Friday, July 18, 2008

The Challenges of Sustainable Development

Note: A slightly edited version of this article appears in the Spanish August/September issue of the journal Foreign Policy.
A broadly accepted definition of “sustainability” is that put forward by the Brundtland Commission convened by the United Nations 25 years ago, which stated that sustainable development is development “that meets the needs of the present without compromising the ability of future generations to meet their own needs.” One implication of the core idea embodied in this definition is that sustainability is not a goal to be reached, but rather a balance to be maintained across space and time in which there are complex interactions at play between the environment, the economy, human institutions and values.[1]

Two central questions in this debate are: what has actually happened to development during the past half a century and are we on a sustainable development path? Development as a global objective for improving human welfare is a relatively recent concept. It was first embodied in the UN Charter, which said: “the United Nations shall promote higher standards of living, full employment, and conditions of economic and social progress and development.”

In time, at least among practicing economists in academia and policymakers in government “development”, came to be seen as improved economic opportunity through capital accumulation and rising productivity. The implicit assumption was that growth would lead to rising living standards, increases in longevity, reduced mortality, and so on. Between 1950 and 2001 world GDP/capita expanded at an annual average rate of 2.1 percent and this expansion—although with considerable regional variations—was associated with a remarkable evolution in three key indicators of human welfare. In the 40-year period to 2000: infant mortality fell from 140 to 52 per 1000 live births, average life expectancy at birth rose from 43 to 64 years, and illiteracy (percent of adults) fell from 53 to 28 percent. Equally impressively, there was a sharp drop in the incidence of poverty. Data from a World Bank study shows that between 1981 and 2001, the globalization phase of the 20th century, the share of the world’s population living in extreme poverty fell from 40.4% to 21.1%.[2] While this still left about 1.1 billion people living under harsh conditions, the trend was undeniable and it led many to ask themselves what could be done to accelerate growth everywhere, particularly in Africa where the incidence of poverty actually rose.

The American economist William Easterly said that he cared about economic growth because “it makes the lives of poor people better, it frees the poor from hunger and disease” and then proceeded to show how growth improves infant mortality, how, for instance, in Africa 500,000 deaths could have been averted if growth in the decade of the 1980s had been 1.5 percent higher. The above insights, in turn, have led to a remarkable re-examination among professional economists and policymakers about the relative importance of various factors in creating the conditions for growth.[3]

In parallel to these encouraging trends, scientists began to ask themselves: are the processes underlying our development path sustainable? Regrettably, the answer increasingly seemed to be NO. Among environmentalists, the focus was on climate change, biodiversity loss and pollution. That the earth has self-correcting mechanisms, that the physical processes underpinning changes in the environment have huge inertia, did not hide the growing consensus in the scientific community that, at the margin, the trends were not sustainable. To take just a few examples: global carbon dioxide emissions from fossil fuels have sharply accelerated since 2000, reflecting a quickening in the pace of growth of the global economy, a rise in the use of coal in China and the weakening of natural carbon sinks such as forests and seas. Not surprisingly, large volumes of the permanent ice in the Arctic Ocean have melted and accelerated flow in Greenland glaciers is contributing to a rise in sea levels.

But even beyond purely environmental concerns, there are other forces at work which are already having a major impact on our system’s institutional underpinnings, which have been at the center of the progress achieved during the past half century. Key among these one can point to population growth and the corresponding pressures on resources. According to the International Energy Agency energy demand will grow by 50 percent by 2030, reflecting the addition of some 2.2 billion people to the world’s population and the corresponding needs for housing, transportation, heating, illumination, food production, waste disposal and the push for sustained increases in the standards of living. Powerful demonstration effects are at work; the spread of instant communication and the internet have led billions of people in China, India, Latin America and other parts of the developing world to aspire to lifestyles and patterns of consumption similar to those prevailing in the industrial world. As if these demand pressures were not enough, there are emerging supply constraints as well. World cereal production per person has been on a downward trend since the late 1980s. It is estimated that by 2025 the number of people living in regions with absolute water scarcity will have risen to some 1.8 billion. Climate change, soil erosion, overfishing are expected to dampen food production and are known to have been a key driving force in the major surge seen in food prices during the past year.

The question is then, how will we reconcile the legitimate aspirations of citizens in the developing world for the high economic growth rates that in the post-War period led to such remarkable improvements in the global standards of living, with the challenges of an economic system under severe stress as a result of the pressures put on it by the very same economic growth?

The solution is likely to involve actions on at least three fronts. First, we will have to invest in conservation and in redressing some of the damage done to the environment through decades of neglect. According to the Earth Policy Institute something like US$100 billion need to be spent annually to protect topsoil in croplands, to stabilize water tables, to restore fisheries and protect biological diversity. A key finding of the Stern Report on climate change was that the annual cost of introducing control measures for greenhouse gases is far, far smaller than the potential cost of uncontrolled climate change. The UN’s Intergovernmental Panel on Climate Change estimates that stabilizing greenhouse gases by 2030 would slow global economic growth by slightly more than 0.1 percent per year. We will also need to invest in energy infrastructure, to replace ageing capacity and meet growing global energy demand, but also to boost efficiency. Second, technology can clearly play a key role. More efficient use of energy has reduced the size of energy consumption in global GDP by more than 30% in the past 20 years; much more can be done in this area, particularly by resort to new technologies of conservation, including greater use of solar power, wind and alternative fuels. The recently issued Growth Commission Report lucidly defines our challenge: “We do not know if limits to growth exist, or how generous those limits will be. The answer will depend on our ingenuity and technology, on finding new ways to create goods and services that people value on a finite foundation of natural resources. This is likely to be the ultimate challenge of the coming century. Growth and poverty reduction in the future will depend on our ability to meet it.”

The third and arguably the most important element of a strategy aimed at sustaining growth will have to be a significant strengthening in the current mechanisms of international cooperation, which have turned out to be highly inadequate to the global challenges that we face. Whether we focus our attention on climate change and the broad range of associated environmental calamities, nuclear proliferation, the workings of the world’s financial system, or growing income disparities, the fact is that major planetary problems are being neglected because we do not have effective problem-solving mechanisms and institutions strong enough to deal with them. Or, put differently, a range of inherently global crises cannot be solved outside a framework of global collective action involving supranational cooperation and a fundamental rethinking of the “national interest.”

The forces of integration underlying the processes of globalization have been, on the whole, beneficial to humanity and have contributed to growing prosperity: about 65 percent of the world’s population today live in high-income or high-growth economies, compared to less than 20 percent in 1978. However, to establish a firmer foundation for sustainable development it will be necessary to take concerted action on the above three fronts. Failure to act will increase our vulnerability to multiple, interrelated crises, with unforeseen costs for human welfare.



[1] A good practical example of this concept at work can be seen in the Nordics approach to budgetary management. These countries have been running budget surpluses for many years because they face an emerging ageing population problem. If the state is going to be able to provide in the future pensions and social protections that will be broadly equivalent to those enjoyed by its citizens today, it must begin to save now. Citizens of Nordic countries have agreed for their governments to spend less than they collect in taxes, so that future generations’ standard of living will not be impaired.
[2] The study is: “How have the world’s poorest fared since the early 1980s?”, prepared by Shaohua Chen and Martin Ravallion, Development Research Group, World Bank, available at www.worldbank.org.
[3] One area that has received particular attention has been the role of technology and innovation. Economic output, it seems, is no longer just a function of capital and labor but, increasingly, knowledge and the acquisition of new knowledge.