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The Three Foundations of the Restoration Economy

The sudden growth of restorative development is rooted in three crises. These crises emerge whenever an economy—global or local—remains dependent on new development for too long.

THE TWENTY-FIRST CENTURY’S THREE GLOBAL CRISES

1. The Constraint Crisis We’re out of “painless” expansion room: every time we put property to a new use, we lose some other vital service it was providing. Wars and legal conflicts over territory and related natural resources are epidemic.

2. The Corrosion Crisis Most of our built environment is aged and decrepit; is wearing out faster than expected; or is based on old, wasteful, dysfunctional designs.

3. The Contamination Crisis The ecosystems that produce our air, soil, food, and water—and fueled our centuries of unbridled new development—are under great stress, as are the immune systems of both human beings and wildlife. Industrial, agricultural, and military contamination is largely to blame, and its damage is compounded, in a vicious cycle, by the reduced capacity of our damaged and destroyed ecosystems to cleanse the environment.

This chapter is an overview—not a thorough accounting—of these crises. Parts Two and Three, where we look at the restorative industries that are addressing these crises, contain a more detailed examination of these crises, and our restorative responses to them. This chapter scans the Three Crises from three perspectives: the U.S. economy, non-U.S. economies, and the global natural environment. The crises won’t be segregated from each other: they are inextricably intertwined. Nor will we always label them or point them out, as each is easily recognizable.

The Three Crises at Work in the United States

In 1998, the American Society of Civil Engineers (ASCE) issued a “Report Card on America’s Infrastructure.” It revealed, for the first time, the extent of one aspect of our built environment’s deterioration: a $1.3 trillion backlog of desperately needed work on our public infrastructure. Our bridges, roads, sewage plants, solid/hazardous waste handling facilities, and educational institutions are crumbling before our eyes.

Although some of this $1.3 trillion is for maintenance, by far the majority of funding is needed for renovation and replacement. Even more importantly, while $1.3 trillion is a gargantuan number, it represents only public infrastructure—just one of eight major industries of restoration— and it’s only the U.S. portion.

But this book isn’t about bad news. Quite the opposite: Restorative development now accounts for hundreds of billions of dollars in the 19United States alone, maybe a trillion, depending on how one defines it. Just two years after the first ASCE Report Card, a small but significant portion of the transportation renovation challenge had been funded. The June 1998 Transportation Equity Act (TEA-21), along with the TEA-21 Restoration Act of July 1998, addressed a significant chunk of the U.S. Corrosion Crisis. It increased spending over a six-year period by 70 percent, allocating over $200 billion in federal funds to U.S. transportation infrastructure. States will add significantly to this amount.

Only 20 percent of these funds is for “new starts,” while about 25 percent is officially designated for restorative projects. But, almost the entire remaining 55 percent is allowed to be spent on restoration (as opposed to maintenance, like patching potholes), and most of it will be, according to conversations with several state Department of Transportation (DOT) officials.

There’s good news for the Contamination Crisis, too. Restoration is being funded by reallocating the budgets of some of the most harmful, out-of-control agencies of new development. The U.S. Army Corps of Engineers’ budget is being reallocated from new development to ecological, infrastructure, and watershed restoration, and the Corps is far from alone. The Department of Energy now spends billions cleaning up the petrochemical and radioactive mess it left all around the United States during the last half of the twentieth century.

The United States will account for more than its fair share of space throughout this book, so we won’t focus more on it here. Suffice it to say that one would be hard put to stand on any piece of American soil without seeing (or detecting with instruments) at least one significant impact of the Constraint, Corrosion, and/or Contamination Crisis.

The Three Crises at Work Around the World

The trillion dollar-plus annual bill for restorative development is no surprise when we consider the Three Crises globally, especially when we factor in the crushing needs of former communist bloc countries. Many of them are economic and environmental basket cases (the two usually go hand in hand), and their problems are affecting us “First Worlders” more than we like to think, in terms of our health and our wealth.

