Technology, Globalization, and Sustainable Development

TECHNOLOGY, GLOBALIZATION, AND SUSTAINABLE DEVELOPMENT

Transforming the Industrial State

NICHOLAS A. ASHFORD RALPH P. HALL

New Haven & London

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561-45401_ch00_8P.indd iii 6/23/11 9:47 AM I The Multidimensional Concept of Sustainability

In Part I of this book we discuss the nature (Chapter one issue, such as climate change, or even a small 1) and evolution (Chapter 2) of the multidimensional group of concerns will limit options and ignore oppor- concepts of sustainability and sustainable develop- tunities to develop cross-cutting approaches to address ment. unsustainable trends in a comprehensive manner. Chapter 1 begins by exploring two central compo- Chapter 2 provides a brief historical context for nents of sustainable development— meeting basic hu- the ideas and themes discussed in Chapter 1. It iden- man needs and equality, which are discussed in the tifi es a number of important texts, national and in- context of governance. We then consider the current ternational events, and U.S. regulations from 1951 to economic growth model and the importance given to 2009 that helped shape the current and continually technological innovation as the key to solving the sus- evolving notion of sustainable development. An ex- tainability challenge. The chapter ends by highlighting panded version of Chapter 2 is provided in the Primer several critical issues that we argue must be included on the Emergence of Sustainable Development found in future development strategies. A narrow focus on on the website associated with this work.

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1.1 Human Needs 20 1.4 A Conceptual Framework for Sustainable Development 88 1.1.1 The Mea sure ment of (Human) Development 22 1.5 The Eu ro pe an Union’s Strategy for Sustainable Development: 1.1.2 Consumption and Well- Being 33 The Lisbon Strategy and Eu rope 2020 97 1.1.3 Employment 35 1.6 The Reformulation of Sustainable Development as a Problem of 1.1.4 Human Needs and Sustainability 54 Global Climate Change 100 1.2 Social Justice, In e qual ity, and the Social Contract between the 1.7 Broadening Our Awareness of Tipping Points 101 Governed and the Government 56 1.2.1 The Social Contract and the Theory of Justice 56 1.8 The 2008 Financial Crisis and Opportunities for 1.2.2 Operationalizing the Social Contract 61 Reconceptualization of the Growth Paradigm 102 1.2.3 Equality of What? 69 1.9 The Necessity of Solving Problems on a Comprehensive 1.3 Living beyond Our Ecological Means: The Technology Basis 105 Debate 73 1.10 Notes 105 1.3.1 Growth, Technology, and Substitution versus a Steady- 1.11 Additional Readings 106 State Economy 77 1.12 References 106 1.3.2 The Environment and Afﬂ uence: The Environmental Kuznets Curve 80 1.3.3 Technological Optimism 86

t the beginning of the twenty- fi rst cen- sustenance requirements. Telecommunications sys- tury, the world might have been described tems have enabled friends, families, businesses, orga- as one of signifi cant technological prog- nizations, and governments to communicate verbally ress, industrialization, and globalization. and visually across thousands of miles. Combine Our current standard of living is based these technologies with our modern transportation Aon many drivers of modern progress. In developed systems, and we remove the notion of the frontier. nations, energy systems supply power to our homes, Having achieved such progress, why should we places of work, and general environment. When we now be concerned about the future of humankind on become ill, we fi nd an abundance of modern drugs a global scale? One answer is that just over 1 billion that can ease or cure our suffering, maintaining or people have any meaningful access to the resources improving our physical and emotional well- being. and quality of life described above. The rest of the Global fi nancial and commodity markets provide tril- world’s population—some 5 billion people who live lions of dollars a day to supply our investment and in less developed regions—have only a taste of what consumption needs. The agricultural sector, through this standard of living might be like (Durning 1992, mechanization and other technological and biolog- 1994; UNDP 2003). Second, even within the devel- ical advances, has been able to supply our growing oped countries, many people do not have access to —-1 —0 —+1

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an adequate supply of essential goods, ser vices, hous- rapid technological change, which are mutually rein- ing, health care, and other necessities. As a result of forcing and create a set of conditions that shortens the fi nancial crisis of 2008, a signifi cant number of the necessary response time for policy, restricts na- people in the developed world are losing their homes tional policy options, and possibly exacerbates dis- and/or their jobs. Energy supply and use in the face tributional in e qual ity and ecological damage. This of both the uncertainty of future availability and chapter sets out these concerns. global climate disruption are increasingly becoming serious concerns. In e qual ity is leading toward a world 1.1 HUMAN NEEDS of growing disparity both between industrialized and developing nations and among different segments of The major problems of the world today can be the population within those countries. In effect, the solved only if we improve our understanding of communities of less developed regions and poor ar- human behavior. Skinner, About Behaviorism, 1974 eas are held captive to the needs and wants of those who are well- off in industrialized (and some in indus- During the mid-1970s, the idea that the purpose of trializing) nations, whose living and consuming hab- development was to develop things (for example, to its are in many ways condemning billions of people to transform resources into commodities/products) was a lower (material) quality of life. Put simply, if each rejected and redefi ned to focus development on sat- member of the global community were to live the isfying the needs of humankind. lifestyle of the average U.S. or U.K. citizen, holding In 1973, Schumacher published Small Is Beautiful, technology constant, we would need the resources of which challenged the prevailing patterns of develop- somewhere between 1.5 and 8 planet Earths (McLaren, ment and approach to global economics. Schumacher Bullock, et al. 1997; Wilson 2002; WWF 2006). It is (1999, p. 139) rejected the idea that what “is best for clear that a global drive to reach the Westernized view the rich must be best for the poor” and redefi ned the of the good life, without a drastic change in production conventional view of development toward human processes and consumption patterns, will soon bring needs. “Development does not start with goods; it us up against ecological and physical limits and force starts with people and their education, orga ni za tion, us to rethink what we mean by a secure and fulfi lling and discipline. Without these three, all resources re- lifestyle. main latent, untapped, potential” (ibid.). These introductory paragraphs present a highly A year later, the Cocoyoc Declaration built on the simplifi ed view of the world, and there is clearly a ideas of Schumacher and placed basic human needs continuum of positions between those presented. at the center of development efforts, stating that The central argument of this book is that if we are “any process of growth that does not lead to their interested in the well-being of current and future fulfi lment—or, even worse, disrupts them—is a trav- 1 generations, we not only should be concerned for the esty of the idea of development.” * The following year future of the world but also should be actively search- the Dag Hammarskjöld Foundation (1975) articu- ing for new ways to enable individuals, communities, lated a similar position on the objective of develop- and nations to live a sustainable life, what might be ment in What Now: Another Development. It called called a sustainable livelihood. If present trends con- for the “development of every man and woman—of tinue and the structural forces driving them remain substantially unchanged, there is a strong possibility * The infl uence of Schumacher’s work is clearly evident that within a few generations the world will be inca- throughout the Cocoyoc Declaration. Schumacher’s call for a pable of sustaining the human population at an ade- “metaphysical reconstruction” (Schumacher 1999, p. xi)—the quate level of material well- being and health, and need to reconstruct the meaning of ideas such as development, economics, knowledge, wealth, employment, and technology—is that it will lack suffi cient and equitable opportunities present in the Cocoyoc Declaration’s redefi nition of develop- for the realization of human potential. These trends ment in terms of self- reliance. Like Schumacher, the declaration include persis tent (and often growing) inequalities rejects economic development that maintains or increases the between and within nations (including the United disparities between and within countries and argues for economic growth that benefi ts the poorest sections of each society. States) and persuasive evidence that we are living Further, the declaration also rejects what might be called the beyond our ecological and physical means. “developed-nation model” in favor of development that supports Further, the social and po liti cal environment in a nation- state’s societal and cultural norms. In this sense, the declaration asks the international community to respect the di- which policy responses to these trends must be made versity of each country and to accept that there is more than one -1— is a diffi cult one. It is defi ned by globalization and type of development trajectory. 0— +1—

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the whole man and woman—and not just the growth developed nations are much broader than employ- of things, which are merely means” (ibid., p. 5). Fur- ment and must “include the right to preserve their ther, the report emphasized the importance of satis- cultural identity, and their right not to be alienated fying the basic needs of the poor, as well as the from their own society, and their own community” universal “needs for expression, creativity, convivial- (ibid., p. 31). ity, and for deciding . . . [one’s] own destiny” (ibid.). It For developed nations, the focus was not on meet- continues, “Development is a whole; it is an integral, ing basic human needs for food, clothing, and shelter value-loaded, cultural process; it encompasses the per se, but instead on the ecological consequences of natural environment, social relations, education, an overindulgent lifestyle. “Living standards that go production, consumption and well- being” (ibid.). beyond the basic minimum are sustainable only if In 1987, over a de cade later, the World Commission consumption standards everywhere have regard for on Environment and Development (WCED) published long- term sustainability. . . . Perceived needs are so- Our Common Future, which again placed “human cially and culturally determined, and sustainable needs” at the center of concerns for “sustainable” de- development requires the promotion of values that velopment. encourage consumption standards that are within the bounds of the ecologically possible and to which Sustainable development is development that meets all can reasonably aspire” (WCED 1987, p. 44). Inter- the needs of the present without compromising the ability of future generations to meet their own needs. estingly, both the Cocoyoc Declaration and What It contains within it two key concepts: Now: Another Development expand the WCED’s view • the concept of “needs,” in par tic u lar the essen- of human needs (in relation to developed nations) to tial needs of the world’s poor, to which overrid- include the physiological and psychological conse- ing priority should be given; and quences of overconsumption. • the idea of limitations imposed by the state of The preceding discussion provides strong evi- technology and social orga ni za tion on the envi- dence that understanding the fundamental needs of ronment’s ability to meet present and future needs. (WCED 1987, p. 43) humans is essential if we are to develop strategies to transition toward more sustainable forms of develop- The WCED’s conceptualization of sustainable de- ment. velopment, which built on the development vision ar- As a consequence of infl uential publications such ticulated in What Now: Another Development, made as Our Common Future, the current discourse on an infl uential case for “the need to integrate economic sustainable development tends to center on trade- and ecological considerations in decision making” offs among economic development and environmen- (WCED 1987, p. 62). The basic notion was that social tal and social goals. Areas of contention frequently and economic development must not undermine the arise during such discussions because the goals of natural environment on which they are based. Hence each nation, group, or individual—which are based sustainable development “requires views of human on their needs—are often at odds with one another. needs and well-being that incorporate such non- Hence if we are concerned for humankind, then we economic variables as education and health enjoyed need to understand the basic needs that are inherent for their own sake, clean air and water, and the pro- in human nature and also those that are a product of tection of natural beauty” (ibid., p. 53). the socialization of humans. In concert with both the Cocoyoc Declaration A key argument of this book is that the satisfaction and What Now: Another Development, Our Com- of essential needs should drive economic and (demo- mon Future spoke to the different needs of devel- cratic) politi cal systems. Borrowing the language of oped and less developed nations. For developing modern economics, we understand that a rational nations, the “principal development challenge is to person will maximize his or her utility function when meet the needs and aspirations of an expanding . . . making a decision to buy a product or service to sat- population. The most basic of all needs is for a live- isfy a need. It follows, therefore, that societal demand lihood: that is, employment” (WCED 1987, p. 54). is the canonical ensemble of everyone’s individual It follows that employment—“the opportunity to sat- utility function.* With regard to the po liti cal system, isfy . . . aspirations for a better life” (ibid., p. 44)—will lead to the satisfaction of such basic human needs as food, clothing, and shelter. However, some observers * In a developed country, a consumer is a very sophisticated concept, but in a developing nation where no markets exist, expressed concern that the needs of people in less people cannot be called consumers in an or gan i za tion al sense. —-1 —0 —+1

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we satisfy our po liti cal needs by voting for the politi- assumes that the “invisible hand” of the market will cian or po liti cal party that is most likely to support generate outcomes that maximize social welfare.§ In our lifestyle and beliefs. When the votes are aggre- this framework, the role of government should be to gated, the candidate or party whose views align more ensure that markets work and, if necessary, to redis- closely with the needs and wants of society should be tribute wealth out of concern for equity through a elected.* Indeed, for many, free markets and democ- progressive tax system. racy are intertwined.† Many have argued that reliance on the market is This demand- side notion that our needs drive likely to result in overconsumption and environmen- economic and po liti cal systems raises an interesting tal harm due to inadequate consumer information. question about how change is likely to occur in prac- Manno (2002) argues that the present industrial capi- tice. If we make decisions on the basis of our indi- talist system of incentives and disincentives is invari- vidual needs, then it can be argued that a society is ably directed toward increasing levels of consumption. likely to address unsustainable activities only once The environmental problems associated with increas- the individual is negatively affected. Neoclassical ing consumption are further compounded by the fact economics argues that each person should act in his that as commodity chains grow in length and become or her own interest and let the market allocate re- more complex and more international, the spatial and sources accordingly, but this assumes that each per- social distances between production and consumption son is receiving perfect or good information and is are widened (Conca 2002; Princen 2002). The result of able to make informed, rational decisions.‡ It also this distancing effect is that consumers lack the information and incentives to behave in a more sustainable manner even if they wish to do so. However, satisfaction of needs drives even the most primitive economic systems of exchange and commerce. The literature on human needs and their fulfi ll- * This statement assumes that there is suffi cient diver- ment is extensive and beyond the scope of this work.2 sity between the po liti cal candidates to present an individual Here we proceed to the related issue of mea sur ing with a real choice. It also assumes that a large enough proportion of a society will vote that it is possible to gauge societal demand human progress or development and its relationship accurately. to sustainability. † For a critique that challenges this notion, see Soros (1997). Soros (1997, p. 45) argues that “the untrammeled intensifi cation of laissez-faire capitalism and the spread of market val- 1.1.1 The Mea sure ment of (Human) Development ues into all areas of life is endangering our open and demo cratic society.” His main concern lies with the assumption that individ- Perhaps the most common mea sures equated with uals (or consumers) have “perfect knowledge” and that by acting progress or development (or, more accurately, eco- in their own self-interest, they will promote the common (or greater) good. Because our understanding of the world is inher- nomic growth) are gross domestic product (GDP), ently imperfect, promoting laissez- faire capitalism at the ex- gross national product (GNP), and gross national pense of the values and institutions that underlie an open and income (GNI). GDP tries to examine the economy democratic society is what Soros refers to as the “capitalist threat.” His concern is that the free market is changing society’s from a macro perspective by mea sur ing the total out- perception of what is right and wrong by, for example, focus- put produced by a country. It is the value of all fi nal ing on fi nancial success and overlooking how that success was goods and services produced in a partic u lar country achieved. Soros (1997, 1998) argues that a better approach would in a one- year period.¶ GDP is the total annual value be to create an open society that accepts our fallibility—i.e., that we will never have perfect information—and enables different of all goods and services produced within a nation’s ideological perspectives to inform and be reconciled in the po liti- borders, whereas GNP is the total annual value of all cal and social arena. Thus, put simply, an open society is “a soci- goods and services produced by a nation’s residents ety open to improvement” (Soros 1998, p. 24). ‡ A survey by the American Association of Retired Per- (or fi rms), wherever they are located. GNI adds in- sons (AARP 2004) asked whether spending power is all that an individual requires to achieve “consumer sovereignty”—i.e., the successful selection of a product or service. The survey con- segmented markets that often suffer from predatory fi nancial cluded that consumers— aged forty- fi ve and over and who repre- practices. sent 52 percent of consumer spending— are fi nding it increasingly § One criticism of a utility-oriented system is that it does diffi cult to use their spending power effectively because of (1) not incorporate concern for others. People vote their interests in “less time and more decisions”; (2) the “increasing complexity of the marketplace, but people do not express (in the market) their products and ser vices”; and (3) “low levels of fi nancial literacy” valuation of other people, relationships, and global equity and (ibid., pp. 2–3). Hence many are unable to exercise consumer security. The market exists to satisfy individual, not social, wants. sovereignty because they are not receiving good information ¶ Statisticians count only fi nal products in GDP calcula- and, therefore, cannot make informed, rational decisions. To tions, not intermediate ones. Counting intermediate products solve this problem, the AARP calls on business and government would lead the GDP statistics to account for the same output more -1— to improve the quality of consumer information, to increase fi - than once, which would not capture the true production taking 0— nancial literacy, and to increase options for banking and credit in place in the economy. +1—

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come received from other countries (principally div- the GDP analytics (Heilbroner and Thurow 1998, p. idends and interest payments) less similar transfers to 76). Furthermore, GDP is a useful tool in the realm of other countries. The fundamental equation of GDP is international politics because, apart from being an the following: economic mea sure, it also constitutes a useful measure of state power. GDP = C + I + G + (X−M), GNP and GDP were originally developed during where C is consumption, I is investment, G is govern- the 1940s— with the formation of Systems of National ment expenditure, X is exports, and M is imports. Accounts (SNAs) throughout the world—to measure In very broad terms, output can be divided into total economic output (Hodge 1997; Neumayer 2004; two basic forms of production. The fi rst includes the Vanoli 2004). Because total economic output does vast spectrum of goods and ser vices that will be not distinguish between “good” and “bad” forms of bought by house holds and individuals for private use, spending, take forgone opportunities into account for example, books, haircuts, clothing, and health (that is, option values), consider nonmarket goods services. This part of output is what we understand as and ser vices, or account for unpaid work and leisure consumption, and the various goods and services in- activities, it is arguably not an accurate mea sure of cluded are consumer goods (Heilbroner and Thurow economic welfare (Glasser and Craig 1994).* Over- 1998). There are also certain goods and services that all, GDP displays a series of limitations as a mea sure do not end up in the possession of consumers. This of economic success: category includes roads, machinery, airports, ports, • GDP does not effectively capture the distribution and bridges, but also smaller objects such as offi ce of wealth in an economy. GDP per capita simply furniture and typewriters (ibid.). These goods are divides GDP by the population of the country. The investment or capital goods. information that this metric conveys, however, for a The breakdown of GDP is not limited only to country with signifi cant income disparities is rather consumption and investment. It also includes gov- limited. Saudi Arabia and South Korea, for instance, ernment spending and the trade balance. Depending have similar GDPs per capita. Nevertheless, Saudi on whether consumption is private or public, that is, Arabia is a country with widely disparate personal incomes and whose growth has been fueled by its depending on whether the fi nal good is consumed by vast oil reserves, while South Korea’s growth model private house holds or the government, a certain pur- is primarily based on technological innovation, and chase can be counted as consumption or as govern- income disparity is signifi cantly lower. ment spending. The same holds true for investment. • Environmental quality is not included in the GDP Although the GDP equation does not distinguish metric. Environmental issues, however, are central between government consumption and government to any mea sure of quality of life. Broadly, econo- investment and counts everything under government mists classify such issues as “externalities,” which expenditure, GDP statistics in some countries actu- are altogether neglected in GDP calculations. ally do use that classifi cation (Heilbroner and Thurow • GDP does not take into account parts of the “black” 1998). It is interesting that not all government spend- sectors of the economy. Nevertheless, underground ing is included in the GDP calculation. Specifi cally, economic transactions can signifi cantly affect the although transfer payments (such as Social Security quality of life of the citizens of a country, both posi- payments, health care, unemployment protection, and tively and negatively. various subsidies and mea sures of social protection) • GDP does not capture nonmonetary activities, such account for a signifi cant portion of government spend- as unpaid or volunteer work. However, as Putnam, ing, they are not considered an “output- producing” ac- Leonardi, et al. (1993) have prominently described, social capital is central to development and eco- tivity because “no direct production takes place in nomic success. exchange for a transfer payment” (ibid., p. 75). This exclusion perhaps creates the fi rst criticism of GDP, because transfer payments increasingly augment the quality of life of the citizenry. * Liagouras (2005) raises a more fundamental problem Finally, the GDP metric includes the trade bal- with economic measures such as productivity and growth. As developed nations transition toward the ser vice economy, con- ance. GDP accounts for all domestic production that cepts such as productivity (the number of products produced per is sold abroad minus all foreign production purchased unit of input) no longer make sense in a context where quality domestically. A negative trade balance, for instance, and variety take pre ce dence over quantity. Thus our current mea sures of progress/development may not be able to mea sure signifi es a “net stream of purchasing power that wends the real change that is occurring. See Section 3.3.1.2 in Chapter 3 —-1 its way abroad” and that should be subtracted from for a more detailed discussion of Liagouras’s (2005) ideas. —0 —+1

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• Many economic activities included in GDP calcu- such as Washington, DC, and Baltimore and St. Louis lations do not advance “real” economic develop- is higher than in cities such as Bangkok and Cairo” ment. For instance, increasing costs associated with (Ponting 2007, p. 337). Furthermore, Ponting (2007, health care or costs of dealing with human- made or pp. 337–338) underlines that although Sri Lanka had natural disasters or war can signifi cantly boost GDP. a GDP per capita equal to 20 percent of that of Ma- Thus an oil spill can increase GDP because the cleanup costs are accounted for in GDP metrics. laysia, it had a comparable mortality rate, food intake, However, such an incident diminishes well-being and number of doctors per capita, and its literacy rate and GDP-enhancing activities such as fi shing, as appeared to be signifi cantly better. seen in the aftermath of the 2010 BP oil spill in the Given the limitations of GDP/GNP, there have Gulf of Mexico. Costanza, Hart et al. (2009) points been a number of attempts to adjust (or “green”) the out that increased crime, sickness, war, pollution, measure to provide a better indication of progress. fi res, storms, and pestilence are all positive for Two examples are the Index of Sustainable Economic GDP because they boost economic activity. Welfare (ISEW) (Daly and Cobb 1994) and the more • GDP fails to capture any mea sure of the quality of recent Genuine Progress Indicator (GPI) (Talberth, goods sold. A higher volume of low- quality prod- Cobb, et al. 2006; Venetoulis and Cobb 2004). Using ucts sold can perhaps boost GDP; however, low- quality products are typically less durable and can the principle of weak sustainability as a guide,* the thus create more waste and ineffi ciency. ISEW and the GPI fi rst make adjustments to account for unequal income distribution by using the Gini • GDP growth also fails to capture whether a country’s growth path can be sustained in the long run. coeffi cient (see the discussion in Section 1.1.3.1). They For instance, in 2009, Russia required a $70 per then add or subtract a number of different elements barrel price for oil in order to balance its bud get to account for ecological and social benefi ts or costs. (Briançon 2009). Rus sia is one of the key examples Over the past decade, the ISEW and the GPI have of an imbalanced growth model, which can be eas- been developed for a number of nations, including ily disrupted by fl uctuations in energy prices. Australia, Austria, Chile, Germany, Italy, the Neth- • GDP includes no mea sure of societal opportunity erlands, Scotland, Sweden, Thailand, the United King- costs. For instance, costs associated with the reme- dom, and the United States (Neumayer 2004). In each diation of harm (such as natural disasters) divert case, the ISEW and the GPI appear to increase until funding from wealth- generating activities and in- around 1970 or 1980 (depending on the nation), after vestments. which they level off or decline. Over the same period, • GDP does not directly capture the essence of prod- GNP continues to increase, thereby widening the gap uct innovation. It does so only indirectly, through between perceived and actual human welfare. Max- the monetary value of products sold. However, pharmaceutical and technological innovations have Neef (1995, p. 117) referred to these trends as evidence increased the quality of goods—and perhaps life— of his “threshold hypothesis”: “For every society there drastically. For instance, a person can be reached seems to be a period in which economic growth (as in almost any part of the globe at minimal cost, conventionally measured) brings about an improve- and many diseases considered incurable thirty or ment in the quality of life, but only up to a point— forty years ago are now treatable. GDP does not the threshold point—beyond which, if there is more convey any information about such advancements, economic growth, quality of life may begin to dete- even though they constitute main pillars of development. riorate.” Although many see the ISEW and the GPI as • It is also possible that GDP may similarly not re- valuable tools to broaden policy prescriptions beyond fl ect improvements in processes, for example, information and communication technology (ICT) a reliance on economic growth (Clarke 2004; C. Ham- increasing the overall quality of ser vices. ilton 1999; P. A. Lawn 2003; Patterson and Jollands 2004), others point to its methodological problems It is useful to note how these limitations are met and question whether there is in fact a growing gap in practice. Ponting (2007, p. 337) notes that “in the between ISEW/GPI and GNP (Neumayer 2000). Le- 1990s the GDP per head in the United States was 40 vett (1998, p. 297) even goes so far to say that “as soon percent higher than in Italy but life expectancy was lower by almost two years because of the poor [U.S.] * Weak sustainability implies that the total stock of nat- health system.” Moreover, as noted earlier, averages ural, human- made, human, and social capital remains constant tend to hide distributional realities. For instance, “the over time. For this to happen, it is assumed that human-made life expectancy of African Americans is lower than capital can replace natural capital and that human and social -1— capital can be maintained by investment in education, health, the average in China and infant mortality rate in cities 0— and other forms of social ser vices. +1—

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as we try to modify GDP to bring it closer to some makers who have committed their countries to a ‘sus- conception of welfare . . . we are back to subjectivity tainable’ pathway a badly needed, fi rst-approximation in deciding which things need to be added to and sub- indicator to track their progress in this endeavor.” tracted from GDP, and how they should be mea- Those who reject GS as a suitable measure of sus- sured and weighted.” An alternative to the ISEW tainable development also reject the ISEW and the and the GPI that is not as vulnerable to these types GPI on the grounds that they violate the principle of of criticisms is the mea sure of Genuine Savings (GS). strong sustainability. For strong sustainability to be The notion of Genuine Savings (GS) was devel- achieved, there can be no depreciation in the stock oped by K. Hamilton (1994, 2000) while working in of natural capital. Thus human-made capital cannot the World Bank’s Environment Department (K. Ham- replace natural capital, because the former relies on ilton, Atkinson, et al. 1997). GS (also referred to as the latter, and, more important, it is simply not pos- Adjusted Net Savings) is an annual mea sure ment of sible for human-made capital to replace the life- changes in national wealth, where “national wealth” is support systems of the planet (Hueting and Reijnders defi ned as the total amount of natural, human- made, 1998). Strong sustainability also implies that nonre- and human capital (Bolt, Matete, et al. 2002). Thus GS newable resources cannot be depleted. If such a con- does not account for changes in social capital, which straint were applied to modern production systems, it one could argue that the ISEW and the GPI attempt to would most likely force a drastic reconceptualization consider through measures such as “defensive expen- of what is meant by “manufacturing” and “industrial- ditures” and the cost of divorces, crime, and lost lei- ization.” Therefore, its advocates have weakened this sure time (Venetoulis and Cobb 2004). Interestingly, constraint somewhat to allow for systems that mini- the World Bank (WBG 1997) has argued that social mize the use of fi nite terrestrial resources (that is, capital is the “missing link” in the creation of a more low-entropy matter and energy) as part of a “steady- accurate measure of sustainable development. How- state economy” (Daly 1991b). ever, diffi culty in fi nding a suitable indicator for so- Hueting and Reijnders (2004) recognize that it is cial capital has resulted in it not being included in “theoretically” possible to increase production and the GS calculation. consumption and maintain natural capital. However, A positive GS value indicates that the total stock such a scenario would require the creation of tech- of capital is increasing.* A zero GS value indicates nologies that are no change, and a negative value means that total na- (i) suffi ciently clean, tional wealth is in decline. Thus a negative GS pro- (ii) do not deplete renewable natural resources, vides a signal that a nation’s activities are (potentially) (iii) fi nd substitutes for nonrenewable resources, unsustainable. Here, “unsustainable” is defi ned in (iv) leave the soil intact, relation to the Hartwick- Solow weak sustainability (v) leave suffi cient space for the survival of plant principle. A simple formula that clearly describes GS and animal species and is as follows (Dietz and Neumayer 2004, p. 277): (vi) are cheaper in real terms than current avail- Genuine Savings = net investment in produced capital able technologies, because if they are more ex- − net depreciation of natural capital pensive in real terms, growth will be checked. + investment in human capital (that is, education). (Hueting and Reijnders 2004, p. 252) In general, neoclassical economists appear more Given the stringency of these requirements, they comfortable with GS than with the ISEW and the conclude that “meeting all these six conditions is GPI because it is based on the already- familiar sys- scarcely conceivable for the whole spectrum of hu- tem of national accounts and avoids the more subjec- man activities” (Hueting and Reijnders 2004, p. 252). tive elements included in the ISEW and the GPI. In An alternative to the ISEW and the GPI and to addition, Bolt, Matete, et al. (2002, p. 4) argue that GS that attempts to integrate economic and environ- “adjusted net savings [or GS] seeks to offer policy- mental data through a nation’s system of national accounts (SNA) is the System of Integrated Environ- mental and Economic Accounting (SEEA) (UN, EC, * Hueting and Reijnders (2004) list a number of conditions that must hold for a positive GS to signal a weak form of et al. 2003). The SEEA was developed by the United sustainable development. Possibly one of the most important Nations Statistical Commission with support from the conditions is that GS ≥ 0 for the entire time series and not just for International Monetary Fund, the World Bank, the the year of the analysis. Another important condition is that Eu ro pe an Commission, and the Organisation for technology can only substitute nonrenewable resources and can- —-1 not replace nature (Hueting and Reijnders 1998). Economic Co-operation and Development (OECD). —0 —+1

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Although the system was not created specifi cally to development focus on the condition of the environ- address sustainable development—for example, it ment (along with trends). In contrast, others attempt is currently unable to account for the social and in- to measure whether development activities/trends are stitutional dimensions of sustainability (UNDESA likely to be sustainable into the future. The Living 2007)—it does provides a platform to combine eco- Planet Index (LPI) is a good example of the former nomic and environmental data using consistent clas- (WWF, ZSL, et al. 2010). It measures changes in the sifi cations and defi nitions. population of some eight thousand vertebrate spe- The SEEA extends the SNA to include environ- cies, providing an indication of the impact of human mental aspects through a system of satellite accounts.* activity on their habitats. The Environmental Sus- By providing guidance on how environment-related tainability Index (ESI) provides a good example of statistical accounts can be compiled, the SEEA pro- the latter type of index (Esty, Levy, et al. 2005). By vides a mechanism to study interactions between combining a wide range of national-level socioeco- the economy and the environment. For example, the nomic, environmental, and institutional indicators, impact of different production and consumption the ESI calculates the relative likelihood that a na- patterns on the environment can be considered. Con- tion will be able to maintain or enhance its environ- versely, the economic impact of environmental stan- mental condition over the next several generations.3 dards designed to keep economic activity within Another well- known metric created to mea sure ecological limits can be explored. the environmental burden of human activity is the Because the system is based on the SNA, it is be- Ecological Footprint (EF).† Developed by Wacker- lieved that the use of the SEEA will improve the nagel and Rees (1995, 1997), this metric attempts to availability of environment- related data and provide translate human activity into the corresponding eco- a foundation for further development of integrated logical area required to sustain that activity (Wack- indicators (UN, EC, et al. 2003). Although, in theory, ernagel 2001; Wackernagel, White, et al. 2004). More the SEEA can be used to evaluate economic activity specifi cally, an ecological footprint “represent[s] the through a lens of weak or strong sustainability, the biologically productive area required to produce the system’s grounding in economics is likely to promote food and wood people consume, to supply space for the former approach through its attraction to neo- infrastructure, and to absorb the greenhouse gas car-

classical economists. bon dioxide (CO2) emitted from burning fossil fuels” With the growing interest in preserving the integ- (Wackernagel, Monfreda, et al. 2002). Thus the EF rity of the environment, some mea sures of progress/ is based on the idea of environmental carry ing capacity— that is, the total rate at which renewable resources can be produced (or regenerated) and * The SEEA consists of four categories of accounts waste (such as CO ) can be absorbed in sinks. (UN, EC, et al. 2003). The fi rst considers industry-level physical 2 data on the fl ows of materials and energy through the economy. The problem with using the EF as a measure of More specifi cally, the category focuses on the energy and materi- “sustainable” development is that it does not consider als used in production and the subsequent creation of pollutants the interactions between the various system compo- and solid waste. The category also combines physical and mone- nents and thereby ignores important processes that tary fl ows into hybrid accounts that are able to provide information on, for example, the impacts of green house gas emissions. can dramatically affect carrying capacity (Becker 1997; The second category focuses on the existing elements of the Hueting and Reijnders 2004). In addition, van den SNA that relate to the effective management of the environment. Bergh and Verbruggen (1999) argue that the EF fails For example, accounts could track the expenditures of businesses, governments, and house holds on activities intended to to reveal the underlying causes of environmental over- protect the environment. shoot or provide adequate policy solutions to problems. The third category of accounts considers environmental as- Further, the EF ignores international and regional sets in physical and momentary terms. For example, the accounts document the stocks and changes in stocks of natural resources, trade, thereby making an implicit assumption that na- such as forests, water, and minerals. tional and regional self-reliance is a desired objective. The fi nal category of SEEA accounts considers how the existing SNA could be adjusted to account for the impact of the economy on the environment. The approaches used to create these † A similar type of holistic indicator not discussed here accounts are similar to those used in the creation of the ISEW, is maximum suitable yield (MSY). MSY provides a measure of the GPI, and GS. In this category, three types of adjustments can the maximum long-term average yield that can be taken from a be made to existing SNA accounts to consider (1) the costs of re- renewable resource (such as a fi shery or forest). If the maximum source depletion, (2) defensive expenditures (e.g., money spent yield is exceeded, the ability of the resource to renew itself on environmental protection or remediation), and (3) environ- through natural growth/replenishment is affected, reducing its -1— mental degradation (or decline in environmental health). ability to “carry” human activities. 0— +1—

