ACCOUNTING FOR THE TRIPLE BOTTOM LINE
What is the ‘New West’ versus the ‘Old West’ Economy?
By Joe Kerkvliet, Guest Writer, 4-09-07
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Natural resource economy? What comes to mind when you hear the term? A poor Third World nation, prosperous logging and mining communities in the American West, or maybe a state where natural resources like coal, gas, minerals and cattle are shipped out but without local residents capturing the majority of the commodity value? In the short essay that follows, Joe Kerkvliet, an economist with The Wilderness Society’s regional office in Bozeman, Montana, provides an overview of what he sees are the differences between the traditional Old West economy, which in many ways still shapes the region’s cultural mindset, and the rapidly growing “recreation economy” which has had a profound influence on land values, inward population migration, changing uses on the landscape, and the flavor of “local culture” and businesses. - Todd Wilkinson
Recent Congressional testimony on the “Evolving West” showed that western whiskey is for drinking, but western economies are for fighting. Montana Governor Brian Schweitzer and Big Sky state Congressman Denny Rehberg sparred on Capitol Hill over the choice of an “old” economy built on resource extraction or a “new” economy built on clean environments, natural amenities, and renewable nature services. Part of their disagreement is more apparent than real.
Old economies are simple and easy to see. A ton of coal is mined, shipped to a power plant, and the miner is paid. New economies are more complex and links between production and payment are less easily seen. However, economists and ecologists have discovered strong links between protecting our environment and what people value.
Economists have learned that people value the environment in many ways. Yes, we value extracted oil and gas and we pay directly for it. Westerners also value the healthy lifestyles supported by clean air and water, abundant wildlife, and wide open spaces. But these values are only indirectly translated into dollars positively impacting local economies.
One indirect way is through property values. Research has shown that views of peaks and the scenic quality of ranch land adds to property values. Conversely, a recent study of Alberta properties found that nearness to oil wells depresses property values.
People also translate western values to dollars when they vote to tax themselves to pay for land protection. In November 2006, the nation’s voters approved 99 bond issues to raise funds for land protection, taxing themselves for $5.73 billion. This included $10 million in both Missoula and Ravalli counties of Montana.
People also “vote with their feet” to express their values. Several studies of US counties in the 1990’s find that that counties with more natural and cultural amenities, and more protection of public land, experience higher population growth. Increasing population often leads to relatively rapid income and employment growth.
Sometimes values are more difficult to translate into dollars. For example, a widely cited report estimates that global natures’ services — cleaning air and water, pollinating crops, controlling pests, etc. — are worth over $36 trillion annually. It is difficult to translate many of these natures’ services into dollars, but some progress is being made. For example, the European Union’s carbon credit market did $5 billion in business last year, and the Chicago Climate Exchange is an emerging market where credits for carbon stored in forests and soils are traded for real dollars. The Nez Perce Tribe is in the process of selling the carbon storage of 5,000 acres of tribal forest land to a willing buyer.
Closer to home, sportsmen and businesses quickly raised $2 million to preserve the natures’ services in the form of blue ribbon fishing at the Madison River’s Three Dollar Bridge.
What does all this mean for the old or new economy?
No one expects our use of oil, gas, or coal to end soon. But, before we develop these resources we must carefully consider all of the extraction costs as well as all of the benefits of leaving the resources alone, even those not easily linked to dollars.
Vibrant local new economies are emerging. A 2005 government study finds that rural counties specializing in recreation and tourism enjoyed higher employment growth rates, higher percentages of working age residents, and lower local poverty rates.
We must be open to new opportunities. Montana farm, ranch, and forest owners may soon find new revenue sources in emerging carbon markets. Communities might follow the lead of the Blackfoot Challenge and attract public and private money for restoration projects aimed at enhanced natures’ services, local jobs, forest products, and improved technologies.
Restoration work can also prepare Montanans to participate in the environmental industry, which provides pollution control equipment, resource recovery, instruments, and so on. At 1.5 million workers, this $200 billion industry is 19 times bigger than the coal industry and growing at ten percent per year.
The evolving new economies of the West are there to see if we look closely. Knowing the positive connection between economic and environmental health will help Montanans make tough policy choices and embrace new opportunities.
