Transcript Folie 1
ECONOMIC GROWTH and SUSTAINABLE DEVELOPMENT TOPICS 1. Economic Growth and Development 2. Growth versus Development 3. The Environmental Kuznets Curve 1. ECONOMIC GROWTH1.AND INTRODUCTION DEVELOPMENT Government worldwide are almost always concerned with the economic growth as a measure of a country‘s performance. Economic growth is commonly understood to reflect an increase in people‘s living standards over time --- what we want is an indicator of how well we are doing as a society --- GNP (Gross National Product). GNP is a monetary measure of the total value of output of a country in any time-period. GNP is also a measure of national incomes to all factors of production (land, labour, and capital) and of total spending (consumption plus gross investment). GNP is often expressed per capita term. If GNP is rising, it is usual to say that a country is experiencing economic growth. 1. ECONOMIC GROWTH1.AND INTRODUCTION DEVELOPMENT GNP is a measure of living standards in the sense that it measures the size of the economic cake to be divided amongst the inhabitants of a country. Rising GNP per capita would not necessarily mean that absolutely everyone is better off, since some could lose or stand still, whilst others gain more than average. GNP takes no account of income distribution or equity. 1. ECONOMIC GROWTH1.AND INTRODUCTION DEVELOPMENT GNP has been critised worldwide as a measure of wellbeing. Some of the main critics: The effects of the economy on the environment are not well measured by GNP. Example: if there was a major oilspill in a country and much had to be spent cleaning it up, then GNP could rise (since the pollution clean-up industry increases its output) even if people feel worse off as a result. Although GNP measures the size of the economic pie, it does not tell us how fairly it is divided up --- GNP per capita could be increasing but income inequalities could worsen. GNP doesn‘t adequately reflect changes in factors such as health and literacy which have important impacts on people‘s sense of well-being. 1. ECONOMIC GROWTH1.AND INTRODUCTION DEVELOPMENT However, GNP still can be used to measure economic performance over time. Question: How can GNP be raised? --- increasing resources and productivity growth. 1. Increasing resources If a country experiences an increase in its resource base, then GNP can increase. This resource base includes capital, labour, land, energy and material resources --- Labour supplies can rise with population growth or migration only aggregate GNP is rising, not GNP per capita --- Energy and material resources can increase through new discoveries (finding new oil sources) --- Technological progress can also drive down the costs of exploiting natural resources. 1. ECONOMIC GROWTH1.AND INTRODUCTION DEVELOPMENT 2. Productivity growth As people learn more through education and training, the productivity of all the resources used in economic activity increases. The more a country invests in its workers through education and training, and thus in its technology, the faster we expect growth to be. Human productivity can also increase through learning-bydoing. Produced capital can also become more productive, with the embodiment of knowledge in new designs of machine. 2. GROWTH1.vs. INTRODUCTION DEVELOPMENT Growth as measured by rising GNP per capita, is not usually assumed to be the same as „development“. This is because development is usually interpreted much more broadly (see for example the „Human Development Index“). Development has several indicators, i.e.: 1. GNP per capita 2. A reduction in income inequality 3. An improvement in adult literacy rates 4. A reduction in infant mortality 5. Reductions in morbidity (illness) and mortality (death) rates amongst adults 3. THE ENVIRONMENTAL 1. INTRODUCTION KUZNETS CURVE Environmental impacts (e.g. pollution per capita) Environmental Kuznets Curve (EKC) --- named after Simon Kuznets --- 1955, hypothesized an inverted U-shape relationship between the equality of income distribution and environmental quality. Y* Income per capita 3. THE ENVIRONMENTAL 1. INTRODUCTION KUZNETS CURVE The EKC hypothesis states that as per capita incomes grow, environmental impacts rise, hit a maximum, and then decline --- implies an inverted U-shape. Two parts of the curve can be identified: before and after a turning point at Y*. Up to Y*, emissions are rising, environmental quality is falling, because: Economic growth results in an increasing use of resources --- this gives rise to an increase of waste. If a country starts an early development stage as an agricultural economy (like Indonesia) then industrialisation leads to an increase in emissions. 3. THE ENVIRONMENTAL 1. INTRODUCTION KUZNETS CURVE After Y*, emissions fall and environmental quality rises, because: There is an increasing demand for environmental quality as incomes go up --- This leads to an increase in government protection of the environment and increasing green consumerism. Technological improvements over time make production per unit of output cleaner. Changes in the structure of the economy occur, such as moves from manufacturing to service sector or high-tech industries.