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Balancing economic growth and environmental protection.

I'm glad to be here today and to see so many old friends and colleagues involved in rural electrification. I'm also pleased that you chose to invite an environmentalist to address your conference, because more and more, environmental questions are going to become central to your work. Then again, maybe you invited me just because I'm an old energy guy and you figured I'd show up in a nice suit and wouldn't say anything too incendiary.

Well, you have nothing to fear. As you can see, I'm wearing a suit. And this morning I'm not going to spike any trees, pour sand in the gas tank of a bulldozer, or file any frivolous lawsuits. That's not The Nature Conservancy's style, and it's certainly not my style. Instead, I'm going to speak about what you asked me to: the balance between preserving the environment and promoting economic development.

Actually, I find this phrase a little ironic. It's like balancing a pound of feathers with a pound of lead--they sure look different, but they both weigh a pound. And that's the way I see the environment and the economy. They're so dependent on each other that you can't really separate them. To be sure, a lot of people have a hard time accepting this, in both the environmental and business communities. The idea that the economy and the environment are fundamentally interrelated goes against a whole host of preconceptions and orthodoxies. You might as well try convincing a member of the John Birch Society that Karl Marx had all the answers.

Well, my goal here this morning is to shatter any preconceptions that you might have about having to somehow "choose" between preserving the environment and promoting economic development. I'll start with an analysis of the linkages between the economy and environment. Then I want to discuss sustainable economic development. This phrase has become one of the chief buzzwords in the conservation vocabulary, and I want to talk about what it means and why it's important. I'll finish up with a look at how these issues of sustainable development play closer to home, and in particular how they relate to rural economic development here in the United States.

Let me start by exploring the connections between the economy and the environment, and why I'm so uncomfortable when people talk about choosing between them. The fact is, you can't view the environment as if it were some separate thing, an entity that exists independent of human activity. The environment undergirds everything we do. It provides our food, water, air, and natural resources--the essentials of life. It's our global life support system. And the more we destroy the environment, the less able it is to support us.

Remember the old television ad with the punchline, "you can't fool Mother Nature"'? Well, I think the copywriters got it wrong. The punchline should have been, "you can't fool with Mother Nature." Because when you do fool with Mother Nature, especially when you overexploit a natural resource, it's all too easy to set off a chain of unintended and often disastrous consequences.

Let me give you a case in point. It concerns the Pacific sea otter, which lives off the California coast. Now, otters are like poster children for the environmental movement. They're cute and cuddly and a guaranteed revenue generator for the direct mail. They're doing pretty well these days, but less than one hundred years ago otters were in deep, serious trouble.

Around the turn of the century, otters were hunted to the brink of extinction for their pelts. In fact, there were only about 1,000 of them left when they were protected from hunting. But as the otter population declined, people began to notice some curious changes in the Pacific coastal ecosystem. Populations of eagles, harbor seals, and fish began to decline dramatically as well. The fishing industry went into a tailspin.

So what happened? The answer lies in the rich beds of kelp that grow off the coast. Kelp forms the bottom rung in a very complex food chain. It nourishes the marine life that feed the fish that in turn are eaten by eagles and seals. As it turned out, the kelp beds were being cut loose from the ocean floor by sea urchins, whose primary predator was--you guessed it--the sea otter. When the otter was protected, the urchin population dropped, the kelp flourished, the eagles and seals returned, and the fishing industry rebounded. All because of the otter.

History is full of other examples of this dynamic in action. Think of the Dust Bowl or the declines in Atlantic fish catch caused by overfishing. Because of excessive irrigation, farm fields have turned into salty wastelands from the Middle East to places across the American West. Some people even hypothesize that the Mayan civilization collapsed because they exhausted their natural resource base, particularly their sources of fresh water.

But you don't have to go back to Mayans to see the results of environmental excess. There's a present-day example that is equally frightening--the former Soviet Union. For seventy years, the Soviets ignored the environment in favor of heavy industry. They are now paying a staggering price for this policy--not just the cost of cleaning up pollution but also the health-care costs of tending to a generation of citizens poisoned by working in a toxic atmosphere. What's more, they've ruined the natural resource base, from fisheries and timberlands to agricultural land and groundwater.

