For more than 50 years, SEZs have continuously been used as a development tool because of the power they possess.  Shielded from local politics, they have offered the perception of freedom and flexibility to nations looking to experiment with radical policy.  The lack of local governance that facilitates freedom also facilitates unfettered exploitation of our environment and society.  However, “environmental issues are ALL social,” said Ravi Agerwal in a lecture I attended in Delhi (Agerwal, 2/14/11).  Economic issues are all social as well.  So, if the QOL of the majority has not improved, then development has not occurred.

The new generation of SEZ policy reforms were created to address the negative consequences of rapid growth policy by employing sustainable development principles.  I have surveyed changes in policy to determine if they have effectively led to a more dynamic development of host economies, and if long-term strategies will bring both firms and nations closer to their economic development goals.

Most zones fail to deliver quality employment at a living wage (Farole).  The wage increases in Shenzhen may be high enough to worry investors, but they are not yet high enough to facilitate a lifestyle change for employees.  Millions still do not earn enough to live outside of the factory dormitories.  It is reasonable to expect that “this time around, rebalancing will need a global new deal that can “lift all boats,” in developed and developing countries alike” (Panitchpakdi, 2011).  This belief was the impetus for an important initiative that was necessary to improve labor conditions within industrial zones.  It represents the partnership between the UK Ethical Trade Initiative and the US Apparel Industry (Tejani, p.265).  The ILO runs localized programs to monitor labor conditions. It also work with firms to assist with compliance issues, giving MNCs a chance to improve.  A tremendous example of improvement was a bold move by Apple’s new CEO, Tim Cook, just three months after the death of Steve Jobs.  In a “dramatic and unprecedented unveiling” of 97% of Apple’s supply chain, Cook stressed the need for corporate transparency and accountability (Gupta, Jan.15, 2012).  This is a positive step indeed, but changes to QOL have not yet occurred.

Shenzhen’s initiative to enforce existing environmental policy did improve air and water quality simply by not contributing to current pollution levels.  It is also positive to discover that zone’s circular economy campaign introduced renewable energy sources and a recycling program to the region.  I conclude from these findings that some of Shenzhen’s mitigation policies have been effective, albeit mildly.  I believe that adaptive policy towards sustainable development shows future promise, but the region at this time is not yet sustainable.  A more radical transformation is required to bring the conditions of existing zones closer to a state of sustainability.  Furthermore, adjustments made in the name of sustainable development to existing rapid growth policy packages are still insufficient.

A few programs in Guraon were well intended, such as; the 5 electric plus 2 solar rickshaws, a carpool service and, of course, the mandatory green guidelines.  None have shown any real promise to lead Gurgaon to a state near sustainability. On the other hand, the Land Acquisition Act of 2007 has successfully limited “land grabs.”  SEZs are no longer permitted to be larger than 5,000 hectares.  Developers no longer have access to arable land, and a plan to develop brownfields has been introduced.  Slightly higher “compensation” is now offered to those displaced by eminent domain and the Ministry of Rural Development is required to provide one new job per displaced family.  These policies barely mitigate India’s acute externality issues, but they are positive nonetheless. Gurgaon is not yet sustainable and shows no promise of achieving sustainability in the near future.

Low-carbon cities look very promising, primarily because they have been embraced by several of the IFIs and are rapidly gaining universal support.  Despite the hundreds of pages that have already been written on the topic of low-carbon cities, very few really seem to know how this utopian transformation will occur—but most are rooting for it.

There are, however, some nay-sayers who still scoff at the “unjustified” expense and consider global warming to be a conspiracy.  They would rather invest in technology to squeeze the last drop of fossil fuel from the planet.  Business as usual (BAU) scenarios project extreme temperature rises of 4-7° C by the end of the century and the Stern Review estimated that the avoidable cost of such inaction would be between 5% and 20% of GDP per year (Suzuki, p.17).  Continued investment in current petroleum based structures merely stalls the inevitable death rattle of a rapid growth system dependant upon finite resources.  For emphasis, rapid growth does not equal sustained growth and carries danger of stagnated growth.

