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The Economics of Environment and Industrialization


Ritheka Sundar

Economic research has proven that industrialization is closely associated with higher levels of education, individual and national income, and improved quality of life but this comes at an escalating cost to the environment.

Certain commercial developments in terms of trade and plantation took place under European colonialism up until the 1800s. The 19th century witnessed rapid economic growth owing to agricultural expansion and fossil fuel and mineral extraction that led to swift industrialization. A glimpse into the 20th century would show the impact of world wars and economic depression coupled with new technological infrastructure and urbanization.

Effects of Industrialization

Although the environmental impact of this time was rather downhill, the onset of the 1950s called “The Great Acceleration” had altered ecosystems immensely, irrevocably, and to an unparalleled scale. Additionally, the 20th century bore the loss of forests in the tropical regions leaving a crippling impact on biodiversity and paving way for high extinction rates.  

The analysis of the environment as a victim of industrialization is imperative especially at this point in time with mounting negative externalities borne by it. Apart from the impact on the working class through reduced wages despite long hours of work, industrialization largely affects nature in numerous ways that perturb the overall well-being of all species on the planet. The vicious cycle of natural disturbances owing to industrialization which in turn affect the economy will be presented in this article.

The central idea of industrialization is achieving the process of transformational change of social and economical nature from an agrarian society into an industrial one. This seemingly advanced process is inured to as often unregulated or poorly regulated in developing nations resulting in damages to nature. While neoclassical models of economics consider natural capital as replaceable by other forms of capital, ecological economists are sturdy in their stance that natural capital is rather irreplaceable and damages to it can be irrevocable too.

In this regard, the U.S. Geological Survey mentioned that two-thirds of polar bears will disappear by 2050. However, not just the polar bears but all forms of life in aquatic, desert, and forest habitats are faced with the danger of extinction. The rate of extinction is said to be 500 times more than before the Industrial Revolution and this can be attributed to the clearing of forests to make way for the industrial infrastructure and increasing levels of greenhouse gases causing ice sheets to melt and sea levels to rapidly rise. 

Climate Change

Yet another pressing issue that seldom garners headlines and is falsely referred to as a hoax by a few is climate change. The planet’s average surface temperature has risen by about 1 degree Celsius since the late 19th century, a change mostly driven by increased human-made gas emissions into the atmosphere. Along with that, the global sea level rose about 8 inches in the last century with the rate in the last two decades being nearly double that of the last century.

From the beginning of 2020 alone, one has witnessed Australian bushfires, floods in Indonesia and Assam in India, volcanic eruptions in the Philippines, cyclones Nisarga and Amphan, locust swarms in East Africa and Asia (to name a few) with many of these having a direct correlation with climate change that most certainly intensifies the natural disasters. The environment is further affected by increasing population levels, technological advancements, and urbanization that is concurrent with industrialization.

The activities that are taken up, under the banner of industrialization, in a bid to improve the standard of living of the masses by exploiting the available natural resources, are altering nature in unimaginable ways and impairing the ecological balance.

As natural capital – that is non-renewable – begins to deplete and renewable is perennially damaged, the prospect of economic growth starts to look dull. After all, the very basis of economic growth is the production and consumption of resources obtained from the surrounding nature. From a sustainable point of view, economic progress did not arise from a linear change but from complex, connected, and non-linear changes much like the transformations of the ecological world.

Apart from this, nature and its various agents provide services that are advantageous to economies. Bees, for instance, perform pollination that is said to underpin about one trillion dollars worth of agricultural sales. Nature doesn’t merely serve as an accelerator of development but is the solid foundation of all economic development. To ensure that nature is not impetuously and irreversibly exploited, an evaluation of natural capital is essential.

Way Forward

As natural capital does not possess a market value, several evaluation methods that have been devised over time can determine the value of an environmental resource and estimate the benefits of preserving them. Policymakers play a critical role in devising and implementing regulations for industrialization and judiciously designing policies that maximize the net benefits and thus, social welfare while being mindful of the environmental impact. 

In conclusion, the environment continues to be the largest victim of industrialization and the destruction of natural capital can have enormous effects on economic growth. While the happenings around the world – especially now – symbolize pessimism, there is hope for a better world with flourishing nature and ecological balance if the above-mentioned steps are seriously considered and deliberated upon. The future of economics and industrialization should develop the management of ecosystems in a resilient manner rather than purely prioritizing absolute economic profit.

First Published in the Parley Project On The Economics of Environment and Industrialisation on January 7, 2020

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