The United States leads the world in many categories of restoration, but all other industrially developed countries are now moving along the restoration track at a similar pace. As a result, most U.S. and European firms that continue to concentrate on new development are being forced to shift their focus to Latin America, Asia, and Africa. Even in regions where new development is still strong, such firms will be missing many, often better, opportunities if they ignore the developing world’s fast-growing restoration markets.

Three recent announcements, one for each of the Three Crises, illustrate the magnitude of non-U.S. restoration.

1. Constraint (and Contamination) Crisis At the Brownfields 2000 conference in Atlantic City, New Jersey, Detlef Grimski, a project officer with Germany’s Federal Environmental Agency, revealed 304,000 (official) contaminated sites in Germany. The agency’s studies show that restoring just 320,000 acres of these “brownfields” could provide 28 percent of Germany’s housing construction needs, and 125 percent of its industrial construction needs.

However, both Germany’s construction industry and its government are stuck in new-development mode, destroying some 300 acres of rare, precious greenfields daily, while ignoring the wealth of brownfields. (“Wealth of brownfields,” a phrase I’ve heard at several conferences, is the sort of perverse language that’s endemic in the dying days of a new development-based economy.)

2. Corrosion (and Constraint) Crisis Developer Minoru Mori, President/CEO of Mori Building Co., Ltd., and a member of Japan’s Economic Strategy Council, has proposed a trillion-dollar restorative development plan for Tokyo, one of the world’s oldest and most crowded cities. “Revitalizing Tokyo and other major cities is the best way to revitalize the Japanese economy,” he claims.¹ It is part of an “Urban New Deal” policy he has presented to the Japanese government. It is strongly focused on cultural renewal, calling for a “true urban renaissance.”

3. Contamination Crisis On June 5, 2000, Romania, Bulgaria, Moldova, and Ukraine signed the “Green Corridor” agreement for the Danube River, which has more riparians (countries that border it) than any river in the world. It is Europe’s largest environmental restoration initiative ever, encompassing over 1.5 million acres of wetlands and riparian habitat. That’s just a beginning: “It is our vision that other countries 21along the Danube will join this initiative for a full-length green corridor, connecting Danube countries from the Black Sea to the Alps, including many EU accession countries,” stated Romica Tomescu, Romania’s Minister of Waters, Forests and Environmental Protection.²

Worldwide disaster recovery—both war and natural—is a category of restoration that accounts for over a hundred billion dollars annually. And then there are non-war, non-natural, human-caused disasters: literally hundreds of significant oil spills, industrial explosions, chemical spills, toxic fires, and radiation leaks occur daily, worldwide. Someone once said that CNN could devote a channel solely to natural and human-made disasters—giving each item 10 seconds and never repeating a story—to fill each day’s programming.

Being more “real estate challenged” (Constraint Crisis) than the United States also puts Europe ahead on the new development vs. maintenance curve. Tim Broyd, Research and Innovation Director at the WS Atkins company in the United Kingdom, told me that his company had, ten years ago, about 2,200 employees and virtually all its business was in the design of new construction. Today, the company has about 7,500 employees, but 60 percent of its business is related to managing existing facilities, and much of what it counts as “new” construction is actually restorative work (or “refurbishment,” as the Brits tend to call it). Broyd says that such growth and profitability paths—switching from new development to maintenance and restoration—are now the industry norm.

The 1998 Yangtze River floods, which were largely caused by the clear-cutting of surrounding forests, killed thousands, obliterated entire communities, and caused massive migration and waterborne sickness. To address the resulting Constraint and Contamination Crises, the Chinese government launched an emergency $12 billion reforestation program. That $12 billion figure exceeds the Gross Domestic Product of Panama, and that of Costa Rica. In fact, it’s larger than the GDP of 113 of the 189 countries existing in 1999, and that sum represents only one of China’s many deforested watersheds. Unlike conservation efforts, where million-dollar projects make headlines, the word “billion” is quite common in restoration circles, at least at the national level.