BAU Arguments:

  • It has been argued that environmental policy in developing nations is unnecessary due to the environmental Kuznets curve (EKC).  The EKC is an inverted U-pattern (similar to Kuznets hypothesis on inequality) that traces the supposition that a willingness to pay for environmental protection rises with income.  This hypothesis lacks convincing evidence and is not believed to have any connection to industrial pollution (sulfur dioxide, nitrogen dioxide) and particulate matter.  In other words, there is nothing to substantiate that environmental damage decreases with higher incomes and because one can afford clean technologies, it cannot be presumed that one will purchase clean technologies (Todaro, p.487).
  • The planet is resilient in its ability to absorb toxins, therefore, restrictive policy is unnecessary when nature can take care of itself.  For example, neoliberals compared the recent spill of 172 million gallons of oil into the Gulf of Mexico to spilling 24 ounces of beer in a football stadium. This analogy only begins to make sense if a giant beer could kill 10,000 animals.  The self-repairing ability of our planet cannot be counted on for three reasons: saturation point, unknown chemical reactions known as synergistic effects and biomagnification as toxins that work their way up tropic levels while increasing in intensity.
  • Mandatory wage hikes are unnecessary because a free labor market will adjust wages to demand.  If workers don’t like the conditions of their work environment they can leave.  That concept of freedom is rare in the LDCs and labor markets are not globally uniform.  It has been demonstrated that workers in SEZs around the world need protection from exploitation

The Secretary-General of the United Nations Conference on Trade and Development (UNCTAD) stated optimistically that if there is one advantage to the recent economic disaster it is that it broke the confidence in one-size-fits-all policy fixes to complex development challenges (Panitchpakdi, 2011). Low-carbon zones are presented as a plan to be individualized and driven by bottom-up policy.  But the establishment of regional bureaus may prove to be problematic as global institutions are altering the power structure and governance of the PRC.

“Given the wide variation in GDP, economic structure, population, resource endowment, and carbon emission profiles among Chinese cities, a “one size fits all” approach to allocate the same low-carbon target has its limitations and sometimes a heavy cost. Instead, Chinese cities should have an opportunity to determine their own best approach based on their city profile. In addition, they could consider engaging in carbon cap and trade or at least trade in energy savings certificates or purchase green electricity, all of which can substantially reduce the costs of meeting low-carbon objectives. Purchase of green electricity, for example, is important for cities with a relatively limited supply of on-site renewable energy within the city boundaries. Developing green electricity trading schemes through imports of renewable electricity is essential to achieve a low-carbon energy mix, and can spur large demand for green electricity.”  (Baeumler, loc 2538-2544)

Promising. I look forward to the day low-carbon cities exist.

Sustainable Trade Policies oppose open door policy because of increased vulnerability to large scale speculative capital flows (just as Keynes warned). The private pursuit of short-term gain can sometimes result in insufficient productive investment and concentrate the rewards with the favored few. The risks are particularly pronounced when financial markets detach themselves from the real economy, tying wealth creation to the rapid accumulation of debt and rising asset prices rather than to steady productivity improvements and increasing incomes, and channeling innovation to financial engineering rather than to technological progress. Such a growth strategy is likely to be neither stable nor fair (Panitchpakdi, 2011).

Interestingly, the concept of human rights emerged with capitalism as sustainability emerges with free trade.  Esteemed economists such as Stiglitz and Todaro have developed new long-term growth policy packages that address social and environmental issues.  In fact, several clear alternatives have been proposed in the past decade and not one has been put into practice.  Perhaps the time is now.

Future recommendations for SEZ development include long-term planning that considers a zone’s proximity to communities, and the relationship that local communities have to the zone.  A policy package that has developed one region in one way has never been successfully repeated as a “best case” model.  Yet foreign stakeholders continue to delude themselves into thinking that success there somehow insures success here.

MNCs must share responsibility with government to address environmental and labor issues. Governments and developers should expect MNCs to invest in research and development for cleaner production.  MNCs also need to be accountable for all of the activities in their value chain (the mix of products and services from suppliers to end customer).  Finally, increase the price of resources used in development.  Nonrenewable resources must incorporate a social cost—not a discounted future for today’s increased profit.  Consumers must also be willing to pay higher prices because our cut corners directly affect our world at large.  It is important to remember that race-to-the-bottom prices are no bargain.  Our global factory requires global mindfulness.  In the words of an unnamed poet, “There will be only one future—or none at all.”