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Common pool resources

Overcoming a tragedy

by Eduardo Araral
The 2009 Nobel Prize for Economics was recently awarded to ­Elinor Ostrom, along with Oliver Williamson. This article examines Ostrom’s contribution to development theory and practice. She is the first woman to win the Economics Nobel. [ By Eduardo Araral ]

The work of Elinor Ostrom, whom the Nobel committee praised for her work on economic governance and especially for her work on common pool resources, is of immediate relevance to fighting poverty. The livelihoods of hundreds of millions of poor people in developing countries all over the world depend upon such common pool resources.

In 1968, the ecologist Garett Hardin wrote an influential article entitled “The tragedy of the commons”. His argument was that common property such as forestry, fisheries, watersheds, national parks, wildlife and irrigation was often poorly managed, because, even though many parties benefited from them, no party had an incentive to invest in these shared assets. Therefore, Hardin stated, they should be either regulated by central authorities or privatised.

Many governments around the world bought this idea and nationalised property rights to common resources. The consequences, however, were disastrous. The sustainability of the resources suffered, and so did the welfare of billions of mostly impoverished households that depend on these resources in developing countries.

Privatisation, however, was not a viable alternative either, as it all too often resulted in exclusion of poor people on the one hand, and one-dimensional strategies of resource exploitation on the other. Commercial forestry, for instance, is about fast growing timber, with little regard for other issues such as biodiversity or watershed management, both of which are of crucial ecological relevance.

Empirical insights

Ostrom, her students and colleagues at the Workshop in Political Theory and Policy Analysis – the research center she founded with her husband Vincent Ostrom 40 years ago at Indiana University – challenged the conventional wisdom on the tragedy of the commons. They studied examples of various communities that manage common resources throughout the world, from the meadows of Switzerland, to irrigation systems in the Philippines, Nepal, and Spain to forests in Latin America and India.

Based on ample data, they showed that resource users can and do manage these resources sustainably over a long period of time given certain sets of rules or institutional design principles. They rely on often quite sophisticated systems of rights and responsibilities. Moreover, success seems to depend on interaction of all stakeholders.

As the Nobel Committee put it, Ostrom has shown that “active participation of users in creating and enforcing rules appears to be essential”. People are more indeed likely to obey rules that they themselves are involved in devising and modifying than rules that are imposed from the outside or unilaterally dictated by powerful insiders. The less legitimacy any sort of regime has, the more likely infringements become.

On the other hand, monitoring and enforcement work better if carried out by people who have a stake in the matter and are familiar with the issues and circumstances at stake. Ostrom’s work has shown that individual users of common pool resources are willing to become active in terms of monitoring and sanctioning, even if the rewards they get for doing so are ­marginal. Indeed, people are often prepared to accept private costs in order to punish illegitimate free-riding, as Ostrom found out.

Today, donors and governments in developing countries around the world have embraced the wisdom of community-based management of common pool resources. This paradigm shift has important implications to billions of people who depend on these resources for their livelihoods. It is now well understood that poor men and women are able to organise, identify shared priorities and rise to local challenges collectively. What they need for doing so is access to information, appropriate capacities and some financial assistance. Where such grassroots organisations cooperate with government agencies and private-sector companies, the results are often quite satisfying.

In irrigation, to give one example, at least 25 developing countries around the world have embarked on efforts to transfer the management of public systems to farmers’ organisations. In forestry, to give another, large-scale efforts to reintroduce community-based management were undertaken in India, Indonesia, the Philippines, sub-Saharan Africa and Central and South America. In developing countries, at least 22 % of forestlands are under some form of community ownership or access. In sub-Saharan Africa, some 20 countries have introduced some form of community-oriented forestry. These reform efforts in forestry have direct impacts to some half a billion people living in extreme poverty who depend on forests for their livelihoods.

Donor policy

Donors have recently begun to roll out large-scale community-driven development (CDD) projects as an alternative way to disburse loans to poor communities and households. The World Bank’s CDD Group points out that this “approach gives control over planning decisions and investment resources to community groups and local governments”. Accordingly, the programmes the CDD Group runs operate on the “principles of local empowerment, participatory governance, demand-responsiveness, administrative autonomy, greater downward accountability, and enhanced local capacity”.

The World Bank’s annual CDD port­folio stands at $ 2 billion, and the Asian Development Bank is planning to scale up its investments too. Donors use CDD to support a variety of urgent needs such as water supply and sewerage rehabilitation; school and health post construction, nutrition programmes for mothers and infants; building of rural access roads and support for micro-enterprises. It is also a widely used approach to deliver aid to disaster affected communities such as Aceh in Indonesia as well as war torn communities in Africa.

Studies by the Asian Development Bank and the World Bank as well as by academics suggest that CDD projects have a number of advantages:
– They reach the poor and are more inclusive than other approaches.
– Community infrastructure projects cost less and are of the same quality or even better than those built in conventional top-down procedures.
– Choices are attuned to local needs.
– There is a higher likelihood of good and sustained operations and maintenance (O&M), and accordingly, a higher return on investment.
– Social capital is built in the sense of communities becoming more cohesive and thus resilient.
– There is better oversight and less corruption.
– Communities become active owners of development.
– Finally, CDD projects scale up quickly and disburse fast.

On the other hand, these studies show that in top-down, supply- and government-driven projects, the choice of location was often poor, technology was inappropriate, operation and maintenance were poor and unsustainable and corruption was prevalent.

Today, the CDD approach to targeted poverty alleviation is already a mainstream national strategy, for example, in the Philippines, Vietnam, Indonesia and many other countries in Africa (Note note essay on appropriate santion, next page). While many scholars, activists, and practitioners have advocated this shift paradigm towards community based development, Ostrom is acknowledged as one of its intellectual leaders.