In fact, the situation is so bad that the authors of a recent book about this subject estimate that the Russians are spending between 15 and 20 percent of GNP dealing with environmental problems. That's a higher percentage than they spent on defense in the 1980s. The old Biblical prophecy "Ye shall reap what ye shall sow" never made better sense.

By contrast, the Department of Commerce estimates that the U.S. spends less than three percent of GNP on all environmental costs combined. That means national parks, natural resource management, pollution control and abatement, and even R&D on environmental technologies. What's more, this investment has brought us real improvement in environmental quality--and our economy has expanded at the same time.

There's another side to this equation. We can see that destroying our natural resources can have negative economic effects, but does it follow that protecting these resources has a positive effect? A new study by an MIT economist sheds some interesting light on this question.

This study compared growth rates in states with strong environmental policies and regulations with growth in states with weaker environmental policies. And the results were conclusive. In strong environmental states, growth in gross state product and growth in labor productivity was twice as fast as in states with less stringent environmental policies. Nonfarm employment was five percent higher in strong states. And in these states, construction employment rose by 53 percent; it actually dropped in weaker states.

By the way, these trends were consistent both in the 1970s, a period of increasing federal rules and regulations, and in the 1980s, when some of the regulations were eased. And these trends were also not limited to big-economy states like Texas and California. Smaller states showed the same patterns.

The lesson of this study seems clear enough to me. On my desk I have a little sign that says, "If you're not the lead dog, the view never changes." Well, I can't think of a more appropriate maxim when it comes to protecting the environment. Businesses and communities that get out in front on environmental issues will have an enormous competitive advantage over those who stall, file lawsuits, or bury their heads in the sand.

Just look at what some of the lead dogs in the business world are doing. Such forward-looking companies as 3M, Dow Chemical, and DuPont are aggressively pursuing strategies that will place them ahead of the curve in environmental technologies and compliance. These companies aren't fighting the move toward greater environmental protection; they're positioning themselves to profit from it. Their efforts include everything from capturing pollutants during the production process to adopting emission standards that well exceed the limits set by federal regulations.

Other companies are pursuing different avenues to environmental protection. Last year, for example, Walt Disney, The Nature Conservancy, and the state of Florida worked out an innovative mitigation agreement that resolved a potential environmental stalemate before it could happen. Here's the deal. To facilitate the permitting process for a 10,000-acre expansion of its Walt Disney World complex near Orlando, Disney purchased and then donated 8,500 acres of prime Florida wetlands to the Conservancy. Disney also placed a conservation easement on an adjacent 8,900-acre parcel and set up an endowment fund to help us manage the land.

And let me give you one final example, from the power industry. In 1990, PG&E, the nation's largest utility, announced that it was integrating environmental considerations into all aspects of its business. Since then, PG&E has devised more than 40 programs aimed at educating its customers on the benefits of energy conservation. The company hopes these measures will help reduce the growth in demand for electricity by 75 percent over the next decade, saving consumers billions of dollars and preventing about 18 million tons of carbon dioxide emissions.

Now, it's all well and good to make the case linking environmental health and economic vitality. And examples of companies that have signed on to this idea are also nice. But the kind of anecdotal evidence I have given you so far doesn't tell us what to do next, or which policies to pursue. And this can be frustrating, like asking for directions at a gas station in the middle of nowhere and being told, "You can't get there from here."

In recent years, however, there has been some progress in getting there, at least on the conceptual front. It's called "sustainable development," and although this idea has been around since the early 1980s it really was thrust into the spotlight at last year's Earth Summit. In short, sustainable development offers a vision for integrating economic growth and environmental protection into our practical, everyday lives.

So let me spend a few minutes on this topic. In general, sustainable development is defined as meeting the needs of people today without compromising the ability of future generations to meet their needs. Sounds simple enough, doesn't it? But don't be deceived. Achieving this goal will not only require advances in science and technology, but also a wholesale revision of deeply ingrained attitudes and points of view.

The unfortunate fact is that most economic development strategies have opted for short-term gain at the expense of long-run growth. I've already talked about Russia, but this problem is especially acute in the developing world. And in developing countries, with rapidly growing populations and high poverty rates, this strategy is perfectly understandable. It's hard to tell a starving person to set aside food for the future.

