The Greening of U.S. Foreign Policy

Monday, April 30, 2001

In the past few years, globalization has become a buzzword that permeates both economics and ecology. Under the globalization banner, economists study the interconnections between diverse economies and environmentalists worry about local actions having global consequences. Environmentalists allege that better science makes us more aware of global interconnections and that new technologies make environmental effects broader reaching. So, taken to its extreme, the Gaia principle suggests that a butterfly flapping its wings in Japan might cause hurricanes in the Caribbean. Allegations of global warming, ozone depletion, and species extinction—all are blamed on market and ecological processes that span the globe.

Not surprisingly, armed with these allegations, the environmental movement has moved the policy agenda beyond local and even national boundaries into the foreign policy debate. By arguing that actions in one country have adverse environmental effects in another, environmentalists call for international agreements that abrogate national sovereignty and delegate foreign policy to nondemocratic international agencies. The Kyoto accord aimed at curbing the emission of greenhouse gases is perhaps the best known of these efforts in recent years, but the list of international regulations rationalized by environmental concerns is long and growing. Biodiversity, biotechnology, chlorofluorocarbons, endangered species, hazardous wastes, and nuclear wastes are but a few of the driving forces for international regulation. Even military operations cannot escape the green hand of regulation. In the midst of the Kosovo conflict, environmentalists raised concerns about the environmental effects of bombing oil refineries, power plants, and ammunition dumps. One wonders if the filing of environmental impact statements will become a prerequisite for all military operations.

Global environmentalism has come to the forefront of foreign policy, challenging and reshaping traditional interactions between national governments. The implications of this "greening of foreign policy" have been profound—and often quite counterproductive. Items on the growing list of environmental issues that now drive international treaties and agreements have high costs with low benefits. If the threats the environmentalists are warning us about are as real as we are led to believe, they can better be handled by returning to the traditional principles of the free society based on a rule of law.

When Regulation Backfires

The most salient case for government intervention into private activities arises when the actions of one individual affect another without his or her consent. This happens when people compete for the use of a resource such as air. One individual wants clean air for breathing or viewing and another wants it as a waste receptacle. If the first person has a right to clean air, then the second, by disposing of waste, imposes a cost on the other by violating his or her right; the polluter creates a third-party effect. Alternatively, one party may create a benefit, such as preservation of endangered species habitat, that another may enjoy without paying. In this case, the actions of the free rider may result in underproduction of the good.

Based on the record to date, a species is more likely to go extinct under the ESA than it is to recover.

Global environmentalism and the greening of U.S. foreign policy have been justified on both grounds.

Indeed the title of a recent book, The Global Commons, captures what happens when the actions of one person impinge on the well-being of another. By arguing that the world is one large commons, everything in the world becomes interconnected so that action in one country can affect goings on in every other. Who is to say that a butterfly flapping its wings in Japan may not influence the likelihood of hurricanes in the Caribbean? Hence, the world’s oceans and atmosphere become a commons subject to tragedy. This argument opens endless arguments for governmental regulations at the international level under the rubric of third-party effects.

The free rider argument also provides numerous justifications for the greening of foreign policy. If people in New York derive value from the existence of tigers in Southeast Asia but will never visit tiger reserves, and if people living with the tigers must forgo economic values in order to preserve the habitat, there is no way of charging the people who benefit and compensating those who bear costs. And who can refute the argument, assuming global warming is a problem, that people in one corner of the world benefit from the preservation of forests as carbon sinks in another corner, but would free ride on the provision of those benefits? Environmentalists argue that these existence values, as they are known, justify using the regulatory and taxation powers of government to produce environmental goods from something as specific as wildlife habitat to something as nebulous as biodiversity.

These arguments for the greening of foreign policy assume that governmental intervention is necessary to internalize costs and benefits. In other words, government must regulate the use of the global commons or provide the public goods for which there are free riders.

Turning to political regulation, however, ignores the costs of implementing this action and the potential for getting the desired result. The command-and-control approach assumes that benevolent politicians and bureaucrats will pursue the public interest. But, in fact, political costs are positive and perhaps even grow exponentially with the size of the governing unit. In short, the net gains from regulation rarely justify moving resource decisions from individuals and small groups to national governments or international bodies.

Subsidizing Global Environmental Destruction

In his book Mortgaging the Earth, Bruce Rich documents how the World Bank and other international financial institutions have subsidized environmental destruction. This story is essentially the exportation of many U.S. environmental policies. Especially in the case of water policy, the United States and other developed countries have dammed rivers with significant environmental consequences and little solid economic justification. Similar policies have been exported through international financial institutions.

One example of how World Bank financing can work against environmental goals is the Northwest Region Development Program. Between 1981 and 1983, the World Bank loaned a little more than $443 million for paving Brazilian national highway number 364, a 1,500-kilometer stretch of road. The purpose of the highway was to connect Brazil’s populous south-central region with the rain forest wilderness in the northwest and to connect 39 rural settlements with the highway to attract settlers to the region. These agricultural settlers were to produce crops such as cocoa and coffee for export. The effort was extremely effective in attracting tens of thousands of settlers to the region.

