Tuesday, October 9, 2007

Paying for Inactivity, Indonesian Style

The Indonesian government have a cunning plan for making money. They'd like the rest of the world to pay them not to destroy the rest of their forests- $5-20 per hectare, to be precise. This might have almost made sense.... the forests in Indonesia are of benefit to the whole world, so the whole world can pay for their maintenance. It's the classic case of externality.

We could apply this same principle in many other areas. Let's pay fishermen not to fish (after all, they deplete the sea, to the detriment of all), farmers not to farm (that'd reduce chemical run-off that is harming world water supplies), and drivers to leave their cars at home (reducing congestion and pollution for everyone else).

But would this really work? I'm very skepical for several reasons. First Indonesia is a very corrupt country. According to Transparency International, Indonesia is ranked 130th out of 163 countries for corruption, on par with Zimbabwe and Ethiopia (in contrast, Hong Kong is ranked 15th, and China manages 70th). Does anyone really believe that this money will get past the government officials charged with administering it to actually help preserve the forests in Indonesia? If so, I have some snake oil I'd like to sell them.....

Second, this sets an alarming precedent. Paying people for not destroying their own environment would encourage more countries to follow suit. How much would the rich world be willing to pay Kenya if threatened with the eradication of elephants and lions? What's the difference between this and blackmailing the rest of the world with the destruction of your own future?

Third, there has to be a better way. How about using property rights, rather than paternalistic handouts, to encourage the indonesians to protect their own forests? It works in Niger, a country that is both poorer (on a PPP basis as well) and more corrupt than Indonesia, so couldn't it work in Indonesia too?

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