required in a world in which many things go wrong and few plans are fully realized. Moreover, that review is largely invisible to outside observers. We must accept their analysis on faith. The NEPA rules will improve this situation. There is moreover a moral obligation for U.S. citizenry to survey the uses made of their tax dollars by the World Bank. The problems that we have experienced in this country from wasteful politically motivated public works programs will be more serious in the Third World. After all, the relative size of the political sector in many undeveloped countries is much larger than in the U.S. (a primary cause of their poverty) and thus the need for a NEPA style review is even more pressing. Moreover, the linkage between the funds and their use is very indirect. Politicians in the Third World solicit funds from their political counterparts in the World Bank who in turn request periodically that politicians in the U.S. and other developed countries provide additional financial backing. Economic reality is far distant in such a multi-tiered political world and thus there is far less reason to suspect rational investments for World Bank loans. The case for additional information for some light to make this process more visible to public criticism is overwhelming. - - XTANKARIYI TRRARIEN AN ASIDE: THE LINKAGE OF ECONOMIC AND ENVIRONMENTAL POLICIES There is a close linkage between good economic policy and good environmental policy. Secure property and contract rights makes it possible for individuals who care about such things to protect their concerns by fencing off their property from others. Even those concerned only with economic exploitation recognize that their property will have a higher value if they maintain environmental amenities (that fact has led various U.S. resource companies to restore their lands and U.S. property developers to preserve vistas and trees). Similarly, the right of contract makes it possible to protect shared environmental resources by covenants and conservation easements. If such restrictions are not likely to be enforced, they can not protect the environment. Property rights, in particular, are critical to environmental objectives. Without secure property rights, all resources are at risk and individuals are rationally inclined to approximate the "rape and ruin" caricature of capitalism. What reason is there to restore a mining site if the chances are that the site will be expropriated prior to any ability to recover the costs of this restoration? A world in which property is subject to the vagaries of the moment is a world in which everyone hurries to recover the value of all investments a world in which everyone sees the future in highly myoptic terms. It is highly ironic to criticize the market system for short-sightedness when one observes the almost total blindness resulting from political instability. - The misguided experiments with collectivist management schemes are unwise but should not be viewed as some particular obsession of the Third World. The U.S. has experimented with exactly such ownership arrangements throughout its history. Indeed, since the federal government still manages over one-third of the nation's land, these experiments continue. There is much to learn from the U.S. experience. An interesting example from our early history was the Puritan effort in colonial America to create a community based on "from each according to their ability, to each according to their need" principles. The results of that experiment during the first two years were bleak. Governor Bradford, the leader of the enterprise, noted that collective-farming arrangements were failing to provide adequate incentives for the type of hard work required. Single men had little reason to work long hours when the more advantaged married men rushed home early to wife and hearth. Obviously, the Puritans like most people would have preferred to continue their traditional ways, but Bradford had no World Bank ready to finance the continuation of this noble but hopeless enterprise. As a result, Bradford, instead changed the property rights regime of the Colony and moved toward a system of individual entrepreneurship. As one might have expected that shift was effective. The next year saw the first celebration of Thanksgiving! The lesson is clear. The absence of a World Bank willing to finance forever a failed experiment greatly benefitted the United States and its citizenry. People were able to preserve their core values, but they were encouraged to adjust their practices if they wished to avoid misery. The presence of the World Bank has changed that fact to the detriment of most Third World countries. The result has been the continuation of destructive economic practices far longer than would otherwise occur and, thus, to much more human misery than necessary. The NEPA requirement would enable more substantive criticisms of these practices to be made earlier by a wider variety of citizens and groups. Such criticisms might even prompt the World Bank to require nations to consider the incentives fostered by their political arrangements. Nothing could do more to harmonize man and nature than such rethinking. CONCLUSION: In a world of private lending, there would be little role for the NEPA requirements advocated in this testimony. When risks are borne by private parties, the outcomes tend to advance human welfare. The purpose of the NEPA requirements is to improve the transparency of the decisions made by political institutions and thus to improve the ability of U.S. citizens to understand and critique that decision process. Such criticisms are essential because the incentives to face economic reality are extremely weak at the World Bank. They are weak enough within the various U.S. political agencies now subject to NEPA -- and the record of U.S. political investment has been abysmal. Such new reporting requirements may lead to a reduction in lending to Third World countries, but it will almost certainly lead to an improvement in the quality of such lending. That goal is a worthy one and thus we support this extension of NEPA to the area of international lending. World Wildlife Fund STATEMENT of WILLIAM K. REILLY PRESIDENT WORLD WILDLIFE FUND and THE CONSERVATION FOUNDATION before the SUBCOMMITTEE ON HAZARDOUS WASTES AND TOXIC SUBSTANCES of the Senate Committee on Environment and Public Works on the Application of the National Environmental Policy Act to U.S. Participation in Actions of International Financial Institutions June 16, 1988 1250 Twenty-Fourth Street, NW Washington, DC 20037 USA 202/293-4800 Telex: 64505 PANDA -1 Mr. Chairman and Members of the Subcommittee, I appreciate very much the opportunity to appear before you and to present my views on the application of the National Environmental Policy Act to U.S. participation in actions of international financial institutions. I applaud the Subcommittee's initiative. This hearing addresses important issues, indeed ones that may go beyond a legislative remedy. I am William K. Reilly, President of World Wildlife Fund and The Conservation Foundation, two organizations with substantial interest in the management of the environment and natural resources in the developing world. World Wildlife Fund is the leading private organization working worldwide to protect endangered wildlife and wildlands. We have 450,000 members in the United States, and about 2 million in our sister WWF national organizations in 23 countries around the world. World Wildlife Fund is a field-oriented organization, supporting individuals and institutions that carry out practical conservation projects on the ground. Our top priority is conservation of tropical forests in Latin America, Asia, and Africa, places that are home to a substantial proportion of the world's animal and plant species. During our 27 years, we have worked in more than 100 countries to sponsor and carry out over 1,300 projects involving a comprehensive array of conservation methods. The Conservation Foundation is an environmental policy research organization with interests in land conservation and development, public lands management, water resources, pollution control, and environmental dispute resolution. We are perhaps best known for our periodic state of the environment reports, the most comprehensive independent assessments of environmental conditions and trends prepared by a private organization. In Mexico, Costa Rica, and other developing countries, The Conservation Foundation 8 is helping private conservation groups prepare state of the environment reports for their respective countries. These activities are part of the Foundation's growing international program that provides technical assistance to governmental agencies and private conservation groups in developing countries on a range of natural resource and pollution matters. Our two organizations affiliated in 1985 in order to combine the field and scientific skills of World Wildlife Fund with the policy analysis and social science skills of The Conservation Foundation. One outcome of the affiliation is The Osborn Center for Economic Development, a joint initiative that seeks to give practical meaning, on the ground and with the help of the people most affected, to the concept of sustainable development. We also are trying to advance the case for environmentally sound economic development in the development community. how can we The issue before us today is one of great importance: ensure that international financial institutions promote sustainable forms of development? I want first to address the proposal under consideration "applying National Environmental Policy Act (NEPA) authorities to U.S. participation in actions of international financial institutions." I will then turn to the question of what more is needed to achieve the goal of integrating development and conservation, a goal on which I believe there is wide agreement. In my view, as important as environmental reviews and guidelines are, absent more fundamental attention to the way projects are conceived and planned, absent a supportive policy framework in the developing countries, absent environmental awareness and a management capability in these countries, the goal of integrating conservation and development will remain elusive. |