Unfortunately, the settlers, who were unable to obtain land titles and credit, turned to clearing the rain forest and planting subsistence crops of beans, rice, and maize. Crop failure after a year or two on the poor, exposed soils forced many of the colonists to move back to the populated south-central region. Meanwhile, the program increased the rate of forest destruction in a region the size of Oregon from 1.7 percent in 1978 to 16.1 percent in 1991. In addition, settlers and the indigenous population were ravaged by disease. More than 250,000 people were infected with malaria. Some Indian tribes experienced epidemics of measles and influenza, with infant mortality rates reaching 50 percent.

Brazil is not the only place where a World Bank project has wreaked havoc on the environment and caused social unrest. From 1976 to 1985, the bank loaned about $500 million for another massive resettlement program known as Indonesia Transmigration. The goal was to resettle millions of poor people from the heavily populated inner islands of Indonesia to the sparsely populated outer islands and to provide support for the settlers to cultivate cacao beans, coffee, and palm oil. The outer islands contained 10 percent of the world’s remaining tropical rain forest and were inhabited mainly by indigenous tribes.

As in Brazil, support for the settlers failed to materialize, and many settlers were forced to clear rain forests to try to survive on subsistence crops. Again, the crops failed because of poor soil conditions. Ironically, if given the $7,000 paid by the World Bank to resettle a family in the remote areas, a household could have lived above the Indonesian poverty level for at least 11 years.

International development efforts illustrate the perils of top-down control. The most recent example is the construction of the Three Rivers Dam in China, arguably the least cost-effective and most environmentally unfriendly international development project ever undertaken. In short, elevating authority to higher and higher levels of government seldom generates fiscal or environmental responsibility. As expenditures are further removed from the citizens paying the costs and as decisions are made by bureaucrats not directly responsible to the electorate, the costs of monitoring governmental agencies rise. This calls for a careful weighing of the benefits and costs of greater centralization.

The Devolution Solution

The well-known environmental slogan "think globally, act locally" admonishes people to seek the appropriate locus for solving environmental problems. This certainly applies to governmental solutions. More centralization is not necessarily better once we consider the public choice costs of using government. At higher and higher levels of government, the principal-agent problems become greater and greater. Measuring and monitoring what state political agents deliver to their constituents is more difficult than measuring and monitoring local political agents, and so on for national and international political agents. In other words, information and incentive matter.

There is a growing body of evidence that environmental federalism can offer a better way of handling some environmental problems. Two examples come from forests and parks. In side-by-side comparisons of national and state forests, states do better on virtually every dimension. Not only do they make money on their operations while the national forests lose, but there is also preliminary evidence of their environmental sustainability. The reason for this difference is largely found in the system of accountability at the state level. Operated under a trust arrangement, western state forest lands are required to earn revenues for state schools. Hence, recipients and managers alike have a reason to monitor costs and develop revenue opportunities. Such accountability is crucial for both fiscal and environmental responsibility and is more likely if the unit of governance is smaller.

If the greening of foreign policy is to have a positive impact, it should foster institutions that encourage political and economic freedom, the traditional goals of U.S. foreign policy.

The second example comes from park management. Again, side-by-side comparisons of state and national parks reveal that state parks generate more revenues per visitor and reinvest in the long-term economic and environmental health of their assets. Similarly, parks in developing countries are more likely to be economically and environmentally sustainable if local people have a stake in their management and in their revenue-generating capability. In both of these examples, it is devolution, not centralization, that leads to better fiscal and environmental results.

Think Globally, Act Locally

Global environmentalism in general and the greening of foreign policy in particular are based on the assumption that international political control is the necessary solution. However, this solution presumes that international political institutions can develop regulations that are appropriate and enforceable, a presumption that is questionable. Measuring and monitoring the activities of political agents grows with the size of government, which necessitates balancing the benefits of solving resource conflicts at higher levels of government with the costs of doing so.

International development efforts illustrate the perils of top-down control. Elevating authority to higher and higher levels of government seldom generates fiscal or environmental responsibility.

If the costs of international political solutions outweigh the benefits, we need not despair. There is, in fact, an alternative solution—decentralization and privatization. The former calls for devolving the locus of authority for resolving disputes over resource use to lower levels of government where agents can be held more accountable, and the latter calls for encouraging the definition and enforcement of private property rights so that individuals and small groups can bargain with one another to resolve conflicts.

Of course, there is no way to define and enforce private property rights to the atmospheric commons, but there is also no way to implement and enforce international regulations on carbon emissions. For that reason we have no choice but to "think globally and act locally." By trying to act globally through the greening of foreign policy, the likely result will be impediments to devolution and privatization because global regulation calls for larger units of governance and creates less secure property rights.

If the greening of foreign policy is to have a positive impact, it should foster institutions that encourage political and economic freedom, the traditional goals of U.S. foreign policy. Given the high correlation between measures of freedom and environmental quality, this is the surest way to bring good natural resource stewardship and environmental quality to the developing world. With freedom comes economic growth, and with economic growth comes the wherewithal to afford environmental amenities. Perhaps the most important parts to this recipe are private property rights and the rule of law. Hence a greener foreign policy should be one that encourages these fundamental institutions both at home and abroad.