But far too often, short-term development policies haven't addressed short-term needs. People are still impoverished. And in too many places, these policies have encouraged people to trash the environment. A good example of this dynamic in action is the destruction of the tropical rain forests of Latin America. Many Latin American governments encourage settlers to homestead in the forest. So the settlers move in, cut down the forest, farm for a couple of years until the soil gives out, and then move on to cut down a new patch of forest.

The international development community hasn't done much to help, either. Over the years, development agencies have poured billions of dollars into big, complicated public works projects or industries that are geared toward exporting natural resources. But in places where most of the people can't read, this is overkill, like trying to drive a two-penny nail with a sledgehammer. The result has been a series of spectacular economic and environmental disasters across the developing world.

Sustainable development seeks to reverse these trends. Instead of exploiting natural resources for the export market, for instance, a sustainable strategy would focus on meeting local needs first. A sustainable strategy would employ technologies appropriate to the society and the situation. A sustainable strategy would discourage people from abusing renewable resources and would reward selective and efficient resource-users.

Now, is this vision just a pipe dream? I don't think so. Changing patterns of behavior is never easy, but in more and more places, these principles are being adopted, and adopted successfully. What's more, I think they can--and must--work in the United States. In the final part of my remarks today, let me examine the nuts and bolts of applying the concepts of sustainable development to our situation.

Without question, the greatest need and the greatest opportunities for environmentally sound economic growth can be found in America's depressed rural areas. Just look at the numbers.

As you know, much of rural America is in bad shape. Each year, for example, five million acres of land are taken out of agricultural production. Resource depletion--from the old-growth timber areas of the Northwest to the fisheries of the Gulf Coast--has left many rural communities with diminished economic hope for the future. Rural outmigration has dramatically reduced business activity in many areas. Poverty is more severe in rural communities than elsewhere, and the rural working poor have been particularly hard-hit by the movement of low-wage, low-skill jobs to offshore locations. And the traditional rural economic development strategy of industrial recruitment has led to a situation where 30,000 community development organizations compete each year for only 500 corporate relocations.

We cannot ignore these problems. A quarter of the nation's population lives in rural areas. Rural America is also home to most of our natural resources and to our precious natural heritage. The question, then, is how to conserve our resources for future generations while providing legitimate economic opportunities for the people who live in these places today.

I think the answer is to fundamentally change the way we go about promoting rural economic development. What worked in the past just isn't doing the job today. So I'd like to propose a vision for a successful and sustainable rural development program. The central ideas are to build on local strengths, to invest in local communities and local businesses, and to create local jobs. There's an old saying that all politics are local; I'd change that to say that all rural development is local.

Let me expand on my proposal. First, instead of trying to compete for industry with other cities and towns, rural communities should play to their own strengths and not someone else's. Look at it this way: If you're five feet tall and weight 95 pounds, don't pick a fight with a linebacker from the Dallas Cowboys. That's not cowardice; that's plain common sense. So in the same way that a business concentrates on the things it does best, rural communities should focus on the things that set them apart.

In economic terms, some examples of this strategy might include promoting value-added agricultural products, capturing rising "niche" or specialty markets, expanding existing enterprises, and exploiting the potential for nature-oriented tourism. Communities known for an "authentic" regional product--split-cane furniture, maple syrup, or whatever--might consider building on the recognition these products already have.

Next, the kind of approach I envisage would target small businesses, which are responsible for creating most new jobs. In fact, one of the things I find most interesting in the Clinton Administration's new economic package is the emphasis on community development banks to help support these kinds of businesses. In too many cases, the missing link for a small, rural business is start-up capital--and "patient" capital, at that. A community development bank can serve this role, providing small loans with generous repayment schedules. What's more, as part of a sustainable development program, these banks could encourage investment in environmentally compatible enterprises.

In addition, my vision would require strong local leadership, hands-on involvement by local people, and would include community development as an integral component. The last of these is simple enough: without an emphasis on human services, education, and environmental protection, rural economic development efforts will never reach their full potential. By the same token, rural development must be a bottom-up endeavor. Local people need to feel that they have a stake in the process, some control over their destiny. They must play leadership roles. And they must share the financial risk. My vision of sustainable rural development is not to create a new federal hand-out program, but to help rural people help themselves.