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Notwithstanding these alternative measures of human development is different from economic progress/development, the reliance of governments growth and that great achievements are possible even on GDP/GNP as a gauge of progress led the United without fast growth” (UNDP 2010, p. 49).† Nations Development Programme (UNDP) to cre- The 2010 HDI and its sister indexes— the Inequality- ate an alternative measure of human development— adjusted HDI, the Gender In e qual ity Index, and the the Human Development Index (HDI) (Moldan Multidimensional Poverty Index—represent the latest 1997). evolution in the human development indexes. The The UNDP (1995, p. 11) defi ned human develop- 2010 HDR addresses many of the criticisms levied at ment as a “pro cess of enlarging people’s choices.” In the indexes included in previous reports (Raworth and par tic u lar, it identifi ed three core choices (or oppor- Stewart 2002; UNDP 2010). The most signifi cant tunities) for people: (1) to lead a long and healthy changes in the 2010 HDR are to the calculation of the life, (2) to acquire knowledge, and (3) to have access HDI, the ability to compare HDI values over time— a to suffi cient resources to be able to obtain a decent problem which the UNDP and others had recognized standard of living (ibid.). Other opportunities it de- (Morse 2003; UNDP 2005)—and the development of scribed as being highly valued by society include new sister indexes that have replaced their prede ces- economic, social, and politi cal freedom and oppor- sors. With regards to the HDI, in addition to adjusting tunities for creativity, productivity, enjoying per- the education and income indices that form part of the sonal self- respect, and guaranteed human rights. index, the index is now calculated using the geometric Hence human development was seen to have two mean of its three health, education, and income indi- sides. The fi rst was the establishment of human ca- ces. A change that mea sures how well rounded a coun- pabilities, such as improved health, skills, and knowl- try’s per for mance is across the three indices, avoiding edge. The second was how people put these acquired the pitfalls of using a simple average that allowed for capabilities to use, for example, by being active in perfect substitution across indices (UNDP 2010). cultural, social, and politi cal affairs. The UNDP’s When looking at the HDI values in Table 1.1, those use of the term “choices” in defi ning human devel- countries that have higher HDI values also tend to opment was deliberate because it raised the question have a high level of Gross National Income (GNI) per whether a person has the opportunity to improve his capita. Conversely, those countries with a low HDI or her current situation.* value face severe poverty. Although the UNDP created the HDI in 1975, it The majority of EU member states have a rela- was not published until the (somewhat controversial) tively high HDI rank. Within this group of twenty- Human Development Report (HDR) of 1990 (UNDP seven countries, with the exception of Portugal, it is 1990). Since then, the HDI has undergone several it- the newer EU member states from the Czech Repub- erations over the past two de cades, but the three lic to Bulgaria that have the lowest HDI values. main components of the index have remained intact: A look at several countries in the Middle East re- (1) life expectancy at birth; (2) educational attainment; veals a wide range in HDI values. Israel, the UAE, and (3) income (UNDP 1995; UNDP 2010). During Qatar, Kuwait, and Saudi Arabia have HDI values its existence, the HDI has served as an important comparable to those of several EU states, whereas measure of development in contrast to GDP/GNP. Yemen, for example, falls within the bottom quarter Its role was reaffi rmed in the UNDP’s 2010 HDR of all HDI rankings. A similar range of HDI values which argued that “the evidence [presented in the exists for the selected Latin American and Carib be an report] does cast doubt on whether economywide in- states, although a comparison of the GNI per capita come growth is instrumental in furthering health and values reveals that these countries tend to be poorer education at low and medium levels of human devel- than a similarly ranked middle east countries— for ex- opment. . . . Using a new dataset and analysis, our re- ample, compare Kuwait with Argentina. sults also confi rm a central contention of the Human Finally, the selected African countries embody Development Reports (HDRs) from the outset: that a signifi cant proportion of the lowest HDI values. At face value, the best place to live from a human

* Section 1.2.3 will take a more detailed look at Am- artya Sen’s (1992) discussion of ine qual ity. In partic u lar, it will † See Section 3.4 in Chapter 3 for a discussion of alterna- focus on the difference between achievement and freedom to tives to the northern growth model, especially Section 3.4.2 that achieve, and on the concept that one’s capability to achieve rep- discusses the case studies of the state of Kerala— which has one resents the opportunity to pursue his or her objectives. of the highest HDI values of any state in India— and Costa Rica. —-1 —0 —+1

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c .. 51 51 53 53 71 57 73 52 74 43 43 59 78 78 97 76 88 88 62 92 89 44 64 66 69 131 114 122 105 103 102 HAPPY HAPPY PLANET countries) (Out of 143 INDEX (HPI) RANK (2009) RANK a .. 7.1 7.1 7.1 7.1 7.3 7.7 8.1 8.1 7.8 5.8 7.2 7.8 7.9 6.7 7.6 5.6 7.4 8.2 6.9 6.8 8.0 8.0 (0– least 10– most satisfi ed, satisfi satisfi ed) satisfi (2006– 2009) OVERALL LIFE SATISFACTION SATISFACTION a ...... 5.5 5.3 5.7 6.1 7.2 5.8 3.9 5.6 5.6 8.2 4.9 4.9 4.9 4.2 4.6 6.4 4.6 4.0 (2006) (Hectares per capita) ECOLOGICAL FOOTPRINT OF CONSUMPTION a (2010) GROSS 25,857 21,658 22,678 37,056 29,619 35,087 17,168 34,873 27,580 21,962 51,109 21,004 29,661 33,872 39,849 36,404 34,341 81,011 35,308 58,810 40,658 36,936 33,078 INCOME (GNI) PER PER (GNI) NATIONAL NATIONAL U.S.$ 2008) CAPITA (PPP a 7 ...... 0 0 0 deprivations) deprivations) (2000– 2008) (2000– (% of population POVERTY INDEX suffering multiple MULTIDIMENSIONAL

a .. 1 5 3 7 2 8 4 9 6 11 15 31 17 35 14 19 23 32 27 39 29 24 INDEX GENDER GENDER countries) (out of 138 (out of 138 (Rank; 2008) IN E QUALIN E ITY a, b a, 1 1 5 5 3 3 2 2 2 8 4 4 6 0 0 0 .. .. –1 –3 –3 –5 –2 2010) ADJUSTED ADJUSTED in HDI rank; HDI (Change INEQUALITY- a 0.815 0.851 0.855 0.812 0.818 0.871 0.841 0.852 0.891 0.938 0.810 0.885 0.885 0.874 0.863 0.867 0.895 0.854 0.872 0.828 0.849 0.866 0.890 (2010) HUMAN INDEX (HDI) DEVELOPMENT DEVELOPMENT a 1.3 5.4 7.6 5.3 5.5 2.0 8.4 4.6 4.9 9.3 0.5 0.9 0.4 0.0 11.2 16.7 10.7 10.4 45.3 82.1 62.6 60.1 2010) (Millions; (Millions; POPULATION POPULATION d d d Slovakia Slovenia United KingdomCzech Republic Malta 61.9 Cyprus Estonia Luxembourg Austria Italy Greece Denmark Spain AustraliaNew ZealandUnited StatesIrelandLiechtensteinNetherlandsCanada 4.3Sweden 21.5 317.6Germany 0.0 16.7 4.6 0.907 0.937 0.902 33.9 0.891 9.382.1 0.890 0.895 ..9 – 0 0.888 0.885 0.885 .. 1 –3 37 25 –2 18 4 3 .. 29 1 16 ...... 7 3 ...... 25,438 47,094 38,692 .. .. 81,011 33,078 40,658 9.0 7.6 38,668 .. 35,308 36,936 .. 4.6 8.2 5.8 7.9 7.8 7.9 4.0 .. 7.8 8.1 .. 8.0 7.2 7.9 .. S e l e cCountries t e d E u r o pNorway e a n France Finland Belgium Ireland Liechtenstein Country Countries Ten Top by HDI Norway 4.9 0.938 0 5 .. 58,810 4.2 8.1 Netherlands Sweden Germany Switzerland a -1— 31 29 26 28 33 35 34 24 25 23 22 19 20 2 3 4 5 6 7 8 9 10 1 14 16 18 5 6 1 7 9 10 13

0— UNDP DEVELOPMENT INDEXES THE SELECTED FOR 1.1: HAPPY PLANET THEIR COUNTRIES INCLUDING TABLE INDEX RANKING (HPI) HDI RANK +1—

561-45401_ch01_8P.indd 28 6/23/11 9:49 AM 1 9 6 15 13 35 33 81 18 41 25 23 16 83 77 47 36 50 67 82 24 70 86 46 49 98 20 90 123 101 128 ontinued) (c 6.5 2.4 4,357 36 96 –17 0.643 4.7 0.815 .. 45 1 58,006 10.3 7.3 10.0 Bolivia QatarKuwait 1.5 3.1 0.803 0.771 .. .. 94 43 .. .. 79,426 55,719 9.7 7.9 6.7 6.6 .. PakistanUnited Arab Emirates 184.8Saudi ArabiaIran 0.490TurkeyYemen 26.2 1 75.1 75.7 0.752Argentina 24.3PanamaMexico 112Costa Rica 0.702Brazil 0.679Venezuela 0.439 ..Ec ua dor 40.7 51 3.5 110.6 .. 4.6 1 –2 128 0.775 29.0 195.4 13.8 0.755 0.750 2,678 0.725 98 0.696 138 77 0.699 –11 .. 0.695 –20 –86 0.7 – –15 –1 60 .. 53 8 24,726 3 81 68 51 5.4 80 64 11,764 3 2,387 3.5 13,359 86 .. 4 .. 2.7 9 .. 14,603 1.0 2.8 7.7 2 13,347 13,971 10,870 10,607 5.6 11,846 3.0 4.8 5.5 7,931 3.2 3.2 2.7 .. 2.3 7.1 1.9 7.8 7.7 8.5 7.8 7.6 6.4 Selected Middle East Countries Israel 7.3Selected Latin American and Ca rib be an Countries 0.872Chile –11 17.1 28 0.783 .. –10 27,831 53 5.4 .. 7.1 13,561 3.1 6.3 Colombia 46.3 0.689 –18 90 9 8,589 1.9 7.3 IndonesiaIndia 232.5 1,214.5 0.600 0.519 9 0 100 122 21 55 3,957 3,337 .. 0.8 5.7 5.5 MalaysiaChinaThailand 27.9 1,354.1 68.1 0.744 0.663 0.654 .. 0 5 50 38 69 .. 12 2 13,927 7,258 8,001 .. 1.8 1.7 6.6 6.4 6.3 Latvia 2.2 0.769 2 22 0 12,944 4.6 5.4 RomaniaBulgaria 21.2 7.5 0.767 0.743 3 5 49 36 .. .. 12,844 11,139 2.7 3.3 5.9 4.4 Selected Asian Countries Singapore 4.8 0.846 .. 10 .. 48,893 4.5 6.7 PortugalPolandLithuania 10.7 38.0 3.3 0.795 0.795 0.783 –1 1 1 21 26 33 ...... 22,105 17,803 14,824 4.4 3.9 3.3 5.9 6.5 5.8 Hungary 10.0 0.805 3 34 1 17,472 3.2 5.7

—-1 38 47 125 32 55 70 83 133 46 54 56 62 73 75 77 15 45 79 95 108 119 57 89 92 48 50 58 27 40 41 44 36 —0 —+1

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c 12 96 133 118 137 119 125 132 143 136 142 129 124 107 120 100 HAPPY HAPPY PLANET countries) (Out of 143 INDEX (HPI) RANK (2009) RANK a (0– least 10– most satisfi ed, satisfi satisfi ed) satisfi (2006– 2009) OVERALL LIFE SATISFACTION SATISFACTION a (2006) (Hectares per capita) ECOLOGICAL FOOTPRINT OF CONSUMPTION a (2010) GROSS INCOME (GNI) PER PER (GNI) NATIONAL NATIONAL U.S.$ 2008) CAPITA (PPP a deprivations) deprivations) of population (2000– 2008) (2000– suffering multiple POVERTY INDEX (% MULTIDIMENSIONAL

a INDEX GENDER GENDER countries) (out of 138 (out of 138 (Rank; 2008) IN E QUALIN E ITY a, b a, 2010) ADJUSTED ADJUSTED in HDI rank; HDI (Change INEQUALITY- a (2010) HUMAN INDEX (HDI) DEVELOPMENT DEVELOPMENT a 4.5 0.315 3 – 132 86 758 1.4 4.6 2010) (Millions; (Millions; POPULATION POPULATION (continued) Zimbabwe 12.6 0.140 0 105 38 176 1.0 2.8 Congo 67.8 0.239 0 137 73 291 0.7 4.4 Niger 15.9 0.261 2 136 93 675 1.7 3.8 Central African Republic MaliMozambique 23.4 13.3 0.284 0.309 –2 0 111 135 80 87 854 1,171 .. 1.9 3.8 3.8 Ethiopia LeoneSierra 5.8 85.0 0.317 0.3281 – 1 125 .. 81 90 809 992 0.8 .. 3.6 4.2 Tanzania 45.0 0.398 9 .. 65 1,344 1.0 2.4 RwandaMalawi 10.3 15.7 0.385 0.385 3 8 83 126 81 72 1,190 911 .. .. 4.2 6.2 South AfricaKenyaGhanaSenegal 50.5 40.9 24.3 12.9 0.597 0.470 0.467 0.4111 – –1 7 0 82 117 114 113 3 60 30 67 9,812 1,628 1,385 1,816 2.7 .. 1.6 1.2 5.0 3.7 4.7 4.5 Country Selected African Countries Egypt 84.5 0.620 –7 108 6 5,889 1.4 5.8 a Non- EU memberEU state. Non- Change in rank is based on countries for which is calculated. IHDI Source: (2010). UNDP -1— Source: Abdalla, Thompson, et al. (2009). a b c d 168 167 159 160 165 157 158 148 152 153 110 128 130 144 101 169

0— 1.1: TABLE HDI RANK +1—

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development perspective would appear to be Nor- The GII (column 6) measures women’s disadvan- way and the worst place would be Zimbabwe. tage in terms of (1) reproductive health (using a ma- In addition to the main headline indexes, 2010 ternal mortality rate and adolescent fertility rate); HDR provides a suite of supplementary indicators (2) empowerment (using parliamentary represen ta- that reveal the complexity of human development. tion and attainment at secondary and higher educa- A close review of these data— covering areas such as tion); and (3) the labor market (using a labor market infrastructure, energy usage, ecological footprint, participation rate). The GII replaced the Gender De- subjective- welling and happiness, employment, em- velopment Index (GEM) and Gender Empowerment powerment, freedom, community safety, and fi nan- Measure (GEM) that were in use since 1995. Table 1.1 cial fl ows— shows that a country with a high HDI shows that nine of the top ten nations in terms of the might have less freedoms and be on a unsustainable GII are located in Europe; Singapore is ranked 10th. pathway, whereas the opposite might be true for a Perhaps somewhat surprisingly, the United States is country with a low HDI. Hence, a broad viewing of ranked 37th. the data is essential. Finally, the MPI (column 7) mea sures multiple Table 1.1 presents (where applicable) country data (and overlapping) deprivations at the house hold level relating to the HDI, the Inequality-adjusted HDI in the dimensions of health, education, and standard (IHDI), the Gender In e qual ity Index (GII), the Mul- of living. The ten component indicators used in the tidimensional Poverty Index (MPI), and several other MPI have equal weights within their dimension, and mea sures such as ecological footprint, the overall each dimension is given an equal weight of one third. life satisfaction of a country’s people, and the New A house hold is considered to be multidimensionally Economics Foundation’s Happy Planet Index (HPI), poor if it is deprived in two of the ten component indi- which is discussed later in this section. cators. The MPI replaced the Human Poverty Index Since the HDI does not reveal disparities in mea- (HPI) that was in use since 1997. Table 1.1 shows the sures of human development that may exist across percentage of the population in each country that is people within a nation, the IHDI adjusts the HDI to classifi ed as being multidimensionally poor. As might take these inequalities into account. The IHDI effec- be expected, the extent of multidimensional poverty tively discounts each of the three dimensions of the is the greatest in developing regions, especially in sub- HDI based upon the extent of in e qual ity experienced Saharan Africa where around 65 percent of the popu- in a dimension— for example, signifi cant income in e- lation falls into this classifi cation (UNDP 2010). quality within a nation would reduce the value of the The ecological footprint and overall life satisfac- HDI’s “income” index. If no inequalities existed tion data (columns 9 and 10) in Table 1.1 further en- within a nation, the HDI and IHDI would be the rich the picture of human development in the countries same. Thus, the HDI can be considered as a measure shown. It is evident that nations with higher HDI val- of “potential” human development, whereas the IHDI ues also have larger ecological footprints, whereas na- measures the “actual” level of human development tions with lower HDIs values have smaller ecological (UNDP 2010). The IHDI- related data in Table 1.1 footprints. This is primarily because countries with shows the number of positions a country would move low HDI values are typically emerging or developing up or down the HDI ranking once inequalities have economies that have yet to create signifi cant indus- been taken into account. For example, the U.S. HDI trial sectors and domestic consumer demand. It also rank (column 5) falls by nine positions once inequali- highlights the burden developed nations place on the ties have been taken into account. The main reason for environment through their production systems and this decline in rank is income in e qual ity, which reduces consuming habits. With regards to the overall life the income index for the HDI by 24 percent.* Table satisfaction measure, countries with the lowest HDI 1.1 also shows that the HDI rank of Israel, Chile, Ar- values also have the lowest levels of overall life satis- gentina, Panama, Brazil, Colombia, and Bolivia drop faction; however, the difference in life satisfaction be- by more than ten positions, primarily as a result of tween countries with medium to high HDI values is signifi cant income in e qual ity within these countries. harder to distinguish. For example, people within The latter three countries also have high education Costa Rica, which is ranked 62nd in terms of its HDI and health inequalities among their people. value, have a greater level of overall life satisfaction than people in any other nation. In Colombia, which is ranked 79th in terms of its HDI value, people have * See Section 1.1.3.1 for a detailed discussion of the growing income in e qual ity in the United States and other re- the same level of overall life satisfaction than people —-1 gions and its major causes. in Germany, which is ranked 10th in terms of its HDI —0 —+1

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value. Thus, a broad perspective of human develop- eral consensus that poor people are less happy than ment is essential when viewing progress through the wealthy people and that wealthy nations tend to be lens of sustainable development. After all, sustainable the happiest, although wealthy societies have not development is a multidimensional concept and will grown in SWB (Diener and Oishi 2000; Kenny 1999). therefore require multiple mea sures to capture its A new measure of development that combines many- sidedness. subjective well- being (that is, self- reported life satis- The UNDP’s (2010) HDR refl ects this view in the faction), life expectancy, and the EF is the Happy breadth of all emasures it presents for comparison. Planet Index (HPI) (Abdallah, Thompson, et al. For example the inclusion of subjective well-being 2009); see the last column in Table 1.1: and happiness measures is a step forward, one that is Happy Planet Index (HPI) = (Life Satisfaction × Life perhaps overdue (Diener and Suh 2000). Expectancy)/Ecological Footprint The measure ment of subjective well-being (SWB) and happiness and their relationship to income have Rather than attempting to revise existing mea sures been the focus of a substantial amount of research by such as GDP/GNI or the HDI, the HPI was created psychologists and social scientists over the past thirty to combine fundamental inputs (that is, planetary re- years (Argyle 2002; Diener and Oishi 2000; Diener source consumption) and ultimate ends (that is, a long and Suh 1997; Diener, Suh, et al. 1997; Inglehart and and happy life) to measure the ecological effi ciency of Klingemann 2000; Kenny 1999; Layard 2005; Oishi, delivering human well- being (Abdallah, Thompson, Diener, et al. 1999).* In the context of sustainable et al. 2009). The index rejects GDP/GNI as a mea sure development, measur ing whether people feel happy of development/progress and shifts the focus to human and satisfi ed with life is also seen as a good proxy for well- being and environmental sustainability. assessing whether they are living in accord with hu- The comparison of a country’s HDI and HPI man nature (Kellert and Wilson 1993). In general, rankings in Table 1.1 highlights some interesting the relationship between income and SWB tends to points. For example, Norway has the highest HDI follow the same trend observed for income and life ranking, but it is ranked 88th by the HPI. Similarly, expectancy. First, there is a dramatic increase in well- the United States has an HDI rank of 4, but an HPI being up to a certain income (which is around $10,000 rank of 114. The reason for this dramatic difference per capita for SWB), after which increases in income in their rankings on these two indexes is the large have only a limited effect on improving a person’s ecological footprint of these (consumer or industri- well-being, although there is a slight increase (Ingle- alized) societies. Indeed, a closer look at those na- hart 2000; Inglehart and Klingemann 2000). A note tions with a high GNI per capita and a HDI ranking of caution is added here: this outcome does not mean show that these countries all have relatively low HPI that unlimited wealth will not affect an individual’s rankings. Conversely, those nations with a more well-being. There is a substantial amount of research modest GNI per capita (and hence a smaller ecologi- that shows that if an individual focuses on materialis- cal footprint)— such as many Latin American and tic pursuits, his or her well- being is likely to decrease Ca rib be an states— where life expectancy fl uctuates (Kasser 2002). However, there appears to be a gen- around the mid seventies and people tend to be quite satisfi ed with life have high HPI rankings. The top 10 countries in the HPI ranking (ordered from 1 to * Diener and Suh (2000) highlight a few important meth- 10) are Costa Rica, the Dominican Republic, Jamaica, odological issues relating to the mea sure ment of SWB that are Guatemala, Vietnam, Colombia, Cuba, El Salvador, worth mentioning. First, initial measure ments of SWB do seem to be comparable across individuals and societies. Second, the Brazil, and Honduras. The low GNI per capita (and translation of the questions used to measure SWB into different ecological footprints) of many African countries, languages does not seem to affect the research results. However, combined with low life expectancy and levels of life further research is called for. Third, even though there have been some positive results, there are still many methodological prob- satisfaction, mean that these nations tend to rank lems associated with mea sur ing well- being across cultures. For poorly in the HPI. The bottom ten countries in the example, the numeric scales used in the questionnaires might be HPI ranking are all found in sub- Saharan Africa. interpreted differently by different cultures. The selection of an indicator (or index) to measure predictor variables such as free- When the HPI is considered alongside mea sures dom or equality is extremely diffi cult. Also, it is not yet clear such as the HDI, it reveals the poor environmental what type of information each culture is using when it is respond- per for mance of industrialized nations. It indicates ing to the questions. Although there are clearly problems with that the (typically) long and happy lives of people in measur ing SWB, the initial results presented by Diener and Suh -1— (2000) are informative. these regions are grounded on an environmentally 0— +1—

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unsustainable lifestyle. It also reveals those nations, relation to other nations. Now that the differences in such as Costa Rica, that provide an example of what a consumption are conspicuously visible, poverty and more sustainable lifestyle might look like (see the dis- its effect on culture become important issues—that is, cussion of Costa Rica in Section 3.4.2 in Chapter 3). people “feel” eco nom ical ly and materially poor. If we For each of the mea sures or indexes discussed assume that the satisfaction of needs drives eco- here, it is possible to fi nd supporting or discrediting nomic and po liti cal systems, one quickly realizes that arguments. On the one hand, proponents argue that if basic human needs become confused with material- the informative power of indexes outweighs any po- istic wants on a global scale, the rapid expansion of tential methodological or subjectivity problems em- the throughput society could lead to serious environ- bedded in their calculation. The politi cal support mental consequences. given to GDP/GNI as the mea sure of progress (and A throughput (or high-waste) society, by defi ni- human welfare) is often cited as an example of the tion, depends on increasing rates of consumption need to present countermea sures that mea sure real (or throughput) (Daly 1996; Princen, Maniates, et al. progress toward sustainable development. On the 2002). To the extent to which we are losing jobs as a other hand, opponents of indexes argue that the sub- result of production effi ciencies (or innovation), the jective selection of indicators (from one or more do- only way to create more jobs is to expand the econ- mains of sustainable development) that are adjusted omy and increase throughput. A critical question, and aggregated into a single value makes the fi nal therefore, is whether basic human needs drive our output diffi cult to use in a meaningful way (Becker throughput society, or whether this drive stems from 1997). Further, combining indicators that measure a conditioned response. both short- and long- term concerns and pro cesses In neoclassical economics, human needs/wants hides diffi cult decisions associated with intergenera- drive systems of exchange and markets. Although tional equity. “There is undeniably a serious confl ict many economists might argue that consumer between the wishes regarding production in the short demand—derived from the purchasing habits of term and the wishes not to jeopardize the living con- consumers— is an accurate repre sen ta tion of what ditions of future generations. By adding elements people desire, they often forget to mention the $277 refl ecting these confl icting goals together in a sus- billion (2006 data) that corporations spend annually tainability indicator, the danger arises that inevita- on advertising with the sole purpose of creating de- ble choices are concealed. This hampers an open mand (U.S. Census Bureau 2010, Table 737). Hence a decision-making process in the course of which the concern is that the world of industrialization and inevitable sacrifi ce of either less sustainability or— commerce has made the distinction between basic hu- more likely—less production in the short run is not man needs and wants unclear (Michaelis 2000). In- hidden” (Hueting and Reijnders 2004, p. 254). deed, one could argue, as Galbraith (1958) did, that if It seems clear that although all the indexes relating a want is to be urgent, it should be the result of a need to development have some form of shortcoming, they that originates within the individual. This position serve a valuable role in raising public awareness about was later supported by economist Nicholas Georgescu- unsustainable development patterns. However, be- Roegen (1971, p. 324), who argued that “only those cause indexes do not reveal the processes that are goods and services an individual can enjoy personally driving unsustainable trends, it would seem unwise infl uence his satisfaction.” If a want is externally con- to base a decision- making pro cess solely on them. trived, it cannot be an urgent (or basic) need. Hence Having introduced several indexes that can be used satisfying that want will occur only through behavior to measure (human) development, we now turn to the that is led by extrinsic motivation, which is not likely challenges raised by the predominant laissez-faire to result in the enhancement of an individual’s well- (that is, market- oriented) approach to development being.* and how this approach can affect human well-being.

* The idea that capitalist economies have been success- 1.1.2 Consumption and Well- Being ful in achieving intermediate goals of increasing material wealth, but that this has been accomplished at the expense of underlying As globalization proceeds, one could argue that feel- human values [and the environment], is becoming more widely ings of deprivation are creating a motivation for bet- accepted by economists (Ackerman, Kiron, et al. 1997). Indeed, the emerging fi eld of ecological economics is a good example of a ter material standards of living. Until we reached the branch of economics that is attempting to integrate human values era of global media, people did not feel deprived in into economic analysis (Krishnan, Harris, and Goodwin 1995). —-1 —0 —+1

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The inference from these remarks is that in pro- essential to their happiness (Jacobson and Mazur moting economic growth, companies entice people 1995). to buy their services or products. The primary way Similarly, Sanne (2002) argues that a focus on the for the value or benefi t of a product or ser vice to be social and psychological factors of consumer behavior conveyed to the consumer is through advertising. M. neglects to consider how producers and businesses R. Smith (1994, p. 13) describes how American adver- create consumption to satisfy their own interests.4 It tising “became the instrument by which big business, also neglects the role of the state and how business in need of ever-expanding markets for its mass- has a tendency to co- opt or lobby government for produced products, imprinted instrumental values— market conditions that favor consumption. This lat- and with them, the ethos of mass consumption— on ter issue creates what Sanne (2002, p. 282) calls the populace.” Hence it can be argued that advertis- “structural lock-in effects.” These effects are the fol- ing leads to producer-created demand—that is, what lowing (in order of impact): we need/want is conditioned by advertising. Galbraith 1. the pattern of work- and- spend promoted by (1967) provides a succinct example of this idea: “Were naturalising paid work as “full time” with con- there but one manufacturer of automobiles in the tinuous, life-long occupation supported by a United States, it would still be essential that it enter legal structure of social insurance, eligibility to extensively on the management of its demand. Other- social benefi ts, etc. wise consumers, exercising the sovereignty that would 2. the making of a consumer culture where mar- be inconsistent with the company’s planning, might ketable goods are forwarded as the means to resort to other forms of transportation and other ways satisfy not only material needs but also needs of of spending their income” (p. 207). Further, Soros social stratifi cation* and cultural identifi cation† (1997) argues that the notion of producer-created de- 3. the promotion of individual means of transport, mand has established money as the mea sure that iden- in par tic u lar cars, which presuppose heavy in- tifi es a product or an individual’s value: “Advertising, vestments in road infrastructure, a classical aim marketing, even packaging aim at shaping people’s of much business lobbying preferences rather than, as laissez-faire theory holds, 4. new communication infrastructures which force merely responding to them. Unsure of what they stand a technology shift on consumers. (Sanne 2002, for, people increasingly rely on money as the criterion p. 282) of value. What is more expensive is considered better. The value of a work of art can be judged by the price Sanne (2002) argues that governments and busi- it fetches. People deserve respect and admiration be- nesses tend to counter incentives to curb consump- cause they are rich. What used to be a medium of ex- tion with deference to consumer sovereignty. This change has usurped the place of the fundamental position passes the responsibility to the consumer, values, revising the relationship postulated by eco- whose purchasing behavior then becomes subject to nomic theory” (ibid., p. 52). moral inquiry. The basic argument is that fi rms Michaelis (2000) takes the concept of producer- would provide environmentally friendly products if created demand one step further by extrapolating it consumers demanded them. Hence we must fi rst ad- to other areas. In par tic u lar, she asks whether a gov- dress the values that support present lifestyles by ernment’s failure to regulate advertising may inhibit educating consumers about the effects of their be- our ability to satisfy our intrinsic need for autonomy. havior. The problem is that there is a fi ne line between “The market economy contains structural incentives education and persuasion or coercion; the latter is an for businesses to market conceptions of the good life that support sales of their own products. Many other * The differentialist view of consumption is that of so- circumstances, including social norms, work culture, cial stratifi cation, i.e., the use of wealth to conspicuously con- and infrastructure constraints, provide strong pres- sume, to display artifacts of taste or expense commensurate with sures for individuals to adopt par tic u lar conceptions one’s position in society (Sanne 2002). See also Thorstein Ve- of the good life. Hence, by adopting a hands- off ap- blen’s (1994 [1902]) classic work The Theory of the Leisure Class, which introduced the phrase “conspicuous consumption.” proach, governments may actually be failing to pro- † The culturalist view of consumption connects the indi- tect an important freedom” (Michaelis 2000, p. 26). vidual to her own self-understanding (Sanne 2002). Consump- A major problem with the current form of advertis- tion is seen as a refl ection of the self; what you buy supports your understanding of who you are. Both differentialist and cultural- ing is that people start to live their lives believing ist views are part of utilitarianism because in both cases the ob- -1— that a high level of income and material wealth are jective is to increase overall well- being. 0— +1—

