Saturday, July 19, 2008

Can economic growth be reconciled with sustainable development?

The second plenary session of the EADI General Conference in Geneva brought together speakers on the "knife-edge between climate change and Millennium Development Goals", as the session was subtitled.

Jean-Louis Arcand from the Center for Studies and Research on International Development in France had a very pessimistic view, explaining that from an economic perspective, he feels helpless to contribute to the title question because of the lack of macro economic data. There are thousands of household surveys and a lot of good analysis around the world, but the long-term view is missing: Continuity in local teams involved in routine data collection is missing, and local policy-makers do not have any interest in the long-term view. Often, government ministries and statistical agencies retain data.

Charles Gore from UNCTAD focused the first part of his intervention on the need for a new way of thinking, a "new paradigm" that marks the end of twenty-five years of structural adjustment programmes and policies of global integration. According to Mr. Gore, five elements need to be taken into consideration to define this new way of thinking: resource scarcity; radical global inequality and radical global interdependence; emergence of the BRICS+; globalisation of expectations without globalisation of opportunities; conceptual confusion, where global issues are still addressed with national frames of references.

He also argued that "MDGs are a muddle", which is why "we have to place them in an economic framework". According to him, productive capacities are the key to reconcile economic growth and sustainable development. If a country can increase productive capacities (for example natural assets and labour productivity), the economy will grow and poverty will be reduced. As policy implications, Gore recommended to focus on the utilization of productive capacities, and industrial policies to promote structural change towards lower energy use on the national level. On the international level, rich countries "must cut emissions more deeply to support low-carbon transitions in developing countries", Gore concluded.

Wolfgang Sachs (Wuppertal Institute for Climate, Environment, and Energy) presented several main arguments. First, the Euro-Atlantic civilisation was based on carbon and colonies, and only managed to grow because it could expand acres overseas and under the soil. Second, monetary growth implies a certain degree of material growth. The ecological footprint of people rises along side the growth of GDP, which constitutes "uneconomic growth". Third, he argued that "monetary growth is an inefficient way to reduce poverty", and from 100 $ GDP growth, only 4$ are reaching the poor. Tackling income distribution would be a much more efficient way to eradicate poverty.

Moreover, energy efficiency measures will not be enough to reach the necessary CO2 reduction of about 80-90% in 2050, because rebound effects surpass efficiency gains. "How much is enough?", would be a more appropriate question. Fourth, Sachs argued that there is not enough carbon left for newly industrializing countries to follow the Euro-Atlantic path for decades. We have to face "another inconvenient truth": The South cannot wait for the North to mitigate, but has to reduce emissions now. This is why ecological leapfrogging, not industrial growth, is the way for industrializing countries to go. It constitutes a chance for poorer countries, because they can still take decisive decisions about infrastructure, agriculture, construction etc.

Last, Sachs claimed that "there is no sustainable development unless the growth in commercial goods is constrained by a growth in common goods." Concluding, it is essential "to put economic growth on the back seat". It should not be a policy priority, but emphasis should lie instead on common goods such as health, education and ecosystem services.

by Birthe Paul

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