And there's also a key role for the business community in this effort. To be blunt, local groups and nonprofit institutions can only do so much. They need partners with financial muscle and good business sense to help develop sustainable projects, in particular to ensure that these projects are efficient and profitable. A rule of thumb about sustainable development: if it isn't profitable, it won't be successful.

I think the new Administration has a tremendous opportunity to put some of these ideas into practice. Bill Clinton ran on a platform of Putting People First, and this vision of renewing our rural economies would do that, and more. It would also put our environment first. I certainly hope that a portion of the stimulus package that the President has proposed could be directed toward these kinds of initiatives, especially considering the cuts he has proposed in other rural assistance programs. I'm sure you know which ones I mean.

Let me add that at The Nature Conservancy, we're not waiting for the President and Congress to act. Right now, we're attempting to demonstrate how these concepts might be put into practice on the impoverished Eastern Shore of Virginia. The Conservancy's involvement in this area stems from our 40,000-acre Virginia Coast Reserve, which encompasses the last undeveloped barrier island chain on the east coast. In turn, this ecological treasure helps protect a pristine coastal ecosystem that supports the local oyster and fishing industry.

Working with dozens of local partners, the Conservancy has launched an initiative that seeks to improve local economic conditions without degrading the natural resource. On one level, we're working to capitalize a local sustainable development corporation that will launch new products and services. These might include such specialty farm crops as asparagus, value-added seafood products, low-density residential housing, nature tourism, and local crafts such as duck decoys. Elsewhere, we're working with the minority community on a low-income housing project and model wastewater treatment plants. And perhaps most important, before any of these enterprises got off the ground, we helped the community develop and adopt a realistic strategic plan for the Eastern Shore.

You are probably wondering what this has to do with conservation. The answer is everything. Inappropriate, unplanned economic development poses the greatest threat to the barrier islands and the rare species that depend on them. Quite simply, the environment is the Eastern Shore's greatest resource. By contrast, well-planned, compatible development can take advantage of this resource without destroying it. This will serve both the short and long-term interests of the local residents. And as I said, it will serve the interests of the Conservancy.

Actually, I think this points out one of the biggest lessons that the Conservancy has learned in our efforts to promote sustainable development. What works for local communities works for us, and vice versa. What's good for the environment is good for the economy, and vice versa. Sometimes this message takes awhile to get across, but it's getting through.

Of course, there are still some barriers out there. I was in Texas a few weeks ago, and before my speech a gruff old rancher came up to me and said, "Mr. Sawhill, no matter what you say, I think all environmentalists are just a bunch of sons-of-bitches." Now, you get used to this kind of thing after a couple of years in the conservation business, so I asked him if it was important to him to pass on his land in good condition to his children and grandchildren. And he said, "Hell, yes." Then I asked him if he believed in protecting our natural heritage. Hell, yes. And what about conserving resources for the future? Sure, he was for that too. So I said to him, "The Nature Conservancy is for all of those things. How can you be against us?" Well, he didn't bat an eye. "Then you aren't an environmentalist." he said. "Environmentalists are sons-of-bitches."

I have news for him. I am an environmentalist and so is he. And so is anyone else who cares about our common future. The old-timer missed the point because he was caught up with names and labels. To build a sustainable future, to develop sound and stable rural economies, we have to move beyond our preconceptions and explore new ways of living. l hope all of you will join me on this journey.

* John C. Sawhill is president and CEO of The Nature Conservancy, an international conservation organization with 650,000 members committed to the preservation of threatened ecosystems and wildlife habitat. Since its founding in 1951, the Conservancy has protected over 6.5 million acres in all 50 states, Canada, Latin America, the Caribbean and the Pacific. Currently, it owns and manages the largest private system of nature preserves in the world.

Dr. Sawhill served as a director of McKinsey and Co., heading the firm's energy consulting practice, where he directed a number of strategic planning studies for some of the largest companies in the electric utility, petroleum, natural gas and coal industries. He has served in various government positions, including Deputy Secretary of the Department of Energy under President Carter.

Dr. Sawhill was president of New York University from 1975 to 1979, and has served as a director for a number of major American for-profit and not-for-profit organizations. He received his Ph.D. in economics from New York University.
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Author:Sawhill, John C.
Publication:Management Quarterly
Date:Mar 22, 1993
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