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infringement on an individual’s freedom to choose. The psychological and environmental problems as- But one could argue that an individual’s freedom to sociated with advertising and the throughput (or con- choose is affected by advertising targeted directly at sumer) society have been well documented (Brown our insecurities. A reliance on consumer sovereignty 1981; de Graaf, Wann, et al. 2002; Diener and Suh is further complicated by the fact that a growing 2000; Durning 1992, 1994; Goodwin, Ackerman, et al. number of consumers in America seem paralyzed by 1997; Kasser 2002; Layard 2005; Princen, Maniates, an inability to speak out against materialistic tenden- et al. 2002; J. C. Ryan and Durning 1997; Schlosser cies because this would go against our core belief that 2002; P. C. Stern, Dietz, et al. 1997). However, calls people should have the freedom to make their own for public recognition of the potential problems with decisions (Harwood Group 1995). Hence people a market economy have failed to materialize. One turn away from questioning their behavior and that possible reason for this is that we are so entrenched of others, undermining any argument that society in the current economic paradigm that we are unable will act responsibly if it is provided with suffi cient in- to recognize that we are in some way addicted to con- formation about the problems associated with its suming (Ehrenfeld 2004). Although the consumption consumption. Thus one pathway to a sustainable fu- of products and services clearly improves our quality ture may be to counter the pattern of work-and- spend of life, we should be aware that our perception of the by establishing shorter working hours or building in good life has been and is being manipulated by mar- work arrangements that anticipate more holidays and ket actors whose primary incentive is profi t. Hence leisure time (Kenny 1999; Sanne 2002).* The notion the line between consumption that satisfi es intrinsic here is that with less income and fewer working and extrinsic needs is becoming blurred. hours, we will consume less and be able to enjoy more In conclusion, this section asks whether focusing leisure time. However, there are those who question on industrialization and commerce is likely to en- whether more leisure time would lead to a better qual- hance overall human well- being. It seems clear that ity of life: “The psychological underpinnings of capi- relying solely on economic growth (and consump- talism have enabled the leisure time which technology tion) to advance human well- being is too simplistic affords us to be converted into yet another opportu- and that government has an important role to play in nity for the consumption of unnecessary goods. Inas- shaping the institutional structure of the economy much as capitalism has ‘freed’ the worker from the to better accommodate nonconsumption solutions to worst excesses of the labour pro cess, it has sought to human needs (Kenny 1999; Manno 2002; Michaelis occupy his free time with ‘compensatory needs’ that 2000; Sanne 2002). Thus there is a need to consider bring neither happiness nor personal fulfi llment” innovative public policies to ensure that noncom- (M. Redclift 1984, p. 53). mercial values—such as the benefi ts received from family and community life— form an integral part of

* In 1998, France’s ruling left-wing coali tion introduced modern society. a law to reduce the legal workweek from thirty- nine to thirty- fi ve hours for most employees, effective January 1, 2000. The objectives of the law were to create jobs, enhance competitiveness, and 1.1.3 Employment establish a better balance between work and personal life (Ministère de l’emploi, de la cohésion sociale et du logement Work and the workplace are essential elements of 2002). The basic idea was that capping working hours would force industrialized and industrializing economies. Work employers to hire more workers to cover any loss in productivity. is combined with physical and natural capital to pro- However, since the law was enacted, it has failed to deliver on its promises: unemployment remains high and productivity has de- duce goods and services. The workplace is where clined. A study by Estevão and Sá (2006) concluded that the law the comparative advantages of workers and owners/ also caused an overall decline in welfare. Their conclusion was managers create a market for exchange of talents based on subjective mea sures of satisfaction with work hours, an increase in the number of workers holding two jobs, and data indi- and assets. Signifi cantly, work is the main means of cating that workers tried to circumvent the law by transitioning distributing wealth and generating purchasing power from large to small fi rms with fewer than twenty people. These in dynamic national economic systems. Beyond mar- small fi rms were required to implement the thirty-fi ve- hour week kets, work provides both a means of engagement of by January 1, 2002. There was also concern that the law would reduce working conditions by, for example, increasing the amount people in the society and an important social envi- of staggered hours worked, with a corresponding increase in task- ronment and mechanism for enhancing self-esteem splitting and hand-over procedures (Bulard 1999). Given con- and satisfaction with life.5 cerns such as those mentioned here, the current administration has introduced greater fl exibility into the laws to (effectively) re- The following two sections address the issues of establish a thirty- nine- hour workweek in the private sector. income inequality— both between and within nations —-1 —0 —+1

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(specifi cally within the United States)—and the im- assessment of between-nation income ine qual ity portance of employment beyond the creation of pur- (Wade 2001). chasing power. Although more research is needed to identify better ways to adequately compare the income of dif- 1.1.3.1 Income and Wage In e qual ity ferent nations, Firebaugh (2003) and Ghose (2003) provide informative analyses of how the spread of in- Since the early 1990s, the Human Development Re- dustrialization and trade liberalization during the last port and development indexes have highlighted the part of the twentieth century has led to a correspond- disparities between the developed and developing re- ing decrease in in e qual ity between nations during this gions of the world. As the reports and indexes make period. Their analyses are based on nations that are clear, the record is mixed: spectacular development weighted by population, which both authors argue is successes in the years since World War II coexist with a more accurate way to measure global income ine- per sis tent human suffering and wasted potential. qual ity. Although many nations have experienced sub- In contrast to the debate on between-nation in- stantial economic growth since the 1960s, it is un- come in e qual ity, there is more agreement on the clear whether this growth has increased or reduced trends of within-nation income and wage ine qual ity between-nation income ine qual ity. The confusion or wage dispersion. For example, there is a strong lies in how national incomes—measured using gross consensus that since the 1970s both income ine qual- domestic product (GDP) or gross national product ity and wage in e qual ity have increased in the United (GNP)— are compared.* States (Barnet 1993; Bernstein and Mishel 1997; Two common ways to convert GDP or GNP into Cornia, Addison, et al. 2004; Firebaugh 2003; R. B. a single currency are to use foreign exchange rates Freeman 1996; Gottschalk and Danziger 2005; Grubb (the FX method) or PPP comparisons (based on the and Wilson 1992; Head 1996; Hyclak 2000; Ilg and Penn World Table) (Firebaugh 2003).6 In general, it Haugen 2000; Johnson, Smeeding, et al. 2005; Katz appears that the FX method tends to reveal increas- and Autor 1999; Katz and Murphy 1992; Levy, Blue- ing in e qual ity (UNDP 1999), whereas PPP com- stone, et al. 1986; Madden 2000; Madrick 1999; Mor- parisons show no discernible trends (or a decline in ris and Western 1999), reversing trends of equalization ine qual ity depending on the period of analysis) that occurred following the Great Depression.‡ Out- (Dowrick and Akmal 2005; McGillivray and Shor- side the United States, similar trends have been ob- rocks 2005). In addition, the measure of ine qual ity served in many advanced industrialized economies (such as the Gini, Theil, or Mean Logarithmic De- since the 1980s (R. B. Freeman and Katz 1994, 1995; viation [MLD] indexes) and whether this measure Ghose 2003; ILO 2008; Kahai and Simmons 2005). has been weighted by population† also affect the Further, Cornia, Addison, et al. (2004) show that over the past two de cades income in e qual ity within a sig- * The debate whether between- nation income in e quality has increased is more concerned with how national income is nifi cant number of developing, transitional, and de- converted to a common currency than with the selection of GDP or GNP. † The decision whether to weight a measure of ine qual- ‡ For a contrasting view, see Fogel (2000). Fogel (2000, ity by population depends on the purpose of the analysis. As p. 143) argues that the increase in income ine qual ity in the Firebaugh (2003, pp. 126–127) remarks, “If the goal is to test a United States during the 1970s and 1980s can be explained by theory of how national economies work— so each nation can be lifestyle choices, primarily by the decision of how to use one’s viewed as a separate realization of some underlying economic free (or leisure) time. His argument is based on the notion that processes—then each nation would be weighted the same. But if two people in the same occupation can choose two very different the goal is to calculate the average disproportionality of individ- work schedules that enable one to retire earlier than the other. uals’ income ratios—that is, to make inferences about global in- The basic idea is that the person who retires early is able to do so come inequality—there is no reason why citizens of large because he or she opted to work more hours per week than his countries should carry less weight than citizens of small coun- or her colleague who chose a more leisurely workweek and a tries, as an unweighted index gives us. People in China and Chad longer career. Although their cumulative lifetime wages might be should have equal value in the analysis.” the same, the differences in their yearly incomes would put them A proportional share, or equality, implies that an income ra- in different income distributions. Fogel argues that such differ- tio equals 1.0 (i.e., rXX==/.10, where r denotes income ra- ences in the hours worked by heads of house holds and spouses tio, X denotes income, and X denotes the mean of X). Hence account for some 54 percent of the rise in income in e qual ity be-

the greater the distance that a given unit (Xj) lies from the pro- tween the top and bottom 10 percent of house hold incomes. This portional share ( X ), the greater the ine qual ity or disproportion- means that more than half of the growth in income ine qual ity ality (ibid.). The summary indexes (such as the Gini or Theil that occurred during the 1970s and 1980s can be attributed to the indexes) measure the average disproportionality across all changing pattern of labor supply. In addition, Fogel presents data -1— units— i.e., they mea sure the average distance of the rj from 1.0, showing that changes in wages accounted for less than 6 percent 0— where distance is a function f such that f(1.0) = 0 (ibid.). of the growth in income in e qual ity. +1—

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veloped nations has increased (to varying degrees), grew continuously during the same period. This slowing development efforts and poverty alleviation.* growth in wage ine qual ity was also accompanied by More generally, the ILO (2005, 2006) has found that an increase in the number of hours worked by both between 1990 and 2000 wages in high-skilled occupa- men and women (Gottschalk and Danziger 2005) tions increased faster than in low- skilled occupations and a recent decline in the benefi ts employers pro- globally, resulting in growing ine qual ity. vide, such as health insurance and pensions (R. B. Although understanding the trends and poten- Freeman 1996; Krugman 2006). Thus the evidence tial causes of in e qual ity within different nations is of points to a growing divide (or wedge) between high- value, we will focus our discussion on the United paid and low-wage workers that is creating an “apart- States, where wage and income disparity seem to be heid economy” of haves and have-nots (R. B. accompanied by policies of wage liberalization (that Freeman 1996).§ is, wage fl exibility)† and a relatively low concern for The growth in wage in e qual ity has been accom- the welfare of workers. Thus calls for emulating the panied by a growth in ine qual ity of house hold in- U.S. approach could portend serious social problems comes.¶ For example, between 1979 and 2000, the real if it is adopted in Eu rope and other regions. income of the lowest fi fth of U.S. house holds grew by With regard to U.S. wages, the trends over the past 6.4 percent, for the top fi fth it grew by 70 percent, and quarter century indicate a decline in median weekly for the top 1 percent it grew by 184 percent (Mishel, earnings of full- time workers (R. B. Freeman 1996; Bernstein, et al. 2005, p. 2). Figure 1.2 shows how fam- Madrick 1999; Morris and Western 1999). During ily income and male wage ine qual ity (measured by this period there was also a persis tent growth in wage dividing the incomes of the top 10 percent of the in- in e qual ity as those at the top of the wage distribution come distribution by the incomes of the bottom 10 pulled away from middle- and low- wage workers percent for each group—that is, the P90/P10 ratio) (Bernstein and Mishel 1997; Mishel, Bernstein, et al. grew signifi cantly from 1975 to 2002. It also shows 2005, 2009).‡ For example, Figure 1.1 shows that the how the growth in income experienced during the hourly wages of both men and women in the bottom economic recovery in the later 1990s was insuffi cient 10 percent (P10) of the wage distribution fell signifi - to offset the in e qual ity that occurred in the previous cantly between 1975 and the late 1980s, after which two de cades (Gottschalk and Danziger 2005). Low- the decline stabilized. In 2002 the hourly wages of income families are not the only ones that have lost both genders within this group were some 20 percent ground. Since the late 1970s, the gap between middle- lower (in real terms) than they were in 1975. In con- income families and high-income families has wid- trast, the hourly wages for both men and women in ened in forty-four states across America (Bernstein, the top 10 percent (P90) of the wage distribution Boushey, et al. 2002). To compound the problem

* In a somewhat contradictory study, Kahai and Sim- § R. B. Freeman (1996, p. 121) argues that although mons (2005) found that the process of globalization—measured some 25 million jobs were created during the Reagan, George using a comprehensive globalization index—tends to reduce in- Bush, and Clinton administrations, the nation needs to recog- come in e qual ity in developing nations. Further, their analysis did nize that it “has an ine qual ity problem based on falling real earn- not fi nd any systematic relationship between globalization and ings for low- paid workers that is unparalleled at least since the income in e qual ity in developed nations. Factors considered in Great Depression.” In making his case, he states that the prob- the creation of their globalization index included the volume of lem with the economy is not the nation’s strong track record of international travel and phone calls, cross-border remittances productivity, technological leadership, or rate of economic and other transfers, the number of Internet hosts within a nation, growth; instead, it is the manner in which the economy distrib- and a nation’s economic integration and share of international utes the economic benefi ts from this progress. Mishel, Bernstein, trade. The fact that Kahai and Simmons were comparing a gen- et al. (2005, p. 5) reinforce Freeman’s arguments by stating that eral index of globalization with income ine qual ity (measured us- between 2000 and 2003, “income shifted extremely rapidly and ing the Gini Index) might help explain the differences in their extensively from labor compensation to capital income (profi ts fi ndings. and interest), so the benefi ts of faster productivity went dispro- † The idea of allowing the market to determine wages is portionately, in fact completely, to capital.” parallel to the U.S. approach to trade (i.e., the Washington Con- ¶ In the United States, wages and salaries for the bottom sensus), which promotes market-liberalizing policies and a lim- four-fi fths of families by income account for approximately 70 ited role for government in the economy. percent of total house hold income (Mishel, Bernstein, et al. 2009). ‡ Wright and Dwyer (2003) examined the quality of jobs Approximately, 7 percent of their income is from business and generated during periods of job expansion from the 1960s capital sources with the remainder coming from other sources through to the 1990s in the United States. The long 1990s boom such as social security benefi ts and tax deferred retirement ac- produced polarized job expansion characterized by a slower counts. In contrast, the top fi fth of families by income obtain 60 growth of middle- level jobs due to the decline of manufacturing, percent of their income from wages and salaries, 26 percent from and stronger growth in bottom-end jobs in retail trade and per- business and capital sources, and 14 percent from other sources —-1 sonal ser vices, and very strong growth in high tech sectors. (ibid.). —0 —+1

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1.20

1.10

1.00

0.90

0.80 90th and 10th Percentiles in Wage Residuals 90th and 10th Percentiles in Wage

0.70 75 77 79 81 83 85 87 89 91 93 95 97 99 01 Year p90-male p90-female p10-male p10-female

FIGURE 1.1: RESIDUAL WAGE IN E QUAL ITY: 90TH AND 10TH PERCENTILES IN HOURLY WAGES (1975 = 1.0) Source: Gottschalk and Danziger (2005, p. 243).

further, recent trends in fuel- price infl ation in the tween 1973 and 2002 the average worker’s annual United States—four times the infl ation of the general hours increased from 1,679 to 1,851 (Mishel, Bern- consumer price index from 1999 to 2007— have re- stein, et al. 2005). However, between 2000 and 2006, duced the relative purchasing power of the poorest 20 the annual hours worked by men and women de- percent of house holds, which spend a larger propor- clined due to the longest jobless recovery on record tion of their income on fuel and food (ILO 2008). (Mishel, Bernstein, et al. 2009). During this period, Figure 1.3 displays the actual P90/P10 ratios for the income from women played an important role several developed nations, including the United States, in limiting the decline of family income for the top from 1990 to 2006. The growth in income ine qual ity 40 percent of earners and dampened the decline to is steadily increasing in the United States, the United the bottom 60 percent (ibid.). Interestingly, the grow- Kingdom, and Germany, but not in Canada and Ire- ing number of women who have entered the workforce land. has had the effect of narrowing gender wage differen- Because of factors such as the decline in hourly tials for all age and education groups (Autor, Katz, et pay for middle- and low-wage workers, the reduction al. 2005; Gottschalk and Danziger 2005; Yun 2006). in employee benefi ts, increasing health- care costs, Those who support the U.S. economic model and a decline in purchasing power, the only ways for generally cite income mobility, the fact that overall house holds to maintain or enhance their income and house hold incomes have risen in real terms, and the well-being (without further developing their skills) employment opportunities that the American dream are to increase the number of hours worked, to in- provides to downplay the current growth in ine qual- crease the number of workers in the house hold, or ity. However, the empirical evidence undermines these both. Since the 1970s, this is exactly what has hap- arguments. First, income mobility— that is, the move- -1— pened. A signifi cant number of women now provide ment of individuals or house holds between income 0— important additional house hold income, and be- quintiles—has fallen over the past several decades +1—

561-45401_ch01_8P.indd 38 6/23/11 9:49 AM Concern for a Global Future 39

1.70

1.60

1.50

1.40

1.30

1.20

1.10

p90/p10 1.00

0.90

0.80

0.70

0.60

0.50 75 77 79 81 83 85 87 89 91 93 95 97 99 01

Adjusted Family Income Wage

FIGURE 1.2: IN E QUAL ITY OF ADJUSTED FAMILY INCOME AND IN E QUAL ITY OF MALE HOURLY WAGE RATES, 1975– 2002 (1975 = 1.0) Note: The hourly wage rates are for male workers aged between twenty- two and sixty- two. Family income is adjusted for family size with heads of house holds falling within the same age range. Source: Gottschalk and Danziger (2005, p. 232).

(Bradbury and Katz 2002; Mishel, Bernstein, et al. be upwardly mobile than their U.S. counterparts 2005, 2009). The situation is particularly stark for (Gangl 2005). This is partly due to the fact that income those who fall at the bottom of the low-income distri- trends in Europe have been positive in the bottom of bution (Theodos and Bednarzik 2006). During the the income distribution and negative in the top deciles, 1990s, 36.3 percent of people who began in the second which is the opposite of what has been happening in quintile remained there, compared with 27.8 percent the United States (ibid.). Thus “the typical Eu ro pe an and 31.5 percent in the 1970s and 1980s, respectively income distribution shows evidence of regression-to- (EPI 2005). This fall in income mobility means that the- mean effects in individual incomes over time, families at the bottom of the income ladder are more whereas the U.S. distribution does not” (ibid., p. 159). likely to remain there than they were three de cades Mishel, Bernstein, et al. (2009, p. 14) make the follow- ago. In fact, when compared with other nations in the ing observations about the differences between the OECD, the United States had the highest percentage United States and its Euro pe an counterparts with re- (9.5 percent) of people who were “always poor” gard to income in e qual ity and productivity: (Mishel, Bernstein, et al. 2005, p. 409), creating the First, while the United States is a very rich country— foundation for a permanent underclass.* Further, in second only to Norway in per capita income— much Europe, low-income persons are much more likely to less of the vast income of the United States is reaching the lower end of the income distribution. The United * Although much attention has been given to the digital States has the highest level of in e qual ity of its peers, divide between developed and developing nations, the creation whether mea sured in terms of Gini coeffi cients or the of an “apartheid economy” within many developed nations (such ratio of earnings of high earners (90th percentile) to as the United States and the United Kingdom) highlights a dif- low earners (10th percentile) . . . . Second, it is far from ferent kind of divide that threatens the very fabric of communities. Identifying ways to reduce in e qual ity and strengthen communities must lie at the center of development strategies. See Section 1.2.2 for a discussion of how to operationalize a Rawlsian designed to make the most disadvantaged members of society —-1 approach to decision making, whereby government policies are relatively better off under new social arrangements. —0 —+1

561-45401_ch01_8P.indd 39 6/23/11 9:49 AM 6.0 6.0

5.0 5.0 United States

Canada 4.0 Republic of Korea 4.0 Ireland

Japan United Kingdom 3.0 3.0

Australia Germany

New Zealand 2.0 2.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 1990 1992 1994 1996 1998 2000 2002 2004 2006

5.0 4.5

4.0 4.0 Spain

3.5 Portugal Italy France 3.0 Netherlands 3.0 Denmark Switzerland 2.0 Sweden 2.5 Finland Belgium 1.0 2.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 1990 1992 1994 1996 1998 2000 2002 2004 2006

5.0 12.0 Hungary

10.0 India 4.0 Austria 8.0

Brazil 3.0 6.0 Poland Czech Republic 4.0 China 2.0 Norway 2.0

1.0 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 1990 1992 1994 1996 1998 2000 2002 2004 2006 FIGURE 1.3: RATIO OF EARNINGS OF TOP 10 PERCENT EARNERS VIS-À- VIS BOTTOM 10 PERCENT EARNERS, 1990– 2006 Source: ILO (2008, p. 13).

-1— 0— +1—

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a foregone conclusion that economies that have strong 1. Technological change (with consequential changes welfare states and labor protection are also necessar- in the skills required of workers) that displaces ily less productive, less- employment- generating, and workers in traditional industries (including the im- less “fl exible” than the U.S. economy. Many peer pacts of automation and productivity gains and countries with strong unions, high minimum wages, enabling effects of information communication generous social benefi ts, and high taxes have caught technology [ICT]) up with, and in many cases, surpassed U.S. productiv- 2. Demand for skilled/educated workers and a shift ity while achieving low unemployment levels. Both in the types of skills demanded (that is, structural Norway and the Netherlands, for example, have higher changes in the mixture of the types of skills re- productivity than the United States and lower unem- quired to make/use new products, processes, and ployment rates. It is an important point that so many ser vices) peer countries have been successful and productive within different economic models. 3. Trade liberalization and the loss of national jobs to the international economy through Second, although house hold incomes have risen multinationalization— that is, the relocation of a in real terms since the 1970s (albeit at a much slower fi rm’s production facilities or services outside its rate than that experienced from the mid-1940s to the home country (see Section 5.2.1) 1970s), the signifi cant growth in income for those 4. Shifts in the mixture of lower-paid service jobs house holds near the top of the income ladder has and higher- paid manufacturing jobs (that is, dein- given them much greater ability to withstand income dustrialization) due to the single and combined 7 shocks (caused by unemployment or ill health) than effects of factors 1, 2, and 3 poorer families (Mishel, Bernstein, et al. 2005, 5. Supply-side shifts in the demographics of the labor p. 360).* This growing divide between the rich and market—that is, changes in the number and type of workers due to (a) immigration and the associ- poor not only reduces income mobility but has the ated infl ux of unskilled workers, (b) the increased additional effect of making the poor feel poorer (see participation of women in the workforce, and Section 1.1.2 for a related discussion). Thus the Amer- (c) the entrance (and pending exit) of the baby ican dream may be only a dream for those who begin boomers into (and out of) the labor market at the bottom of the income ladder, undermining a 6. Changes in (a) the orga ni za tion of work (includ- central pillar of the American way of life (Judt 2005; ing an increase in the number of contingent or Rifkin 2004b).† temporary workers, who are much less likely than Finally, the dynamics that underlie the recent regular employees to receive benefi ts) (see Chap- growth in U.S. income and wage in e qual ity are likely ter 7 for a discussion of or gan i za tion al innovation to continue to affect future employment opportuni- and learning), (b) the sources of compensation of ties, incomes, and wages in both positive and negative employees (that is, shifts in the proportion of income derived from wages and benefi ts), and (c) ways. The main factors shaping trends in ine qual ity the broader politi cal and institutional environ- include the following (Barnet 1993; R. B. Freeman ments that affect factors such as the minimum 1996; ILO 2008; Mishel, Bernstein, et al. 2005, 2009; wage and the strength of trade unions (whose de- Morris and Western 1999; O’Rourke 2001; Oster- cline over the past several decades has reduced man, Kochan, et al. 2001): the ability of employees to address low pay and benefi ts) The challenge facing U.S. policy makers is that * From 1979 to 2006, the bottom 90 percent of wage earners saw their annual earnings increase by 16 percent. In con- the combined impacts of these factors are complex. trast, during the same period, wage earners in the 95th to 99th Both the mechanism by which each factor can affect percentile saw their earnings grow by 52 percent, and the top 1 ine qual ity and the time period over which the im- percent experienced an increase of 144 percent. The wage earn- pact occurs can vary signifi cantly. It is possible to ers in the top 0.1 percent saw their earnings increase by an aston- ishing 324 percent—increasing their wages from $525,000 in 1979 reveal some of this complexity (1) by exploring how to $2,224,000 in 2006 (Mishel, Bernstein, et al. 2011, p. 29). Simi- technological change (the fi rst factor above) can af- larly, in corporate America in 2007, CEOs earned 521 times fect wages and (2) by looking at the debate surround- more than the average employee; this fi gure was 370 four years earlier (ILO 2008, p. 18). ing the skill-based technological change (SBTC) † As concern has risen over the future of the American hypothesis and how this debate points to other infl u- way of life, a number of commentators have pointed to the Eu ro- ential factors. Even if the relative contribution of pe an Union as embodying an alternative development model— one that relies less on capitalism and more on multistate each of the various factors is not known, policies to cooperation, justice, community, harmony, and the creation of correct or lessen inequalities can nonetheless be fash- meaningful employment (Reid 2004; Rifkin 2004b). For a ioned (see the discussions in Chapters 7 and 8). —-1 thoughtful critique of these publications, see Judt (2005). —0 —+1

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1.1.3.1.1 The Impact of Technological Change on fi rm, the benefi ts received by employees who decide Wages and Employment Technological change (or in- to retrain for higher-skilled jobs rest on the number novation) can create both up- and downskill jobs and of these jobs created by the economy. Government (perhaps) displace workers’ jobs that existed before policies designed to increase the number of skilled the introduction of a new technology, all of which workers— whom Robert Reich (1992, p. 177) refers can affect wages (see Section 7.6.3 for a discussion of to as the providers of “symbolic analytic services”— technological change and employment). For exam- without a strategy to increase the size of the skilled ple, the introduction of a more advanced computer job market will have the effect of fl ooding this sec- or automated pro cess could have the effect of in- tion of the labor pool and lowering wages there. (The creasing the skills of the fewer workers needed to main criticism of Reich’s formula of addressing em- operate the work-saving technologies, while other ployment problems by creating more high- skilled applications of advanced technologies could reduce workers, such as computer programmers or techni- the skill level required because the new technology cians [IPR 2005], is that many high- skilled workers, embodies knowledge previously held by workers (for especially those in information technology occupa- example, manufacturing knowledge is incorporated tions, are now experiencing growing unemployment into automation equipment, or the knowledge of ser- rates because of offshoring and outsourcing [Her- vice workers is transferred into, or embodied in, bert 2003; Mishel, Bernstein, et al. 2005, p. 236].‡ menus or repair manuals). Further, if the total num- Further, the task of increasing the number of high- ber of new jobs created that demand higher-skilled skilled jobs is also undermined by the growing move- workers is less than the number of new jobs created ment of high-skilled manufacturing operations to for lower- skilled workers, then the wages of the lat- China [Bronfenbrenner and Luce 2004; Manufactur- ter group of workers could be depressed. The total ing News 2003]. Hence low- skilled manufacturing effect on the average or median wage rate could be workers are not the only ones who are being affected negative. (The Dutch policy of educating people for by the relocation of production facilities overseas.) work with skills that are more than those thought to Although we have discussed technological change be needed in the jobs envisioned by industry has rein general terms, it is possible to classify technological sulted in a counteracting effect whereby workers ini- change into four broad categories (see Section 6.2.1): tially viewed to hold “lower skills” are more highly 1. Product changes (for example, the creation of a valued by the fi rm than originally anticipated. The new product/technology/ser vice) result is that fi rms have increased the wages of lower- skilled workers, which has led to a reduction in wage 2. Pro cess changes (for example, improvements or effi ciency gains in the pro cess of manufacturing a dispersion in Holland [ter Weel and Kemp 2000]. product or delivering a ser vice)§ The Dutch model highlights the value of an educa- 3. Shifts from products to product-services (for ex- tional policy that is not tightly coupled to market ample, purchasing a photocopying ser vice rather demand and focuses on communication skills, team- than a photocopying machine) work, and learning abilities that are essential in the 4. More far-reaching system changes (for example, a knowledge economy [ibid.].)* dramatic realignment of producers, ser vice pro- In this scenario, an existing worker who previ- viders, and other actors to create entirely new ously used a fi rm’s older technology faces the option ways of delivering a product or ser vice) of upgrading his or her skills or accepting a lower- paid position if suitable compensation or retraining The fi rst two categories have received the most mechanisms are not in place.† Beyond the individual attention in the literature on job displacement and

* The OECD (2001, p. 19) adopted a similar “jobs strat- once the technology has been implemented. Thus volatility in egy” based on “measures that promote broad-based upskilling wages and the availability of jobs might be high. and lifelong learning [that] can help . . . raise the mobility and ‡ It is important to recognize that some skills are spe- employability of workers and mitigate the costs of job displace- cialized, while others are more enabling capacities that make ment resulting from rapid technological change.” See the discus- workers more broadly educated/trained and more adaptable, sion below on the 2010 OECD initiatives to link innovation such as having interpersonal skills or data- researching skills, as policy with increases in employment. distinct from specialized knowledge of, for example, how to re- † The implementation of a new technology requires a pair electronic equipment using vacuum tubes, which become period of transition (or gearing up) within the fi rm during which obsolete. the skills of existing workers might be enhanced. However, the § Pro cess innovations can occur as a result of techno- -1— demand for workers with these higher skills required for the new logical as well as organ i za tion al change (Edquist, Hommen, et 0— technology may be transient and reach saturation or a plateau al. 2001). +1—

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wage in e qual ity (Vivarelli and Pianta 2000). In par- wide growth in jobs that occurred, for instance, in ticu lar, process changes—productivity gains that oc- the United States and Japan and in the manufactur- cur because of the improved productiveness of capital ing industries in East and Southeast Asia during (such as the use of more effi cient technology)*—are periods of ICT expansion (Castells 1999). Further, often cited as the main cause of job displacement. although there has been a decline in the global The writer Jeremy Rifkin (2004a) is perhaps the most employment- to- population ratio (which is the share visible critic of the negative impact of advances in of the world’s working- age population aged fi fteen capital productivity, especially those that relate to years or older that is in work) over the past decade, gains in information and communication technology the total number of people employed increased from (ICT). In his book The End of Work, Rifkin (2004a, 2.45 billion in 1995 to 2.85 billion in 2005 (an in- p. xvii) argues that “the old logic that technology crease of 16 percent) (ILO 2006). gains and advances in productivity destroy old jobs In his writings on what he calls “the new, ruthless but create as many new ones is no longer true.”8 Fur- economy,” the journalist Simon Head (1996, 2003) ther, he argues that it is not only the low-skilled work- paints as stark a picture as Rifkin of how lean ers who are being displaced; high- skilled workers are production, reengineering, and enterprise resource also becoming increasingly vulnerable to technologi- planning—enabled by advances in ICT and software cal displacement.9 From the perspective of declining and hardware packages—are negatively affecting the real wages, a diminishing number of jobs, and the re- workplace. His central argument is that these tech- cent unsustainable growth in consumer credit in the nologies have allowed the manufacturing principles United States, Rifkin raises a fundamental question of Henry Ford and Frederick W. Taylor to survive in about where the consumer demand (and necessary the modern manufacturing industry and also to cross purchasing power) will come from to buy the new and over to the ser vice economy. Head (2003, p. 188) con- better products and services made available through cludes that “the link between higher productivity productivity gains. His answer lies in rejuvenating the and higher real wages and benefi ts breaks down trade- union movement and extending its geographic when technology is used in ways that deskill most reach across fi nancial markets to ensure that the ben- workers, undermine their security in the workplace, efi ts of technological change reach the workers— not and leave them vulnerable to employers possessed of just the CEOs and shareholders. overwhelming power. . . . In such an economy one It should be noted that although Rifkin’s ideas would expect the fi gures for the growth of labor pro- have received much attention in the pop u lar press, ductivity and fi gures for the growth of real wages his arguments have not been well received by some and benefi ts to grow far apart, and that is exactly academics who view his work as alarmist and based what the statistics do show.” Indeed, between 2000 on weak and incoherent empirical claims (Castells and 2005, worker productivity in the United States 1999; V. Smith 2006). Further, Vivarelli (1996) and grew by 16.6 percent, while total compensation for Spiezia and Vivarelli (2000) argue that the “end- of- the median worker increased 7.2 percent (Green- work” literature has a tendency to overemphasize house and Leonhardt 2006). the labor- saving impacts of pro cess innovation and C. Freeman and Soete (1994) provide a contrast- neglects to consider the compensation effects of ing view on the impacts of ICT-related product and technological change (discussed later) and the posi- pro cess innovations. Although they acknowledge that tive impacts of product innovations (see also Econo- productivity-enhancing ICT innovations can reduce mist 1995). A more general criticism of the work of employment, they are optimistic that new products Rifkin and others (King 1991; Aronowitz and Di and ser vices will create a “virtuous circle of high Fazio 1994) is that although these studies announce output growth, high employment growth and high the emergence of a jobless society due (primarily) to labour productivity growth [that] tend to go together ICT, they fail to take a broader look at the economy- and to reinforce each other” (ibid., p. 59).† Their

