Transcript Economic Sustainability - Universiti Putra Malaysia

Topic 9
Economic Sustainability
Assoc Prof Dr Sharifah Norazizan Syed Abd Rashid, APPM
Department of Social & Development Science
Faculty of Human Ecology
Universiti Putra Malaysia
[email protected]
Content
 Background
• Why Economic Sustainability?
• What is the difference between economic growth, economic
development, and environmentally sustainable economic
development?
• What are the earth’s main type of resources? How can they be
depleted or degraded?
 Definitions
 Principles
 Practice
Sustainable development
Sustainable development is a pattern of resource use that aims
to meet human needs while preserving the environment so that
these needs can be met not only in the present, but also for
generations to come. The term was used by the Brundtland
Commission which coined what has become the most oftenquoted definition of sustainable development as development that
"meets the needs of the present without compromising the ability
of future generations to meet their own needs."
A representation of sustainability showing how both economy and
society are constrained by environmental limits
Ecological Worldview
The Hierarchy of Sustainability
Nature/Environment
Society
Economy
A representation of
sustainability
showing how both
economy and
society are
constrained by
environmental limits
Economic Worldview:
The Essentials of Sustainable
Economic Development
• Today’s industrial economy is not sustainable. It is depleting
resources and degrading the natural environment.
• Sustainable economies must meet the needs of the present
without diminishing opportunities for the future.
• All economic value comes from the earth or from people – from
natural or human resources – ultimately from energy.
• Sustainable development must invest in nature and society even
when there are no economic incentives to do so.
• Sustainable development depends on social and ethical values,
which are different from economic values.
ECONOMIC OBJECTIVES
 Growth
 Equity
 Efficiency
SOCIAL OBJECTIVES
 Empowerment
 Participation
 Social Mobility
 Social Cohesion
 Cultural Identity
 Institutional Development
ECOLOGICAL OBJECTIVES
 Ecosystem Integrity
 Carrying Capacity
 Biodiversity
 Global Issues
Economic Growth and Economic
Development
Economic growth – increase in goods and services.
• Requires more producers and consumers (i.e.,
population growth);
• and/or, more production and consumption per person.
Economic development – improvement of human living
standards by economic growth.
The growth of the economy
undermines sustainability
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depletes resources
exceeds global and bioregional carrying capacity
destroys ecosystems
overwhelms natural waste disposal sinks
alters the climate
wages war on subsistence cultures
produces shocking mal-distribution of wealth and income.
Economics and Sustainability must be harmonized.
contd
• Global crisis of mainstream economic systems
(capitalist & socialist): energy crisis, environmental crisis, food
crisis, financial crisis, spiritual crisis ; marginalization of less
developed countries
• Globalization of poverty: creeping poverty in both developed
and less developed country.
IBN KHALDUN’S IDEAS ON
ECONOMIC GROWTH.
• More growth may lead to
social costs
• Higher taxes may lead to lower
economic growth and tax
revenue
• Excessive spending and
luxury habits may cause
unethical and immoral
behavior, inflation,
unemployment, poverty and
environmental degradation.
• Higher government spending
may reduce private business
activities, economic growth
and revenue
Costs of Economic Growth
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CONGESTION
POLLUTION
EPIDEMIC
INFLATION
UNEMPLOYMENT
POVERTY
CORRUPTION
CRIME
MIGRATION
Costs of Economic Growth
POLLUTION
MORAL
DECLINE,
CRIME AND
CORRUPTION
EPIDEMIC
LACK OF SOLIDARITY,
POLITICAL INSTABILITY
DECREASE IN REVENUES
POPULATION GROWTH,
HIGH PRICES
UNEMPLOYMENT
AND MIGRATION
POVERTY
INFLATION
CONGESTION
The Challenge of Economic
Sustainability
• A sustainable economy must provide permanent sustenance
for the individual, social, and ethical well-being of all, including
those of present and future generations.
• It must meet the material or tangible needs of individuals. It
must sustain the economic and social health of families,
communities, and societies and the productivity and ecological
health of nature. And, it must provide a means for each
generation to meet its needs while fulfilling its ethical
responsibilities for the future of humanity.
• “Sustainability is a community's control and prudent use of
all forms of capital…“
– physical capital
– human capital
– natural capital
– social capital, and
– cultural capital
• “…to ensure that present and future generations can attain
a high degree of economic security and achieve democracy
while maintaining the integrity of the ecological systems
upon which all life and production depends" (p. 46).
How did the Brundtland Commission
operationalize sustainability?
