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Topic 9 Economic Sustainability

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 sharifah@putra.upm.edu.my. Content. Background Why Economic Sustainability?

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Topic 9 Economic Sustainability

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  1. 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@putra.upm.edu.my

  2. 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

  3. 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

  4. Ecological WorldviewThe Hierarchy of Sustainability A representation of sustainability showing how both economy and society are constrained by environmental limits Nature/Environment Society Economy

  5. Economic Worldview:

  6. 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.

  7. 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

  8. 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.

  9. 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.

  10. 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.

  11. IBN KHALDUN’S IDEAS ON ECONOMIC GROWTH. • More growth may lead to social costs • Excessive spending and luxury habits may cause unethical and immoral behavior, inflation, unemployment, poverty and environmental degradation. • Higher taxes may lead to lower economic growth and tax revenue • Higher government spending may reduce private business activities, economic growth and revenue

  12. Costs of Economic Growth • CONGESTION • POLLUTION • EPIDEMIC • INFLATION • UNEMPLOYMENT • POVERTY • CORRUPTION • CRIME • MIGRATION

  13. Costs of Economic Growth

  14. 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.

  15. “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).

  16. 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)

  17. 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]

  18. 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

  19. 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/economic-sustainability.html#ixzz1sPKFp1TJ

  20. Economics Principles for Sustainability Sustainability: Meeting the needs of the present without diminishing opportunities for the future

  21. It takes getting the principles right! • Ecological/Environment Principles: • holism, diversity, interdependence • Social Principles: • trust, kindness, courage • Economic Principles: • scarcity, efficiency, sovereignty

  22. 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 Principles of Creating a Sustainable Economic Development

  23. 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.

  24. 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.

  25. 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.

  26. 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.

  27. 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).

  28. And in Practice? Identify challenges to sustainability • Government: policy measures • Industry: management approaches

  29. 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.

  30. Thank You

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