Protecting the Environment:



WWF-Macroeconomics Program Office

POVERTY REDUCTION FOR THE POOR,

NOT THE PRIVILEDGED

1. From Structural Reform to Institutional Crisis, then on to Poverty Reduction Strategies

Structural reforms have been implemented in virtually every country during the past two decades. In low income countries in particular, such reform programs have been premised on the need to diminish the economic role of the state and to unleash market forces for stimulating economic growth. Basic elements of the reform package have included privatization of state-owned assets, liberalization of domestic markets, liberalization of investment and trade policies and promoting export-oriented growth.

Among the basic outcomes resulting from some twenty years of policy reform we include the following. First, global aggregate productivity has risen steadily as has the volume and value of traded goods. Second, the economic gap between OECD and middle income countries and some 100 less developed countries has widened considerably with no sign of abating. Third, the number of poor, particularly the rural poor, has not significantly diminished despite the promise that structural reforms were designed to benefit the world’s 2 billion poor.

The failure of these policies to address the broadening and deepening grip of poverty on a major portion of humanity led to an institutional crisis in the major development institutions in the mid-1990s. In response to that stark policy failure, the World Bank and bilateral development agencies reoriented their investment priorities and agreed that poverty alleviation would, thereafter, be the overarching and unifying goal of those institutions. From that apparent policy reorientation, a new set of investment guidelines, and conditionalities, have been established, particular in the case of the World Bank and IMF, in the form of the Poverty Reduction Strategy Papers (PRSPs). PRSPs, meant to be developed primarily by national governments, establish each country’s national development strategy against which development assistance is to be charted and assessed. Moreover, the Millennium Development Goals, adopted by all members of the United Nations, embody the new commitment to alleviate poverty and to increase country “ownership” of national development strategies.

2. The Environment Is Largely Ignored as a Central Requisite of Poverty Alleviation

The Millennium Development Goals (MDGs) are significant in that they establish universally agreed objectives of development and development assistance. As such they serve as measures against which current and future development assistance and the effectiveness of PRSPs can be measured.

That said, two major shortcomings, each associated with the environment, are embodied in both the MDGs and PRSPs. First, those defining strategic frameworks fail to recognize that the rural poor, constituting over 70% of the world’s poor, have an immediate survival dependence on access to use and sound management of environmental resources. Deprived of their natural resource assets, the rural poor experience major declines in living standards or migrate to urban areas. That relationship, undeniable and pervasive, is simply ignored in both the MDGs and PRSPs. The environment is viewed, today as in the past, as a separate sectoral issue and priority, rather than as the foundation for attaining all other development goals.

Second, these overarching frameworks assume that the current approach to economic growth, can address the needs of the rural poor while also maintaining the ecological foundations on which the poor depend for their survival. This approach, for example in rural areas, leads to an emphasis on rapid expansion of input-intensive, export-oriented agricultural production. In practice, this often translates to favoring large scale enterprises with market access, leaving conditions unchanged, or worse in the hinterland.

Instead of strengthening and improving management of precious and precarious natural environments, the institutional reforms that have accompanied economic reforms, decrease the access of the poor to land, forests, mangroves, other natural resources, investment opportunities, and decision-making mechanisms. In sharp contrast, they provide a diverse array of incentives and opportunities to the wealthier, privileged economic actors at national and international levels. So, while aggregate production data improve, the plight of the poor has worsened in virtually every country, including the dynamic developing countries of China and India.

3. PRSPs: Coherence between the Local, National and International Levels

These strategies are intended to be nationally owned, and formulated in a participatory way, with involvement not only of government, but also civil society and the private sector. They represent a country’s development strategy and if approved by the boards of the IMF and World Bank, form the basis for extending macroeconomic and sectoral loans. In addition these are also becoming a development blueprint, shaping resource allocation for development assistance by all major bilateral and multilateral donors. About half of all the low income countries eligible for concessional lending and debt relief for poverty reduction are in Africa. This indicates not only the magnitude of the needs in Africa, but also underscores the relevance for attention to the environment. Here, vast natural resources are the easiest target for export oriented economic expansion. Unless attention to natural resource use for poverty reduction is explicitly taken into consideration, there is danger of these resources getting rapidly depleted leading to grave long term consequences.

WWF is conducting an analysis of completed Poverty Reduction Strategy Papers (PRSPs) to examine whether their implementation will guarantee the achievement of poverty reduction through sustainable development and protection of the natural resource base on which their economic growth depends.

The results for five countries (Kenya, Tanzania, Uganda, Madagascar and Cameroon) indicates that potentially promising opportunities in macroeconomic and structural reforms are being missed due to a single-minded quest for ‘market efficiency’ and export promotion. For example, there is no mention of improvement in rights of poor communities to natural resources as part of the move towards privatization. The overall set of priorities and policy frameworks for poverty reduction are also found to be limited. For instance, even when water safety and adequacy is high on the agenda, there is little connection made with the protection of river basins and watersheds, which are essential for protecting water sources. The neglect of environment is nearly complete in the absence of monitoring indicators. Since these strategies are being refined as the go on, there is hope that such omissions will get rectified with strengthening local participation.