* There are three different ways to improve productivity: † B. Davis and Wessel (1998, p. 5) provide a similar opti- (1) improve the productiveness of capital (through moderniza- mistic view, arguing that the prosperity of middle-class Ameri- tion); (2) improve the productiveness of labor (through enhanc- cans will be enhanced over the coming decades by a combination ing worker skills); or (3) improve the interface between the of (1) future productivity gains made possible by better use of factors of labor and capital (i.e., technological artifacts). The ICT, (2) improved levels of education, and (3) growing levels of problem with using productivity to mea sure per for mance is that trade, especially with the emerging consumer class in developing it is a ratio (or a statistic) and provides no information on what is nations. In critiquing Rifkin’s ideas on mass unemployment, the —-1 driving effi ciency improvements. authors argue that “nothing about the computer suggests that its —0 —+1

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belief that ICT advances will be accompanied by a A study by van Ark, Inklaar, et al. (2003) pro- growth in employment is based on the assumption vides a more nuanced look at the impacts of ICT that the diffusion of ICT will be rapid because of the on employment and productivity in the United States vast number of applications of ICT, such as tele- and Eu rope. The authors focus on three groups of working. In contrast to Head’s views, Freeman and industries— industries that produce ICT products and Soete (1994, p. 170) state that “nightmare scenarios ser vices, industries that invest heavily in ICT, and in- of total dehumanising computerisation are . . . often dustries that make less intensive use of ICT. The re- misconceived. . . . ICT- based ser vices will not (in- sults of their study are informative: “First, we fi nd that deed cannot) replace personal caring services, in- the inverse relationship between productivity and em- cluding most health and education. What they can ployment growth is mostly stronger in manufacturing do is to improve and enhance these ser vices and in than in services. Second, as a result of increased use some cases to make them more accessible to people of ICT, this relationship has turned positive during who otherwise could not enjoy them.” To avoid the the second half of the 1990s, in partic u lar in ICT- creation of a permanent underclass of low-paid, low- using ser vices. Finally, Eu rope fell behind the US in skilled workers, the authors promote policies for most industry groups because of slow productivity training/education and high- quality services— based growth and/or limited employment expansion. In- on an extensive ICT infrastructure—to increase the deed the employment-reducing effects of productiv- proportion of ICT- related employment.* ity growth have remained much more per sis tent in A more balanced view of the impact of ICT on Eu rope than in the US” (ibid., p. 93). employment is provided by Castells (1999). After re- Van Ark, Inklaar, et al. (2003) argue that the U.S. viewing a wide body of literature, he concludes “that experience provides some evidence that ICT is an there is no systematic structural relationship be- important factor in stimulating innovations in ICT- tween the diffusion of information technologies and using ser vices industries that create productivity the evolution of employment levels in the economy gains. The OECD (2003, 2010a, 2010b) also supports as a whole. Jobs are being displaced and new jobs are the notion that ICT may increase the effi ciency of in- being created, but the quantitative relationship be- novation, enhancing the potential for long-term eco- tween the losses and the gains varies among fi rms, nomic growth. Further, van Ark, Inklaar, et al. (2003) industries, sectors, regions, and countries, depending argue that or gan i za tion al innovation— the subject upon competitiveness, fi rms’ strategies, government of Chapter 7—may be just as important for strong policies, institutional environments, and relative po- productivity growth as ICT investment. Although sition in the global economy” (ibid., p. 263). Although ICT- related innovation can displace employment and he is not as optimistic as C. Freeman and Soete affect employment opportunities (Edquist, Hom- (1994), Castells does believe that ICT will lead to the men, et al. 2001), van Ark, Inklaar, et al. (2003) note creation of more jobs over the long run.† that the growth in demand for ICT-using services during the 1990s offset any employment- reducing effects in the United States. With regard to Europe, the effects will be different from those of other powerful technolo- authors suggest that the national systems of innova- gies since the Industrial Revolution— steam power, railroads, tion in Eu ro pe an countries have so far been unable electricity, automobiles—that produced more jobs than they destroyed” (ibid., p. 245). to generate the type of product and organ i za tion al * On a related subject, the idea that investing in ICT (or innovations needed to strengthen employment and high- tech) research will lead to signifi cant economic growth (and productivity growth simultaneously. job creation) has been questioned by Havas (2006). His main concern is that focusing R&D efforts mainly on high- tech (ICT- In contrast to the “end- of- work” literature, most based) industries ignores the fact that the OECD has a sizeable economists tend to view technological change as ben- number of low- and medium-tech industries. Because these in- efi cial to employment (at least over the long run) dustries have signifi cant growth potential and tend to be knowledge intensive, Havas (2006) suggests that a better strategy (Economist 1995; Spiezia and Vivarelli 2000; Vivar- would be to invest in a well-functioning knowledge infrastruc- elli 1996). Their support for technological advance- ture that can support technological upgrading in all sectors. In ment is grounded on Schumpeter’s (1962 [1942], p. 84) this regard, his views are similar to those of C. Freeman and idea of “creative destruction.” Schumpeter viewed the Soete (1994) in that the full potential of the ICT infrastructure has yet to be realized. economy as a dynamic environment in which new † In contrast, Drucker (1999) argues that it is not ICT fi rms and industries continually emerge and displace and computers that have revolutionized work, but e-commerce. existing market players that are either unprofi table or See the discussion of Drucker’s ideas in the following section ti- -1— tled “Skill-Based Technological Change and the Relative Impor- offer outdated (or unwanted) products and services. 0— tance of Other Factors in In e qual ity.” The pro cess of creative destruction can be rather dra- +1—

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matic for employees of displaced fi rms. However, the al. 2005; Harrison, Jaumandreu, et al. 2008; Jauman- same process also creates new employment opportuni- dreu 2003; Peters 2004). However, these studies also ties, although these may not arise in the same market found that pro cess innovation may not displace em- and may demand new sets of skills. ployment, as is commonly suggested (Head 1996, The OECD is a proponent of the view that tech- 2003; Rifkin 2004a). For example, in a study of Span- nological change is benefi cial to employment. In a ish manufacturing fi rms, García, Jaumandreu, et al. study, Technology, Productivity and Job Creation, it (2005, p. 1) found that “the potential employment concluded that “technological change, even in the compensation effect of pro cess innovations sur- form of new labour- saving production pro cesses, passes the displacement effect, both in the short and does not reduce aggregate employment but gener- long run (when competitors react).” However, Pianta ates more growth and jobs” (OECD 1996, p. 4). This (2000) found that the long-run trends in process- position is also embodied in the OECD’s 2001 jobs innovation- based industries in Germany, France, the strategy: “New technologies destroy jobs in some in- United Kingdom, and Italy show a pattern of techno- dustries, especially among the low- skilled, while cre- logical unemployment over the past two decades. He ating jobs which are often in different industries and also argues that the dominant impact of technological require different skills. Historically, this pro cess has change in Europe’s manufacturing industry has been led to net job creation, as new industries replace old labor displacing. Notwithstanding these studies, the ones and workers adapt their skills to changing and general consensus is that process innovation causes expanding demand” (OECD 2001, p. 3).* job displacement† and that product innovation leads In May 2010, the OECD (2010a) released its “In- to job creation (Edquist, Hommen, et al. 2001). novation Strategy” in which it stated: “Human capi- The concern that Europe is displacing jobs through tal is the essence of innovation. Empowering people specialization in process innovation provides a useful to innovate relies on broad and relevant education as link to the emerging Eu ro pe an interest in product- well as on the development of wide- ranging skills that service innovation/systems (Mont and Tukker 2006; complement formal education.” The same sentiments Tukker and Tischner 2006). This interest is driven by are refl ected in the OECD Development Agenda re- the realization that Eu ro pe an manufacturing indus- leased later that same year (OECD 2010b). tries are unable to compete with low-wage countries The views of economists differ, however, on the such as China in labor- intensive, mass- consumption mechanisms by which technology-based effi ciency products (EC 2003). Therefore, a new approach to gains affect new employment opportunities (Addison, business is needed that builds on the core competen- Fox, et al. 2000; Cyert and Mowery 1987). Vivarelli and cies of the Euro pe an industry. Tukker and Tischner Pianta (2000) provide a useful summary of the main (2006) explain how the convergence of two strands compensation theories developed by economists to ex- of research focused on business management and plain the positive relationship between technological sustainability have created a new business model for change and employment (see Table 1.2). The basic product- services or integrated solutions. The idea is premise behind the mechanisms described in Table 1.2 to improve the position of companies in the value is that economic forces will compensate for the labor- chain by focusing on ways to sell “need fulfi llment” saving effects of technological change. rather than products that the customer must then use The most effective compensation mechanism in to satisfy his or her own needs. For example, the de- Table 1.2 is seen by Vivarelli and Pianta (2000) to be cision of Xerox to sell a photocopying ser vice rather the development of “new products.” Their position is than photocopying machines means that customers reinforced by several recent empirical studies that no longer need to worry about owning and operating all concluded that product innovation is associated equipment. This new form of business model also with employment growth (García, Jaumandreu, et means that Xerox must rethink the design of its

* A background paper for the conference of the Eu ro- † A possible exception to this general rule is “or gan i za- pean Foundation for the Improvement of Living and Working tional” process innovations, particularly capital-saving (as op- Conditions (in Dublin) titled Competitive Europe—Social Eu- posed to labor-saving) orga ni za tion innovations that can have rope: Partners or Rivals? discusses the uncertainty in fulfi lling (potentially) neutral impacts on employment (Edquist, Hommen, the EU’s Lisbon Strategy to make Europe “the most competitive et al. 2001). By defi nition, capital- saving or gan i za tion al innova- and dynamic knowledge- based economy in the world, capable of tions reduce the amount of capital engaged in work- in- progress. sustainable economic growth with more and better jobs and This type of innovation is associated with ideas such as just-in- greater social cohesion” (Eurofound 2006a, p. 1). See Section 1.5 time production. In contrast, labor- saving or gan i za tion al innova- for a discussion of Europe 2020, the successor to the Lisbon tion consistently has a negative impact on employment that is, in —-1 Strategy. effect, designed out of a pro cess. —0 —+1

561-45401_ch01_8P.indd 45 6/23/11 9:49 AM Technology, Globalization, and Sustainable Development 46

TABLE 1.2: KEY ELEMENTS OF COMPENSATION THEORY

IMPORTANT COMPENSATION MECHANISMSa COMMENTSb

Compensation “via new machines.” The same pro cess innovations Mechanism offers limited benefi ts to employment. which displace workers in the user industries create new jobs in the No longer used much by economists. capital sectors where the new machines are produced. Compensation “via decrease in prices.” On the one hand, pro cess The effectiveness of mechanism relies on the idea of innovations involve the displacement of workers; on the other hand, perfect competition. Thus an oligopolistic regime is likely these very innovations lead to a decrease in unit costs and prices and to undermine expected compensation by maintaining so to an increase in demand, production and employment[, either in higher prices. the modernized sector or in other sectors where consumption of new Productivity increases may simply be appropriated goods and ser vices increases.] through increased profi ts or dividends to shareholders. Does not take into account the fact that demand constraints may occur. Compensation “via new investments.” If the reduction of costs due to Compensation depends on the decision to invest profi ts. technological progress is not completely translated into prices, Capital- intensive investments may not produce signifi - innovative fi rms will accumulate extra profi ts: to the extent these cant employment opportunities. profi ts are invested, they raise production and generate new jobs. Compensation “via decrease in wages.” As for other forms of unemploy- Lower wages can induce fi rms to hire additional workers, ment, the direct effect of labour- saving technologies may be compen- but a decrease in aggregate demand can also lower sated by a decrease in wages which induces the adoption of more employers’ expectations, resulting in the hiring of fewer labour- intensive techniques of production. workers. Compensation “via increase in incomes.” Directly in contrast with the Flexible wages and the decline in the median earnings of previous mechanism, this compensation channel has been put full- time workers in the U.S., undermine this Fordist forward by the Keynesian and Kaldorian tradition. To the extent the approach to compensation. increase in productivity due to technological change is translated into higher wages, it stimulates consumption and leads to an increase in employment which may compensate the initial job losses due to pro cess innovations. Compensation “via new products.” Technological change is not always Product innovations remain the most effective mecha- equivalent to pro cess innovation, but it can also assume the form of nism to counterbalance labour- saving pro cess innova- creation and commercialisation of new products; in this case, new tions. However, the impact of product innovations varies economic branches develop and additional jobs are created. signifi cantly depending on the type of product and the prevailing institutional framework.

a The text shown in this column is extracted from Vivarelli and Pianta (2000, pp. 16– 17). b The comments shown in this column are adapted from Vivarelli and Pianta’s (2000, pp. 16– 17) discussion of each of the compensation mechanisms. Source: Vivarelli and Pianta (2000, pp. 16– 17).

A critical aspect of product-service innovation is machines for ease of recyclability and longevity— that labor can be essential to integrate technology (a two factors that are critical to reduce the ecological product) and its associated service(s). In this context, footprint of products. the current emphasis on how product- services can Because the transition from products to product- contribute to competitiveness and to more sustain- services is a recent phenomenon, there is a lack of able production and consumption patterns (Tukker empirical evidence assessing how this new type of in- and Tischner 2006) should be extended to explicitly novation might affect employment and wages. How- include employment. In fact, research is needed to ever, we believe that product-service innovation can identify how meaningful employment can be de- provide signifi cant and rewarding employment oppor- signed into product- service innovations. tunities. For example, the frontline employees at Xe- Finally, given the nature of system innovations, it rox are now required to visit customers regularly to is diffi cult to know how a structural change in the maintain their equipment. This mobility provides its way products, services, or product-services are man- employees with work variety and an opportunity for ufactured and delivered will affect employment and social engagement, both of which are essential aspects wage ine qual ity. Thus system innovations should be of meaningful work (see Section 1.1.3.2). Further, the considered on a case-by- case basis, and the outcomes specifi c skills held by the Xerox employee are likely to of such studies are likely to depend on the types of be highly valued by his or her customers, which could innovation that are driving a system transformation -1— enhance wages. (see Section 6.2.1). 0— +1—

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What is evident from the preceding discussion is For example, Card and DiNardo (2002, p. 735) that (1) the type of technological change— that is, pro- argue that “contrary to the impression conveyed by cess, product, product- services, or system innovation— most of the recent literature, the SBTC hypothesis can have differing impacts on the skills demanded and falls short as a unicausal explanation for the evolution on wages, and (2) it is important to look not only at the of the U.S. wage structure in the 1980s and 1990s. In- fi rm or industry level but also at the entire economy to deed, we fi nd puzzles and problems for the theory in identify the broader impacts of technological change. nearly every dimension of the wage structure.” Simi- The challenge facing policy makers is to try to under- larly, Beaudry and Green (2002, p. i) “do not fi nd much stand the complex interrelationship among techno- empirical support for the view that ongoing (factor- logical innovation, job displacement, reemployment augmenting) skill-biased technological progress has opportunities, and economy-wide job growth when been an important driving force” in the growth of in- developing technology and employment policy. come ine qual ity between 1976 and 2000. Mishel, Ber- 1.1.3.1.2 Skill- Based Technological Change and the Rel- nstein, et al. (2005, p. 111) argue that “skill demand ative Importance of Other Factors on Ine qual ity Having and technology have little relationship to the growth discussed the interconnections between technological of wage ine qual ity within the same group (i.e., workers change and employment, we now shift our focus to the with similar levels of experience and education), and skill-based technological change (SBTC) debate. The this within-group ine qual ity was responsible for half of SBTC hypothesis has been put forward to explain the overall growth of wage in e qual ity in the 1980s and the growth in in e qual ity between the wages of skilled 1990s. Technology has been and continues to be an and unskilled workers in the United States and other important force, but there was no ‘technology shock’ industrialized nations during the 1970s, 1980s, and in the 1980s or 1990s and no ensuing demand for 1990s (Acemoglu 2002b; Katz and Autor 1999; Katz ‘skill’ that was not satisfi ed by the continuing expan- and Murphy 1992; Machin, Ryan, et al. 1996).* The sion of the educational attainment of the workforce.” SBTC hypothesis states that production technology A main point of many opponents of the SBTC hypoth- has evolved to favor skilled over unskilled labor by esis is the fact that the growth in wage in e qual ity increasing its relative productivity and, therefore, in the early 1980s began before the mass introduction its demand. Thus the growth in ine qual ity refl ects a of computers, which means that other factors were technology-based increase in demand for educated involved. or skilled workers (mea sured using wage premiums) The debate surrounding the likely impact of SBTC combined with a simultaneous decline in the supply on wage and income ine qual ity provides a useful of these workers.† However, there are those who crit- bridge to other factors that might underlie the growth icize the emphasis given to SBTC as the leading fac- in ine qual ity. For example, a study by Singh and tor behind the increase in ine qual ity (Howell 1994, Dhumale (2004) questions the emphasis the ine qual- 2000; Singh and Dhumale 2004).‡ ity literature has given to the impact of technological change and trade on wages and income in the recent period. Instead, they argue that “there is robust em- * In contrast to the United States, wage in e qual ity in pirical evidence to indicate that the concentration on continental Europe “has been much lower and stable” (Dev- illanova 2004, p. 231). There are several potential explanations these two factors to the exclusion of others [—such for this difference, which include the theories that (1) the supply as the role of social norms, economic institutions, of skilled workers increased faster in Eu rope than in the United and growth in output and employment—] is not justi- States over the past several de cades (Kranz 2006); (2) the stronger labor unions and social assistance programs in Europe profi ed” (ibid., p. 161). tected the wages of low-/semi-skilled workers at the expense of A brief digression on the arguments about the im- higher unemployment (Blank 1998; Mahler 2004; Morris and pacts of trade on wage ine qual ity is informative. The Western 1999); and (3) technological change was less skill based in Eu rope than in the United States (Acemoglu 2002a, 2002b). in e qual ity literature addressing trade liberalization † Another way to consider SBTC is that an initial growth is grounded on the Heckscher- Ohlin model of trade in the supply of skilled workers induces faster technological that incorporates the Stopler-Samuelson theorem change that in turn leads to an increase in the demand for skilled (Anderton and Brenton 2006; Bhagwati and Dehejia labor (Greiner, Rubart, et al. 2001). ‡ A new strand of research that builds on the SBTC hypothesis looks at the potential impact of skill-based organ i zation al change (SBOC) (Piva, Santarelli, et al. 2003). The SBOC Italian manufacturing fi rms, Piva, Santarelli, et al. (2003) show hypothesis states that skill upgrading occurs as a direct result of that upskilling is more a function of SBOC than of SBTC. How- a fi rm’s reorgan i za tion al strategies rather than the introduction ever, they also fi nd some evidence of a combined, coevolutionary of new technologies. Indeed, in a study of some four hundred impact of technological and organ i za tion al change on upskilling. —-1 —0 —+1

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1994; Cornia 2004; Guscina 2006; Wood 1994).* The useful to focus on the indirect impacts of production basic theory is that countries should specialize in the and management techniques— such as lean produc- production of commodities for which they have an tion, downsizing, and restructuring—on employment advantage in resource endowments and/or produc- than to try to measure the impacts of international tive capabilities (such as labor skills) and should ex- trade or cross-border direct employment. change any surplus home-produced commodities Notwithstanding Castells’s (1999) remarks, a study for those more easily produced by others. Because by Kletzer (2000) on the impacts of trade on job losses high- skilled workers are more abundant in developed in U.S. manufacturing concluded that there was a nations and low-skilled workers are prevalent in de- strong positive relationship between increasing for- veloping and transitional economies, it follows that eign competition and job displacement (between 1979 developing nations should focus on the production of and 1994) for import-competing industries, although low- skill- or labor- intensive commodities (such as ag- the scale of job displacement caused by increasing ricultural goods, raw materials, and minerals) and foreign competition was found to be relatively small export any surplus in exchange for imports of high- when it was considered next to the turnover of jobs skill- or capital- intensive commodities produced in the U.S. economy. Similarly, Scott (2003) fi nds (mainly) in developed nations. With regard to devel- that the North American Free Trade Agreement oped nations such as the United States, the importa- (NAFTA) eliminated some 879,000 U.S. jobs be- tion of labor-intensive goods is seen to reduce the tween 1993 (when NAFTA was signed) and 2004 demand for low- and semiskilled workers, depress- because of the rapid growth in the net U.S. export ing their wages and increasing income ine qual ity defi cit with Mexico and Canada.‡ More generally, he (Mahler 2004; Wood 1994). The reverse occurs in argues that the process of trade liberalization has led developing nations (exporting labor-intensive goods), to growing structural trade defi cits that have put which are seen to experience a decline in income in- downward pressure on the wages of low-skilled equal ity. † workers in the United States (Scott 2001).§ The mechanism by which trade can affect employ- More recent studies of the decline in labor’s share ment is captured quite succinctly by Castells (1999, of national income— that is, the share of income ac- p. 254): “The more the pro cess of economic globaliza- cruing to labor compared with that accruing to cap- tion deepens, the more the interpenetration of net- ital—as a result of trade and other factors reveal works of production and management expands across some interesting fi ndings. Guscina (2006) fi nds that borders, and the closer become the links between the since the mid-1980s, the decline in labor’s share of conditions of the labor force in different countries, income in industrialized countries has been equally placed at different levels of wages and social protec- driven by openness to trade and by technological tion, but decreasingly distinct in terms of skills and progress. Similarly, Jaumotte and Tytell (2007) show technology.” According to Castells (1999), it is more that trade has played an important role, but that rapid technological change, particularly in ICT, has * See Section 4.4.1 in Chapter 4 for a discussion of the had a more signifi cant (negative) impact. Workers in Heckscher- Ohlin model of trade and Stopler- Samuelson theo- low-skilled sectors are more adversely affected than rem. those in high- skilled sectors. Both studies identify † The impact of trade on employment and wages in the manufacturing sector of developing nations differs among coun- employment-protection policies as an important tries (WCSDG 2004). For example, it is apparent that manufac- factor in moving income toward labor, although the turing workers in Asian economies have generally benefi ted from growth in trade (Jaumotte and Tytell 2007), but unskilled workers in Latin American countries such as Brazil and Mexico ‡ More generally, NAFTA has been described as a fail- have seen their real wages decline, while those of skilled workers ure for working people in the United States, Mexico, and Canada have increased (WCSDG 2004). Further, the relative size of a (Faux, Scott, et al. 2001). A study by economists at the Economic nation’s labor pool is also likely to affect wage in e qual ity. For Policy Institute found that since the signing of NAFTA, each na- example, it is estimated that China has some 200 million under- tion has experienced a decline in real wages combined with an employed workers in rural areas who could move into industry upward redistribution of income and a signifi cant expansion in over the next two decades (Economist 2004a). This surplus of the number of informal jobs offering low security, low pay, and cheap labor is likely to hold down the wages of low-skilled work- no bargaining power (ibid.). ers, enabling China to sustain its competitive advantage in labor § Bivens (2006) argues that when trade imbalances in and resulting in a growth in wage ine qual ity between low- and manufacturing are properly accounted for, they caused over a high-skilled workers. However, it is also important to recognize fi fth of the job losses in this sector between 2000 and 2003. To that although developing nations such as China do have a signifi - stem the loss of manufacturing jobs, Bivens (2004) recommends cant pool of unskilled labor, if the majority of this labor does not that the U.S. trade account should be balanced by depreciating -1— have an education, then this limits a nation’s potential compara- the U.S. dollar to make domestically produced goods more com- 0— tive advantage in labor- intensive manufacturing (Wood 1994). petitive in global and domestic markets. +1—

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impact of such mea sures is undermined by global- that service- sector jobs are, on average, less well paid ization. than manufacturing jobs. Thus the growth of the ser- Another important factor depressing wages is the vice sector represents an overall decline in wages and threat levied by fi rms that unless workers accept their income for those workers who might previously have terms of employment, their jobs will be relocated found employment in manufacturing. This view is to nations where wages are cheaper and labor regula- supported by Drucker (1994), who argues that the tions are less stringent or more diffi cult to enforce problem with the service economy is that displaced (Bluestone and Harrison 1982; Bronfenbrenner industrial workers cannot simply move into knowledge- 1997). Bronfenbrenner (2000, p. 53) argues, “Capital based or ser vice employment because they lack the mobility and the threat of capital mobility have had a formal education and qualifi cations necessary to do profound impact on the ability of American workers so. Hence the challenge of upgrading one’s skills and to exercise their rights to freedom of association and general approach to employment (such as embracing collective bargaining.” This view is also held by Jeff continuous learning) may simply be too much for dis- Faux, the founding president of the Economic Policy placed industrial workers, who may have no choice Institute in Washington, DC. In a speech at the 2002 but to accept low-wage employment in the service World Social Forum in Brazil, Faux (2002) argued sector. that “the fundamental purpose of neo-liberal poli- Although many commentators view computers as cies of the past 20 years has been to discipline labor revolutionizing work (and contributing to wage ine- in every country in order to free capital from having quality), Drucker (1999) makes a strong case that the to bargain with workers over the gains from rising computer has simply transformed pro cesses that al- productivity. Such bargaining is the essence of a ready existed during the Industrial Revolution.‡ He democratic market system.” See Section 5.2.3 for a argues that it is the Internet and, more specifi cally, discussion of the impacts of technology-enabled cap- e-commerce (both of which rely on computers) that ital mobility on development. will transform the global economy. His main point is In taking a closer look at the impacts of trade on that e-commerce will change the mental geography displaced U.S. manufacturing workers in import- of commerce by eliminating distance—there will be competing markets, Kletzer (2000) found that these “only one economy and only one market” (ibid., workers suffered the largest average earnings loss of p. 50). Competition will know no boundaries, but the any industrial group, which was particularly acute products and sectors that are affected will be eclectic for those reemployed in the service sector (see also and unexpected. “New distribution channels [will] Kletzer 1998).* This fi nding highlights the growth of change not only how customers behave, but also what the ser vice sector (or deindustrialization) as a factor they buy” (ibid., p. 52). Thus Drucker provides an al- behind the decline in wages.† The basic argument is ternative view of how trade, or, more accurately, the systems supporting trade, can affect the global econ-

* Similarly, in their classic work The Deindustrialization omy and employment: of America, Bluestone and Harrison (1982, p. 10) argue that “studies of workers who lose their jobs as the result of a plant closing show that a large proportion of the unemployed take years to recover their lost earnings and many never fi nd compa- signal a rise in the consumerism, with a corresponding growth in rable work at all.” Further, they argue that the whole society suf- the associated negative environmental and social impacts. A fers when workers from high-productivity jobs have no option growth in (2) might mean that the quality of manufactured goods but to accept low-productivity (and service-oriented) jobs such has diminished and they need to be repaired more often. In- as washing cars. Their concern is that deindustrialization can re- creases in (3) might highlight a rise in poverty and environmental sult in serious physical and emotional health problems for dis- or occupational disease, and increases in (4) might highlight placed workers and their families and can lead to a decline in tax poor urban planning or a failure to internalize the true social revenue that undermines essential public services. In effect, what costs of transportation. A growth in (5) might portend corrup- Bluestone and Harrison (1982) are describing is the other (nega- tion in fi nancial markets, and (6) might point toward the failure tive) side of the coin of Schumpeter’s (1939) notion of “creative of traditional education, increases in attention- defi cit/hyperac- destruction.” tivity disorder (ADHD) related to environmental exposures or † The so-called service sector, unlike manufacturing, is poor diet, or problems of social exclusion creating problem youth. composed of very different types of activities. These activities Finally, increases in (7) may highlight the growing impacts of include (1) retail trade; (2) repair of products, appliances, and global climate change, and increases in (8) an increase in interna- automobiles, trucks, and buses; (3) delivery of health care; (4) tional confl ict or crime within communities. transport services; (5) banking and fi nancial services; (6) educa- ‡ This view is reinforced by Gordon (1999, 2000) and tional services; (7) activities related to the response to natural Petras (2002), who argue that technological changes during the hazards such as drought, hurricanes, and blizzards; and (8) secu- early and mid- twentieth century had a much greater impact on rity and defense expenditures. A growth in these activities is not economywide productivity growth than the introduction of —-1 always an index of progress. For example, a growth in (1) might computers in the later twentieth century. —0 —+1

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The truly revolutionary impact of the Information cognitive and manual carework occupations. The Revolution is just beginning to be felt. But it is not great increase in the creation of jobs in the latter “information” that fuels this impact. . . . It is not the category accounts for the increased job polarization. effect of computers and data pro cessing on decision- Drucker’s (1994) notion of the “knowledge- based” making, policymaking, or strategy. It is something worker seems to fall into the category of nuturant that practically no one foresaw or, indeed, even talked about ten or fi fteen years ago: e-commerce— carework. Note that the monetization of previously that is, the explosive emergence of the Internet as a uncompensated work discussed by Ayers (2006) is major, perhaps eventually the major, worldwide consistent with Dwyer’s (2010) analysis, but Ayres distribution channel for goods, for ser vices, and, argues that the contribution of this work to total surprisingly, for managerial and professional jobs. wages paid is now saturated, one factor contributing This is profoundly changing economies, markets, and to reaching a plateau in growth of GDP. Dwyer’s fo- industry structures; products and ser vices and their cus on routinization might offer a new lens through fl ow; consumer segmentation, consumer values, and consumer behavior; jobs and labor markets. . . . which to view wage dispersion. If routinization of both E-commence is to the Information Revolution what manufacturing and service jobs, facilitated by techno- the railroads were to the Industrial Revolution— a logical change and computerization, indeed character- totally new, totally unpre ce dented, totally unex- izes employment trends, one could expect a signifi cant pected development. And like the railroad . . . , fall in wages in both contexts. e-commerce is creating a new and distinct boom, Note, further, that technological displacement rapidly changing the economy, society, and politics. in any category of work caused by the replacement (Drucker 1999, pp. 47, 50) of labor by capital, will put downward pressure on To return to the opponents of the SBTC hypothe- wages, refl ecting the diminishing contribution of any sis, Howell (1994, 2000) rejects the theory, arguing kind of labor to production and the provision of ser- that labor’s declining bargaining power and increas- vices, compared to the contribution of capital. The ingly global and deregulated labor markets—which extent to which wages go up or down in any category dramatically increase the number of available low- of jobs will also depend on the existence of labor sur- skilled workers— are the primary causes behind the pluses or shortages, but that is a different matter and collapse of wages at the bottom of the wage distribu- should not be confused with technological displace- tion. Beaudry and Green (2002) argue that the declin- ment and consideration of policies that would mini- ing ratio of human to physical capital is more useful mize or even reverse that trend. for explaining the change in wages since 1976 than the The different and competing perspectives on which SBTC hypothesis. Finally, in acknowledging that factors are the most important determinants of in- some of the rise in ine qual ity during the early 1980s come and wage in e qual ity highlight the complexity was due to rapid technological change, Card and Di- that accompanies empirical studies. It seems that Nardo (2002) point to the decline in the real value of any attempt to isolate the effects of factors such as the minimum wage as being the primary cause of rapid technological change, the available skills in the ine qual ity. labor market, the monetization of previously uncom- A neglected source of wage dispersion, exacerbat- pensated work (e.g., carework), trade, or institutional ing especially gender and racial in e qual ity, was stud- and or gan i za tion al arrangements must be cognizant ied by Dwyer (2010) who analyzed job polarization of how other factors might be driving or infl uencing in the United States since 1980 and concluded that any observable trends. Further, the impact of such rather than increases in high-paying technology jobs factors on low-, middle-, and high-wage workers is (due to skill- biased technological change), wage dis- likely to be different. Mishel, Bernstein, et al. (2005, persion (or job polarization) might better be explained p. 5), however, offer a rough assessment of the likely by the increase in lower-skilled jobs in “carework.” impact of several different factors on wage ine qual- Carework is defi ned as “labor that maintains health ity that provides a useful rule of thumb. In par tic u- or well- being or involves the capabilities of people” lar, they attribute one- third of wage in e qual ity to (ibid). “Reproductive labor jobs” involve more of shifts in the labor market (for example, the decline of the physical labor of care and are distinguished from trade unions and the drop in the real value of the “nurturant carework” such as teaching, social ser- minimum wage), one-third to the combined effects vices, etc., which tend to be more highly paid. The of economic globalization (for example, growth in distinction between nuturant and reproductive care- trade, immigration, and capital mobility) and the -1— work parallels the distinction between non-routine shift toward a ser vice economy (with lower- paying 0— +1—

