Chapter 4 Tourism the environment and economics Objectives o The relationship between economics and the natural environment o o How tourism can be used to conserve the environment using an economic issues of economic growth common pool resources and externalities rationale The role of the natural environment Services provided by the natural environment for society Resources for wealth creation Ability to act as a waste disposal system Providing us with aesthetic appreciation and landscapes for recreation Provides us with a life support system Oxygen and water Economic growth and human welfare One of society s primary concern is increasing the standard of living The conventional view to achieve this objective is through higher levels of production and consumption or economic growth Economic growth has come to be identified as a way of improving people s welfare tourism may have a significant role in wealth creation within the context of economic growth From the perspective of government the primary concern with tourism has been as a vehicle for economic growth The most important benefits are foreign exchange earnings reduction of the trade deficit employment creation increased expenditure linkages to other sectors of the economy and diversification of the economy tourism can be developed with relatively little financial investment when compared to other industries The rationale has therefore been based upon economic benefits with relatively little consideration on its impact on the environment the terms standard of living and quality of life are used interchangeably However they mean different things standard of living measures economic welfare quality of life includes environment culture activities levels of health religious or spiritual life The degree of success in achieving economic growth is measured by the gross domestic product GDP and gross national product GNP GPD is the value of all the goods and services produced over a period of time GNP has been commonly used to measure the total production of the country they are key indicators of the success of economic policy Both tell little about quality of the environment GNP only measure things that are bought and sold for cash it does not take into consideration clean air pure water natural beauty Tourism and Growth Many view tourism as a measure of pursuing economic growth it is important to recognize that only a portion of the money spent by tourism will stay in the destination economy the reason is that the money spent leaks out of the economy the leakage occurs when interest charges are paid on loans import of materials and equipment the employment of foreign workers taxes paid to the government etc The world s tourism earners in 2005 1 United States 81 7 B 2 Spain 47 9 B 3 France 42 3 B 4 5 United Kingdom 30 7 B Italy 35 4 B Package tours have a high leakage factor Approximately 80 of all expenditures going to airlines hotels and other international companies the cost of air transportation is about 40 50 of the total cost of travel vacation it is important to consider the real economic benefits of tourism during the planning stage before development Problems of Externalities tourism development can lead to negative effects ex pollution of the sea can lead to the contamination of stocks impacting the fishing industry increased air and car traffic could lead to air pollution and incidences of asthma in the local population there is a discrepancy between private costs of production and full social costs in a society Externalities arise because resources such as clean air water and landscape can be classified as public good one way to correct the situation is to have the government impose an environmental tax on the hotels the imposition of a fine on a hotel means that the external cost of the operations are internalized The producer hotel will then be paying for the compensation of fishermen for their loss of opportunity to fish and for health care to treat residents the hotel management may pass these additional costs to the guest by raising prices one of the problems with the polluter pays concept is estimating the value of the resources being damaged another method of applying polluter pays is taxation taxation is called green taxation green taxation has been considered a method to close the gap between private and social costs Public or collective consumption goods impacts caused by development are related to resources with open access and with few legal controls finding solution of overuse is complicated issue fact that public goods are non exclusive and considered as having 0 costs means market for goods cannot operate Tourism economics and conservative economics have tried to examine how economics can be inclusive of the natural environment putting economic value on environmental assets is difficult WTP willingness to pay is a measure of an individual preference for a good in market place environment must have an economic value TCM travel cost method has been most widely accepted method based on what people spend on recreational spots tourist place a value on quality of destination by spending money and time to travel there if tourist want to see wildlife possible to give it a market value some species of animals are not attractive to tourist but have an ecological system if natural wildlife is judged not to have sufficient economic than other options of development are considered revenues generated by tourism may be used for the conservation of resources building infrastructure employment opportunity etc tourism is vulnerable to external factors like economic recession and climate change this makes conservation programs financed from tourism revenues an unstable option Chapter 5 Environment poverty and tourism Introduction Poverty may be viewed as a condition that denies people the freedom and the ability to take a long term perspective on the use of natural resources in many developing countries the tourist industry has a significant role economic development opportunities are limited for many of those countries however many developing countries have a comparative advantage in wilderness and wildlife with potential to attract tourists comparative advantage physical natural elements to develop tourist industry In the United Nations Millennium Development Goals MDG S have as a principal role education of poverty 2000 International agencies and organizations have called for tourism to consider national development