The driving forces that put pressure on the environment and the natural resource base are under the influence of macroeconomic policies. Monetary and fiscal policies, for example, determine growth rates and the direction of structural changes in every economy. These economic policies condition the actions of all economic agents, from the largest corporations, to the smallest household. They help shape decisions about technology choice and resource management at the micro level. This is why the importance of macroeconomic policies on environmental stewardship and in shaping environmental change cannot be ignored.
Even the International Monetary Fund recognizes that macroeconomic policies are critical in deterring or avoiding patterns of growth that damage the environment. The Stern Review on the Economics of Climate Change provides yet another example of how macroeconomic policies are receiving more attention in environmental debate. Yet, little research has been done on the precise ways and transmission mechanisms through which these policies affect the environment. It is possible that this lack of attention arises from the fact that the transmission mechanisms don’t always appear to be clearly identified. Also, the chain of events linking macroeconomic policies to their impacts on the environment may appear to be long. Typically, only the proximate causes of the environmental damage are seen (for example, slow investment rates that prevent clean technologies from being introduced or social marginalization and poverty that may lead to the destruction of traditional production systems), while the ultimate causes (tight monetary and fiscal policies causing slow growth and inequality) are seldom considered. Another possible explanation for this lack of attention is the state of flux in which macroeconomic theory finds itself today, making it difficult for applied economists to rely on solid theoretical references.
It is ironic that although the environmental implications of trade agreements and trade flows have been recognized as critical for the environment, there has been a general failure to acknowledge that trade liberalization is only part of a more general policy package. Monetary and fiscal policies, as well as financial deregulation and openness to capital flows, together with exchange rate and credit regulations, are the pillars of this policy mix, and together they define an open economy model. In spite of this, the importance of this policy package for environmental stewardship has not been adequately addressed. This project aims to redress this state of affairs by analyzing the main issues in the intersection between macroeconomics and the environment.
This groundbreaking action-oriented research will concentrate on macroeconomic policies in five Latin American countries: Argentina, Brazil, Costa Rica, Ecuador and Mexico. This group of countries provides in itself a mosaic of environmental problems and issues that is highly relevant to IUCN’s mandate: from illegal and industrial logging practiced under unsustainable resource management patterns, deforestation and loss of biodiversity, overuse of aquifers, soil erosion and loss of fertility, to over exploitation of fisheries and irresponsible activities in the extractive industries. Some of the problems present in the region have world wide repercussions (witness the effects of deforestation in the Amazon River basin on global climate change). Three of the five countries in this project are megadiverse (given their share of the world’s surface they host a significant percentage of the world’s species): Brazil, Ecuador and Mexico. This project will be the first to examine how economic policies at the macro level are affecting conservation efforts in the context of megadiversity. Thus, the project also touches upon one of the most pressing problems of our times, namely the mass extinction that is being driven by (among other causes) loss of natural habitats.