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Editor’s Note: Joe Kerkvliet specializes in natural resource, environmental, and ecological economics.
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Comments
It is true that small business is thriving in parts of the state but that was true 100 years ago when bars, whore houses, casinos, and hardware stores serviced the miners that worked in the pit and elsewhere. Unless the new entrepreneurs and others speak up about how this state is developing the economy will revert back to dependence on a set of narrow economic interests based on energy, tourism, and second homes.
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The timber eventually grew back, the stream still runs, the plowed land still grows crops, and some cattle and sheep still graze.
In the new economy, the timber is protected as a wildfire fuel source, the stream is used to carry runoff from sewage lagoons, miles of new streets, thousands of new roofs, carrying the detritus of urban commerce, the feces of dogs and cats, and the dams are being torn out. Replacement power comes from coal and natural gas. The plowed land is covered with homes and streets and business and expansion and growth and when the wind blows, the scenery is great....way off in the distance...sort of. Wolves, cougars, bears, coyotes, all protected by the new urban mind set, are eating the cattle and sheep, dogs and cats, llamas and goats. Where the truck farms used to be is the airport or the high school or the newest big box store in town. The food in the megagrocery comes from countries all over the world, grown using pesticides not permitted in the US. Farmed salmon is labeled organic but wild fish are not qualified. The wild salmon swim in water choked with hormones, the most egregious are from birth control pill pee. Whoopee!! The New Economy!!! So I know a clearcut will grow trees someday. What will grow on Quail Run Acres? How will you farm the old Walmart site? Where does the old asphalt go? The game left when the winter range grew cul de sacs. Snow machines and mountain bikes and atvs don't bother them anymore. And where does the growth and vigor of the new economy stop? Are there boundaries? What are they? Or is the new economy subdivisions from ridge top to ridge top? And all across the valley floor.
So what comes after the New Economy? The Newer Economy or the New New Economy. I'm going to promote the New New Economy. It will be based on nostaligia. People will build these new things called dams to make clean power. Trees will be cut to make that quaint product called lumber. People will wear wool clothes, leather shoes. Burn wood in the stove. If the wilderness burns your house, you can't rebuild. The Good Times. The New New Economy. I am going to own the Reinvented Wheel Car Company.
"Restoration work can also prepare Montanans to participate in the environmental industry, which provides pollution control equipment, resource recovery, instruments, and so on. At 1.5 million workers, this $200 billion industry is 19 times bigger than the coal industry and growing at ten percent per year."
This may be a difficult thing to quantify, but can you provide any insight into how much of this industry is dependent on congressional or state funding? How much on industry money that comes from regulatory or judicial mitigation? How much comes from private individuals restoring land? How much comes from non-profit groups that raise money to pay for such work (such as RMEF, TNC or TU)? What other sources of capital sustain this industry?
Also, could you break down the 1.5 million workers you cite? Is this a regional statistic, national? What kinds of workers are included in the number?
Where does the money come from to sustain this industry and who is paying the salaries?
Thanks for any insights you can offer.
Chris, you ask some really interesting questions and I have a few answers for you. The employment numbers I used were national. I have not seen a breakdown by regions or states. About half of the employments is in the "services" sector, including solid waste management and consulting and engineering. Most of the other half of the employment is in equipment, including air and water pollution control. A smaller sector is water utilities, resource recovery, and energy sources.
As to the amount of funding that is dependent on state and federal funding, the latest numbers I have are from 1998 at which time 34 percent of the environmental industry's revenues came from the public sector and the remainder from the private sector (US Department of Commerce, Office of Technology Policy, Sept. 1998).
No doubt some of the private sector funding originated in efforts to comply with federal and state regulations, but evidence seems to indicate that this is a declining impetus for environmental spending. A growing impetus is based on firms wanting to live up to public perceptions of being "green" and fullfilling their "corporate responsibilities", reducing potential liabilities resulting from damaging products or emissions, and in finding new sources of profit in reducing inputs, recycling, and making processes more efficient.
A growing company in this field is Battelle Memorial Institute, whose vice president states "Sustainability and strategic environmental management define what we do. We help industry design tools and develop a knowledge base, to empower companies to become for sustainable." (Environmental Business Journal, XVI, 3/4, 2003.
Thanks again for your interest.