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jobs),* and one-third to macroeconomic factors new products, ser vices, and markets. Thus innovation (such as the impacts of high unemployment).† becomes the mechanism through which a nation can 1.1.3.1.3 Addressing Wage and Income Ine qual ity in sustain or improve its international share of produc- the United States The manner in which wage and tion and profi t. The idea is that if a large enough income ine qual ity is addressed in the United States group of fi rms adopt such a strategy, it will create a will depend on the degree to which the nation leans “leading- edge” economy that is less concerned about toward “human development” and away from a “neo- price competition and generates more opportuni- liberal” view of development (see Section 1.2.3 for a ties for long-term competitiveness and employment.§ discussion of both views of development). The for- Innovation-driven strategies rely on what Charles mer view is more likely to distribute economic gains and Lehner (1998, p. 218) call “intelligent production through taxes or a higher minimum wage, for exam- systems,” which exploit the potential for creativity that ple. The latter view is more likely to adopt the view exists at the interfaces of an or ga ni za tion’s produc- that economic growth will eventually improve every- tion system (physical capital) where different knowl- one’s well-being and is less concerned with economic edge and experience (human capital) intertwine. This inequalities in the near term. Another critical factor approach is the opposite of lean- production strate- is the extent to which employment is included in gies that seek to minimize the interfaces in a produc- innovation- driven strategies designed to enhance nation system to save costs. tional competitiveness. Charles and Lehner (1998) ar- Kleinknecht (1998) argues that liberalizing wages gue that if government and industry approach national (downward) discourages innovation by rewarding competitiveness and international productivity using fi rms that do not use labor effectively, thus dampen- a “cost-driven strategy,” the end result is likely to be a ing Schumpeterian displacement of suboptimal fi rms reduction in mass wealth (through the lowering of and industries by more innovative entities. He notes wages) and an increase in unemployment (through that relaxing environmental standards similarly re- the introduction of lean- production pro cesses). In es- wards fi rms that do not deal most effectively with sence, competitiveness is traded off against employ- environmental challenges. ment. To address this problem, they suggest that an In summary, although the debate over the trend alternative approach would be to adopt an “innovation- in between-nation income ine qual ity has yet to be driven strategy” for competitiveness (that is, for a com- resolved, there is consensus that within-nation wage petitive advantage).‡ They argue that such an approach and income ine qual ity in many developed, transitional, focuses on increasing wealth and welfare. and developing nations has steadily increased over the The objective of innovation-driven strategies is to past several decades. There is also a growing consen- reduce the relevance of prices and costs for competi- sus that no one factor or theory can adequately ex- tive advantage and shift the focus to the creation of plain the trends in ine qual ity. Instead, a combination of factors is more likely to explain the trends in ine- * This fi gure is comparable to that given by the U.S. quality. These factors include (1) technological change Trade Defi cit Review Commission (2000, p. 111), which con- that displaces workers in traditional industries; (2) the cluded that trade is responsible for at least 15 to 25 percent of the changing demand for skilled/educated workers and growth in wage in e qual ity. † Although the impact of technological change on wage shifts in the type of skills demanded; (3) trade liberal- in e qual ity may not be signifi cant (see the discussion of SBTC), ization and the loss of national jobs to the international the fact that the real median value of wages has declined over the economy through multinationalization; (4) shifts in past quarter century indicates that wages have not kept up with technological progress (i.e., productivity gains). The evidence the mixture of lower- paid ser vice jobs and higher- points to the fact that between 1966 and 2001, only the top 10 paid manufacturing jobs because of the single and percent of the income distribution experienced a growth rate of combined effects of factors 1, 2, and 3; (5) supply-side real wage and salary income that matched or exceeded the average rate of economywide productivity growth (Dew- Becker and shifts in the demographics of the labor market due to Gordon 2005). Thus the real wage of the average worker has not (a) immigration and the associated infl ux of unskilled grown with advances in technology, indicating that the fi nancial workers, (b) the increased participation of women in benefi ts of productivity gains are not trickling down to the vast majority of the U.S. workforce. ‡ It is important to recognize that cost-driven strategies also rely on innovation. However, rather than focusing on the § A leading- edge economy does not rely solely on high- creation of products and new markets, cost-driven strategies rely tech industries. Rather, such an economy will consist of low-, on pro cess innovation to cut costs (Charles and Lehner 1998). If medium-, and high-tech industries that are focused on delivering product innovation does occur under a cost-driven strategy, it is products and services with better market-relevant qualities than likely to arise within existing product lines and markets (ibid.). the majority of their competitors (Charles and Lehner 1998). —-1 —0 —+1

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the workforce, and (c) the entrance (and pending which may or may not focus on environmental sus- exit) of the baby boomers into (and out of) the labor tainability. market; and (6) changes in (a) the or ga ni za tion of work, (b) the sources of compensation of employees, 1.1.3.2 The Importance of Employment beyond the and (c) the broader po liti cal and institutional envi- Creation of Purchasing Power ronment that affect factors such as the minimum Section 1.1.3.1 focused primarily on the factors behind wage and the strength of trade unions. the growing trends in income and wage ine qual ity in In the United States, there is a clear need to iden- the United States and other developed nations. How- tify strategies that can begin to close the wage and in- ever, income and wages are only part of the overall come ine qual ity gap. It seems that identifying ways to benefi t or satisfaction derived from employment. Be- combine national competitiveness with employment yond the creation of purchasing power and economic opportunities— for example, through the creation of in- status, meaningful employment can provide social telligent production systems or new product-services— contacts/inclusion, enhance self-esteem, and lead to a is one approach that would not only strengthen the better quality of life (Eurofound 2004). Further, our economy but also improve the quality and (poten- occupations and professions inform “our conception tially) the availability of well- paid employment. of self” and play an important role in shaping human As this book goes to press, the 2008 fi nancial cri- character (Bertram and Sharpe 2000, p. 44). sis has led to serious repercussions on employment. Euro pe an studies of living and working conditions Reported levels of unemployment are among the point to the critical importance of income and em- highest, and periods of unemployment are the most ployment in life satisfaction (Eurofound 2002, 2004, protracted, since the Great Depression. Those who 2005a). These studies also stress that life satisfaction have found jobs often receive less than their previous improves when high levels of employment coexist with compensation. Some people are losing their homes. high- quality jobs. A number of factors combine to Not only is the purchasing power of ordinary citi- infl uence the quality of jobs and employment. These zens diminishing, but wage in e qual ity is further ex- include career and employment security, skills de- acerbated as well. Although global climate change velopment, issues relating to work-life balance, and and other environmental issues may be the focus of worker health and safety (see Figure 1.4). those scholars and social activists who are promot- During the turbulent period of social unrest in ing sustainability, it may be that unemployment, un- the 1960s, more highly educated industrial workers deremployment, and personal economic insecurity began to reject the routinization of jobs and the lack become the main driving forces behind public anger of creativity they represented and to call for more and frustration and as a result drive politi cal change, humane working conditions (Ashford 1976; Ashford

Career and employment security • Employment status • Income • Social protection • Workers’ rights

Health and well-being Skills Development • Health problems Job and • Qualifications • Risk exposure employment • Training • Work organization quality • Learning organization • Career development

Reconciliation of working and nonworking life (i.e., work-life balance) • Working/non-working time • Social infrastructures

-1— FIGURE 1.4: FACTORS THAT INFLUENCE JOB AND EMPLOYMENT QUALITY 0— Source: Eurofound (2002, p. 6). +1—

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and Caldart 1996; HEW 1973).10 At the center of ing an individual’s overall well-being. In addition to their concerns lay the need for more autonomous and the obvious fi nancial implications, extended peri- engaging work that enables the potential and capa- ods of unemployment can damage self-esteem (Gold- bilities of workers to fl ourish (Green 1980; Heckscher smith, Veum, et al. 1997), worsen symptoms of somati- 1996; Walton 1985). Today, concerns about worker zation, depression, and anxiety (Linn, Sandifer, et al. autonomy, working hours, the intensifi cation of work, 1985), and lead to social exclusion (Eurofound 2005a). physical and psychological working conditions, and More generally, people who have been unemployed the growth in contingent/temporary workers are im- for prolonged periods report lower levels of satisfac- portant factors in the debate on life satisfaction. For tion with family life, social life, and health than those example, a survey of workers in twenty- eight Eu ro- who have had continuous employment (Eurofound pe an countries, including the acceding and candidate 2004). All these fi ndings reinforce the view of many countries as well as the current member states of the sociologists that work is an anchor point in life (be- Eu ro pe an Union, found that individuals with low lev- tween learning and retirement), and involuntary un- els of work autonomy are less satisfi ed with their lives employment is detrimental to individual and family than those with high levels of work autonomy (Euro- well- being. The negative impacts of unemployment found 2005b). also highlight the important benefi ts that meaning- Both Hochschild’s (1997) and Schor’s (1991) stud- ful employment can provide. ies of work patterns in America point to the negative Although the signifi cance of unemployment points impacts that the increase in daily working hours since to the dilemma that a “bad” job is better than no ac- the 1970s has had on many working families, espe- cess to a job over a prolonged period (Eurofound cially on neglected children. Further, Boisard, Car- 2005a), adopting policies simply to create jobs with tron, et al. (2003a) fi nd that increased working time is little concern for the value they provide workers clearly linked by employees to increasing health and seems unwise. The idea of designing meaningful jobs safety risks. The perception of these employees is re- that enrich lives is not new. For example, in Design inforced by the empirical evidence that links growing of Jobs, L. E. Davis and Taylor (1972, p. 9) recognize incidences of headaches, muscular pains, fatigue, anx- that “we are faced with a new and serious responsi- iety, and insomnia to increasing daily working hours bility for appropriately developing jobs and organiza- (ibid.). Although policies designed to reduce daily tions, and linking them to the larger society. The hours worked might appear to be the logical way to requirement now is to design jobs and roles in a con- enhance well-being—such as the French thirty-fi ve- text having few external referents and in which all hour week—the Euro pe an survey mentioned in the must be designed: the jobs, roles, and the technologi- preceding paragraph (preliminarily) concluded that cal and social systems that will provide meaning for “reduced working time only has a minor impact on individuals and institutions in the larger society.” overall life satisfaction” (Eurofound 2005b, p. 54). With the nature of work continually changing, pri- This fi nding highlights the need to identify those fac- marily in response to global competition (Ackerman, tors that play a more signifi cant role in enhancing the Goodwin, et al. 1998; Carr and Chen 2004; Dough- benefi ts of employment. The same Euro pe an study erty 1998), creating jobs that provide workers with found that long-term unemployment was the most sig- value beyond income becomes increasingly challeng- nifi cant factor affecting subjective quality of life, fol- ing. In the continual drive for competitive advantage, lowed by physical and psychological working conditions fi rms can search for improved per for mance by en- and low work autonomy. The number of hours worked hancing the skills and ability of their internal work- and the intensifi cation of work— that is, work carried force to respond to rapid change or search for ways to out at a faster pace (see Boisard, Cartron, et al. cut costs by reducing their commitment to the work- 2003b)— were statistically signifi cant but had a lower force in favor of contingent workers who can be hired relative impact.* as needed (Cappelli 1998). These two strategies for It should be no surprise that long- term unemploy- competitiveness lie at opposite ends of a continuum, ment is the most important work- related factor affect- where the former approach tends to reinforce job security and meaningful employment and the latter ap- * Although these two last factors are found to be rela- proach tends to undermine it. tively less important, work intensity has been linked to stress The recent growth in the number of contingent (Dhondt 1997; Kompier and Levy 1994) and musculoskeletal dis- workers and in the rate at which workers move be- orders (Eurofound 2002), and the growing number of hours worked is commonly associated with the breakdown of family tween fi rms (reducing job tenure) creates a number —-1 life (Hochschild 1997; Schor 1991). of problems. First, temporary workers are unlikely —0 —+1

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to form bonds of friendship, trust, and commitment for safety, security, and sustenance, employment (both if they are employed for a short period of time (Ber- paid and unpaid) is also a critical factor in the satisfac- tram and Sharpe 2000). This situation not only under- tion of our human needs relating to competence, effi - mines these key elements of human character (Sennett cacy, and self-esteem; autonomy and authenticity; and 1998) but also reduces opportunities for social inclu- connectedness. This section emphasizes the impor- sion. Second, the growing mobility of workers and the tance of thinking beyond policies that focus only on transferability of skills discourage fi rms from invest- job creation to strategies that encourage the creation ing in training because they may not see a return on of meaningful jobs that ultimately enhance our gen- their investment. If a large proportion of fi rms ad- eral well-being and satisfaction with life. The grow- opted a poaching rather than a nurturing approach to ing interest in work- life balance in many fi rms and the acquisition of worker skills, workers would become institutions across the world is encouraging, but the more responsible for their own training and career de- real challenge lies in developing jobs that enhance velopment (Cappelli 1998). This development might competitiveness without undermining the value em- also raise distributive justice concerns, because fi rms ployees derive from workforce participation (see (that is, executives and shareholders) would reap the Section 7.6.4 in Chapter 7 for a related discussion of benefi ts of the additional educational burden put on values for sustainable employment). society as a whole (ibid.). Further, those workers who might not see the value of education and skill 1.1.4 Human Needs and Sustainability development would face increased social exclusion due to reduced ability for participation. There is convincing evidence to suggest that under- The strain that the changing nature of work has standing the fundamental needs of humans is essen- placed on employees and their families and friends tial if we are to develop strategies to transition society has elevated the debate on work-life balance (Wool- toward more sustainable forms of development. Put ley 2006). For example, improving living and work- simply, human needs motivate behavior, and developing conditions in Europe is the primary mission of the ing a better understanding of this relationship is needed Euro pe an Foundation for the Improvement of Living to enhance economic, social, and politi cal decision and Working Conditions (Eurofound).11 In the United making. States, the concept of work-life balance has been ad- It is well documented that individuals, groups, opted by many fi rms that are keen to create a working and cultures develop the actions and value systems environment more conducive to family life. For ex- that are used to realize their needs. This is especially ample, in 2006, IBM had over fi fty programs to pro- important when one is considering differences in the mote work-life balance, and Bank of America had needs of people in developed versus developing na- more than thirty (Economist 2006). More generally, tions, where livelihoods vary signifi cantly. It also means companies in the United States are being recognized that the satisfi ers of needs will change over time and for their family- friendly policies. For example, Work- across cultures with socioeconomic change. Further, ing Mother magazine annually compiles a list of the if societal and cultural values nurture basic psycho- top one hundred companies in America that offer the logical needs, it is likely that the social fabric of a best work- life- balance programs.12 With the growing community will strengthen, which in turn will facili- number of women in the workforce, the need for more tate the well-being and integrity of individuals within fl exible but secure working arrangements is becoming that community (R. M. Ryan 1995). If not, then the more evident. Indeed, Eurofound (2006b, p. 110) ar- reverse is likely to occur. gues that “issues of fl exitime and fl exicurity should A growing concern in Western culture is that our be systematically integrated with those of equal op- view of the good life has been affected (or put out portunity, and with those of good quality and afford- of balance) by the forces of the market economy able child and frail elder ly care.” It also argues that (through advertising, as well as social competition for “family-friendly employment policies might be de- conspicuous consumption). The result of this imbal- fi ned as the basis for a new family policy, in which ance is that an individual’s behavior is being exter- not only income, but time (time to care, to develop nally regulated—that is, it is aimed at obtaining the relationships) is conceptualised as a crucial resource” approval of others. For example, we buy a certain (ibid.). type of product or strive for a high income to ensure In summary, although paid employment provides that we gain the approval of our friends or maintain -1— an essential resource to help satisfy basic human needs our perceived status in society. Such behavior is not 0— +1—

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likely to result in our ability to satisfy our intrinsic Further, relying solely on the market to ensure needs for competence, autonomy, and connected- that basic human needs are met is clearly not a viable ness. option if sustainability is to be achieved—who would A neoclassical economics solution to this concern provide education and primary health care for the might be that each person should act in his or her own poor? Hence government has an important role to interests and let the market allocate resources accord- play in ensuring that markets function for the benefi t ingly. This solution assumes that each person is receiv- of society and intervening where they fall short. To ing good information and is able to make informed, enable an acceptable balance of responsibility to be rational decisions. However, this does not appear to achieved, there needs to be a willingness on the part be the case for consumers aged forty-fi ve and over in of governments, society, and industry to engage in the United States, who are fi nding it increasingly dif- discussion and the analysis of the connection between fi cult to use their spending power effectively (AARP freedom, regulation, and control— and its relationship 2004). It also assumes that even if a person had per- to overall societal good— if and when radical changes fect information, he or she would act in a socially re- to our social and physical systems become necessary sponsible (and rational) manner—an assumption that (Haland 1999). Further, reliance on social infl uence is likely to be challenged by the communitarian move- (or goodwill) to initiate change ignores evidence that ment.* An additional problem is that today’s youth unless the right environment and resources are made have become the most targeted audience for advertis- available, society will be asked to act beyond its capac- ing in history, primarily because of their future spend- ity (Schmuck and Schultz 2002). In many ways, what ing power.13 It is well established that alcohol (Center is needed is a coevolutionary approach to change, in on Alcohol Marketing and Youth 2002, 2005; Jones which the values held by government, society, and and Donovan 2001)14 and tobacco (Cummings, Mor- industry evolve to support human needs and the ob- ley, et al. 2002) companies have targeted products at jectives of sustainable development. youth with the intention of creating lifelong consum- Although markets do provide the goods and ser- ers. But beyond these arguably harmful products, vices that can help meet human needs, the industries encouraging youth to buy music, sports equipment, that operate within the market economy also provide automobiles, electronics, and other products is also a another essential and often overlooked function: the major force for consumption. The “burgeoning youth provision of employment. Holding a well- paid and marketing industry” not only is raising important meaningful job not only enables an individual to ethical questions (Kasser and Linn 2004, p. 1) but purchase goods and services but also provides op- also is reinforcing producer- created demand and the portunities to enhance psychological well-being. The throughput economy. These two outcomes have the problem, however, is that the growing trends of within- potential to lead to signifi cant negative psychologi- nation wage and income in e qual ity in the United cal and environmental impacts, respectively. Recon- States and many other developed nations, com- ceptualizing advertizing to provide (less intrusive) bined with low income mobility, are undermining “information” on products and ser vices rather than the ability of the poor to access important services, messages designed to encourage lifestyles geared to such as health care. Further, the changing nature of consumption is one solution (Victor 2008), although work— for example, the growing number of contin- achieving such a shift in the approach of the advertis- gent workers—is reducing the potential value derived ing industry would be no simple feat. from employment. If these two trends are left un- checked, they could lead to growing feelings of deprivation and a declining satisfaction with life among * The objective of communitarianism is to identify ways the workforce. to restore social and moral consensus to communities without imposing a set of behaviors and values on them. The movement is These concerns present a signifi cant challenge to based on the concern that in the United States the relationships creating a more sustainable society. Determining the between individuals and groups, between rights and responsibili- root causes of diverse issues such as consumerism, ties, and among the institutions of state, market, and civil society growing inequalities, and changing employment op- are out of balance. This imbalance means that personal and social ethics are also out of balance, resulting in a preoccupation portunities is extremely diffi cult. However, what is with individualism. Thus if a large segment of society exhibits clear is that human needs and behavior are common individualistic tendencies, it is questionable whether its members to all these issues. As Pol (2002, p. x) argues, “The would act in a more socially responsible manner if they were provided with perfect information about the impacts of their (eco- sustainability problem is a result of individual and nomic and social) behavior. collective human behaviour. It cannot be treated as —-1 —0 —+1

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an economic or technical problem, without consider- 1.2 SOCIAL JUSTICE, IN E QUAL ITY, AND ing the mechanics that intervene on the behavioral THE SOCIAL CONTRACT BETWEEN side of it.” THE GOVERNED AND THE Placing human needs at the center of sustainable GOVERNMENT development strategies is likely to be a positive step The test of our progress is not whether we add more forward. Such strategies would mean that govern- to the abundance of those who have much; it is ment, society (that is, communities and individuals), whether we provide enough for those who have too and industry would need to promote values that cen- little. Franklin Delano Roo se velt, Second Inaugural ter on innate human needs. In the context of employ- Address, January 20, 1937 ment, this is already recognized in the use of the term “anthropocentric production” (Brödner 1990; Lehner An important conclusion drawn previously is that 1992), which distinguishes people-centered employ- government should act as a trustee to ensure that ba- ment from the use of human resources in the most sic human needs are met in an equitable and just man- profi table or effi cient production schemes, to the det- ner. However, governments cannot provide the whole riment of workers. answer; competitive markets will also continue to play Equally important is the promotion of levels of a vital role in meeting human needs. The challenge is consumption and manufacturing pro cesses that do to fi nd a tolerable balance between government regu- not exceed ecological limits. Ultimately, turning our lation and economic (and other forms of) freedom.† focus to meeting human needs is likely to “make fewer In general, economists tend to reject the notion demands on our environmental resources, but much that the government should interfere with the mar- greater demands on our moral resources” (Brown ket and argue that we should let people express their 1981, p. 359). A term such as “anthropocentric con- utility in the marketplace. However, as discussed in sumption” as an analogue to anthropocentric pro- the previous section, consumers are fi nding it increas- duction sounds inappropriate because almost all ingly diffi cult to use their spending power effectively. consumption is intended for human consumption. Hence it appears that there are two predominant views: “Sustainable consumption” is a better term. (1) there are basic needs, and that is why we need mar- Because the single-purpose design of policies is un- kets; and (2) there are basic needs, and that is why we likely to address multidimensional sustainable devel- need government. opment problems adequately, a better approach would The focus of this section will be on the problems be to search for ways to co-optimize (or even better, of equity within a country or region, equity between integrate) policies that can address multiple concerns. developed and developing nations, and intergenera- For example, identifying ways to combine national tional equity. The critical questions addressed here competitiveness with employment opportunities— for are what is fair within society and what role govern- example, through the creation of intelligent pro- ment should play. If the state is to play a role in needs duction systems or new product-services—is one ap- satisfaction, we should have some understanding of proach that would not only strengthen the economy the relative roles of the governed and the government. but also improve the quality and (potentially) the In this regard, we begin this section with a look at the availability of well- paid employment. In the end, the social contract. challenge facing society is how to reconcile the void between individual human needs, on the one hand, 1.2.1 The Social Contract and the Theory and the sustainable development of social and physi- of Justice cal systems at local, national, and global levels, on the other. It seems that a good way forward would Man is born free; and everywhere he is in chains. be to accept the complexity of sustainable develop- One thinks himself the master of others, and still remains a greater slave than they. Jean- Jacques ment and focus on the design of policies that bring Rousseau, 1762 together competitiveness, employment, and environmental protection.*

† A reliance on markets is not likely to be suffi cient, because if there is producer-created demand, then businesses infl u- * For example, enhancing purchasing power by increas- ence both the supply and the demand side of the economy. ing commercial activity may inadvertently create environmental Although such infl uence may not result in monopoly prices, it problems. Thus in this situation a physical standard of living has the potential to reduce our ability to fulfi ll our basic human -1— needs to be co- optimized with environmental quality and em- needs. Hence government has a role to play in ensuring that a full 0— ployment. range of products and ser vices is provided for society. +1—

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The modern notion of the social contract can be work is to develop and enforce laws that maximize traced back to the po liti cal and moral theories of the well- being and happiness of society. But utilitari- Thomas Hobbes (1985 [1651]), John Locke (1988 anism suffers from two major problems (Brock 1973). [1690]), Jean-Jacques Rousseau (1968 [1762]), and First, the theory raises moral confl icts, particularly Immanuel Kant (1989 [1785]), but the present-day in regard to justice. For example, although reducing interpretation rests most heavily on the work of John taxes might maximize the happiness (or material Rawls (1971). well- being) of society, it might also have the effect The basic premise of the social contract is that an of reducing the availability of basic health or edu- individual, in accepting that the pursuit of self- cational services for the disadvantaged. The aggre- interest is ultimately self-defeating, relinquishes cer- gative character of utilitarianism means that it is tain freedoms and rights to a system of collectively not concerned about the pattern of distribution of enforced social arrangements in exchange for peace welfare,† and therefore it provides no justifi cation for and security (Friend 2004). Hence he or she agrees to in e qual ity in its distribution (Cohen 1993). Further, follow the “general will” of society and be held ac- “It would not only be morally right to sacrifi ce the in- countable if his or her “individual will” motivates be- terests of individuals or minority groups if this would havior that breaks the social contract—that is, the law serve to maximize common utility, but those who are of the land (Rousseau 1968 [1762]). What ever free- sacrifi ced would even have a moral duty of benevo- doms an individual loses in the transition from the lence to let this happen” (Wetlesen 1999, p. 42). Sec- state of nature* to the civil state are more than com- ond, utilitarianism fails to support the more liberal pensated for by belonging to a civil society that en- nature of Western societies that emphasize liberty sures liberties and property rights. Hence the social and individual rights. For example, slavery was a use- contract tries to balance individual freedom with be- ful institution in the United States for promoting the ing a member of a civil society that limits freedoms success of agricultural advance, but it was ultimately for the greater good. rejected on moral and sociopoliti cal grounds. Simi- During the nineteenth century, interest in the solar arguments apply to the elimination of child labor cial contract declined as the utilitarian movement in industrialization. took hold (Rawls 1971). Utilitarianism argues that all In an effort to address the shortcomings of utili- moral judgments should aim to achieve the greatest tarianism, as well as those of intuitionism (that is, good for the greatest number (Bentham 1970 [1781]; systems of philosophy that consider intuition the fun- Mill 2002 [1863]). Hence the objective of social insti- damental process of our knowledge), John Rawls pub- tutions and human actions under a utilitarian frame- lished his seminal work in 1971, A Theory of Justice, which renewed the notion of the social contract by arguing that po liti cal and moral positions can be de- * The “state of nature” refers to a hypothetical state of termined by using impartiality. living that occurred before the establishment of society and the introduction of any form of government or social arrangements. The traditional social contract (envisioned in its Hence in the state of nature there are no restraints on how one various forms by Hobbes, Locke, Rousseau, and Kant) can behave. The manner in which one defi nes the state of nature revolved around the agreement of people in a state of has implications for how the social contract is subsequently envisioned. For example, Hobbes’s (1985 [1651]) politi cal philosophy was based on the idea that men in a state of nature (i.e., in a state † The Brundtland report, Our Common Future, interprets without civil government) are in a state of constant war, which “welfare” as the “satisfaction of human needs and aspirations” any rational and self- motivated individual would want to end. (WCED 1987, p. 43). This interpretation rests on fundamental Hence the solution is to establish a social contract to ensure human needs for “primary goods,” such as food, shelter, cloth- peace and order and to enable individuals to live in a civil soci- ing, and employment, and the legitimate expectations for a better ety, which suits their own interest. Hobbes’s hypothetical view of life. Wetlesen (1999) argues that we can reasonably interpret the the state of nature was extreme in that he envisioned a world in Brundtland Commission’s view of welfare in an objective and which man would constantly fear for his life. Locke (1988 [1690]) a subjective sense. The former is concerned with conditions and built on Hobbes’s notion of the social contract but constructed standards of living, and the latter with the perceived quality of his theories on a different view of the state of nature. Locke life that an individual is able to achieve. The Brundtland report (1988 [1690]) argued that without government to enforce social is also concerned about the equitable distribution of welfare. arrangements and laws, man is not free to do anything he pleases “The essential needs of vast numbers of people in developing because he is constrained by a sense of morality. In this regard, countries— for food, clothing, shelter, jobs— are not being met, the “State of Nature is pre-political, but it is not pre-moral. . . . It and beyond their basic needs these people have legitimate aspira- is therefore both the view of human nature, and the nature of mo- tions for an improved quality of life. A world in which poverty rality itself, which account for the differences between Hobbes’ and ine qual ity are endemic will always be prone to ecological and Locke’s views of the social contract” (C. Friend [2004], “The and other crises. Sustainable development requires meeting the Social Contract,” The Internet Encyclopedia of Philosophy, basic needs of all and extending to all the opportunity to satisfy —-1 www .iep .utm .edu/ soc -cont/ [accessed June 8, 2010]). their aspirations for a better life” (WCED 1987, pp. 43– 44). —0 —+1

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nature to form a society and government that they parties are able to adopt “the standpoint of someone will be obligated to obey (Brock 1973). In this rein the original position, and so the moral point of gard, the social contract is “primarily a theory of view, at any time.” In theory, an individual in the politi cal obligation” (ibid., p. 488). In contrast, Rawls original position will adopt the same principles for developed a version of the contract in which the rel- justice as any other person, thereby establishing a evant agreement revolves around moral principles, robust set of principles and arrangements to regulate the principles of justice (ibid.). These principles can a just society. be considered a set of game rules that must be fol- A problem identifi ed by Rawls when he is consid- lowed in designing new social arrangements, such as ering the design of the social institutions that form policies and programs. Central to Rawls’s theory is the basic structure of society is that individuals are the hypothetical situation, the “original position,” in born into the world with a wide range of circum- which an individual’s knowledge is constrained by a stances and characteristics. Although it is not possi- “veil of ignorance.” Behind the veil of ignorance, ble to alter many of the human characteristics that “No one knows his place in society, his class position form our personalities and physical ability, Rawls or social status; nor does he know his fortune in the argues that it is possible to adjust the social institu- distribution of natural assets and abilities, his intel- tions to favor those who are disadvantaged. Hence ligence and strength, and the like. Nor, again, does Rawls develops two principles of justice that he ar- anyone know his conception of the good, the partic- gues contracting parties would select in the original ulars of his rational plan of life, or even the special position— behind the veil of ignorance— to establish features of his psychology such as his aversion to risk a just society: or liability to optimism or pessimism. . . . The parties First Principle: “Each person is to have an equal right do not know the par tic u lar circumstances of their to the most extensive total system of equal basic own society, . . . its economic or politi cal situation, or liberties compatible with a similar system of liberty the level of civilization and culture it has been able for all.” to achieve” (Rawls 1971, p. 137). Rawls argues that Second Principle: “Social and economic inequalities decisions made for society should be made as if the are to be arranged so that they are both (a) to the participants do not know in advance what their lot in greatest benefi t of the least advantaged, consistent life will be. with the just savings principle, and (b) attached to In essence, Rawls’s original position is an abstract offi ces and positions open to all under conditions of version of the state of nature. It follows that from fair equality of opportunities” (Rawls 1971, p. 302). the original position people are able to identify what they must do individually and collectively The fi rst principle determines the distribution of (through social institutions) to realize the nature of civil liberties. It states that each member of a society justice. The simplicity of the veil of ignorance is its is to receive as much liberty (or personal freedom) as strength. By denying contracting parties the knowl- possible, as long as every other member of society edge of their own characteristics or circumstances, receives the same. The principle “implies that one they are forced to adopt the moral point of view and person’s good can never be considered a good if it are unable to develop principles or policies that favor constitutes an obstacle to someone else’s pursuit of themselves. Rawls also states that contracting par- their good, even if that someone else comes a genera- ties are assumed to be “rational and mutually disin- tion or two later” (Voorthuis and Gijbels 2010, terested” (Rawls 1971, p. 13): “rational” in the sense p. 376). The second principle states that social and that the contracting party makes the most effective economic inequalities are justifi ed only if the most decision to reach a given end, and “mutually disin- disadvantaged members of society are made rela- terested” in the sense that each person does not take tively better off under new arrangements. As Friend “an interest in one another’s interests” (ibid.). Thus (2004) notes, “Only if a rising tide truly does carry the “rational” choice is to develop principles and all boats upward, can economic inequalities be al- strategies for a just society from initial conditions lowed for in a just society.” that are inherently fair. Justice, therefore, proceeds Rawls (1971) developed the second principle out of fairness, giving rise to Rawls’s formulation of (known as the difference principle) using the maximin “justice as fairness” (ibid., p. 17). Further, as Brock rule— that is, the best outcome is one that minimizes (1973, p. 489) notes, in Rawls’s theory there is no the maximum loss. He argued that since people do -1— historical agreement, which means that contracting not know their position in society when they are 0— +1—