The similarly huge reforestation projects that are needed worldwide would take pages to list. In early 2000, when deforestation-related floods devastated Mozambique, Zambia, and Madagascar, Mozambique asked 22world donors for $450 million to rebuild its nation. Millions are still suffering the effects of the floods—again greatly amplified by deforestation— caused by Hurricane Mitch in Honduras, El Salvador, and Guatemala, in October 1998. The more reforestation takes place, the fewer such devastating disasters. Reforestation fulfills many agendas beyond mere flood prevention: producing drinking and irrigation water, carbon sequestration, firewood-lumber-pulp supply, and recreational industries are just a few of the added benefits of reforestation. As the advantages of reforestation become better recognized, the funding for watershed restoration continues to increase.

Saying Goodbye to (Some of) New Development’s Ethical Problems

As has been extensively documented in recent years—even by the bank itself—the World Bank’s colossal dam, highway, and fossil fuel power projects almost unfailingly displace poor farmers. They also disrupt healthy portions of socioeconomic systems, and kill or degrade vital ecosystems, all while (usually) failing to provide the promised counterbalancing, short- or long-term benefits.

Further, the World Bank does not attempt meaningful remedies for people it has displaced, as many have noted. For example, Lori Pottinger of the International Rivers Network said in a Wall Street Journal article, “We’ve never had confidence in the World Bank’s ability to restore these people’s lives.” MIT professor of Law and Development Balakrishnan Rajagopal refers to the “violence of development.” He coined the term “development cleansing” to describe the way new development, such as dam building, usually takes place on the lands of poor and/or indigenous peoples, displacing them by the hundreds of thousands, in a process similar to ethnic cleansing, only with bulldozers instead of guns.

Trying to find ways to improve and revive the waning paradigm called new development is a recipe for frustration. The Constraint and Contamination Crises will provide development banks with many decades, even centuries, of work if they switch from new development to redevelopment. As we’ll see in Chapter 14, that’s exactly where the World Bank’s future may lie: restorative development.

On a cynical note, we could say that efforts in the first seven restorative industries—ecosystems, watersheds, fisheries, farms, brownfields, infrastructure, and heritage—decrease business in the eighth: disaster restoration. No worries, though: swelling (largely coastal) populations, 23

combined with global climate change, should ensure a burgeoning supply of lucrative disasters for the world’s restorative A/E/C (architectural, engineering, contracting) firms. The fact that politically powerful lumber companies still get away with clear-cutting ensures that many fortunes will continue to flow from flood-related restoration for decades to come.

The Three Crises Have Been Masked by Three Myths

The environmental problems of new development derive from all three of the Three Crises. The Corrosion Crisis contributes to environmental problems in the form of outdated, toxic industrial facilities, obsolete sewage treatment facilities, antique fossil fueled power plants, etc. The Contamination Crisis’s effects in this context are obvious.

But it’s the Constraint Crisis that’s most tightly linked to our ecological decline. If we keep expanding our population on a planet of finite size, simple logic plots a clear path to Armageddon. Restorative development can greatly delay the collapse and can even increase quality of life along the way, but there’s no escaping the laws of physics. The universe might be expanding, but this planet isn’t.

It took us only twelve years to go from five billion to six billion people. Several indicators show the rate of population growth decreasing, “thanks” in part to increased death rates due to starvation, dehydration, waterborne diseases, malaria, AIDS, cancers, and other health concerns, most of which are directly or indirectly related to the Three Global Crises. The average life expectancy in many African countries has plummeted in the past decade, dropping from 62 to 40 years in Botswana, and from 61 to 39 in Zimbabwe.

Unfortunately, many anti-family-planning forces have jumped on these lowered population growth estimates and said, “See? The population is going down!” They are confusing a slowing of increase with a decrease. The most optimistic forecasters say we might see world population entering a period of net decline toward the end of this century. But they are assuming that our current downward blip in birthrates is the beginning of a long trend. Hopefully, this will prove to be the case, but it’s wise to remember that the largest group of youngsters the world has 24ever seen—the children of the baby boomers—is entering its peak reproduction years.

