Friday 24 February 2012

The Sustainability Mindset

Markets and capitalist incentives have great strengths in promoting economic efficiency, growth, and innovation. And, as Ben Friedman of Harvard University argued persuasively in his 2006 book, “The Moral Consequences of Growth”, economic growth is good for open and democratic societies. But markets and capitalist incentives have clear weaknesses in ensuring stability, equity, and sustainability, which can adversely affect political and social cohesion. Obviously, abandoning market-capitalist systems, and implicitly growth, is not really an option. Collectively, we have little choice but to try to adapt the system to changing technological and global conditions in order to achieve stability, equity (in terms of opportunity and outcomes alike), and sustainability. Of these three imperatives, sustainability may be the most complex and challenging.

For many people, sustainability is associated with finite natural resources and the environment. The global economy will probably triple in size in the next quarter-century, largely owing to growth in developing countries as they catch up to developed-country incomes and adopt similar consumption patterns. Thus, there is a well-founded fear that the planet’s natural resources (broadly defined) and recuperative capacities will not withstand the pressure.

To some, this logic leads to the conclusion that growth is the problem, and that less growth is the solution. But, in developing countries, where only sustained growth can lift people out of poverty, limiting it cannot be the answer. The alternative is to change the growth model in order to lighten the impact of higher levels of economic activity on natural resources and the environment. But there is no existing alternative to which we can all switch. Changing the growth model means inventing a new one over time, step-by-step, from complementary parts. The two key ingredients seem to be education and values. Everyone, not just policymakers, needs to understand the consequences of our individual and collective choices. We need to be aware for example, that population growth and rising consumption levels have inter-generational consequences, and that how we conduct ourselves will affect the lifestyles and opportunities of our children and grandchildren. 

Thus far, the quality of our choices has been unimpressive, reflecting little sensitivity to sustainability and the impact of our choices on future generations. As a result, many developed countries have built up dangerously large public debts and even larger non-debt liabilities, owing to unsustainable growth patterns. Education and values are the foundation of sound individual and, ultimately, collective choices. Without them, the incentives and policies that economists rightly argue are needed to increase energy efficiency, limit carbon emissions, economize on water usage, and much more will lack support and fail in the democratic decision-making process.

If sustainability is to triumph, it must be predominantly a bottom-up process. Environmentalists are right to focus on education and individual choices, even when their policy proposals are not always on target. Education and values will drive local innovation, alter lifestyles, and shift social norms. They will also affect business behavior via choices by customers and employees, including business leaders. Thus, they are essential components of the formulas needed to pursue sustainable patterns of growth.

There are clear steps that can be taken. Appropriate regulation and sufficiently long time horizons can make structures of all kinds much more energy-efficient, without imposing burdensome costs. In a similar way, transportation can become less energy-intensive without restricting mobility. Some of these shifts might be subject to international coordination, in order to avoid adverse competitive consequences, whether real or perceived. But too much coordination can be a bad thing. That is why climate-change negotiations are shifting from the misguided objective of seeking risky 50-year commitments to binding carbon-emissions targets to focusing on parallel, step-by-step processes, including higher energy efficiency, better urban planning, improved transportation systems, and on learning as we go.

Progress has been helped by growing awareness in populous Asia – and in developing countries generally – that sustainability is the key to achieving their longer-term growth objectives. This perspective perhaps comes more naturally in an environment of rapid growth, because their growth models require continual review and adaptation to be sustainable. Over time, values shift as knowledge is acquired and disseminated. Policies aimed at sustainability are likely to follow. What is unknown is whether we will reach that point fast enough to avoid major disruptions, or even potential conflict.

Author: Michael Spence.
This article appeared in Pakistan Today on February 19, 2012.
Republished with permissions.

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