Sri Lanka’s Economic Chaos Shows the Dangers of Environmental Planning

Sri Lanka’s Economic Chaos Shows the Dangers of Environmental Planning
A Sri Lankan farmer works in a paddy field on the outskirts of Colombo on Jan. 9, 2016. (Lakruwan Wanniarachchi/AFP via Getty Images)
Zilvinas Silenas
On July 14, after months of economic and social unrest, Sri Lanka’s President Gotabaya Rajapaksa resigned in disgrace and fled to Singapore, leaving in his wake an economic crisis and a food shortage.

How Rajapaksa’s fate was sealed is not complicated.

You probably heard that Sri Lanka adopted an all-organic approach to agriculture, banning the import of regular fertilizer and fuel because activists assured the government that organic farming was the future. As a result, in merely one year Sri Lanka went from an exporter of rice to an importer. Sri Lanka was not a wealthy country to begin with, and the organic experiment—combined with COVID-19 and government lockdowns—plunged about half a million people into poverty and caused prices to surge. (Inflation is running well over 50 percent, the BBC notes.)

It’s a classic example where a supposedly “green” policy was implemented with a lot of fanfare, achieved very little, and created a lot of suffering.

Moreover, such environmental overzealousness isn’t limited to countries like Sri Lanka. Rich countries have their share of poorly thought-through “sustainable” initiatives that create a lot of misery and achieve little good. It’s just that rich countries have capital (or license to print dollars and euros) to hide the effects of bad policies.

Consider the current issue of high energy prices. Sure, there are some unexpected factors, like Russia’s invasion of Ukraine. However, expensive energy is largely a product of bad policies across the world.

In the last decade, oil and gas production in the United States increased significantly, in large part due to innovation, particularly hydraulic fracturing (“fracking”). This growth could have continued, lowering fuel prices at home and selling the excess oil and gas to Europe or other countries. However, green-minded policymakers have canceled or stalled a number of investment projects, such as the Keystone XL Pipeline, the Atlantic Coast Pipeline, and others.

In addition, there are signs that the oil and gas industry is reluctant to invest a lot of money into new projects. It could be that the industry fears even more zealous policies against fossil fuels in the future. After all, would you want to invest in this sector when the government promises to eliminate fossil fuel use altogether?

Most importantly, obstacles to oil and gas exploration in the United States do little to reduce consumption of fossil fuels in the United States or globally—oil and gas are merely acquired in other places, sometimes with much worse environmental records, e.g., Venezuela.

Moving over to Europe, Germany is another country where unreasonable energy policies are wreaking havoc. Sure, the cuts in Russian-supplied gas are the most visible issue, since Germany is very dependent on Russian gas. But this is in part due to German policies, which actively aimed to eliminate coal production and reduce coal consumption in favor of imported natural gas.

At least changing from coal to natural gas has some sense in terms of climate change: In general, coal has more CO2 emissions than natural gas. Although one could wonder whether relatively cleaner fuel is the right price for somewhat reduced CO2 emissions in exchange for dependence on natural gas supplied by Russia.

However, there’s little practical justification for the German approach to nuclear power. German politicians chose to close working nuclear power plants (the last ones will shut down in 2022). Moreover, in a truly zealous fashion, some politicians are against allowing German nuclear plants to come back online even as the country faces a true energy emergency. They prefer imposing energy rationing on industry or telling people to turn the thermostat down a couple of degrees.
Climate change politics could explain the resistance to coal, but not the opposition to nuclear. This latter is likely a combination of the legacy of the Green movement’s hostility to nuclear power, which goes back to the 1970s (long before climate change battles), and general distaste for development and industry.
If you think the policies that impede development are only limited to fossil fuels and nuclear—just wait. Resistance to renewable energy (pdf) is beginning to rear its head too. Some of the opposition to renewable energy is legitimate, e.g., not all electricity produced on a windy day can be accommodated by an electric grid without major investment. Some rests on the “I-don’t-like-the-way-it-looks” sentiment, which some describe as “visual pollution.”

All these cases are politician-produced disasters that impede man-made progress. Synthetic fertilizer made Sri Lanka self-sufficient in food, but the government banned it. Indigenous energy sources could heat German homes, but politicians prohibited them. American oil and gas could make fuel affordable and power the free world, but politicians on the fringe impede their development.

The Nobel Prize-winning economist F.A. Hayek once said, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

This is demonstrably true and a warning to overconfident politicians, aspiring social engineers, and green zealots. If they don’t trust logic and famous dead economists, they should at least learn from experience—blatant mistakes carried out right now for all the world to see.

Banning synthetic fertilizer will result in less food. Impeding oil production will cause higher fuel prices. Shutting down power plants will cause blackouts. All of this is logical, obvious, and inevitable. It’s just that the effects of these policies take longer to manifest in rich countries. In poor countries, like Sri Lanka, the effects of bad policies are tragically visible almost instantly.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Zilvinas Silenas became president of the Foundation for Economic Education (FEE) in May 2019.
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