“Seven strategic imperatives for sustainable development:
• reviving (economic) growth;
• changing the quality of growth;
• meeting essential needs for jobs, food, energy, water, and
sanitation;
• ensuring a sustainable level of population;
• conserving and enhancing the resource base;
• reorienting technology and managing risk;
• merging environment and economics in decision-making.”
(Hackett, 2006)
Sustainability from an
economic perspective
Economist Robert Solow (1987 Nobel Laureate)
• Sustainability is just what economists have been talking
about (in the economic growth and environment literature).
• Sustainability is making sure that each successive
generation is no worse off than the current one, indefinitely.
Argument: physical capital (durable assets) and
human capital (knowledge/health) are substitutes for
natural capital.
Two key questions (Toman (1994), c.f. Kolstad (2000))
• What obligation does one generation owe to others?
[Ethical/moral question]
Economic Sustainability
• It is about understanding that economic growth is only
sustainable if it simultaneously improves the Quality of Life and
the environment.
• Economic sustainability focuses on the importance of stable
economic growth
• Egs of Economic Sustainability:
- elimination of extreme wealth and poverty
- be content with little
- profit sharing
- voluntary giving
- work as worship
- moderation
Economic Sustainability
• The use of various strategies for employing existing
resources optimally so that that a responsible and
beneficial balance can be achieved over the longer
term.
• Economic Sustainability is the maintenance of
capital or keeping capital intact.
Read more:
http://www.businessdictionary.com/definition/econo
mic-sustainability.html#ixzz1sPKFp1TJ
Economics Principles for
Sustainability
Sustainability: Meeting the needs of the present
without diminishing opportunities for the future
It takes getting the principles right!
• Ecological/Environment Principles:
 holism, diversity, interdependence
• Social Principles:
 trust, kindness, courage
• Economic Principles:
 scarcity, efficiency, sovereignty
Principles of Creating a Sustainable
Economic Development
• Ensuring a Better Quality of Life for the Community, Now and for
Generations to Come
• Maintenance of High and Stable Levels of Economic Growth
and Employment
• Prudent Use of Natural Resources and the Community
Competitive Advantages
• Ensuring Social Progress Which Recognizes the Needs of a
Diverse Community
• Considering the Long-Term Implication of Decisions
Ecological Principles of Economic
Sustainability
• Holism: A whole is more than the sum of its parts: the
relationships among the parts are as important as the parts.
• Diversity: Differences among the parts give wholes the resistance
and resilience to withstand adversity and the ability to renew,
regenerate, and evolve.
• Interdependence: Mutually beneficial relationships among
interdependent parts of wholes make them “something more” than
the sum of their parts – emergent properties.
• Ecological principles must also be respected in social and
economic relationships; society and the economy are part of nature.
Social Principles of Economic
Sustainability
• Trust : Results from honesty, fairness, and responsibility.
Validations of trust strengthen social relationships. Violations of
trust weaken and destroy social relationships.
• Kindness: Results from empathy, respect, and compassion.
• Courage: Requires commitment in spite of adversity. Good
intentions without action are of little consequences. It takes moral
courage to be trusting and kind.
• Social principles also must be respected in relationships with
nature and in sustainable economic relationships.
Essential Economic Principles of
Sustainability
• Scarcity: Economic value is determined by scarcity, not by human
necessity. Some thing essential for economic sustainability have
little if any economic value.
• Efficiency: Economic value relative to economic costs. Economic
sustainability requires efficient use of natural and human resources.
• Sovereignty: People must have freedom to make informed
economic choices, without coercion or persuasion.
• Economic principles must also be respected in social relationships
and in relationships with nature.
Addressing Sustainability
What can we do to be more sustainable
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Cut down on use of energy
Recycle
Adopt a more environmentally transport
Use renewable energy resources eg wind power; solar power;
tidal power; hydroelectric power and biofuels.
What can economists do?
While Science and Technology will do much of the work
• Need to better understand the interaction between economy
and environment.
Economy Environment
• Formulate appropriate government policy – taxes and subsidy
• Understand equity implication of economic policies and
climate change and devise corrective measures (such as taxes
on carbon and technology transfer).
And in Practice?
Identify challenges to sustainability
 Government: policy measures
 Industry: management approaches
Provide Resources
• Link economic concepts to sustainability issues website:
• http://www.montgomerycollege.edu/~sdas/index.htm
• John Ikerd (2012), The Essentials of Economic
Sustainability, Kumarian Press.
Thank You