Is Bolivia’s development model sustainable? Insights from Bolivia’s Green National Accounts

Bolivia’s current development model relies heavily on non-renewable natural resource extraction (especially natural gas and minerals) and the mining of nutrients from newly deforested soils for agriculture. This kind of activities clearly cannot be sustained forever. However, if the depleted natural capital is converted into other types of productive capital, it is still possible to leave future generations better off, in the sense of having more productive capacity. The maintenance of total productive capacity is the minimum requirement for weak sustainability.

Is Bolivia converting its natural capital into other types of productive capital? Or is it merely consuming its natural capital, leaving future generations with fewer options?

The Institute for Advanced Development Studies has recently completed a first version of the Green National Accounts in order to answer that question (1). The results show that Bolivia’s current development model is indeed sustainable. Just.

Conventional national accounts do not take into account the depredation of natural capital, and thus cannot say anything about sustainability. But the Green National Accounts calculates a variable called “Environmentally adjusted Net Capital Formation (ENCF)” which tells us if the economy has been able to generate new capital to compensate for depleted natural or produced capital. It is calculated by subtracting the depreciation of produced capital and the depredation of natural capital from the “Gross Capital Formation” variable from the conventional national accounts.

Figure 1 shows that ENCF has been positive, although small, during the whole period of analysis (1990-2008). This indicates that the total stock of productive capital in Bolivia is increasing slowly, despite the strong reliance on non-renewable natural resources and the depredation of renewable natural capital. This indicates that Bolivia’s development model is sustainable, at least in the weak sense of maintaining total productive capacity.

Figure 1: Gross Capital Formation, Net Capital Formation and Environmentally-adjusted Net Capital Formation (% of GDP), Bolivia, 1990-2008

Source: Author’s elaboration based on (1).

Weak sustainability, however, is not sufficiently ambitious for Bolivia in my opinion. Weak sustainability just means perpetuating the current high levels of poverty, inequality and exclusion. We want to achieve much, much more than that. We should work towards the ideal of “suma qamaña” or “living well in harmony with nature,” implying not only maintaining the status quo, nor “living the good life”, but actually “living life as good persons” in a way that is economically, environmentally and socially sustainable both now and far into the future. And that is an entirely different challenge.

Do you think Bolivia’s development model is sustainable? Leave your thoughts below.

Lykke E. Andersen is the Director of the Center for Economic and Environmental Modeling and Analysis (CEEMA) at the Institute of Advanced Development Studies (INESAD), La Paz, Bolivia.

(1)Jemio, L. C. (2010) “Cuentas Medioambientales para Bolivia, 1990-2010.” Development Research Working Paper No. 14/2010. Institute for Advanced Development Studies, La Paz, Bolivia. December.