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Summary Economics and Sustainable Development
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Summary of the course Economics and Sustainable Development, all lectures included
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Samenvatting Economics and Sustainable Developmentlecture 1
Environmental pressure
higher GDP → more wealth/ welfare → more environmental pressures → degradation of the worlds
ecosystems → change in rainfall patterns, frequency of
extreme events impact jobs, lives, migration patterns.
The economic system
economic system (capitalism) characterized by:
- Most of the means of production are privately
owned
- Production for the market
- Operation to make a profit
- Profit motive, along with inheritance law, and
supported by contract law, forms the driving force of
capitalism.
In brief:
- Economics and the environment are not separated
- Many constraints, environmental, but also social
- We need a sustainable development
→ what is sustainable development and where does this idea come from?
o Sustainable development = development that meets the needs of the present
without compromising the ability of future generations to meet their own needs.
The origins of sustainable development:
1. Club of Rome: limits to growth (1972)
a. A condition of ecological and economic stability that is sustainable far into the future
and capable of satisfying the basic material needs of people.
Deze manier heeft gevolgen voor de toekomst.
2. Goldsmith: a blueprint for survival (1972)
a. A stable society that could be sustained indefinitely while giving optimum
satisfaction to its members.
3. Brundtland’s world commission on environmental and development (1987)
a. Development that meets the needs of the present without compromising the ability
of future generations to meet their own needs.
Message of the book: the earth is finite and the quest for unlimited growth in population, material
and goods would eventually lead to a crash.
,Why are we still here? The fetishism around economic growth
Criticism of the report:
- Doomsdayers
- Do not take into account human ingenuity, adaptability
- Market mechanism and innovations will prevent any collapse
Kuznet and evidences to support economic growth
Economic growth will bring higher living standards and more wealth in the system.
Kuznets curve → shows the relationship between income per capita and inequality in a society.
BUT
Economic growth = increase in the goods and services
produced within an economy over a given period of time → for
economies to grow, countries must constantly increase
production, consumption and at best their exports → process
of ever-increasing global resource-extraction (natural or
labour)
Trade-off between income and natural resources.
Imperative of economic growth in development
John Williamson and the Washington consensus, 1989:
Set of …. For developing countries. Who has a high level of debt, try to develop by trying to achieve
this objectives to receive a loan.
- Low government borrowing. Discourage developing economic from having high fiscal deficits
relative to their GDP.
- Diversion of public spending from subsidies to important long-term growth supporting
sectors like primary education, primary healthcare, and infrastructure
- Implementing tax reform policies to broaden the tax base and adopt moderate marginal tax
rates
- Selecting interest rates that are determined by the market
- Encouraging competitive exchange rates through freely-floating currency exchange
- Adoption of free trade policies
- Relaxing rules on foreign direct investment
- The privatization of state enterprises
- The eradication of regulations and policies that restrict competition or add unnecessary
barriers to entry
- Development of property rights
Today
- Still focused on GDP and economic growth
- Friedman, 2005: economic growth fosters ‘’moral societies’’ characterized by openness of
opportunity, tolerance, economic and social mobility, fairness, and democracy.
William Nordhaus → How climate change affect economic growth.
High discount rate: future generations are valued less, discounted compared to present ones. (weak)
Low discount rate: is making everybody on a same level.
- He prefers a low discount rate.
Focus on GDP growth, even though it is not good now, because future generations will be much
richer and therefore they will be much better to limit the problem.
,1.5 is the limits stated by the IPCC
Changing views joseph Stiglitz
- “It’s clear: we are living beyond our planet’s limits. Unless we change something, the
consequences will be dire. Should that something be our focus on economic growth?”
- “The world is facing three existential crises: (1) a climate crisis, (2) an inequality crisis and (3)
a crisis in democracy… Yet the accepted ways by which we measure economic performance
gives absolutely no hint that we might be facing a problem.”
Stockholm statement, 2016
1. GDP growth is not an end in itself
2. Development has to be inclusive
3. Environmental sustainability is a requirement, not an option
4. There is a need to balance market, state and community
, 5. Successful development requires providing macroeconomic stability, but this does not just mean
balancing budgets or focusing exclusively on inflation
6. One has to attend to the impact of global technology and inequality. It will be especially
important to assess impacts on labor, in both developed and developing countries
7. Social norms and mindsets matter. One especially needs to bring the insights of modern
behavioral economics to bear in development policies
8. Global policies have significant effects on developing countries. The international community,
and especially the advanced countries, have a responsibility to ensure that there are equitable
pro-development policies.
Alternative views/ models on growth
Human development index → account for wealth
Green growth →
Degrowth →
Donut economics →
Summary
- Why are we still unsustainable? focuses on economic growth, depletion of natural resources,
becoming richer leads to a pressure into the environment
- We cannot continue in the same way of producing and consuming → need for sustainable
development
- Many different interests and visions of the world
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