Even if the trend toward smaller families continues, several factors point to a less-than-rosy scenario: the Three Crises have all been worsening at a rate that’s greater than the population growth rate. In the United States, development of greenfields (Constraint Crisis) has outpaced population growth by a factor of three in most areas. This means that even if the population froze at its current levels, all three crises would continue to intensify. Another factor is that all real population growth (that is, not driven by immigration) in the coming decades will take place in the developing world, which has the least ability to handle it. Without an equally intense growth of restorative development, this could lead to far greater political instability than we currently experience.

The Constraint Crisis isn’t driven solely by population growth. It’s partially driven by the increasing consumerism, and thus the larger ecological footprint, of developing countries’ citizens. But even U.S. citizens—who already consume 10 times more than the average world citizen—are still increasing our ecological footprints. The amount of real estate “required” by each U.S. homeowner has been growing quickly and steadily in recent decades and shows no signs of slowing.

Even if the most recent projections of a world population peak of “only” nine billion around 2070 turn out to be accurate, a continuation of this increasing-footprint trend means that the Constraint Crisis will follow a much steeper trajectory than that of population growth. And the Constraint Crisis will continue to worsen, even after the population peak has been reached. That’s bad news for the world in general; good news for real estate owners.

Our seeming inability to get a handle on our breeding, manage our resources properly, eliminate toxic and wasteful industries, and effect other reforms stems in large part from three common myths that cloud our perception of the Three Crises.

Myth #1: We’ve got lots of land available for development Those who oppose rational dialogue on the problems of human population growth often point to the planet’s enormous expanses of sparsely populated lands as proof that we’ve got almost unlimited room for expansion. What they don’t understand is that the problem isn’t that we don’t have enough land for more human residences and industries: there is plenty.

However, we’ve reached the point where new development usually means destroying some other, often irreplaceable, use for the land that 25we also consider important, whether for agriculture, watershed, species survival, indigenous peoples, or just sanity-inducing open space. Almost every acre of arable land on the planet is either already being farmed, or has been paved or housed over. The no-win situation of having to sacrifice food, wildlife, commerce, watershed, or housing to get just one of those five uses—being forced to define a “highest and best use”—is emblematic of the Constraint Crisis.

From California’s Central Valley to the suburbs of Shanghai, houses are replacing farms, even while the world’s hunger grows. Geographic expansion of communities is increasingly undesirable, even in those few cases where it’s still possible. (The Earth’s inventory of real estate is actually shrinking in real terms, due to rising sea levels.) Witness the multilateral war on urban sprawl and corresponding focus on smart growth.

Meanwhile, much of the land that’s left is losing its value, due to desertification, salinization, contamination, and other ills. Both of these dynamics intensify a Constraint Crisis that’s primarily caused by population growth and poor land use.

Such dynamics make it even more obvious that the solution to the Three Crises of our aged new development-dependent economy is not to stop, or even slow, economic growth, but to develop as rapidly as possible in the opposite direction: restoration. The price tag for repairing our world will be huge, but that’s not a problem as long as it’s a profitable, rather than charitable, activity. (Fully restoring a Victorian house, e.g., usually adds more to the economic and the cultural capital of a community than does building a new house, and uses far fewer resources.)

Myth #2: The prime economic value of ecosystems is their products For centuries, our accountants have measured only the timber, fish, nuts, deer, etc., harvested from ecosystems. But all systems, human and natural, are based on both goods and services: Just as our human economy has switched its emphasis from manufacturing to services, so too must we start focusing more heavily on the service side of the natural economy. The services provided by Earth’s natural systems far exceed the value of their products.

Ecosystem services include air and water purification, genetic resource development/storage, healthful aesthetics, and carbon sequestration (turning atmospheric carbon dioxide into oxygen and nongaseous forms of carbon, such as wood, in order to mitigate global climate change). Were these systems to go “on strike” for even a few weeks, all human civilizations would quickly collapse. As long as our accounting 26

systems are blind to the services provided by ecosystems, we will undervalue them and will be unable to “manage” them intelligently (they’ve actually been managing us, without our knowledge or appreciation).