However, more alarming are results of analysis of policy frameworks developed by the IMF and the World Bank that are intended to use the PRSP strategies to formulate their concessional lending programs. Our analysis finds that the IMF and World Bank lending programs only respond to selected PRSP priorities – concentrating on promoting mainly foreign business, while giving little attention to strengthening rights of the poor or to improving environmental management. Thus, though the World Bank is the lead development institution on the environment, and its environment division is helping countries to build capacity to better integrate environment issues in their poverty reduction strategies, the impact of its lending priorities may serve to weaken the very foundations that countries’ PRSPs may have developed through the participatory mechanisms mandated by this process. Unless safeguards to monitor these lending operations are established, such selective responses could undermine the national strategy development processes.

4. There Is An Alternative Approach: Some Results from an Action-Research Program[1]

Over the past few years, WWF’s Macroeconomics Program Office has sought to encourage an alternative approach to better link needs for addressing rural poverty and natural resource management. A pilot program is being carried out in five countries: China, Indonesia, Zambia, South Africa and El Salvador. This endeavor is built on the premise that initiatives must improve local capacity to influence policy and institutional reforms taking place.

Perhaps the most significant lesson derived is that the economic changes have posed relatively few barriers, and often time presented opportunities, for the rural poor. In contrast the institutional arrangements implemented by governments, often with support from the Bretton Woods institutions pose serious and pervasive threats to the survivability of the rural poor. The results show that rural communities, especially the poorest ones, while continuing to rely on natural resources for their livelihoods, are increasingly finding these resources ‘out of bounds’ through a variety of public policies stemming from need for export revenue generation. In all the countries where this work is being done, this has been the case despite progress made with decentralization. In principle this is intended to empower local populations and their enfranchisement

A number of institutional issues are identified as contributing to a perverse poverty-environment dynamic. These include: erosion of traditional institutions and rights; promotion of ‘self financing’ local environmental governance that is in competition with community rights and benefits; establishment of ‘market’ mechanisms that effectively shut out poor communities from participating in management of their own resources, and in some cases, even a complete neglect of rural sector investment. The result in every case is a gross inability to improve either people’s livelihood needs or those of environmental management – leading to stagnation of one and erosion of the other.

However, there are opportunities waiting to be developed for improving the ability of local communities to access and manage their environments. Our work shows us that it not hard to build the capacity of communities and local institutions to effectively participate in public decision-making. Examples of locally led interventions include: fiscal reform in Zambia to strengthen rural communities’ ability to generate livelihoods from natural resource management; better linkage between game parks management and land reforms to enable newly resettled communities to improve their livelihoods and better manage resources in South Africa; legislative and institutional reforms in Indonesia and China to enable community co-management of lands and forests claimed by the state; and directly tapping into investment capital for rural schemes in El Salvador.

5. Conclusions and Recommendations

Sound policies would provide resource security and access to the poor rather than to the highest bidders and those who can turn the resources into rapid exportable revenues. As a result new market oriented reforms are beginning to encompass natural resources that were formerly held and managed by communities.

There are some key common elements of structural reforms that have led to the emerging poverty priorities – market liberalization, trade and export promotion, shrinking government budgets and functions and devolution from central to local jurisdictions. How do the poor and the environment fare under these conditions? There is little evidence that livelihoods or resource management are improving. Rather commercial interests, and those better able to navigate legal frameworks, are dispossessing local communities. The complex mix of incentives for trade, exports, and tightening government budgets, finds chronically undervalued natural resources an easy target to exploit. In the face of increased competition for these resources, local communities are easily the losers. Even in countries where decentralization is the mantra, and steps to bring governance close to people and enhance their rights -- is the prima facie policy – in reality the situation is far removed from it.

Based on this analysis and consultations with WWF offices in these countries it is recommended that improvement is needed in capacity at the local level, to link key macroeconomic and structural priorities squarely with protecting the resource base of the poor and management of natural resources. To this end, environment organizations also need to better relate conservation results to the economic, health and other benefits, to increase their integration into development goals. Finally, it is also important that donor policies, especially those of major lenders such as the IMF and the World Bank be closely monitored to ensure success of poverty reduction goals for local communities, and not just for those with investment capital. Finally, enabling and supporting civil society organizations to build their capacity for policy analysis and participation in issues relating to access and management of natural resources by poor communities will be an essential part of any success. Unless this is achieved, we will continue to see growing disparities in wealth, and a destruction of our natural resource wealth.

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[1] The ‘Economic Change Poverty and the Environment’ program is being carried out by WWF-Macroeconomics Program for Sustainable Development Program Office in partnership with local organizations in five countries worldwide. The local organizations in Africa include MANO in Zambia, GEM in South Africa, PRISMA in El Salvador, WWF-China and WWF-Indonesia.

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