Topic 9 Economic Sustainability

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Topic 9Economic Sustainability

• Assoc Prof Dr Sharifah Norazizan Syed Abd Rashid,
  APPM
• Department of Social Development Science
• Faculty of Human Ecology
• Universiti Putra Malaysia
• sharifah_at_putra.upm.edu.my

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Content

• Background
• Why Economic Sustainability?
• What is the difference between economic growth,
  economic development, and environmentally
  sustainable economic development?
• What are the earths main type of resources? How
  can they be depleted or degraded?
• Definitions
• Principles
• Practice

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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 often-quoted 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

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Ecological WorldviewThe Hierarchy of
Sustainability
A representation of sustainability showing how
both economy and society are constrained by
environmental limits
Nature/Environment
Society
Economy
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Economic Worldview
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The Essentials of Sustainable Economic
Development

• Todays 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.

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• 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

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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.

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The growth of the economy undermines
sustainability

• 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.

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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.

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IBN KHALDUNS IDEAS ON ECONOMIC GROWTH.

• Higher taxes may lead to lower economic growth
  and tax revenue
• Higher government spending may reduce private
  business activities, economic growth and revenue

• More growth may lead to social costs
• Excessive spending and luxury habits may cause
  unethical and immoral behavior, inflation,
  unemployment, poverty and environmental
  degradation.

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Costs of Economic Growth

• CONGESTION
• POLLUTION
• EPIDEMIC
• INFLATION
• UNEMPLOYMENT
• POVERTY
• CORRUPTION
• CRIME
• MIGRATION

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Costs of Economic Growth
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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.

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• 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).

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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)

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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

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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

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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.htmlixzz1sPKFp1TJ

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Economics Principles for Sustainability
Sustainability Meeting the needs of the present
without diminishing opportunities for the future
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It takes getting the principles right!

• Ecological/Environment Principles
• holism, diversity, interdependence
• Social Principles
• trust, kindness, courage
• Economic Principles
• scarcity, efficiency, sovereignty

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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

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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.

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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.

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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.

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Addressing Sustainability

• What can we do to be more sustainable
• 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.

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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).

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And in Practice?

• Identify challenges to sustainability
• Government policy measures
• Industry management approaches

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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.

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Thank You