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behind the veil of ignorance, they will select the dif- future,† or that the current generation has a larger ference principle because it will be to their benefi t population than the previous generation— a fact that if they end up in the most disadvantaged section of will clearly change how much society should save society. (Barry 1999; Casal and Williams 1995; P. Dasgupta In the latter part of principle 2(a), Rawls intro- 1994; Heyd 1992). Nevertheless, Rawls’s ideas pro- duces the notion of “just savings,” which is the fi rst vide a useful starting point for discussions about in- comprehensive treatment of intergenerational equity tergenerational equity. (or justice). The basic idea is that when individuals The two principles of justice are to be considered are in the original position, behind the veil of igno- in a specifi c order. The fi rst principle must be consid- rance, they do not know which generation or in what ered before the second principle because “liberty stage of socioeconomic development they might live can only be restricted for the sake of liberty, not for and must, therefore, select “savings” principles that other social and economic advantages” (Brock 1973, do not favor earlier generations over later ones.* In p. 490).‡ This ranking implies that society would A Theory of Justice, Rawls’s formulation of the just rank the determination of civil liberties above that savings principle was based on a “motivational as- of economic advantage. Also, within the second prin- sumption” that contracting parties would want to ciple, equality of opportunity (2b) is to be consid- save for their successors, regardless of whether their ered before the difference principle (2a), using the ancestors saved for them.15 This formulation runs same rationale. counter to the notion of “mutually disinterested” con- Before we progress further, it is worth mentioning tracting parties and has been criticized as being sex- that there are those who question these basic princi- ist and arbitrary (Barry 1978; Okin 1989). ples of justice. For example, Brock (1973) argues that In Politi cal Liberalism, Rawls (1993) revised his people in the original position are likely to tolerate notion of the just savings principle to address these minor sacrifi ces in liberty for substantial economic inconsistencies. His revised assumption is that gen- gain, especially in situations of severe economic un- erations are mutually disinterested. Therefore, con- derdevelopment. Further, the difference principle as- tracting parties in the original position, behind the sumes that all risk taking in the original position is veil of ignorance, should “agree to a savings princi- irrational: “It allows no possible gain in one’s life ple subject to the further condition that they must prospects, should one turn out to be among the bet- want all previous generations to have followed it. Thus ter off members of society” (ibid., p. 491). This latter the correct principle is that which the members of point refl ects a common criticism of Rawls’s decision any generation (and so all generations) would adopt to use a maximin rule (Harsanyi 1975). Rawls (1974) as the one their generation is to follow and as the counters such arguments by stating that the original principle they would want preceding generations to position masks the probabilities of outcomes, mak- have followed (and later generations to follow), no ing alternative decision rules too risky. In addition, matter how far back (or forward) in time” (ibid., the difference principle acknowledges the fact that p. 274). In this formulation, the principle of just sav- any good circumstances into which a person is born ings is considered as binding for all previous and fu- are “unearned and undeserved” (Brock 1973, p. 491). ture generations. A problem, however, with Rawls’s The benefi ts that are derived from these circum- restatement is that he does not consider the impli- stances should therefore benefi t all of society. Thus cations of an increasing number of people in the whether a person is for or against Rawls’s theory of justice will depend, to a certain extent, on that per- * In the words of Rawls (1971, p. 287): “The parties do son’s perceived position in society. not know to which generation they belong or, what comes to the same thing, the stage of civilization of their society. They have no way of telling whether it is poor or relatively wealthy, largely ag- † In contrast, in Northern industrialized societies there ricultural or already industrialized, and so on. The veil of igno- are implications of decreasing populations that can not provide rance is complete in these respects. Thus the persons in the suffi cient amenities for those retiring (International Economy original position are to ask themselves how much they would be 2004). willing to save at each stage on the assumption that all other gen- ‡ It is possible to envisage a situation where liberty is erations are to save at the same rates. That is, they are to consider constrained to protect liberty— i.e., “restrictions to individual their willingness to save at any given phase of civilization with freedoms are justifi ed when the unfettered exercise of these free- the understanding that the rates they propose are to regulate the doms confl icts with other freedoms” (Beatley 1994, p. 156). For whole span of accumulation. In effect, then, they must choose a example, the speed at which vehicles are allowed to drive is con- just savings principle that assigns an appropriate rate of accumu- strained to protect broader public freedoms such as individual lation to each level of advance.” safety. —-1 —0 —+1

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Rawls argues that his notion of justice as fairness to enable it to achieve this goal. But establishing a begins with the adoption of the principles of a just philosophy of government that ensures that basic hu- society, which will guide all subsequent actions, in- man needs are met is a complex task. cluding the reform of institutions. “Having chosen a Basic human needs are categorized under the conception of justice, we can suppose that . . . [the headings of sustenance, competence, autonomy, and contracting parties] are to choose a constitution and connectedness (Kasser 2002). However, this formu- a legislature to enact laws, and so on, all in accor- lation does not provide government with a clear di- dance with the principles of justice initially agreed rective on what actions are required to satisfy our upon. . . . Moreover, assuming that the original posi- basic needs. In this regard, Max-Neef, Elizalde, et tion does determine a set of principles (that is, that a al’s (1989) theory of human needs and satisfi ers is of partic u lar conception of justice would be chosen), it value in that it identifi es the qualities, things, actions, will then be true that whenever social institutions and settings that are associated with fundamental satisfy these principles those engaged in them can needs such as protection, participation, and freedom. say to one another that they are cooperating on Further, because satisfi ers are ultimately defi ned terms to which they would agree if they were free by society— an essential characteristic of the social and equal persons whose relations with respect to contract— an interesting experiment would be for a one another were fair” (Rawls 1971, p. 13). representative group of contracting parties to com- Rawls argues that the challenge raised by the dif- plete Max- Neef, Elizalde, et al’s (1989) matrix of needs ference principle is how to choose a social system and satisfi ers while behind the veil of ignorance . In (that is, a basic structure of government) that will theory, this action would develop the satisfi ers of hu- ensure distributive justice in a capitalist market man needs that are culturally defi ned and impartial. economy. From the premise that the basic structure Once the basic human needs of a society are agreed of government and its actions are regulated by a con- on, the role of government (in a Rawlsian sense) is to stitution protecting the liberties of equal citizenship, develop laws, policies, and programs to assist those Rawls outlines four branches of government (Rawls members of society who are unable to satisfy their 1971, pp. 274–284). The fi rst is the allocation branch, basic needs. Opponents to the formation of such a required to keep markets competitive, prevent the welfare state argue that the only way to meet the formation of unreasonable market power, and cor- needs of the disadvantaged is through economic regu- rect for externalities. The second is the stabilization lation and taxation, which results in a loss of civil lib- branch, needed to bring about strong effective de- erties (Nozick 1974).* Hence civil liberty and social mand (through the deployment of fi nance) and to welfare stand in constant tension with each other.† maintain full employment and choice of occupation (that is, those who desire work can fi nd it). The third * In 1974 the late Robert Nozick—a professor of philos- is the transfer branch, essential to the formation and ophy at Harvard and a colleague of John Rawls— published An- maintenance of a social minimum. By considering archy, State, and Utopia in opposition to the nonminimal welfare basic human needs, this branch determines the level state proposed in A Theory of Justice. Nozick (1974, p. ix) defi ned of guaranteed minimum income that maximizes the the minimal state as follows: “Our main conclusions about the state are that a minimal state, limited to the narrow functions of long-term expectations of the least advantaged. Fi- protection against force, theft, fraud, enforcement of contracts, nally, there is the distribution branch, needed to en- and so on, is justifi ed; that any more extensive state will violate force inheritance and gift taxes, in addition to general persons’ rights not to be forced to do certain things, and is unjustifi ed; and that the minimal state is inspiring as well as right. Two income or expenditure taxes. It follows that the allo- noteworthy implications are that the state may not use its coer- cation and stabilization branches are required to cive apparatus for the purpose of getting some citizens to aid maintain an effi cient economy; the transfer branch is others, or in order to prohibit activities to people for their own good or protection.” Interestingly, although Nozick’s and Rawls’s designed to ensure that basic human needs are iden- philosophies of government were opposed, they both agreed that tifi ed and met; and the distribution branch is needed individual rights are more important than utilitarian consider- to prevent the concentration of economic power. ations and that government should be neutral in respect to peo- As stated in the introduction to Section 1.2, we ple’s right to choose and pursue their own vision of a good life (Sandel 1996). argue that government has an important role as a † “The extent to which the needs theory dominates the trustee to ensure that basic human needs are met in philosophy of government . . . can be measured by the levels of an equitable and just manner. The preceding discus- taxation and regulation of economic activity. Government takes money out of the hands of individuals and spends it on what it sion of the social contract and Rawls’s theory of jus- considers are the needs priorities of the people. The more an in- -1— tice indicates how government could be structured dividual is taxed, the greater the loss of his freedom to determine 0— +1—

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One might question, however, whether a laissez- has had the effect of exposing the public sphere to “the faire market is able to operate free from government manipulative deployment of media power to procure intervention and supply the products and services that mass loyalty, consumer demand, and compliance with society needs. In partic u lar, Brulle (2000, p. 37) ex- systemic imperatives” (Habermas 1992, p. 452, quoted presses concern that government is not able to opera- in Brulle 2000, p. 37). In such an environment, it is dif- tionalize the social contract, arguing that “there is fi cult to envision how society can be an effective part little public policy about policy.” of the decision-making process. Thus the social con- Brulle (2000) describes how since the Great De- tract between the governed and the government is un- pression, the U.S. government has become an active dermined, thwarting efforts to establish a social order participant in economic activity, primarily to stabi- that enables “the communicative generation of legiti- lize the economic system and to compensate for the mate power” (ibid.). adverse effects of capital accumulation. This involvement in the economy means that the government as- 1.2.2 Operationalizing the Social Contract sumes a level of responsibility to ensure the legitimacy of the market. Because economic growth is based on Given the preceding discussion, a critical question investment and consumption, the government plays remains: how should we operationalize the social an important role in furthering these two drivers of contract? Further, if government is to act as a trustee, economic development. Brulle (2000, pp. 34– 35) ar- how should it interact with the public? gues that the “inability of the market to maintain it- Ashford and Rest (2001) provide some useful an- self creates a po liti cally maintained private market swers to these questions. In partic u lar, they argue in which socialized production and private appro- that the perceived and actual role of government in priation of production exist in a system legitimized public participation is crucial, as is the role adopted by formal democratic rules. This creates a confl ict by the stakeholders: between the normative justifi cations for collective de- Specifi cally, what is important is whether the govern- cisions. Market outcomes are legitimized as the out- ment sees itself and is seen as (1) a trustee of community/ comes of democratic will formation. This leads to a stakeholder interests, or alternatively (2) as a mediator series of contradictions and crises in Western society.” or arbitrator of confl icting interests in the community Brulle’s (2000) major concern is that the public or stakeholder group. The roles adopted by the partici- sphere—“an arena in which the common good was pants of community and stakeholder involvement debated and a demo cratic consensus was reached” processes are likewise important, specifi cally the par- (p. 37)— has been undermined by the insulation of ticipant dynamics that foster majoritarian or utilitarian outcomes, versus communitarian outcomes.[†] Both government action from public input.* This situation sets of roles can affect the process and outcomes of public participation efforts. In other words, the role of his own priorities and to satisfy his individual needs. In short, government and the tenor of community or stake- through taxation and regulation, government decides how a per- holder participation are codeterminative of success— son should spend his money. Rather than leave a person’s re- which we defi ne, in large measure, as enhancing sources to himself and permit him to make his own arrangements fairness, justice, and empowerment for the most for the satisfaction of his needs, the government expropriates his [adversely] affected. wealth and in return seeks to provide him the necessities of life as determined by government. . . . It is clear that a needs based In order for the government to act in a trusteeship theory of human rights can be pursued only at the expense of the capacity, it must be committed to justice and fairness gradual loss of freedom and a gradual movement towards totali- in the Rawlsian sense— i.e., it must fi rst and foremost tarianism” (M. Cooray [1985], “Human Rights in Australia,” The Basic Human Rights and the Needs Based Human Rights, www .ourcivilisation .com/ cooray/ rights/ chap5 .htm [accessed June strong infl uence over government, thereby undermining the abil- 8, 2010]). ity of society to express its views through the democratic process. * Brulle (2000, pp. 36– 37) puts forward a number of † “The . . . communitarian approach to confl ict resolu- ways in which government policy is insulated from the public. tion is a pro cess wherein the various community members or For example, the use of scientifi c discourse in the development stakeholders strive to achieve the greater social good rather than and analysis of state policy has the effect of limiting the public’s maximize their own benefi t, thereby transcending individual in- access to institutional policies. The management of po liti cal de- terests. We emphasized the distinction between a consensus mand through the selective involvement of certain groups in ne- reached by majoritarian processes (where the politi cal majority gotiations presents clear barriers to public participation. Also, gets what it wants, thereby approximating maximum collective public demands are insulated by increasing the decision-making utility), and a communitarian approach using normative pro- authority of the executive agencies of the state. Korten (2001) cesses, in which citizens and other stakeholders are willing to and Nader (2004) also argue that the power of commercial enter- sacrifi ce self- interest on behalf of longer- term and more far- prises has grown to such an extent that they are able to exert a reaching societal goals” (Ashford and Rest 2001, p. VII- 9). —-1 —0 —+1

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TABLE 1.3: TYPES AND OUTCOMES OF INTERACTIONS BETWEEN THE GOVERNMENT AND STAKEHOLDERS

STAKEHOLDER POSTURE

UTILITARIAN (Maximizing COMMUNITARIAN (Promoting GOVERNMENT’S ROLE individual/social beneﬁ t) the greater social good)

As a trustee for the affected 1. Decision is made by 2. Decision is made by govern- stakeholders government in a trustee- ment in a trusteeship role on ship role on behalf of all behalf of the stakeholders the participating (mirroring a normative consen- stakeholders. sus, possibly expanding to beneﬁ t the larger nonparticipating public as well). As a facilitator of utilitarian 3. Stakeholder involve- 4. Idealized stakeholder involve- or majoritarian consensus, or ment pro cesses reach a ment pro cesses reach normative alternative dispute resolution consensus or compromise consensus, possibly expanding among the stakeholders among the participating to beneﬁ t the larger non- stakeholders. participating public as well.

Source: Adapted from Ashford and Rest (2001, p. VII-14).

encourage or allow those activities that provide rela- In the left column of Table 1.3, the two roles of tively greater advantage to those individual members government are indicated: (1) the government acts as or groups who are relatively worse off to begin a trustee of stakeholder interests, and (2) the govern- with. . . . In a po liti cal climate where stakeholder ment acts as a mediator of confl icting interests be- involvement is encouraged to legitimize confl ict tween or among stakeholders. For the stakeholders, resolution or the parceling out of scarce agency resources, government can easily abdicate its trustee- two (somewhat idealized) positions are presented: ship role in favor of a more utilitarian approach to (1) utilitarianism, in which stakeholders seek to max- problem solving. The result is often a continued imize their own utility; and (2) communitarianism, polarization of various community groups and in which stakeholders act for what they perceive as members. . . . the greater social good. Further, a distinction is made To the extent that government sees and presents between the participating stakeholders—that is, those itself as a convener or mediator of opposing interests, actively involved in public participation efforts— government itself may foster utilitarian, rather than communitarian values and outcomes. Conversely, and the nonparticipating public who are also stake- where government presents itself as a guardian of the holders. disadvantaged, community participation mechanisms If we consider the fi rst row in Table 1.3 where the that protect minority views and interests by address- government adopts the role of trustee, two situations ing imbalances of power are encouraged. The com- can arise (Ashford and Rest 2001, p. VII- 13). First, munity members themselves may step out of their government acts on behalf of the participating stake- roles as representatives of narrow community inter- holders to promote utilitarian solutions (cell 1). Sec- ests, and address issues of fairness on a broader ond, government acts on behalf of all stakeholders, scale. Thus, vehicles for public participation and stakeholder involvement must be seen within this including those who are not present, to promote com- broader perspective in order to gauge their accom- munitarian solutions (cell 2). Likewise, if we consider plishments. (Ashford and Rest 2001, p. VII- 9) the second row in Table 1.3 where the government adopts the role of facilitator of compromise or con- The research undertaken by Ashford and Rest sensus, we see two different situations (ibid.). First, (2001) indicates that the outcome of discourse be- government acts to implement the compromise or tween government agencies and the public depends consensus reached by the participating stakeholders on the roles adopted by each. To help visualize the (cell 3). Second, government acts to implement the interactions between government and society, they normative consensus achieved by stakeholders on developed a matrix that presents the likely outcomes behalf of the larger nonparticipating public (cell 4). under the different government/stakeholder positions (Table 1.3).* only the second matrix is discussed here. Those interested in the difference between community involvement mechanisms and -1— * Although Ashford and Rest (2001) use two matrices to stakeholder involvement mechanisms are directed to Ashford 0— distinguish the community from the wider group of stakeholders, and Rest (2001). +1—

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As before, the former promotes utilitarian solutions advantage to individuals or groups who are relatively and the latter communitarian ones. worse off to begin with. Ashford and Rest (2001, p. VII- 15) draw the fol- A Rawlsian government refers to a government lowing conclusions from the matrix: that is willing and has the capacity to either impose or endorse Rawlsian outcomes. If the stakeholders If what is desired is reaching decisions that benefi t hold a predominantly utilitarian posture, it is likely the larger group of stakeholders (both participating and nonparticipating), this can be achieved either that the Rawlsian outcomes will need to be imposed by government adopting a role as a trustee/decision- on the stakeholders, which a Rawlsian government maker for the larger group of stakeholders . . . [cell 2] may be willing to do. Although this situation appears or through an idealized stakeholder involvement autocratic, it should be recognized that utilitarian pro cess facilitated by government . . . [cell 4]. This is solutions can result in unjust outcomes that could especially appropriate in environmental justice infringe on an individual’s liberty and rights. Here communities. the fundamental assumption is that Rawlsian out- On the other hand, if the participating stakeholders are able or not [able] . . . to think beyond their comes are more likely to be just and fair for all mem- narrow self- interests, stakeholder involvement pro- bers of society. Hence if the stakeholders hold a cesses will leave them most satisfi ed if either the predominantly communitarian posture—which pro- government facilitates giving them what they want motes the (perceived) greater societal good—the through meaningful participation in reaching com- government is likely simply to endorse the solutions promises or resolving disputes . . . [cell 3] or if the agreed on by stakeholders. government serves as a trustee for their interests . . . It follows that a non-Rawlsian government is either [cell 1]. unwilling or does not have the capacity to impose Hence the public participation mechanism should be Rawlsian outcomes on the stakeholders. Instead, it chosen with care, “paying special attention to the best adopts the position of mediator of stakeholder inter- way to achieve procedural fairness, procedural com- ests. Under this arrangement, the responsibility for petence, and optimal outcome. . . . This will necessar- achieving a just and fair society is left to the stake- ily involve a variety of complementary mechanisms, holders. A non-Rawlsian government does not mean utilizing both community and stakeholder involvement that a Rawlsian outcome cannot be achieved; it sim- pro cesses” (Ashford and Rest 2001, p. VII- 14). ply means that the government does not act as a To help visualize the implications of Ashford and trustee for stakeholder interests, and it would take a Rest’s (2001) framework, we have created Table 1.4 to strong communitarian group of stakeholders to press show whether the (idealized) roles of government and for a Rawlsian outcome. stakeholder postures are likely to result in a Rawlsian The ideas presented in Table 1.4 present some outcome. As in Table 1.3, the stakeholders’ posture useful insights that can help guide decision making in the decision pro cess is idealized as being either toward a just and fair society. In effect, the table shows utilitarian or communitarian. Table 1.4 uses the terms two important outcomes: (1) a Rawlsian- sympathetic “Rawlsian outcome,” “Rawlsian government,” and government may not be suffi cient to achieve a Rawl- “non-Rawlsian government,” which require some clar- sian outcome if the stakeholders adopt a utilitarian ifi cation. posture and the government accedes to their wishes; A Rawlsian outcome is where new legislation, poli- and (2) a non- Rawlsian government can arrive at a cies, or programs support initiatives that offer greater Rawlsian outcome, but only if stakeholders adopt a

TABLE 1.4: LIKELIHOOD OF ACHIEVING A REVISED RAWLSIAN OUTCOME WITH A RAWLSIAN/ NON- RAWLSIAN GOVERNMENT AND UTILITARIAN/COMMUNITARIAN STAKEHOLDERS

STAKEHOLDER POSTURE IN THE DECISION- MAKING PRO CESS

UTILITARIAN (Maximizing COMMUNITARIAN (Promoting GOVERNMENT individual/social beneﬁ t) the greater social good)

Rawlsian government Revised Rawlsian outcome Revised Rawlsian outcome (government acts as trustee possible highly likely for stakeholders) Non-Rawlsian government Revised Rawlsian outcome Revised Rawlsian outcome (government acts as unlikely likely facilitator for utilitarian/ —-1 majoritarian consensus) —0 —+1

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communitarian posture* and the government ac- fer, for example. Therefore, the Rawlsian approach cedes to their wishes.† should be seen as a movement (a process) and not a If stakeholders adopt a communitarian posture, fi nal state, but it is nonetheless possible to operation- the likelihood of a Rawlsian outcome being reached is alize Rawls’s theory of justice by “bounding” the good but variable, depending on whether the govern- acceptable moves and rejecting the clearly utilitarian ment is a trustee or mediator of stakeholder interests. moves that are not Rawlsian. If there is a Rawlsian government, a Rawlsian out- If we consider the risks that workers are willing to come will be more likely (see the upper right cell). In accept to take a dangerous job, it is possible to illus- contrast, if stakeholders adopt a utilitarian posture, it trate the concept of bounding acceptable moves. It has is less likely that a Rawlsian outcome will be reached. been observed that workers coming from a poor so- If there is a Rawlsian government and stakeholders cioeconomic class are willing to accept a dangerous adopt a utilitarian posture, a Rawlsian outcome is job at a lower level of pay than workers who come possible, although its achievement may not satisfy the from a more affl uent socioeconomic class—for exam- winning party as a result of hard-won compromises. ple, the sons or daughters of the executives of the fi rm In many respects, the United States is a good example that is offering employment (Ackerman and Heinzer- of this situation, where government tends to facilitate ling 2004; Ashford 1981; Ashford and Caldart 1996). utilitarian consensus (Ashford and Rest 2001). In this case, the sons or daughters of the executives The strength of the decision-making philosophy are likely to demand higher pay to accept the risks as- just described can be illustrated by a simple exam- sociated with the work. Therefore, consciously setting ple. In a typical policy setting, if one were to adopt a the pay at a level that only workers from a poor socio- Rawlsian approach to decision making— that is, any economic class would accept is wrong from a moral new social arrangement should preferentially advan- standpoint. This outcome is what economic effi ciency tage the least advantaged—analysts would likely ask and utilitarianism dictate. Clearly, a Rawlsian solu- by how much the least advantaged should be made tion is not to provide a level of pay that only workers better off, Because the Rawlsian approach talks only from a poor socioeconomic class would accept but about movement toward justice (or fairness), there is something much more toward what the most advan- no unique answer to how much to preferentially ad- taged would be willing to accept, given the associated vantage the least advantaged as long as signifi cant level of risk. Although the Rawlsian outcome is not maldistributions remain. In contrast, if we were to calculable in the absolute sense, it can certainly be adopt a utilitarian approach, it would be possible to bounded. Further, the solution should arrive at “a identify the optimum level of safety or income trans- well-grounded and situationally determined feeling of fairness” (Voorthuis and Gijbels 2010, p. 376). At * It should be understood that communitarian stake- the upper bound, if the executives paid their workers holders will not develop a Rawlsian outcome based on Rawls’s as much as the richest portions of society would (1971) theory of justice; rather, they are likely to approximate a Rawlsian outcome by pursuing the greater social good (or com- require to assume the job, it would not be anti- mon purpose or goal). Thus communitarians are likely to arrive Rawlsian. Thus the fi nal solution will lie between the at a Rawlsian outcome from the perspective of shared moral val- upper and lower bounds at a point that the stake- ues that stem from the traditions of a community. Although it holders believe is fair, econom ical ly feasible, and in is not possible to know whether, and to what extent, communitarian stakeholders will develop Rawlsian outcomes—because line with the interests of society as a whole. The idea the perception of a “fair outcome” is likely to differ between of bounding the acceptable moves and rejecting the communities—one would imagine that their strong emphasis on clearly utilitarian moves that are not Rawlsian is ex- the “community” is likely to prevent or minimize the marginal- ization of disadvantaged groups. For an insightful discussion of plored later in this section. the differences between views of liberals (i.e., Rawlsians) and The preceding illustration shows that Rawls’s orig- communitarians, see Etzioni (1990). inal position is essentially a voting tool. It is a way of † It is important to realize that this framework does not attempt to achieve a single state of utopia; Rawls does not defi ne getting society to agree on what is fair for society. In such a state. This fact highlights an important difference be- this sense, it has a communitarian weighting—it helps tween Rawlsian thinking and utilitarianism—utilitarian out- individuals instill in social arrangements what they per- comes can be defi ned by an end state (i.e., effi ciency). In contrast, ceive as the greater social good. Thus asking society Rawlsian outcomes should be seen as a movement toward equality, not equality per se. If a society were to continually advantage to “vote” about what is fair from the original position the least advantaged, it is conceivable that it would eventually can be seen as a way of operationalizing the commu- achieve equality, but this is not necessarily the case. If a society nitarian choice process. continually allowed concentrations of wealth in an effort to make -1— the economic pie bigger, it might never reach total egalitarianism If we consider the concept of sustainable devel- 0— (i.e., social equity). opment, an interesting question is whether Rawls’s +1—

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theory of justice can ensure that human activity does maintained that the capacity for a sense of justice is not degrade the environment to a state where it is unnecessary in order to be owed the duties of justice, it able to recover. The reason for asking this question is does seem that we are not required to give strict simple. It stems from the belief that the ultimate ratio- justice anyway to creatures lacking this capacity. But it does not follow that there are no requirements at all nale of governance is to support and encourage a way in regard to them, nor in our relations with the natu- of life that recognizes and values human (economic ral order. Certainly it is wrong to be cruel to animals and social) needs and the natural environment, is just and the destruction of a whole species can be a great and fair, and continually strives to achieve an accept- evil. The capacity for feelings of plea sure and pain able balance between civil liberty and regulation. and for the forms of life of which animals are capable Hence the philosophy of government and the stake- clearly imposes duties of compassion and humanity in holder posture adopted by society will have a signifi - their case. I shall not attempt to explain these considered beliefs. They are outside the scope of the cant infl uence on whether it is able to move toward theory of justice, and it does not seem possible to sustainability. extend the contract doctrine so as to include them in a The four major environmental factors that under- natural way. A correct conception of our relations to lie the concern for sustainable development (to be animals and to nature would seem to depend upon a discussed further in Section 1.4) are the following: theory of the natural order and our place in it. One of the tasks of metaphysics is to work out a view of the 1. The disruption of ecosystems and loss of biologi- world which is suited for this purpose; it should cal diversity and the indirect effects these have on identify and systematize the truths decisive for these human health and well- being questions. How far justice as fairness will have to be 2. The rapid use of fi nite resources and energy sup- revised to fi t into this larger theory it is impossible to plies say. But it seems reasonable to hope that if it is sound as an account of justice among persons, it cannot be 3. The direct impacts of toxic pollution on human too far wrong when these broader relationships are health and the health of other species taken into consideration. (Rawls 1971, p. 512; 4. The disruption of the global climate emphases added) All four of these factors occur as a result of hu- Several interesting points can be gleaned from man action and the technology we have at our dis- Rawls’s comments (D. R. Bell 2006; Partridge 1976). posal. Therefore, it will be possible to address these First, Rawls adopts the position that because crea- problems only if there are social arrangements that tures “lack the capacity for a sense of justice,” they enable us to do so in an effective manner. The grow- should not be considered moral agents within the 16 ing interest in environmental justice provides some community afforded justice. Thus rather than ex- evidence that society is willing to ensure that devel- tending “duties of justice” to individual animals or opment does not adversely affect the disadvantaged entire species, Rawls states that society has an obli- by protecting the environment in which they live. gation to impose “duties of compassion and human- However, as a practical matter, environmental jus- ity in their case.” Rawls does not extend his thoughts tice is primarily concerned with the protection of on what these “duties of compassion and humanity” people. Hence in addition to searching for Rawlsian might be because he believes that they are not com- solutions to social problems (which include eco- mensurate with the “contract doctrine” on which nomic and indirect environmental considerations), A Theory of Justice is based. D. R. Bell (2006, p. government and stakeholders also need to search for 210) makes an interesting argument that although solutions that take environmental protection into Rawls excludes sentient animals from the community consideration. afforded “justice,” this does not mean that he intended In A Theory of Justice, Rawls provides little dis- to exclude them “from the community of moral sub- cussion of the environment. His rationale for this jects.” As Rawls comments, “A conception of justice omission is given in one lengthy paragraph in which is but one part of a moral view.” he raises the notion of justice to nature (in contrast Second, Rawls appears to view humans (or social to justice to humans). Rawls begins the paragraph by systems) as separate from nature. The impression he recalling the limits to his theory of justice: gives is that a theory of justice is separate from “a Not only are many aspects of morality left aside, but theory of the natural order.” Adopting this position no account is given of right conduct in regard to leads Rawls to several conclusions that seem “to be animals and the rest of nature. A conception of justice at considerable variance with key components of the is but one part of a moral view. While I have not ecological point of view” (Partridge 1976, p. 209). For —-1 —0 —+1

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example, Rawls (1971, p. 287) states that “a society tunities, income and wealth, and self- respect.‡ These meets its duty of justice by maintaining just institu- goods are seen to be essential to human development tions and preserving their material base,” with no rec- and to the realization of one’s life plan. Because the ognition that such a position might be constrained by “basic structure of society” (ibid.) is the main conduit the availability of natural resources or by ecological through which these primary goods are distributed, limits. In addition, Rawls tends to adopt a reduction- creating a structure that fosters justice and fairness is ist view of systems* and does not include environ- of paramount importance. This objective forms the mental goods in his list of “just savings” (Partridge bases for Rawls’s theory of justice. 1976, p. 210).† Although making the environment into a “pri- Finally, Rawls ends his paragraph by recognizing mary good” is an elegant solution, it does not make that his theory of justice “will have to be revised” to explicit the relative importance of the environment account adequately for “animals and the rest of na- compared with the “social” primary goods. If we are ture.” In many ways, his decision not to extend his concerned about sustainable development, then so- theory represents a missed opportunity. The recogni- cial systems need to be considered within the broader tion that his theory of justice needs to be amended or context of the natural environment within which incorporated into a “larger theory” has encouraged they exist. When the environment is viewed in this many to take up this challenge (Dobson 1998; Lehman manner, it becomes a “metaprimary good”— that is, 1995; Miller 1999; Partridge 1976). The most common without it none of the “social” primary goods could recommendations for changing Rawls’s theory are to exist. One interesting way to give the environment a make the “environment” or “ecosystems” into “pri- much more prominent role in Rawls’s theory of jus- mary goods” and to consider these forms of natural tice is to include it in a third principle of justice. Be- capital under the just savings principle. Environmen- cause protecting and preserving the environment are tal justice advocates have also argued that “the ability essential for the longevity of the human race, one to live in a safe environment is a primary good” can envisage the following principle of justice that (Chapman 2001, p. 16). In contrast, Voorthuis and could be considered in the original position: Gijbels (2010) combine Rawls’s principles of liberty Third Principle: Social arrangements are to be orga nized and fairness with McDonough and Braungart’s (1998) so that they (a) protect and continually improve the “cradle-to- cradle” design concept. Although this environment, especially for those individuals and spe- combination is an effective way to guide the design of cies most heavily affected by environmental degrada- new products, process, and services, it is less application or pollution, and (b) do not result in activities that ble to the design of policies to transition the actions exceed ecological carry ing capacity. of society toward sustainability. Hence our focus is The intent of the third principle— the environmen- to consider how Rawls’s theory might be adapted to tal principle— is (1) to ensure that society continually integrate the social and natural realms into a set of strives to protect and improve the environment and simple game rules for decision making and policy the lives of people negatively affected by pollution formulation. (broadly defi ned), and (2) to keep human activity Rawls (1971, p. 62) defi nes “social” primary goods within ecological limits.§ The basic premise of this as “things that every rational man is presumed to principle is twofold. First, protecting human health want,” such as rights and liberties, powers and oppor-