Myth #3: Our oil wells are almost dry, our mines almost empty Looking at this book’s Table of Contents, we might wonder why the text focuses so much on the natural environment, when most visible forms of restoration deal with the built environment. If it struck you in this manner, you might be the victim of a third common myth, one that hamstrings the “green” strategic planning of many organizations.

Many people, including many government and business leaders, think that our impending natural resource shortages primarily involve antediluvian, non-renewable materials such as metals, phosphate, coal, natural gas, petroleum, and others. The reality is that we still have vast supplies of such materials, at least for current generations. Despite the fact that our oil consumption went from 57 million barrels per day in 1973 to 73 million in 2000 (and is expected to reach 110 million by 2020), known reserves have remained at about a trillion barrels, thanks to new discoveries.

The resources that are actually disappearing—at a catastrophically rapid pace—are the assets we’ve always assumed were inexhaustible, such as topsoil, fisheries, fresh water, clean air, and genetic wealth (e.g., crop diversity). In other words, we’re losing those things that are produced only by complex living systems. As Saudi oil minister Ahmed Yamani famously said, the Stone Age didn’t end because we ran out of stones, but because humans came up with better ways of doing things. Likewise, our switch to renewable, nontoxic sources of energy, raw materials, pharmaceuticals, and chemicals will derive from our desire for healthier, more enjoyable lives, not from exhausted mines or dry oil wells.

That’s not to say excessive use of these buried treasures isn’t a problem. Overuse of non-renewable resources is directly linked to the Contamination Crisis: our dying ecosystems; our epidemics of asthma, cancers, depression, weakened immune systems, and other signs of toxicity. Present-day species and ecosystems evolved in a world where much of 27our carbon and metal ores were out of circulation. The carbon had been sequestered by ecosystems, millions of years ago. Putting it back into circulation so suddenly has been equivalent to transporting wildlife to a different planet, or to a much earlier Earth: most plants and animals can’t possibly adapt quickly enough.

The apologists of the new development realm aren’t always ill informed, or even influenced by material gain; they’re just removed from natural reality. Even those in the life sciences sometimes have little concern for wildlife. Some biologists join the “brown” industrialists in singing “don’t worry, be happy,” claiming that it’s arrogance for humans to think we can kill the Earth, and that nature has nothing to worry about.

They’re right on the planetary scale, of course, but such cavalier attitudes dismiss as unimportant the irretrievable loss of thousands of ancient species. This biological, aesthetic, and spiritual tragedy would occur (and is occurring) long before we snuffed ourselves. (Humans would likely be among the last of the larger life forms to go, because we share the adaptable super-survivor traits of cockroaches, starlings, and Norway rats.)

Even if a miracle occurred and we made a rapid switch to renewable resources, the ecosystems we’re expecting to churn out these renewables— fish, fresh water, timber, etc.—have already lost much of their ability to do so. Many of these systems can’t passively recover on their own, even if vigorously protected, at least, not quickly enough to address the needs and impacts of our fast-growing human population. These systems need active restoration, at local, state, national, and global levels, which is a huge job. The largest, in fact.

Environmental and lifestyle-related illnesses (e.g., heart disease, asthma, cancers, and depression) are raging, as are plagues old and new (tuberculosis, malaria, AIDS, to name a few). The reduced ability of human immune systems and wildlife ecosystems to perform under the massive load of industrial and agricultural contaminants is no small factor in this situation.

The good news is that there are many lucrative opportunities in the recapture, re-use, and/or resequestration of the metals, gases, and elements that don’t belong in our air, soil, or water in such vast quantities. If we want a return to pure, unlimited fresh water; wide, clean beaches; 28

rich, deep topsoil; and other vital needs, the only solution is to revive the living systems that produce them. Bringing such dying “resource manufacturing systems” (to use the language of the new-development realm) back to a state of high productivity is spawning new industries of immense proportions.

¹ Management Visions for a Changing World: Japan’s CEOs Speak on the Record, “A Better Life: Revitalizing Japan,” Forbes.com [Special Advertising Section].

² Worldwide Fund for Nature (WWF), press release, June 5, 2000.