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. However, 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. However, 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.
However, 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 intergenerational 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.
Most of us, I believe, do not knowingly make choices that adversely affect future generations. So perhaps incomplete knowledge of the consequences of our choices is responsible. Moreover, an unfunded liability path, once taken, is hard to leave, because at the point of departure, some generation is paying for past commitments and at least beginning to fund future ones. That seems unfair, because it is.
Most people might agree that living beyond our means in the aggregate, via unfunded social services and insurance, or disproportionate use of resources, imposes a burden on our offspring. However, we might still fail to reach agreement on who should pay for funding these programs, or for reducing our consumption of resources. Too often, it is easier to deal with the distributional problem by shifting the burden to those who are not present and who are insufficiently represented by those who are.
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.
But, while education and values are necessary, they clearly are not sufficient. Complementary national policies and international agreements will require careful scientific and economic analysis and thoughtful choices. The need for burden-sharing, particularly between advanced and developing countries, will not magically disappear. Climate-change risks, though serious, should not be mistaken for the entire sustainability agenda.
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.
However, 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. Likewise, businesses and industries that are heavy water users will simply develop new technologies and thrive in the face of scarcity.
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.
Michael Spence, a Nobel laureate in economics, is professor of economics at New York University’s Stern School of Business and a distinguished visiting fellow at the Council on Foreign Relations.
Copyright: Project Syndicate
Eating at a breakfast shop the other day, I turned to an old man sitting at the table next to mine. “Hey, did you hear that the Legislative Yuan passed a bill to give everyone NT$10,000 [US$340]?” I said, pointing to a newspaper headline. The old man cursed, then said: “Yeah, the Chinese Nationalist Party [KMT] canceled the NT$100 billion subsidy for Taiwan Power Co and announced they would give everyone NT$10,000 instead. “Nice. Now they are saying that if electricity prices go up, we can just use that cash to pay for it,” he said. “I have no time for drivel like
Young supporters of former Taiwan People’s Party (TPP) chairman Ko Wen-je (柯文哲) were detained for posting the names and photographs of judges and prosecutors believed to be overseeing the Core Pacific City redevelopment corruption case. The supporters should be held responsible for their actions. As for Ko’s successor, TPP Chairman Huang Kuo-chang (黃國昌), he should reflect on whether his own comments are provocative and whether his statements might be misunderstood. Huang needs to apologize to the public and the judiciary. In the article, “Why does sorry seem to be the hardest word?” the late political commentator Nan Fang Shuo (南方朔) wrote
Chinese Minister of Foreign Affairs Wang Yi (王毅) reportedly told the EU’s top diplomat that China does not want Russia to lose in Ukraine, because the US could shift its focus to countering Beijing. Wang made the comment while meeting with EU High Representative for Foreign Affairs and Security Policy Kaja Kallas on July 2 at the 13th China-EU High-Level Strategic Dialogue in Brussels, the South China Morning Post and CNN reported. Although contrary to China’s claim of neutrality in the Russia-Ukraine conflict, such a frank remark suggests Beijing might prefer a protracted war to keep the US from focusing on
There are no obvious connections between the 7-Eleven retail chain in Japan and the Philippines’ national security concerns in the South China Sea. Here is one, one that also takes in Canadian Broadcasting Corp (CBC), the government of Denmark and Taiwanese plastic surgeons on the way. Japan’s 7-Eleven on Friday last week posted on social media an image of uniforms worn by the chain store’s employees in various locations, including Taiwan, the US, Hawaii, Australia, Sweden, Denmark, Cambodia and the Philippines. If this was intended to promote a sense of camaraderie within the 7-Eleven family, it backfired. Taiwan was tagged with the
RSS