Green Markets: The Economics of Sustainable Development.

• Author: Bailey, Jim

1. Introduction

   Theodore Panayotou's book, Green Markets: The Economics of Sustainable Development,(1) addresses one of the most important topics in international trade and international environmental law today: how to produce successful economic development without concomitant destruction of the environment. The phrase coined for this goal is "sustainable development." While sustainable development as a political and legal concept has been debated for several years, the fundamental economic implications of the concept have largely been neglected. Panayotou's book provides an accessible economic analysis of sustainable development that is essential to the formation of appropriate environmental and trade policies.

   To understand the significance of the sustainable development concept and the importance of Panayotou's discussion, the concept must be viewed in the context of the development of both international trade and international environmental law. The international trade negotiations of the late 1940's failed to achieve the goal of establishing an International Trade Organization (ITO) to regulate the actions of nations in order to maximize the benefits of world trade.(2) Anticipating the creation of the ITO, the participants entered into an interim agreement referred to as the General Agreement on Tariffs and Trade (GATT).(3) However, when the effort to establish the ITO collapsed, primarily due to the cyclical manifestation of the United States, isolationist tendencies, the signatories to GATT reevaluated the interim agreement and agreed to continue its existence.(4) Since then barriers to international trade have been steadily, albeit often slowly, lowered or eliminated. Most recently, the Uruguay Round of GATT negotiations successfully concluded with substantial reductions in global tariff levels.(5)

   International efforts to address the global environment at the 1992 United Nations Conference on Environment and Development (the Rio Conference) can be seen as the beginning of a journey along a similar path.(6) Essentially, the Rio Conference initiated an effort to address global environmental conditions similar to the 1940's effort to address international trade. Thus, the Rio Conference became significant not only because it produced a binding treaty regarding the global environment, but also because it signalled a major step transitional step on the path toward international environmental cooperation. Most importantly, the Rio Conferencees dedicated themselves to the concept of sustainable development as stated in the conference's Declaration of Principles.(7)

   Originating in the 1987 report of the United Nations sponsored World Commission on Environment and Development(8) and refined over the past six years,(9) sustainable development acknowledges the need for conservation and protection of the environment as well as the legitimate need of developing nations to provide a better standard of living for their people. The difficulty in giving effect to the principle of sustainable development is that the principle contains an inherent conflict: economic development inevitably changes the environment just as absolute preservation of the environment unavoidably stifles economic development. Panayotou's book examines how this problematic concept need not be considered paradoxical but can be sensibly implemented.

2. Discussion

   Panayotou begins his consideration of the topic with several important observations. He first notes that, while human economic and technological developments have provided the means for addressing environmental problems, there are more examples of technological failures than successes. In this he finds three implications: (1) common causes of environmental degradation exist that transcend location, culture, and development; (2) economic growth alone neither causes nor cures environmental degradation; and (3) failure to understand what are insidious environmental problems results either in neglect or in interventions that treat the symptoms rather than the underlying causes."(10)

   Panayotou's thesis is that economic growth and environmental protection are not contrary goals and that simultaneous efforts to achieve both can be actually complementary. Panayotou begins his exploration of this idea by pointing out several persistent erroneous assumptions about the interaction between economic growth and environmental safeguards. Panayotou notes that while most governments and environmental groups focus on physical manifestations of environmental degradation, "the physical manifestations of environmental degradation are lagging and misleading indicators of unsustainable development . . . [instead,] economic manifestations of environmental degradation are the most useful indicators for those who wish to pursue sustainable development."(11) The results of this error are well-intentioned but misguided, as are reflexive reactions by environmental groups that call for treatment of the symptoms of governmental mismanagement...