What Is the Relationship between the Environment and Economic Development?

Esther Ejim

The relationship between the environment and economic development may be accessed from two different points of view. One point of view is that factors like political climate, governmental policies and culture in the environment affects economic development. A second viewpoint is the manner in which the activities associated with economic development affect the environment.

Green economic development planning considers the environmental impacts of new infrastructure.
Green economic development planning considers the environmental impacts of new infrastructure.

Environment and economic development are linked in the sense that the factors in place in the environment have a huge impact on the rate of economic development for a region. A country with a politically unstable reputation will not be able to attract necessary investors and businesses from interested investors both within and outside the country. A local investor with the resources to establish a business may prefer to take his or her money elsewhere, to a country with a reasonably stable government. This lack of investment by entrepreneurs is due to the fact that there is no guarantee of any security for their investments. Lack of security also means that the business will not flourish in the way it would in a country with a stable government.

Runoff from fertilizers used on large-scale agricultural farms can create negative environmental and economic impacts.
Runoff from fertilizers used on large-scale agricultural farms can create negative environmental and economic impacts.

Another way in which environment and economic development are related is due to the fact that a country with unfavorable government policy will not attract as much investors or foster economic development as much as a country with favorable government policies. Such policies may be in the form of taxation, import quotas or other forms of regulation. The taxation policies may be favorable or unfavorable. In some cases, the government in some countries may reduce the taxes paid by organizations in certain industries with a view to attracting investors, while also encouraging the development of certain sectors. An example is the solar energy and other green energy sector that routinely receives various tax concessions from different western governments as a form of encouragement.

Certain types of culture help foster the relationship between environment and economic development. Some cultures are more receptive and open than others. Such open cultures are quick to embrace new ideas, new technologies and other facets that will help in the economic and social development of countries. The negative link between these two concepts lies in the way in which the byproducts of economic development affect the environment. Such a link includes issues like emissions from industrial plants, the runoffs from fertilizers used on large scale agricultural farms, and the various emissions from vehicles used to transport both raw materials and finished goods.

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Discussion Comments


This is a very intelligent idea to analyze the relationship between economic development and environment in two ways.


@pleonasm - That factor still has a huge impact on economies. I know in some places the introduction of a single foreign animal can disrupt whole industries.

New Zealand and Australia are still battling the rabbits which were introduced there over a hundred years ago. With no natural predators, they cost farmers billions of dollars in control and lost revenues.

Likewise in the United States introduced diseases have had huge impact on the forestry sector, for example elm disease and the disease that affected all the native chestnut trees.

And that's not even mentioning environmental disasters. The environment has a huge and complex affect on economy really, even in big countries. And in smaller or developing countries it can be an absolutely crucial influence.


@umbra21 - Environment has historical significance as well. I've heard the theory that the reason Europe and Asia were able to develop such strong economies (and, in turn spawn the USA and other related countries) was because they had just the right environment to nurture them.

Not only did they have relatively mild weather, they also had the kinds of animals which could be domesticated available. Horses, in particular, were responsible for people being able to travel and spread.

Because most of the large mammals in other countries were made extinct before they could be domesticated (if indeed they ever could), those countries were always relying on manpower, and rarely made it past the tribal stage of hunter-gathering.


This goes both ways when you are thinking about the affect of the economy on the physical environment.

It's no coincidence that most developing nations are in very hot or very cold environments. When you are having to battle the elements all the time, it's difficult to really get a foothold.

And there are other factors to consider, such as disease and food shortages. If a country which is primarily desert happens to have a drought they can't rely on other areas of the country to make up the shortfall with food, the way different places in the United States might.

And hot countries often have to deal with mosquitoes carrying disease as well.

An economy is directly dependent on real human workers, something that is often talked about in abstract terms, but it really does come down to whether or not the guy who makes the products to be sold is well enough to get out of bed in the morning.

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