‡ Interestingly, Rawls (1971, p. 62) does refer to “natu- * Such a view stands in contrast to an “ecological ethic” ral” primary goods, but these are described as health and vigor that values each part of a system in the context of the whole (Par- and intelligence and imagination—i.e., they are not concerned tridge 1976, p. 210). with the “natural environment.” Because these natural primary † Rawls (1971) argues that each generation has a respon- goods are not directly affected by the “basic structure of society,” sibility to pass on to the next a certain amount of “capital” that is Rawls considers them to fall outside his theory of justice. to be agreed on using his just savings principle. The purpose of § A signifi cant work that focuses on the links between the just savings principle is to achieve a fair distribution of capi- environmental quality and human equality and those between tal between the most disadvantaged members of the current and sustainability and environmental justice more generally is Agye- future generations. Rawls (1971, p. 288) defi nes “capital” as “not man, Bullard, et al.’s (2003) Just Sustainabilities: Development in only factories and machines, and so on [i.e., human-made capital an Unequal World. This publication, which consists of a selection and possibly fi nancial capital], but also the knowledge and cul- of essays, focuses specifi cally on the linkages between the po liti- ture [i.e., social capital], as well as the techniques and skills cal and policy processes surrounding environmental justice and [i.e., human capital], that make possible just institutions and the sustainability. Just Sustainabilities highlights “an important and fair value of liberty.” What is most apparent from this state- emerging realization that a sustainable society must also be a just -1— ment is that “natural capital” is clearly not part of Rawls’s notion society, locally, nationally and internationally, both within and 0— of capital. between generations and species” (ibid., p. 3). +1—

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is believed to be of paramount importance. Second, Another argument one could make that deviates from the natural environment is believed to be good in the just savings principle is that because each genera- and of itself and should be protected and regener- tion is mutually disinterested in one another, the criti- ated if it is being degraded by human activity. In real- cal point is that the environmental principle improves ity, part (a) of this principle is likely to be the most the quality of the environment within each genera- useful because defi ning and agreeing on the ecologi- tion. Thus it seems plausible that past and future gen- cal carry ing capacity of the environment to imple- erations would choose the environmental principle ment part (b) is still a major work in progress. In because it would be in their own rational interests to addition, part (a) of the principle aligns well with the protect and improve their environment. idea of movement toward justice (or fairness) and The third principle follows the lexicographical does not attempt to defi ne an end state or goal. structure of Rawls’s two principles of justice (that is, We believed that the environmental principle is it is to be considered third). This ordering means that consistent with the just savings principle because it human considerations are put before the natural envi- can be argued that past, current, and future genera- ronment, which means that the framework could be tions would select it. First, let us consider the present labeled one of “liberal ecologism” (D. R. Bell 2006, generation. When contracting parties are in the orig- p. 215). Although some might argue that the environ- inal position, behind the veil of ignorance, they do mental principle is of paramount importance and not know whether they live in an area of high pollu- should be put fi rst, if Rawls’s theory of justice is used as tion and low environmental quality. Therefore, it can a basis, then the environmental principle should build be argued that a rational and mutually disinterested on his theory. In addition, placing the environmental individual would select the environmental principle principle fi rst would undermine the stability of Raw- on the grounds that it would improve his or her qual- ls’s theory of justice. As it is, only the fi rst principle ity of life— especially if he or she ended up living in an of justice achieves relative stability (or “overlapping area bearing a disproportionate amount of pollution. consensus”) when it is compared with other compre- The same argument also applies across generations. hensive theories on the po liti cal conception of jus- Because contracting parties do not know whether tice (Barry 1995). Thus placing the environment fi rst they live in a generation that is negatively affected by would undermine the stability and elegance of Raw- poor environmental quality, it is in their own inter- ls’s theory. ests to adopt a principle “that they must want all pre- A fi nal point is that the environmental principle vious generations to have followed” (Rawls 1993, does not make species into “formal” stakeholders p. 274). Thus the third principle of justice should be that are part of the community afforded justice. This selected because any rational individual would want outcome is in keeping with Rawls’s (1971) argument the previous generation to have applied it. that we have “duties of compassion and humanity” If we consider future generations, a potential prob- to animals (and the natural world). One can argue lem does arise. If each generation continually im- that society’s “duty” toward the natural environment proves the environment, then subsequent generations is to act as trustee on its behalf. Therefore, because are likely to be better off from an environmental species (other than humans) are not represented in quality and health standpoint. However, if each subse- the original position, individuals or groups must act quent generation happens to gain from an improved on their behalf. Perhaps ecologists are the only group environment, surely this outcome is desirable from a that has the capacity to adopt such a role. However, human perspective. Indeed, one might argue that it is possible that other groups might want to act as society has a duty to preserve and improve the envi- trustee for species and the environment on the basis ronment for the well-being of future generations—a of different belief systems. fundamental principle of sustainable development.* An important objective of the third principle of justice is to focus attention on movement toward * The third principle of justice is designed to “protect environmental justice (broadly conceived). Given the and continually improve the environment, especially for those inherent complexity of intergenerational issues and individuals and species most heavily affected by environmental the fact that it is problemmatic to allocate resources degradation or pollution.” The principle is in keeping with Raw- ls’s general formulation that any new social arrangement should fairly within current generations, we believe that the advance (i.e., improve) the well-being of the least advantaged. environmental principle will be a useful guide for de- Thus the third principle of justice should be considered as more cision making and policy formulation. Wells (1996, than a conservation principle. In addition to conservation, it aims to replenish or restore environmental capacity that has p. 195) argues that Rawls’s “two principles of justice —-1 been lost to industrialization. are extremely important for an ethic suitable to a —0 —+1

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global ecology. Their implications for environmental consider decisions that affect trade and technologi- policy are pervasive and so important that they cal development— two factors that have a signifi cant should be the objective of much careful thought.” infl uence on whether society moves toward or away We believe that adding the environmental principle from sustainable development. to Rawls’s theory of justice will show how his ideas One can argue that government is, in fact, the can form a central pillar of our thinking about sus- trustee of trade because trade is currently the prov- tainable development. While Rawls’s two principles ince of government—for example, government nego- of justice focus on the social world, the third princi- tiates trade agreements and engages in designing the ple is designed to require decision makers and stake- rules of international commerce. It can also be ar- holders to consider how their decisions might affect gued that an equal province of a Rawlsian govern- the natural world.* ment is the trusteeship of technology. By bounding decisions using the Rawlsian/ The importance of technological development be- utilitarian decision-making philosophy,† we have de- comes apparent when we consider a shift from an veloped what Petrinovich (1999, p. 5) refers to as a outcome focus (identifi ed using the Rawlsian frame- “pluralistic moral philosophy” that considers “both work) to the mechanistic, pragmatic question of who utilitarian concerns and basic rights and freedoms of guides the pathway to realizing that outcome. For ex- individuals” rather than relying on a single philo- ample, if technology is central to achieving a larger sophical view for decision making (also see Beatley economy that can be divided in a more equitable way, 1994). The argument put forward in this section is then someone needs to be a trustee for the birth of that outcomes that lean toward Rawlsian solutions that technology. If government acts as a trustee for are more likely than purely utilitarian ones to move society, it should by default assume this role. If not, a society toward sustainable development through then it is left either to industry or to society to adopt the reduction of in e qual ity. this role. However, from a Schumpeterian perspective,‡ The value of the bounded Rawlsian/utilitarian

decision-making philosophy is that it is not applica- ‡ Joseph Schumpeter, born in Austria, was an infl uential ble only to social outcomes. It can also be used to Harvard economist of the mid- twentieth century who is best known for describing the process of competition and monopoly in a capitalist market as “the process of creative destruction” * The integration of environmental and social (e.g., em- (Schumpeter 1962 [1942], p. 82). Schumpeter believed that the ployment) concerns is vital for making progress toward sustain- main principle of capitalism was innovation and the development able development, but the major international declarations that of new technologies rather than the “entirely imaginary” notion address development do not explicitly link these concerns. For of perfect competition (ibid.). He saw the pro cess of innovation example, the 1972 Stockholm and 1992 Rio declarations focus on as being distinct from an invention. An invention is conceived as improving the human living environment, but they do not address an idea, a sketch, or model for a new or improved device. An in- the human working environment. The topic of human welfare— novation occurs when the invention is put into use/practice. which includes the protection of workers in all occupations— and Schumpeter argued that innovations either passed or failed the development is addressed separately by the 1994 Declaration of “market test.” Schumpeter’s central idea was that innovation Philadelphia. Hence there is a need to establish a fundamental leads to economic growth and is, therefore, the engine of capital- framework that encourages the integration of both the natural ism. However, the success of one fi rm’s innovations will ulti- and the social worlds in decision making. By revisiting Rawls’s mately lead to the destruction of another fi rm’s market share. notion of the social contract from the perspective of the envi- Schumpeter’s idea of creative destruction can also work in the ronment, we have been able to develop a framework that tries to opposite direction toward monopolies. The Schumpeterian per- achieve this objective. See the later discussion of the 1972 Stock- spective is thus the pro cess of creative destruction, where “inno- holm Declaration and the 1994 Declaration of Philadelphia in vators out-compete non-innovators” (Kleinknecht 1998, p. 392). the context of the critical environmental and social (e.g., employ- In the words of Schumpeter, “The essential point to grasp is ment) factors that underlie the concern for sustainable develop- that in dealing with capitalism we are dealing with an evolution- ment. Finally, for an interesting application of a Rawlsian ary pro cess. . . . Capitalism . . . is by nature a form or method approach to trade and development, see Stiglitz and Charlton of economic change and not only never is but never can be (2005). stationary. . . . The fundamental impulse that sets and keeps the † When one is deciding on a new social arrangement, capitalist engine in motion comes from the new consumers, the range of potential outcomes (the decision space) can be goods, the new methods of production or transportation, the new “bounded” by identifying those outcomes that are purely Rawl- markets, the new forms of industrial or ga ni za tion that capitalist sian and those that are purely utilitarian. These two sets of out- enterprise creates. . . . The opening up of new markets, foreign or comes mark opposite ends of a continuum. As one moves from domestic, and the organ i za tion al development from the craft the utilitarian to the Rawlsian end of the continuum, the poten- shop and factory to such concerns as U.S. Steel illustrate the tial outcomes will transition from focusing on maximizing soci- same process of industrial mutation . . . that incessantly revolu- etal welfare (without concern for the distributional impacts of a tionizes the economic structure from within, incessantly destroy- new social arrangement) to identifying the best (or fair) outcome ing the old one, incessantly creating a new one. This pro cess of for all individuals in a society. In the latter case, the distribu- Creative Destruction is the essential fact about capitalism. It is -1— tional impacts of a new social arrangement are of paramount what capitalism consists in and what every capitalist concern has 0— importance. got to live in” (Schumpeter 1962 [1942], pp. 82– 83). +1—

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it is unlikely that industry will displace itself by en- ward sustainable development. First and foremost, it couraging the development of technologies that un- places social equity at the center of decision making. dermine its existing products/ser vices. Also, it is Second, it supports the notion of economic growth unlikely that the “diffuse society” will have the institu- so long as the benefi ts from this growth are distrib- tional capacity to assume this role. Thus government— uted fairly among society. Social and economic in- whether acting as a trustee for society or not—has an equalities are tolerated only if the most disadvantaged important role to play in guiding the development of members of society are made better off under new new technology. arrangements. Finally, it makes movement toward a By focusing on the social outcomes of justice and better environment a critical component of any new fairness (and environmental protection), it is possible social arrangements. Hence the framework provides to identify the various pathways that must be taken to a valuable tool through which movement toward sus- achieve these outcomes. Because Rawlsian outcomes tainable development becomes a real possibility. and sustainable development are really pro cesses, we should feel comfortable using trade and technological 1.2.3 Equality of What? development as instruments through which social (and environmental) objectives can be achieved. The manner in which equality is defi ned and evalu- Hence the pathway to achieving sustainable de- ated is directly linked to the types of inequalities one velopment is not just a matter of developing the right is trying to right. This section takes a brief look at social arrangements. It is also a matter of trade (which the various ways in which equality is considered and affects distribution) and technological development. how these considerations relate to the broader pic- With regard to technological development, what is ture of sustainable development. needed is a combination of a Schumpeterian and a The major philosophies of government (or social Rawlsian vision if technology is to advance at a rate arrangements), some of which are discussed in the necessary to realize the objectives of sustainable de- previous section, all support the notion of equality in velopment. Implicit in this statement is the notion terms of a “focal variable” such as income, wealth, that current rates of technological progress, if left to happiness, opportunities, rights, or needs fulfi llment the market, are unlikely to adequately address social (Sen 1992, p. 2). The basic premise of these theories is and environmental problems in a fair and just man- that each individual should have equality of opportu- ner. To achieve the desired rate of change will require nities in regard to the variable(s) selected (see Rawls’s “waves of creative destruction” in order to obtain second principle of justice). For example, everyone the best technology, and this may require disruptive should have an equal opportunity to gain employ- forms of technological change (see Section 6.2 in ment or to have an education. In a world in which Chapter 6). everyone’s circumstances and abilities are the same, The value of the framework proposed in this sec- focusing on equality of opportunity would suffi ce. But tion is that it can be applied to any situation in which this is not the world in which we live, and adopting government is needed to change or implement new such a posture in decision making often results in social arrangements (that is, rules, regulations, laws, unequal treatment of the disadvantaged. or policies) to improve the well-being of society. In the book In e qual ity Reexamined, Nobel Prize– By introducing the idea of bounding the acceptable winning economist Amartya Sen (1992) raises the moves when one is behind the veil of ignorance, it question “equality of what?” and links it directly to has been possible to discuss how Rawls’s theory of the consideration of human diversity. In par tic u lar, “justice as fairness” can be operationalized by explic- he argues that social arrangements (for example, gov- itly relating it to utilitarianism. Bounding the accept- ernment policies and laws) should be assessed in rela- able moves enables stakeholders to move away from a tion to a person’s capability to achieve functionings. purely utilitarian approach to problem solving, which Sen’s (1992) idea of functionings is Aristotelian in can be unfair to disadvantaged members of society. origin.* He defi nes functionings as the various things Justice does not stem from unfair practices. The third principle of justice—the environmental * Aristotle believed that the attainment of the good life principle— has been added to Rawls’s framework in or happiness was the result of self-realizationism —i.e., the ability an effort to link the social and natural worlds in de- to realize one’s potentialities, character, or personality. To Aris- cision making. The signifi cance of the revised Rawl- totle, the person who has the greatest potentialities and is able to actualize this potential has the brightest prospect of happiness. sian/utilitarian decision-making philosophy is that it Conversely, the person whose potential remains unfulfi lled will —-1 supports decision making that can move society to- ultimately be frustrated and unhappy. —0 —+1

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that a person has “reason to value,” from being well duces the concept of capability to describe an indi- nourished or avoiding escapable morbidity to more vidual’s freedom to achieve “valuable” functionings. complex realizations, such as having self-respect or “It represents the various combinations of function- being a valued member of a community (ibid., p. 5). ings (beings and doings) that the person can achieve. Alkire (2003, p. 5) describes Sen’s idea of function- Capability is, thus, a set of vectors of functionings, ings as “an umbrella term for the resources and ac- refl ecting the person’s freedom to lead one type of life tivities and attitudes people spontaneously recognize or another . . . to choose from possible livings” (ibid., to be important— such as poise, knowledge, a warm p. 40).† friendship, an educated mind, a good job. What is Sen’s focus on functionings and on the capability centrally important varies in different places, which to achieve functionings differs from the traditional is why there is no rigid and infl exible set of specifi c views of equality that tend to focus on variables such capabilities— the priorities will have to be set and re- as income, wealth, or happiness (1992, p. 7). Instead set again and again in different ways.” of mea sur ing equality using such focal variables, It follows that an individual’s achieved function- Sen argues that a “more adequate way of consider- ings are those that the individual has successfully pur- ing ‘real’ equality of opportunities must be through sued and realized. However, Sen (1992) argues that equality of capabilities (or through the elimination focusing on achieved functionings (or focal variables) of unambiguous inequalities in capabilities, since alone is not suffi cient. The inherent diversity of exter- capability comparisons are typically incomplete)” nal circumstances and psychological and physiological (ibid.). makeup among individuals means that the character- A major difference between Sen’s capabilities- istics of in e qual ity tend to diverge within the variable based assessment of equality and Rawls’s theory of under analysis. In other words, differences in the cir- “justice as fairness” lies in their assessment of the cumstances and abilities of people mean that equality holdings of “primary goods”— that is, goods that are of opportunity will not lead to equal wealth or happi- considered essential for the survival and self-respect ness, for example. In addition, “equality in terms of of individuals (Rawls 1971). one variable may not coincide with equality in the Rawls’s theory is that in the original position— scale of another. Equal opportunities can lead to very behind the veil of ignorance —most people will be unequal incomes. Equal incomes can go with signifi - able to agree on a set of primary goods that are consid- cant differences in wealth. Equal wealth can coexist ered important regardless of an individual’s circum- with very unequal happiness. Equal happiness can go stances. Rawls argues that social primary goods are with widely divergent fulfi lment of needs. Equal ful- “things that every rational man is presumed to want,” fi lment of needs can be associated with very different such as “rights and liberties, powers and opportuni- freedoms of choice. And so on” (ibid., p. 2). Hence

Sen’s core argument is that “the basic heterogeneity of cesses); (2) economic facilities (the opportunities that individuals human beings” and “the multiplicity of variables in have to “utilize economic resources for the purposes of con- terms of which equality can be judged” are two fac- sumption, or production, or exchange”); (3) social opportunities tors that complicate the idea of equality (ibid., p. 1). (the access that individuals have to facilities such as basic education and health care, which are essential if a person is to have an This means that a focus on individual functionings (or effective role in economic and po liti cal activities); (4) transpar- focal variables) does not necessarily incorporate an ency guarantees (“the freedom to deal with one another under individual’s freedom* to achieve. Hence Sen intro- guarantees of disclosure and lucidity”); and (5) protective security (the need to provide a social safety net to assist those individuals who face abject misery and possibly even starvation and * The freedom Sen (1992, p. 31) refers to is “the real op- death). portunity that we have to accomplish what we value.” Sen (1999, † Although Sen does not formally list capabilities, this p. 36) also described development as the “process of expanding has not prevented others from doing so. The most comprehensive real freedoms.” Sen views the expansion of freedom as both “(1) attempt is presented by Nussbaum (2000), who developed a set of the primary end and (2) the principal means of development” “central human functional capabilities.” The major headings of (ibid.). The former is referred to as the “constitutive role” and the Nussbaum’s list of capabilities include the following: life; bodily latter as the “instrumental role.” The “constitutive role” refers to health; bodily integrity; senses, imagination, thought; emotions; the basic premise that freedom must be regarded as a primary practical reason; affi liation; other species; and control over one’s objective of the development process. The “instrumental role” environment (ibid., pp. 78–80). Under each heading, Nussbaum refers to the various ways in which freedom can act as an “instru- defi nes the “combined” capabilities that a person should be able ment” of development. Sen identifi es fi ve types of instrumental to achieve. For example, the capabilities for bodily health are freedoms that tend to enhance the capability of an individual to defi ned as “being able to have good health, including reproduc- live more freely (ibid., pp. 38– 40): (1) po liti cal freedoms (the op- tive health; to be adequately nourished; to have adequate shel- -1— portunities that individuals have to be a part of demo cratic pro- ter” (ibid., p. 78). 0— +1—

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ties, income and wealth[, and] . . . self- respect” (Rawls The essence of Sen’s conception of equality is that 1971, p. 62).* Hence Rawls’s general conception is “a person’s capability to achieve does indeed stand that “all social primary goods . . . are to be distrib- for the opportunity to pursue his or her objectives” uted equally unless an unequal distribution of any or (Sen 1992, p. 7). From this premise, the UN defi ned all of these goods is to the advantage of the least fa- human development as the “process of enlarging vored” (ibid., p. 303). The focus of Rawls’s formula- people’s choices” (UNDP 1995, p. 11) and sought the tion is “equality of opportunity,” which is captured removal of obstacles—“such as illiteracy, ill health, within the difference principle (see Section 1.2.1). lack of access to resources, or lack of civil and politi- Sen identifi ed a fundamental problem with Rawls’s cal freedoms” (Fukuda- Parr 2003, p. 303)— that pre- formulation of the difference principle: “Two per- vent an individual from achieving his or her valued sons holding the same bundle of primary goods can objectives in life. Thus the intention of the UN HDI have very different freedoms to pursue their respec- was to shift international attention to the expansion tive conceptions of the [greater] good (whether or of basic human capabilities, especially the capability not these conceptions coincide). To judge equality— to (1) have a healthy life, (2) acquire knowledge, and or for that matter effi ciency—in the space of primary (3) reach a decent standard of living.‡ Because the goods amounts to giving priority to the means of purpose of the HDRs is the “global evaluation of freedom over any assessment of the extents of free- development,” these three indexes were selected for dom, and this can be a drawback in many contexts” their universal value since they form the basis on (Sen 1992, pp. 8–9). Thus Sen argues that equality which many choices in life depend (Fukuda-Parr in the holdings of primary goods or resources ig- 2002, p. 6). The notion of investing in health and ed- nores the fact that disadvantaged members of society ucation in partic u lar maps closely with physical may not have the capability or freedom to con- health and learning, two essential attributes an indi- vert these goods/resources into the things that they vidual requires to attain a high level of well- being. value. Therefore, if a government were to use pri- To provide a context for the preceding discussion, mary goods as a mea sure of well- being for purposes Table 1.5 compares and contrasts the human devel- of justice, there is a concern that disadvantaged opment approach with the neoliberal (utilitarian) al- members of society might suffer from unjust (or un- ternative and its precursor, the basic-needs approach equal) treatment. To put it another way, these people (fi rst espoused by Paul Streeten [1982] and Frances are likely to have an unfair share of opportunity. Stewart [1985]).§ Table 1.5 also presents an idealized Thus Sen’s capability- based assessment of equality framework from which public policy formulation can forms the foundation for affi rmative action, for em- be considered. For example, by looking at the “eval- powering the powerless, and for positive discrimina- uative” and “agency” aspects of a set of policies, it tion (Bidwai 1998). should be possible to determine whether the govern- Sen’s theories of capabilities and functionings and ment supports a human development approach (that Rawls’s theory of “justice as fairness” have had a sig- is, its policies are just and fair and consider human nifi cant impact on how governments have shaped capabilities) or a neoliberal approach (that is, its pol- social arrangements to establish equitable and just icies are utilitarian in nature) to the pro cess of devel- societies.† Sen’s theories have also provided a strong opment. It is interesting to note that none of the conceptual foundation for the UN’s work on human approaches contain an explicit concern for the envi- development (Fukuda-Parr 2002, 2003). In partic u- ronment, on which human activity and development lar, his ideas have shaped the UN Human Develop- ment Reports (HDRs) and the Human Development ‡ Although the HDI’s focus is on “evaluating” human Index (HDI), including its extensions. development, Sen (2003) argues that the human development perspective also contains an “agency perspective” that is often overlooked. When one has identifi ed where improvement to human lives can be made though the HDI, it is necessary to turn to * Rawls (1971, p. 62) states that other primary goods, the agency perspective to develop policy and politi cal strategies such as health and vigor or intelligence and imagination, are to realize the necessary changes. “natural” primary goods. Although natural primary goods can § It is worth noting that Sen’s theories on capabilities be infl uenced by social arrangements, they are not directly under and functionings grew from the basic-needs approach to interna- their control. tional development (Alkire 2005). Sen’s main reason for rethink- † Incidentally, it was Sen (1993, p. 43) who once said that ing the basic- needs approach was to introduce a greater role for “it is signifi cant that no democratic country with a relatively free individual freedom. His concern was that the basic-needs ap- press has ever experienced a major famine.” That is, there are no proach tended to focus on commodities, as opposed to human famines in democracies. beings and their functionings. —-1 —0 —+1

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TABLE 1.5: COMPARISON OF KEY FEATURES OF THE HUMAN DEVELOPMENT APPROACH WITH THE NEOLIBERAL ALTERNATIVE AND THE BASIC- NEEDS ANTECEDENT

HUMAN DEVELOPMENT a NEOLIBERALISM BASIC NEEDS

Philosophical underpinnings Normative assumptions Explicit Implicit Not fully specifi ed Concept of well- being Functionings and capabilities Utility Meeting basic needs Evaluative aspect Leading criterion for Human capabilities; equality of Economic well- being; Poverty reduction in evaluating development outcomes; fairness and justice in economic growth; effi ciency terms of income; access progress institutional arrangements to basic social ser vices M e a s u r e m e n t t o o l s Human outcomes, deprivational Economic activity and Access to material favored and distributional mea sures condition, averages and means; deprivational aggregate mea sures measures Agency aspect People in development as Ends and means: benefi ciaries and Means: human resources for Ends: benefi ciaries ends and/or means agents economic activity Mobilizing agency Individual action and collective Individual action Concern with po liti cal action will and po liti cal base Development strategy Key operational goals Expanding people’s choices Economic growth Expanding basic social (social, economic, and po liti cal) ser vices Policy concerns Distribution of benefi ts Emphasis on equality and human Concern with poverty Concern with poverty and costs rights of all individuals Links between develop- Human rights and freedoms have No explicit connection; No explicit connection ment and human rights intrinsic value and are develop- current search for link and freedoms ment objectives; current research between po liti cal and civil on their instrumental role through freedoms and economic links to economic and social growth progress

a This perspective is speciﬁ cally and especially concerned with distributional equity. Neoliberalism and basic needs are not. For example, a neoliberal approach might focus on raising people above a poverty level, but it will still tolerate enormous levels of disparity. Source: Adapted from Fukuda- Parr (2002, 2003).

depend.* It is clear that if we are to transition toward agents, they will—given the opportunity—be able to sustainable development, the need to protect the en- “think, assess, evaluate, resolve, inspire, agitate, and vironment must be added to the need to ensure that through these means, reshape the world” (ibid., p. 1). we live in an equitable and just society that recog- Hence Sen advocates a capability-centered approach nizes human capabilities. to sustainable development. The objective of Sen’s Sen’s work has also had an important infl uence ideas is to “integrate the idea of sustainability with the on the formulation on the concept of sustainable de- perspective of freedom, so that we see human beings velopment, which he defi nes as “development that not merely as creatures who have needs but primarily promotes the capabilities of present people without as people whose freedoms really matter” (ibid., p. 6). compromising capabilities of future generations” (Sen (See Section 1.2.1 for a discussion of how Rawls’s 2000, p. 5). Sen believes that the Brundtland (need- theory of justice combines individual freedom with centered) view of development is “illuminating” but sustainable development.) Sen’s contribution to our “incomplete” (ibid., p. 2). He argues that individuals understanding of equality and his more recent notion must be seen as “agents who can think and act, not of development as “a momentous engagement with just as patients who have needs that require catering” freedom’s possibilities” (Sen 1999, p. 298) provide one (ibid.). His basic premise is that by treating people as of the few credible challenges to the neoliberal (or utilitarian) orthodoxy that has guided development efforts since the 1980s (Saha 2002). * However, they do implicitly incorporate employment As mentioned earlier, one of Sen’s major contri- and purchasing power. This highlights the two different strands of sustainability scholarship, one focusing on the environment butions to sustainable development is his infl uence -1— and the other on economic empowerment. on the UN’s conceptualization of human develop- 0— +1—

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ment that formed the basis for the HDRs and the national governance that ensures peace and security, HDI. Fukuda-Parr (2002), the director of the HDRs environmental protection, and employment (an im- since 1995, argues that it is possible to describe the portant objective of economic and social develop- UN’s general human development agenda using fi ve ment) are not explicitly mentioned in Fukuda-Parr’s core elements. Fukuda- Parr calls these fi ve elements New York Consensus. Hence if we are to integrate the “New York Consensus”* because they are re- human development with the broader notion of sus- fl ected in many of the UN agreements. It is interest- tainable development, the following elements need ing to note the similarities between Sen’s ideas on to be added: human development and the ideas presented in the • Environmental protection at local, regional, na- New York Consensus. The fi ve elements of the UN’s tional, and global levels constitutes an integral general human development agenda (or the New part of the social and economic development York Consensus) are as follows: pro cess and is not to be considered in isolation from it. • Priority to “social development” with the goals of expansion of education and health opportu- • Extending equity considerations to future genera- nities; tions. • Economic growth that generates resources for • National governance that ensures peace and se- human development in its many dimensions; curity. • Po liti cal and social reforms for demo cratic gov- • The creation of secure, satisfying, and safe employ- ernance that secure human rights so that people ment with adequate purchasing power. can live in freedom and dignity, expanding . . . [collective] agency, participation and autonomy; The fi rst three additional elements might be called • Equity in above three elements with a concern the “Rio elements” because they stem from the 1992 with all individuals. Special attention to the Rio Declaration on Environment and Development. downtrodden and the poor whose interests are often neglected in public policy; A signifi cant challenge posed by these new elements • Policy and institutional reforms at the global lies not so much in the need to protect the environ- level that create a more conducive economic en- ment or in peace and security (although achieving vironment for poor countries to have access to these objectives has proved far from easy) as in the global markets, technology, information. idea of intergenerational equity. Put simply, it is ap- (Fukuda- Parr 2002, p. 10) parent that we are unable to allocate resources equi- The preceding list presents a robust agenda (or tably in the present, let alone across generations. paradigm) for human development, but human de- Hence we do not have a near future that is properly velopment is only a part—although an extremely vital allocated. Further, the ability of governments to part— of the broader notion of sustainable develop- develop equitable social arrangements that also tran- ment. If we take a holistic look at all the UN agree- sition societies toward more sustainable forms of de- ments, it is possible to identify several elements that, velopment will depend on how they, and society, view if added to the New York Consensus, would trans- the purpose of development—either to establish a fair form it into a consensus of sustainable development. and just society (Rawlsianism) or to maximize the It is possible to describe the international communi- well-being of society in the neoclassical sense (utility’s notion of sustainable development as consisting tarianism). of fi ve critical components: (1) peace and security, (2) economic development, (3) social development, 1.3 LIVING BEYOND OUR ECOLOGICAL (4) national governance that ensures peace and devel- MEANS: THE TECHNOLOGY DEBATE opment, and (5) environmental protection (Dernbach 1998, 2004). A comparison of these fi ve components A central question in the sustainable development with the fi ve elements listed previously reveals that discourse is how infl exible but fragile ecological limits are with respect to human activity— especially activity supporting economic growth.17 With all else re- * The New York Consensus stands in stark contrast to maining constant, the more rigid the limits, the more the Washington Consensus, which promotes market-liberalizing policies and a reduction in big government (ul Hague 2004). radical and painful the changes necessary for sustain- “Washington Consensus policies are sometimes referred to as ability become. Therefore, the debate has traditionally ‘neo-liberal,’ based on ‘market fundamentalism,’ a resuscitation centered on the potential and ability of technology to of the laissez- faire policies that were pop u lar in some circles in the nineteenth century” (Stiglitz 2002, p. 74). substitute one resource for another, reduce material —-1 —0 —+1

