement and reinforce regulation rather than replace it. As pointed out by Stephan Schmidheiny and the Business Council for Sustainable Development in their book "Changing Course" eco-efficiency is the key to sustainable development which meets both environmental and economic goals -efficiency in the use of energy and materials and in the prevention, disposal and recycling of wastes.



Avoiding mistakes

 

This will enable us to leave "space" for developing countries to grow and to set them an example that enables them to avoid the abuses and the costs of our own growth experience. But they will be much more influenced by our example, and by evidence that sustainable development is in their own interest, than by our exhortations.

And it is clearly in our own interest to ensure that they have both the incentives and the means to make the transition to sustainability. This means facilitating their access to the latest state-of-the-art technologies and to the additional capital they will need to employ them. It would be unrealistic to expect that this would come through increases in foreign aid in traditional terms. Foreign aid is in decline and private investment now accounts for the principal flows of financial resources to the rapidly developing countries. Accordingly, we must develop the incentives and innovative financial mechanisms to ensure that private capital will be utilized for sustainable development. Otherwise it would be illusory to think that we . can make the transition to sustainability provided for in Agenda 21.

In no field is this more important than energy. It is inconceivable that the massive amounts of new capital required by.developing countries to meet their needs for electric power alone will be available if they attempt to do so on the basis of current wastefully low levels of energy efficiency. And given that electric.' power generating facilities have a long life, the environmental consequences as well as the economic and social costs of proceeding along the traditional pathway would be, for all practical purposes, irreversible. Energy efficiency, as my own company, Ontario Hydro, is demonstrating, offers the best "no regrets" basis' for improving economic performance as well as reducing emissions. It offers a win-win solution for both developing and industrialized countries. And it buys precious time to change the energy mix away from our over-dependence on fossil fuels. There are similar prospects in other sectors.

At a time when all government are experiencing limits on the amounts of new debt they can incur and new taxes than can levy, it would clearly be unrealistic to expect totally new funds to be made available for these purposes. Neither is it necessary to do so. For governments everywhere continue to spend hundreds of billions of dollars on direct and indirect subsidies for activities which run counter to sustainable development - as for example, chemically intensive agriculture and to fossil fuels. These impose costly burdens on people as taxpayers and consumers as well as encouraging environmentally unsound and unsustainable practices. A reorientation and redeployment of these resources would provide all the resources required to effect the transition to sustainable development, at home and abroad, while improving economic efficiency.

And such new financial mechanisms as tradeable emission permits can utilize markets to channel funds available for environmental improvement to the places where they can be employed on the most cost-effective basis.



Economic power shift

 

There is a major shift of economic power away from governments, of which the widespread movement towards privatization is but one manifestation. As we approach the limits of government, a wide variety of new actors are emerging within civil society who are becoming primary agents of change. This is certainly true in the field of environment and sustainable development. The most exciting and promising post-Rio developments are occurring outside of governments, where there has been a virtual explosion of activities and initiatives on the part of grass-roots organizations, citizen groups and other key sectors of society. It is encouraging that so many people returning from or inspired by Rio are determined to translate its basic themes into their own responses to Agenda 21.

Engineers and architects, through their international bodies, have committed their professions to sustainable development and cooperative programs in implementation of Agenda 21 in their sectors. The World Business Council for Sustainable Development brings together an impressive group of world industrial leaders in a continuing commitment to leading the way in effecting the transition to eco-efficiency and sustainable development. Many of the world's cities are establishing their own Local Agenda 21 under the aegis of the International Council of Local Environmental Initiatives. And some 100 National Councils of Sustainable Development, or equivalent bodies, have been or are being formed, bringing together a unique multi-sectoral mix of representatives of government and various sectors of civil society.

The Earth Council, a new kind of non-governmental body, headquartered in San Jose, Costa Rica, has been formed to facilitate the process of communication and cooperation amongst these actors, focusing particularly on linking people at the community and grass-roots levels with the policy and decision-making processes which affect them.

As we move into the 21st century we have much to rejoice and to be proud of. Human ingenuity and the miracles wrought by our mastery of science and technology have produced a civilization beyond the wildest dreams of earlier generations and given us the tools with which to shape an even more exciting and promising future. But these same forces have also given rise to some serious and deepening imbalances which must be seen as ominous
threats to that future.

These threats stem primarily from the concentration of economic growth, and its benefits, in the industrialized countries and population growth, with its attendant costs and pressures, in the developing countries. This is accentuating rich-poor differences both within and amongst nations and compounding the problems of managing cooperatively the risks to our common future arising from the growing pressures on the Earth's resource and life-support systems.

Issues of water supply and quality are likely to move to the centre of the environmental agenda in the period ahead. And medical scientists warn of the growing risk of emergence of new forms of disease and the resurgence of new strains of traditional communicable diseases, like tuberculosis and malaria, which had been largely eradicated. While these problems will arise primarily in developing countries, there is no way in which we can be isolated from them or their consequences. The recent confrontation between Canada and the European Union over depleting fish stocks is a portent of the growing potential for "eco-conflicts" over scarce resources.

Migration which has historically helped relieve the pressures of poverty, suffering and persecution, is no longer a practical alternative for most. Although the pressures for migration will continue to mount, the borders of the world are closing for all but the privileged few. I see signs of a "fortress north" mentality developing in industrialized countries. While welcoming the growing market developing countries offer for our goods and services, there is an increasing tendency to regard them more and more as sources of competition and threat. The Economist, hardly a left-leading publication, recently stated that, despite the fact that Marxism has been thoroughly discredited as a political system, one of Marx's principal tenets may yet be validated through a rich-poor class war.

In the technological civilization knowledge is power and a primary economic resource. But it is encouraging to know that knowledge does not diminish or deplete with use. Rather, the more widely it is disseminated the more it grows. The dominant characteristics of our technological civilization are that it is global in scale and systemic in nature. Most of the actions to which we shape our common future take place at the local and individual levels; yet their impacts occur through a complex system of cause and effect in which the sources of these actions are often far removed in space and in time from their ultimate consequences. This is particularly true of such phenomena as ozone depletion and global warming. Thus, the concept of "thinking globally and acting locally" is no mere rhetorical notion, but an indispensable requirement if we are to effect the transition to a sustainable future.



Signs of Hope

 

So on this 25th anniversary of Earth Day we see signs of hope as well as reasons for continuing concern. Our experience over the past quarter century has demonstrated that solutions are available, or can be found, for even the most intractable environmental problems when there is a clear political will to make possible concerted action through a combination of policies, regulations and incentives. Even the most local of solutions must be applied in a global context. This requires new dimensions of international cooperation, particularly as between developing and industrialized countries, as well as the re-developing countries of Eastern Europe and the former Soviet Union. No society today can escape the realities of global interdependence. And the United States, more than any other country, has a primary interest in and responsibility for developing the ethos and the mechanisms necessary to achieve the new dimensions of cooperation amongst nations and peoples that will be the key to our security and sustainability in the 21st century.