Nature’s capital and its rational utilization

By Sanjib Chandra Hota*

In the process of global development over a period of time due to adoption of improved technology emerging out of new innovation, productivity of the inputs in production is always on the upward trajectory lessening time between application of inputs and the final product. This has happened in the technologically advanced Western countries along with the Asiatic giants like Japan, South Korea, Taiwan, China and Vietnam. One may as well assume that these technologically developed countries have reached Industry 4 and some may be innovating with more advanced technology to push the production process to Industry 5. But it is to be carefully noted that while adopting innovative technology to shorten the production process with higher productivity, there has been increasing utilization of nature’s capital namely water, soil, forest, mountain and air.

In Economics these are called gifts of nature to mankind. Present innovative process of production has wrongly affected the nature’s gifted diversity which includes the biosphere as well as the inanimate bounty of nature. “ Sustainable Development”, the expression was first coined by Gro Harlem Brutland in a document “Our Common Future”, a report on environmental sustainability published in 1987 published by U.N. in Oxford University Press. Ms Brutland was former Norwegian Prime Minister and assumed the Chair of World Commission on Environment and Development (WECD). She was also the Vice President of the Socialist Party International. This Commission was set up at the behest of the General Assembly of the U.N. “Sustainable Development” was for the first time given recognition by the U.N. in 1992 at the World Earth Summit at Rio de Janeiro, Brazil. In the report “Our Common Future”, there was a dire warning against limitless exploitation of nature’s capital. The report cautioned against a future disaster wherein it was emphasized that in order to meet the want of mankind of today, nature’s capital should be so harnessed that it should not create a situation of scarcity of such capital for future development. Therefore for the future generation of mankind, natural capital should be separately earmarked while deciding its utilization for development of present generation. There are certain resources in nature’s capital like mineral wealth which can not be replenished. Top soil of the earth, glacier of the mountain once gone can not be replenished for the use of our succeeding generation; will take much longer a period for replenishment.

In the United Nations Development Programme held in 2016, it was urged upon the member states that each state should continuously audit with a
mathematical formula to value the natural capital and assess the degradation of environment and biosphere while utilizing the natural resources in the process of development and should be cautious and conscious enough to rational use. When the state will be vigilant enough in this regard, all stakeholders will fall in line and will be conscious of their accountability. It is true that while calculating the Gross Domestic Product (GDP) of a country applying GVA (Gross Value Addition) formula, loss to the environment and bio diversity are not taken into account in the calculation matrix.

While calculating the GDP of a country, if loss of natural capital (both permanent loss like extraction of mineral resources, destruction of mountains, removing top soil and degradation of value like pollutant discharged to water bodies through untreated industrial effluent, urban waste, emission of suspended particles along with CO2 to air will figure in, total value of GDP will be much lower than what would be obtained by applying GVA formula. Only such a rational calculation of GDP will reveal a true picture and will make the people in management of state craft more conscious in prudent use of nature’s capital in the process of development.

We know that a country’s effort to push forward in the growth process, it is inevitable that along with human resource, nature’s capital has to be
harnessed. But the pertinent point about a global economic process with unbridled consumerism which encourages high pace of utilization of natural
capital without setting apart a part of it for the future generation and particularly that part of natural capital which once destroyed can not be
regenerated once utilized. Mother Nature has given to mankind a natural sphere consisting of four subsystems of which biosphere is one. Other
subsystems are lithosphere (land), hydrosphere (water) and atmosphere (air). This is evident that besides living kingdom, other gifts of nature like soil, water and air which are inanimate have come into existence through a process of evolution. In the evolutionary process many species of plants and animals have been extinct not necessarily with human intervention.

Other subsystems have also undergone evolutionary changes. Such changes occur as a natural phenomena. But over and above the evolutionary process, irrational exploitation of natural capital brings such damage to each of the subsystems of natural sphere giving rise to many new phenomena like tsunami, rising of sea level, melting of glacier in all parts of the globe shrinking Antarctica, destruction of all types of forest thereby raising atmospheric temperature, dumping all types of waste including toxic substances into ocean, change in rainfall pattern and changes in climate due to constant emission of CO2 because of use of fossil fuel. All these phenomena do not augur well for future of mankind. This may sound gloomy, but one can not hide the reality unless steps are taken to innovative use of natural capital. Heat wave has affected all parts of the globe. These four subsystems of natural sphere contribute to 40% of the world economy; world humanity earns 80% of their livelihood. A healthy biosphere can be helpful for the research of medicinal science and further innovation. A healthy biosphere if properly managed will be conducive to sustainable development.

Availability of natural capital namely land, water, mountains, hills, forest, minerals, fossil fuel are finite which are utilized and harnessed producing more of goods and services in the process of development. Irrational utilization of these natural capital which amounts to as much utilization as possible in as little time will result in depletion of such capital (which are not replenishable) making very little of them available for future generation. Attempt to recreate any such capital may not bring back to its original form and may not fully succeed. For example replanting a forest with plant species other than which are conducive to the native soil and a planted forest devoid of wild life may not bring back the biosphere originally lost.

We borrow the present from the future generation. As time passes on, with the speed of economic growth in an acquisitive greed, one does not know
when the present generation is gone and the succeeding generation has asserted. If 25 years are taken as a period of one generation, with the longevity
of mankind rising, at a particular point of time people of four different generations live. Even if some natural capital like water and air will not be
exhausted, their usable quality for living kingdom particularly for mankind will be considerably degraded much to the detriment of global economy and human welfare. Depletion of natural resources along with deterioration in quality of the remaining natural capital (which would lose its quality) will have negative impact on the world economy in the years to come. The time what we call today, we have inherited from our preceding generation.

Likewise, excessive use of natural capital today by us for enhancing for our material progress of unbridled greed will deprive our future generation of their legitimate dues. Production process in producing goods and services generate positive and negative externalities. Development projects in certain area generate employment for local people, create infrastructure like roads, communication, electricity and net connectivity, piped water supply, develop market and business activities. All these benefit the locality and its periphery. These are positive externalities. Projects in their execution and operation also generate negative externalities like emission of CO2 with suspended particles to the air, discharge of untreated effluent to water bodies like river, reservoir, lake etc. making the water completely unsuitable for drinking for humans and animals (both livestock and wild life). It also affects the aquatic life particularly fish thereby making a dent on the livelihood of marginal fishermen. Heavy drawl of ground water pulls down the water table affecting the people in the neighbourhood making shallow tube wells sunk for providing drinking water going dry. For setting up of an industry or a power plant in a green field, forest is destroyed and reforestation as a compensatory measure does not take place simultaneously.

Indeed, there is a big time lag between destruction of a forest and compensatory reforestation. Project development most of the time lead to displacement of local population; many times displaces indigenous people who inhabit the locality over centuries. Inspite of a good package of compensation and resettlement they suffer a psychological trauma as they are left to lead an uncertain life. Biodiversity of the area is
badly affected. As these externalities have a bearing on the human society as well as on natural sphere, these can be measured in terms of marginal social cost and marginal social benefit by assigning appropriate cost and value in a prudent manner with expertise. Gathering empirical data marginal social cost (MSC) and marginal social benefit (MSB) can be plotted in diagram. It is seen that MSC curve slopes upward with stiffness while MSB curve rises initially up to a point, then becomes flat and plateaus for a while, then slopes downward. Ideal point of a project expansion should be up to a point where marginal social cost is equal to marginal social benefit. If the growth process with a certain package of technology expands limitlessly, negative externalities outweigh the positives.

In course of economic growth, disparity in ownership of country’s wealth among different segments of population and inequitable distribution of
country’s income occur. Such wealth and income inequity among people is a type of negative externality. In a market economy with ultra consumerism galvanising the production process and supply chain, social cost benefit analysis is seriously applied with the aim of reducing social cost and maximising social benefit. As a result of this the socio economic progress presented by the state is something different from reality. Economists apply a measure called Inclusive Wealth Index taking into account utilization and conservation of nature’s capital in development process. It measures the wealth of nations by carrying out a country’s production base. It measures all of the assets from which human wellbeing is derived including human capital and natural capital. It measures a country’s capacity to generate and maintain human welfare over generations. This index was developed with the launch of the Inclusive Wealth Report (IWR) at the United Nations Conference on sustainable development at Rio de Janeiro, Brazil otherwise known as Rio+ 20 in June 2012. This IWR takes into account five capital factors namely financial, manufactured, human, social and natural.

Growth rate GDP indicates the growth of a country’s GDP at a particular time unit while IWR takes into account the productivity of all types of capital as well as their availability in future. In other words this index contains inbuilt analysis of a country’s long term development and human welfare over generations. While developing this Index, UN has done a detail empirical enquiry. It found out that between 1990 and 2014, growth rate of world economy even though was reported to be 3.4%, yet applying the IWR it works out to 1.8% only. Report from the World Economic Forum from Davos in 2018 revealed that among 103 countries on the basis of gross development rate, India’s position was 62, Pakistan 47, Bangladesh 34, Sri Lanka 40 and Nepal 22. Ministry of Statistics, Government of India also admits that between 2005 to 2015, gross state domestic product (GSDP) of each state varied between 7% to 8%, but in 11 states there had been continuous degradation of natural capital.

It should be borne in mind that thoughtless and unplanned exploitation of natural capital leads to increasing inequity in an economy totally driven by
market forces with little control of the state. People in the bottom layer of economic progress are further marginalised. If we take the human race as one family inhabiting this globe as a common home, all sections of humans have equitable right on nature’s free gift. Benefitting a few groups of human beings in a few group of countries in owning and recklessly exploiting nature’ gifts at the expense of other humans will not be a sustainable development process either for the world polity or global economy. It is therefore time for introspection for those who are in charge of state affairs. In Economics, the assumption ceteris paribus or “other conditions remaining same” does not hold good always. Achim Steiner, Administrator of the UNDP observes “Over many decades, development economics relied on stable factors including global climate. However, more disruptions like climate change and inequality are underway now, threatening steady socio-economic progress. The global Human Development Index value declined two years in a row, erasing the gains in previous five years while younger generations could be four to seven times more exposed to heat waves than older ones – with such factors, the world needs new tool for economic development.” (Economic Times, 3rd March 2023).

Under the auspice of the UN, the then Secretary General Kofi Annan, in the beginning of this millennium in 2001 started the programme of review of biodiversity. Its report was out in 2005. It revealed that during preceding fifty years, human activities have brought damage to the biosphere so
much that had never happened earlier in the history of mankind. This has happened due to ever increasing demand for food, clothing, water and fuel.
This has resulted in serious diversity to such an extent that its repletion and regeneration is impossible. It is true that rapid transformation of
biosphere has benefitted the mankind , but much more loss has occurred because of such transformation and has increased the misery of the
subaltern. The report warns that unless the scientists and environmentalists work out to tackle the problem then future mankind will
be badly affected by nature. If human race as a whole is unkind to nature, it should not expect nature to be kind to it either. Instead,
nature’s fury will appear in different forms. By rational use of nature’s capital development process treats nature as a friend, not slave. This will
conserve natural capital for the future, avoid unexpected natural phenomena not conducive to mankind. With this, distribution of global
wealth will be more equitable.



The author is a former Odisha cadre bureaucrat.


DISCLAIMER: The views expressed in the article are solely those of the author and do not in any way represent the views of Sambad English.

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