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and energy content/intensity, or otherwise render 1968);§¶ population growth (Ehrlich 1968).** †† fl awed these limits less relevant.* technology (Commoner 1971); the exploitation of Building on the growth theories of Adam Smith nonrenewable energy (R. U. Ayres 1978; Georgescu- and David Ricardo, Thomas Malthus provided one Roegen 1971); the fi xation on economic growth of the earliest predictions of how population growth (Ecologist 1972); and prevailing world trends in is likely to be constrained to a “stationary state” by population growth, capital investment, resource us- the availability and productivity of agricultural land.† age, agricultural productivity, and pollution rates More recently, during the emergence of the environmental movement in the 1960s and 1970s, the issue § Coase (1960) rejected the idea that externalities can of limits to growth arose again. However, this time be addressed by internalizing external costs and argued that a it was debated from a number of different perspec- close- to- optimal outcome could be achieved through private bargaining. Coase’s theorem states that if there are zero transaction tives. The predominant views linked the prevailing costs and legal rights (land rights in partic u lar) are well defi ned, and perceived future ecological crisis to the failure then the socially effi cient solution to negative externalities will to internalize environmental externalities (Pigou occur regardless of legal entitlement. Hence under these assump- ‡ tions, environmental disputes, for example, will be resolved 1932); the use of pesticides/chemicals ( Carson 1962); through private negotiations. The problem with Coase’s theory, inadequate property rights (Coase 1960; Hardin however, is that transaction costs are almost never zero, property rights may be diffi cult to defi ne, and identifying who is responsible for certain externalities can be complicated. Thus one inference from Coase’s theorem is that government has a role in * During the 1980s, the most salient example of human minimizing transaction costs to enable the market to function society living outside its ecological means could be found in sub- effi ciently. Saharan Africa. Long before the problem of global climate ¶ Garrett Hardin’s “Tragedy of the Commons” pop u lar- change had been recognized, sub- Saharan Africa experienced ized the effect of different regimes of property rights on the ex- periods of rapid growth with no consideration (or banking) for ploitation of public- domain resources. The basic premise of this harder conditions in the future, and in future years when a pro- article is that without the private ownership of land or the gov- longed drought struck, the result was mass starvation. The cause ernmental allocation of usage rights (i.e., regulation), the free of the crisis was perceived to be “natural variation” in the weather. commons creates an economic incentive for each user to exploit Less than a de cade later, it was as if global climate change was the resource to his or her advantage. The example Hardin uses is waiting in the wings to be formulated as an “ecological issue” as the overgrazing of a public common by cattle. Because there are opposed to a “natural variation.” It now seems that industrial- no (grazing) costs to the farmer for adding one additional cow to ized societies exceeded the limits of natural variations in the cli- his herd, the more cows that are added, the wealthier the farmer mate long before they linked them to ecological damage. is likely to become through the produce from, and the eventual † A central theme of Malthus’s work was that once all sale of, his livestock. The inherent problem with these activities the available agricultural land was used, a population could no is that the eventual overgrazing of a growing number of cattle longer continue to grow and would arrive at a “stationary state.” will destroy the public common and bring ruin to all the farmers. Although Malthus recognized that the stationary state could be In essence, Hardin saw the problem as overpopulation, a point postponed by technological progress or a halt in population often not mentioned in recitation of his work. growth, his model has since been regarded as too pessimistic ** Paul Ehrlich’s book The Population Bomb, as indicated (M. R. Redclift 2000). It underestimated the ability of technol- by its title, also saw the problem of the commons in terms of too ogy to extend ecological limits and did not account for the fact many people. Ehrlich’s argument was the modern exposition of that rising per capita incomes, education, and urbanization can Malthus’s concern that living conditions in nineteenth-century lead to a reduction in birth rates (OECD 1995). “What the years England were likely to decline as a result of overpopulation. Eh- since Malthus have shown incontrovertibly is that high living rlich predicted that by the 1970s and 1980s hundreds of millions standards do not engender population growth; that population of people would starve to death as a result of overpopulation and growth can be reduced and halted; and that the productive power a fi xed amount of resources. Although Ehrlich’s predictions have of technology is enormous. It is as clear today as it was to Mal- yet to materialize, his book was infl uential for the antigrowth thus, that the stationary state is not an inevitability” (M. R. Red- movement. clift 2000, p. 37). See New School University, Classical Growth †† One of the most famous examples of how population Theory, www .newschool .edu/ nssr/ het/ essays/ growth/ growthcont growth can lead to environmental destruction and the eventual .htm (accessed February 8, 2011). collapse of a civilization is the history of Easter Island. See Clive ‡ Pigou (1932) argued that an externality occurs when Ponting’s (1991) discussion of the lessons of Easter Island for an an individual’s decision to buy a product/service results in costs informative account of how sustained population growth, com- or benefi ts to other individuals or groups who are not part of the bined with limited resources, led to the overshoot and collapse of transaction. Thus the individual does not bear all the costs or ecological systems (as a result of deforestation) on which the is- receive all the benefi ts from his or her action. To address this land’s inhabitants depended. Research has shown that once the problem, Pigou argued that the costs of “negative” externalities island’s forests were depleted, the advanced Polynesian society need to be “internalized” in the end price of a product/ser vice to that had successfully survived on the island for centuries (be- refl ect its true social costs. This internalization of costs could be tween the fi fth and fifteenth centuries a.d.) was gradually forced achieved by matching a fi rm’s marginal cost of environmental into primitive living conditions, tribal warfare, and cannibalism. damage with the marginal benefi t received from the product/ser- The story of Easter Island also supports the argument made in vice provided. One mechanism for doing this is to use a Pigou- Limits to Growth (D. H. Meadows, D. L. Meadows, et al. 1972), vian tax to correct for the negative effects of externalities. Pigou’s that once human activity exceeds (or overshoots) the ecological -1— notion of internalizing external costs is also commonly known as limits of the earth, humanity will face a rapid decline in popula- 0— the “polluter- pays principle.” tion and industrial capacity. +1—

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(D. H. Meadows, D. L. Meadows, et al. 1972). (See the development to environmental and ecological varia- Primer on Sustainable Development at this book’s tions (Diamond 1997). In considering the collapse of website for a discussion of these theories.) It is not a society, Diamond (2004) employs a framework that only the increase in the volume of chemicals used and consists of fi ve sets of factors that may affect what the consequential pollution that are of concern. New happens to a society: understanding has refi ned the picture. The nature of • Environmental damage chemical production, use, and disposal has shifted toward halogenated synthetic chemicals that are par- • Climatic change ticularly hazardous (Commoner 1979). We have a • Hostile neighbors growing appreciation that increases in environmental • Loss of trading partners degradation and infectious diseases are related, and • Society’s responses to environmental problems that both antibiotic and pesticide re sis tance have increased (Pimentel, Cooperstein, et al. 2007), that can- Using this prism, Diamond (2004) manages to ex- cers that are chemically caused are on the increase plain the collapse of societies as diverse as the Maya globally (Sasco 2008), and that hormone (endocrine) of Central America (environmental damage, climate disruption is increasingly leading to reproductive dam- change, and hostile neighbors), the Rapa Nui of age in all species (Colborn, Dumanowski, et al. 1996). Polynesia (environmental damage), and the Green- Each of these concerns gives rise to particularized per- land Norse (climate change, environmental damage, spectives on environmental damage, and each sug- loss of trading partners, hostile neighbors, and unwill- gests that “tipping points” not only exist with respect ingness to adapt). Scholars have also cited the case of to global climate change but also are to be expected Easter Island, which Diamond singles out as the best with regard to chemically caused cancer, reproduc- historical example of societal collapse in isolation tive health, neurological and autoimmune diseases, (Diamond 2004; Ponting 2007). and contagion. Expanding on the preceding list, Diamond (2004) According to World Resources, 2000–2001: People lists eight specifi c factors that have historically con- and Ecosystems, prepared by the UNDP, the United tributed to the collapse of past social structures: Nations Environment Programme (UNEP), the • Deforestation and habitat destruction World Bank, and the World Resources Institute, half • Soil erosion, salinization, and fertility losses of the world’s wetlands have been lost in the past century, nearly half of the world’s forests have been • Water- management problems cut down, 70 percent of the world’s major marine • Overhunting fi sheries have been depleted, and all of the world’s • Overfi shing coral reefs are at risk. The next report in the series, • Effects of introduced species on native species World Resources, 2002–2004 , pointed out that one • Population growth out of every six humans is dependent primarily on fi sh for protein, but 75 percent of the world’s fi sheries • Increased per capita impact of people are overfi shed or fi shed at their biological limit. A However, apart from these “historical factors,” Dia- more recent study in Science warns that global fi sh- mond (2004) also identifi es a series of new factors eries might actually collapse as early as 2050 if cur- that are highly likely to contribute to the reduction rent trends persist (Worm, Barbier, et al. 2006). or collapse of contemporary or future societies: Already, 20 percent of the world’s river fl ows are extracted for human use, and 40 percent of the world’s • Global climate change people live in water- stressed river basins. Both of the • Buildup of toxins in the environment World Resources reports conclude that the capacity • Energy shortages of ecosystems to deliver goods and services is declin- • Full human utilization of the earth’s photosyn- ing, while our demand on ecosystem products, such thetic capacity as food, water, and timber, is increasing. Most, if not all, of these factors, however, consti- In his book Collapse, Diamond (2004) examined tute main consequences of contemporary economic a series of old civilizations and societies and at- growth and the Northern growth model. Furthermore, tempted to identify why they collapsed or survived in there is an additional element that makes Diamond’s a signifi cantly reduced form. This work came after (2004) analysis all the more worrisome. In the distant the publication of his previous book, in which he at- —-1 past, societies were signifi cantly isolated, and societal tributed historical differences in economic and social —0 —+1

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collapses appeared to be rather isolated, without thirds of the total effect of greenhouse gas emissions systemic spillover effects on other societies. Today’s (Ponting 2007, p. 387). However, other gases, such as societies, however, are signifi cantly interconnected, methane and nitrous oxide, have also been released and the international economy reaches even the into the atmosphere in signifi cant volumes, thus ex- most distant regions of the world. As the economic acerbating the ecological disequilibrium. Finally, the crises of the past de cades have shown, a simple eco- air pollutants black carbon and ozone constitute 30 nomic crisis that occurs in some regional fi nancial percent of the sources of global warming, linking markets can spill over to other nations with unimagi- concerns of public health with global climate change nable speed. Although this is a consequence that (Moore 2009). Table 1.6 provides some indication of could potentially be mitigated by returning to a more the growth of industrial activities during the twenti- highly regulated international fi nancial regime, eco- eth century. logical collapse will need far more effort than a The fact that a collapse or breakdown has not oc- new Bretton Woods— it will require unpre ce dented curred so far does not signify that it will not happen international cooperation despite a signifi cant rift in the years to come. Many of the societies that col- between the interests of developed and developing lapsed in the past also believed that they were in a nations. sustainable societal equilibrium, only to discover later Unfortunately, global ecological collapse is not an that they were mistaken. Ponting (2007, p. 423) notes: unimaginable scenario. Ponting (2007) notes: “By the time they had to face the crisis, they were unable to make the social, economic and politi cal The increase in the amount of carbon dioxide in the changes necessary for survival. The problem for all atmosphere in the last 250 years refl ects the second great transition in human history— the exploitation of human societies has been to fi nd a way of extracting fossil fuels and the development of societies dependent from the environment their food, clothing, shelter and on high energy use. Coal production is now 350 times other goods in a way that does not render it incapa- higher than in 1800 and oil production is 350 times ble of supporting them.” higher than in 1900. The number of vehicles in the In The Limits to Growth, D. H. Meadows, D. L. world rose from almost nil in 1900 to 775 million Meadows, et al. (1972, pp. 23–24) listed three con- in 2000. In parallel, forests— particularly tropical clusions: forests— have been destroyed on an unpre ce dented scale in the last two hundred years. All these forces • If the present growth trends in world population, have had an impact on the earth’s atmosphere. Since industrialization, pollution, food production, and 1750 about 300 billion tonnes of carbon dioxide has resource depletion continue unchanged, the limits been added to the atmosphere through human to growth on this planet will be reached sometime actions— but half of that total has been added since within the next one hundred years. The most prob- 1975. The result has been a rise in the amount of able result will be a rather sudden and uncontrol- carbon dioxide in the atmosphere (p. 386). lable decline in both population and industrial Concentrations are mea sured in parts per million capacity. (ppm) and in 1750, before the widespread use of fossil • It is possible to alter these trends and to establish a fuels, there were about 270 ppm of carbon dioxide in condition of ecological and economic stability that the atmosphere. This is the baseline against which is sustainable far into the future. additions are mea sured. The slow pace of industrialization in the nineteenth century can be judged from the fact that concentrations had only risen to 280 ppm TABLE 1.6: SUSTAINABILITY AND THE WORLD IN THE by 1850 and 295 ppm by 1900. By 1950 this had still TWENTIETH CENTURY only risen to 310 ppm— a roughly 15 per cent rise in FACTOR INCREASE, 1900– 2000 200 years. . . . In 1959 the fi gure was 316 ppm, by 1985 it was 345 ppm and by 2005 it was 381 ppm— a 20 per World population × 3.8 cent rise in forty- fi ve years, refl ecting the huge World urban population × 12.8 increase in carbon dioxide output in the second half of World industrial output × 35 × the twentieth century. . . . The rate of increase is also World energy use 12.5 World oil production × 300 rising— it was about 1.5 ppm a year in the mid- World water use × 9 twentieth century but reached a record 2.6 ppm in World irrigated area × 6.8 2005 (pp. 386– 387). World fertilizer use × 342 World ﬁ sh catch × 65 In general, carbon dioxide is not the most power- World organic chemical production × 1,000 World car own ership × 7,750 ful green house gas, but because of the huge volumes Carbon dioxide in atmosphere 30% up -1— that have been released, it accounts for about two- 0— Source: Ponting (2007, p. 412). +1—

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• The sooner the world’s people decide to strive for substitution of available existing technologies. The this stability, the greater will be their chance for second is that increasing levels of wealth will be ac- success. companied by environmental improvement because In a subsequent article, D. L. Meadows (2007, p. 405) fi rms, individuals, and society will be increasingly underlined an important change that had occurred willing to pay for more environmentally sound tech- since the publication of The Limits to Growth: “In nology, products, and ser vices. The central idea is 1972 we concluded that global population and indus- that the perceived value of the environment in- trial activity were still below the levels that could be creases with rising affl uence. This implies that the supported indefi nitely on earth. By 2004, it was clear solution to environmental degradation is economic to us that they had grown above sustainable levels. growth that enhances per capita income— perhaps the So in 1972 the main objective seemed to us to be fi nd- faster the better. Third, some believe that new tech- ing ways of slowing down physical expansion on the nology can and will emerge to address even the most planet. In 2004 the main objective had become get- diffi cult environmental problems. Finally, there are ting physical fl ows that are propelled by population those who argue that both the social and the techno- and industry back down below the carrying capacity logical responses will arise in time to prevent irrevers- of the planet.” ible ecological damage. These four manifestations of This point is corroborated by the Millennium Eco- optimism are related to the concepts of (1) substitu- system Assessment Synthesis Report (MEA 2005), tion of alternatives (Section 1.3.1), (2) the environ- which summarized the work of approximately 1,360 mental Kuznets curve (EKC) (discussed in Section experts from ninety- fi ve countries who tried to assess 1.3.2), (3) technological optimism (discussed in Sec- the consequences of ecosystem change for human tion 1.3.3), and (4) the absence of tipping points be- well-being and to establish the scientifi c basis for ac- yond which no solution will be found to be adequate tions needed to enhance the conservation and sustain- because of its late realization and response (see the able use of ecosystems (D. L. Meadows 2007). As discussion of The Limits to Growth in Section 1.3.2). D. L. Meadows (2007) notes, in the MEA report, among the fi ve drivers of change in ecosystems and 1.3.1 Growth, Technology, and Substitution versus their ser vices, population change and change in eco- a Steady- State Economy nomic activity were the fi rst two to be mentioned. Fur- thermore, the notion of collapse was also put forward The dominant neoclassical economic paradigm as- as a possible or even likely scenario (MEA 2005, p. 1): sumes the existence of utility functions, which con- “Approximately 60% (15 out of 24) of the ecosystem stitute the foundation of production and consumption ser vices examined during the Millennium Ecosystem functions. These functions act as simplifi ed abstrac- Assessment are being degraded or used unsustainably, tions of economic decisions. In the consumption- including fresh water, capture fi sheries, air and water production framework, every material product in the purifi cation, and the regulation of regional and local system is produced by other products made within the climate, natural hazards, and pests. . . . The challenge system, plus exogenous capital and labor (R. Ayres of reversing the degradation of ecosystems while meet- and Warr 2009). A particularly interesting observa- ing increasing demands for their services can be par- tion made by R. Ayres and Warr (2009), but also by tially met under some scenarios that the . . . [MEA] Georgescu- Roegen (1971), is that this model of the has considered but these involve signifi cant changes in economy displays a characteristic neglect of energy policies, institutions and practices that are not cur- and material fl ows. In addition, there is an obvious rently under way.” Thus the goal of modern societies need to relate changes in the economy and technol- should be none other than to anticipate the point at ogy to environmental impacts. which the environment is being harmed by contempo- One of the earliest, most intuitive approaches to rary societal demands and to fi nd the optimal systemic understanding environmental problems came from = (economic, social, politi cal) measures to respond ac- the “I PAT” formula (Ehrlich and Holdren 1971): cordingly (Ponting 2007, p. 423). Impact (environmental) = Population × Affl uence The consequences of increased ecological dam- (GDP per capita) × Technology (environmental impact age as a result of growth have led to four optimistic per dollar of GDP). scenarios. The fi rst is that the ecological impacts of Since its publication, a number of revisions have been growth (whether from population growth or increases suggested. For example, Holdren, Daily, et al. (1995) in per capita consumption) can be countered by the —-1 adjusted the formula to disaggregate affl uence from —0 —+1

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resource use and to separate mea sures of the “stress” Solow’s (1993) approach to sustainability is rooted in that technology imposes on the environment from the idea that technology can create high degrees of measures of actual damage, which depend on stress substitutability between one resource and another and “susceptibility.” The mea sure ment of susceptibil- and, implicitly, that natural and human- made capital ity is predominantly a function of cumulative damage are in some sense “fungible.” This is what R. U. Ayres from previous environmental stress. Thus the revised (2007) describes as the “weak” sustainability position, formula is which essentially argues that all kinds of natural capital can be substituted by human-made capital.† If re- Damage (environmental) = Population × Economic sources are fungible, society has no obligation to save activity per person (affl uence) × Resource use per economic activity (resources) × Stress on the environment a resource for future generations as long as an alterna- per resource use (technology) × Damage per stress tive resource is made available. Solow (1993, p. 182) (susceptibility). argues that “what we are obligated to leave behind is a generalized capacity to create well-being, not any par- It is important to acknowledge that formulas such tic u lar thing or any par tic u lar resource.” It follows that as these are a simple repre sen ta tion of a highly complex system. They are informative and can help stim- The human economy is seen as part of a larger whole. Its domain ulate discussions about the causes of environmental is the entire web of interactions between economic and ecologi- degradation, but to argue whether they are “right” is cal sectors. Ecological economics defi nes sustainability in terms unwise (Holdren, Daily, et al. 1995). What they indi- of natural capital— the ability of natural systems to provide cate is that the magnitudes of all the factors need to goods and ser vices, including clean air and water and climatic stability. Ecological economists propose that the vital role of nat- be considered because these factors have multiplica- ural capital (e.g., mineral deposits, aquifers, and stratospheric tive effects on environmental damage. However, we ozone) should be made explicit in commodity production (Daly should also recognize the limitations of these formu- 1994b). Thus consumption should not deplete natural capital at a faster rate than it can be replaced by human capital. Daly’s no- las. They do not take into account the interdependen- tion of the steadystate economy views natural ecosystems as cies or nonlinearity that might exist between the being fi nite and, therefore, focuses on the scale of human activity factors, there is no explicit consideration of societal (i.e., the economy) that can be supported. Living (and producing) within ecological limits is the major focus of ecological econom- factors and how they can infl uence each variable, and ics. Green economics (Lawson 2006) and natural economics they do not consider how each of the variables can (Ruth 2006) build on ecological economics but focus more exchange over time, which is especially critical for tech- plicitly on informing/shaping politi cal views and policy for sus- nological change (ibid.). tainable economic development. † Neoclassical economics views technological innova- Given the politi cal diffi culty inherent in develop- tion and reproducible human-made capital as providing “substi- ing mea sures to curtail population growth or limit/ tutes” for natural capital (Hartwick 1977, 1978a, 1978b; Solow reduce affl uence and the associated levels of con- 1974). Under these assumptions of weak sustainability, consumption can be sustained, environmental externalities can be over- sumption, it seems that the easiest way to achieve a come, and resource scarcity problems can be solved. Neoclassical less environmentally destructive society is to focus economists argue that as prices increase because of scarcity, in- on technological innovation. Indeed, the “techno- vestment in technological innovation creates substitutes to replace the scarce resources. The idea that technological innovation logical fi x” has become a major or integral aspect of will free society from concerns of resource scarcity, enabling many theories put forward on how society can live economies to become less reliant on natural resources, has been within its ecological means. rejected by some. R. U. Ayres (1978) presented a convincing case Two interesting (somewhat academic) develop- that the laws of thermodynamics place limits on the ability of human-made resources to replace or substitute natural capital. ments in economics that treat technology differently The basic argument is that human-made capital is built and are the ideas of substitutability (Solow 1993) and maintained using natural capital. Thus both forms of capital are the steadystate economy (Czech and Daly 2004; complementary and cannot be substituted for one another. It follows that the maintenance of natural capital stock is essential 18 Daly 1991b, 1996, 2008), which is part of the much for the economic pro cess. A reduction in the availability of natu- broader view of ecological/green/natural/sustain- ral capital will reduce the productivity of human- made capital, ability economics (R. U. Ayres 2008; Costanza 1991; which depends on ecosystem goods and ser vices. The same argument is also made by Georgescu- Roegen (1993). Similarly, R. U. Lawson 2006; Ruth 2006; Söderbaum 2008).* Ayres (1997) argues that the neoclassical view of externalities as exceptional occurrences in a larger economic context is incor- rect. He considers environmental externalities pervasive be- * In general, the emerging fi eld of ecological (or sustain- cause the real economy depends on extracting, pro cessing, and ability) economics, which combines both the economy and tech- converting materials (and energy), which create waste residuals nology with ecology, provides a holistic perspective of sustainable that can have negative environmental and economic conse- development (R. U. Ayres 2008; Costanza 1991; Söderbaum quences. Because these consequences are not priced in the real -1— 2008). It studies the relationships between ecosystems and eco- economy, the environment is treated as a free good and medium 0— nomic systems, encompassing both biological and cultural change. for disposal. +1—

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resources should be assessed as if they were savings and investments (that is, we have a choice between current consumption and providing for the future through Production the investment of nonrenewable resource rents).* Production In contrast, Daly (1991b) holds what R. U. Ayres

(2007) calls a “strong” sustainability position, which Consumption entails that many of the most fundamental services provided by nature cannot be replaced by services Consumption produced by humans or human-made capital. Daly (1991b) provides what is probably the best- developed FIGURE 1.5: NEOCLASSICAL ECONOMICS VIEW OF GROWING CYCLES OF PRODUCTION AND CONSUMPTION vision of an economy that functions within ecologi- Source: Adapted from Daly (1991b, p. 181). cal limits. Arguing from the fi rst principle of thermodynamics, Daly describes a steadystate economy (SSE) as one in which births replace deaths and pro- ECOSYSTEM duction replaces depreciation. The objective of the Raw SSE is to keep the throughput of raw materials (low Materials entropy) and waste (high entropy) at levels within Solar Energy Production Recycled Heat the regenerative and assimilative capacity of the Materials ecosystem. Whereas neoclassical economics views Consumption the growth economy as a continual expansion of pro- Waste duction and consumption (Figure 1.5), the SSE considers these cycles to be in equilibrium with the ecosystem (Figure 1.6).†

Within the SSE, technology, knowledge, the distri- FIGURE 1.6: STEADY- STATE ECONOMICS VIEW OF PRODUCTION bution of income, and the allocation of resources are AND CONSUMPTION CYCLES IN EQUILIBRIUM WITH THE fl uid.‡ Because a fi xed amount of resources will yield ECOSYSTEM constant fl ows of goods and ser vices (all else being Source: Adapted from Daly (1991b, p. 181). equal), technological progress is one way in which more (or more highly valued) goods and ser vices can To help describe the SSE, Daly (1991b) compares be produced (Czech 2003; Czech and Daly 2004). it to a steadystate library, where the addition of a new However, given the laws of thermodynamics, there book would mean the removal of an old book. Thus, are limits to what is technologically feasible. Thus although the quantitative physical scale remains there is a theoretical maximum size (an ecological constant, the library would continue to improve in a carry ing capacity) at which a steadystate economy qualitative sense. In this regard, Daly’s view of the may exist. This constraint implies that high- quality, necessary technological fi xes for environmental deg- long- lasting, and repairable goods are preferable to radation is more conservative than Solow’s. Rather § low- quality, short- lived, and disposable goods. than continuing business as usual and investing in future alternatives, Daly’s focus is to develop new * Solow (1993) describes resource rents as the invest- science/technology that reduces the environmental ment of the pure return on a nonrenewable resource. For exam- burden to rates within ecosystem limits and also ex- ple, in using up a natural resource such as oil in the North Sea oil fi eld, the revenues that are intrinsic to the oil itself should be in- tends human lives. Daly’s and Solow’s viewpoints are vested in new technologies that will eventually replace oil. Hence quite different and represent contrasting views of the investing the “rent” from the nonrenewable resource is seen as role that technology plays in development. an effective way to continue the current levels of consumption while providing for future generations. R. U. Ayres (2007) offers a critique of proponents † See Rees (1995a) for a useful review of the expansion- of both strong and weak sustainability. In his view, ist (neoclassical economic) and steadystate (ecological eco- although the mathematics of Solow’s argument are nomic) views of development. “impeccable,” the underlying assumptions, or what ‡ In general, ecological economists, especially those who focus on steady-state economics, are concerned with the size of the economy relative to the ecosystem. The effi cient allocation of resources is a concern, but it is not the primary focus, as energy that reduce the available stock of terrestrial resources in neoclassical economics. (assuming that the recycling process is not powered by solar en- § Although one could argue that an effective recycling ergy), and (2) most recycling involves the degradation of mate- pro cess reduces the need to extend the lifespan of goods, this ar- rial, which means that it is suitable only for poorer-quality goods. —-1 gument is weakened by the fact that (1) recycling processes use The latter point is often referred to as “downcycling.” —0 —+1

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Ayres calls “the physics,” are not. R. U. Ayres (2007, the present crisis. The fi nancial system borrows p. 116) believes that proponents of strong sustain- against the future, on the expectation that indefi nite ability are right to point out the relevance of entropy economic growth will give the means to repay the law, the second law of thermodynamics, and the im- interests and the debts. Then there is what the economists describe as the real economy, the GDP at possibility of perpetual-motion machines; however, constant prices. When it grows, it indeed allows for they are wrong to assert that human civilization is to- paying back . . . some or all the debt, when it does not tally dependent on a fi nite stock of high- quality (lowgrow enough, debts are defaulted. Increasing the debts entropy) resources stored in the earth’s crust. As R. U. forces the economy to grow, up to some limits. Then, Ayres (ibid.) points out, “The fact that much of our down below underneath the economists’ real econ- industrial base currently utilizes fossil fuels and high omy, there is what the ecological economists call the quality metal ores is merely due to the ready availabil- “real- real” economy, the fl ows of energy and materials whose growth depends partly on economic factors ity of these resources at low cost. It does not follow (types of markets, prices) and in part from physical from the entropy law that there are not substitutes.” and biological limits. The “real- real” economy also Nonetheless, R. U. Ayres (2007, p. 126) concludes, “I includes land and capacity of humans to do work. have to reiterate that, while there is plenty of room for substitution and some possibility of major break- The ecological approach to the present crisis states throughs (e.g., in manufacturing room temperature that the level of fi nance grew too large and too fast for super- conductors or carbon nanotubes) the the real economy to adapt. The fi nancial system also pessimists—those who espouse the notion of ‘strong increased debts too much, in the absence of coherent sustainability’ appear to be closer to the truth than the regulation, and this expansion of credit lines was mis- optimists who believe in more or less unlimited substi- taken for real wealth (Kallis, Martinez- Alier, et al. tution possibilities.” 2009). At the same time, the economy is not a closed In general, in this time of growing ecological and system but operates within certain ecological limits economic crisis, it becomes increasingly apparent that and biophysical constraints, which condition the rate questions of ecology cannot be separated from ques- at which real wealth can increase. This analysis resem- tions of economics, and that building a truly sustain- bles that of Polanyi (1944), who placed markets within able future will necessarily involve new theories, new social systems rather than regarding them as in de pen- paradigms, and new policies. Ecological and steady- dent “value-neutral” entities. state economics provide the fi rst step in thinking about In general, energy resources appear to be of in- the economy and the environment in different terms. creasingly pivotal importance around the world. As As old theories become obsolete in light of events Klare (2001, p. 13) notes, ever since the end of the with real consequences and a politi cal economy that Cold War, politi cal analysts of different persuasions is both unsustainable and immoral, new paradigms have attempted to identify the “defi ning principle of will emerge. the new international environment.” Although there The fi nancial crisis that began in 2008 is connected have been many competing theories about this new de- to the issue of ecological limits to growth. In tandem fi ning paradigm, such as Samuel Huntington’s “clash with the signifi cant economic and fi nancial distur- of civilizations,” Robert Kaplan’s return to Malthusian bances, the ecological situation is particularly prob- dynamics, and Tom Friedman’s “fl at world,” Klare is lematic and is a direct consequence of the workings of correct to note that “the fervent pursuit of resource our industrial systems. Kallis, Martinez-Alier, et al. plenty in total disregard of any civilizational loyalties” (2009) put forward an alternative framework for appears to have much more signifi cant explanatory studying the fi nancial crisis of 2008. According to power with regard to contemporary international dy- their analysis, the economy must be analyzed at three namics (ibid.). levels (from top to bottom):

• The fi nancial level 1.3.2 The Environment and Affl uence: The Environmental Kuznets Curve • The real economy • The “real- real” economy A somewhat academic idea—but one that seems to persist in many development/policy dialogues*— that Kallis, Martinez- Alier, et al. (2009, p. 16) note:

At the top there is the fi nancial level that can grow by * For example, the WTO promotes an environmental loans made to the private sector or to the state, Kuznets curve approach to development in its discussion of how -1— trade liberalization and stable and predictable trade conditions sometimes without any assurance of repayment as in 0— support the environment. “An important element of the WTO’s +1—

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300 these empirical studies suggest that an EKC exists for Turning point production- based, relatively short- lived pollutants 250 that have a regional/local impact, such as sulfur diox-

ide (SO2), oxides of nitrogen (NOx), carbon monox- 200 ide (CO), suspended particulates (SPM), and fecal coliforms. However, many authors of these studies

per Capita 150 are careful to state that their fi ndings should be 2 treated with caution. For example, Grossman and 100 Krueger (1995, p. 372) stress that “there is nothing at

Kg SO all inevitable about the relationships that have been 50 observed in the past. These patterns refl ect the technological, po liti cal and economic conditions that ex- 0 isted at the time.” See Box 1.1 for a summary of key 0 5,000 10,000 15,000 20,000 25,000 points related to the EKC. $ GNP per Capita The EKC hypothesis effectively challenged the FIGURE 1.7: ENVIRONMENTAL KUZNETS CURVE FOR SULFUR idea that the pro cess of industrialization and eco- DIOXIDE EMISSIONS nomic development “inevitably hurts the environ- Source: Panayotou (1993) from Stern, Common et al. (1996, p. 1152). ment” (IBRD 1992, p. 38). For example, Beckerman (1992, p. 482) claimed that “there is clear evidence focuses on the relationship between economic growth that, although economic growth usually leads to envi- and environmental impact is the environmental ronmental deterioration in the early stages of the pro- Kuznets curve (EKC). The EKC hypothesis postu- cess, in the end the best— and probably the only— way lates that the relationship between a specifi c environ- to attain a decent environment in most countries is mental pollutant (such as sulfur dioxide) and per to become rich.” Bartlett (1994, p. 18) even suggested capita income follows an inverted-U shape (Figure that “existing environmental regulation, by reducing 1.7).* This relationship implies that as a nation’s GDP economic growth, may actually be reducing environ- per capita increases, environmental degradation will mental quality.” The clear focus of these “income- fi rst increase up to a turning point that varies by pol- deterministic” arguments was that economic growth lutant (Barbier 1997a; Yandle, Bhattarai, et al. 2004), is the best way to alleviate poverty and (eventually) after which it will begin to fall. address environmental degradation. Since the early 1990s, a signifi cant number of stud- In a critique of the environmental Kuznets curve ies have tried to identify whether an inverted-U-shaped that is traditionally focused on a few specifi c pollut- relationship (or an EKC) exists between different in- ants as measures of total environmental pressure, dicators of environmental degradation and per capita Spangenberg (2001) fi nds no indication of an environ- income (Barbier 1997b; M. A. Cole, Rayner, et al. mental Kuznets curve can be found for the total re- 1997; de Groot, Withagen, et al. 2004; Grossman and source throughput in several advanced countries. The Krueger 1993, 1995; Hettige, Lucas, et al. 1992; List vast majority of man- made emissions of suspended and Gallet 1999; Panayotou 1993; Selden and Song 1994; Shafi k and Bandyopadhyay 1992).* In general, ronmental degradation. Their results identifi ed an inverted- U-shaped relationship between SO2, dark matter (fi ne smoke), and suspended particles and income per capita. In addition, the contribution to sustainable development and protection of the World Bank’s 1992 World Development Report (IBRD 1992; environment comes in the form of furthering trade opening in Shafi k and Bandyopadhyay 1992) and research by Panayotou goods and ser vices to promote economic development, and by (1993) and Selden and Song (1994) are often associated with the providing stable and predictable conditions that enhance the early development of the EKC hypothesis. Interestingly, there possibility of innovation. This promotes the effi cient allocation appears to be some confusion over whether Panayotou or Selden of resources, economic growth and increased income levels that and Song coined the term “environmental Kuznets curve”; see in turn provide additional possibilities for protecting the envi- Dinda (2004), Gawande, Berrens, et al. (2001), and Tisdell (2001). ronment.” WTO, “An Introduction to Trade and Environment in Others have applied the EKC concept to consider the relation- t h e W T O , ” w w w . w t o . o r g / e n g l i s h / t r a t o p _ e / e n v i r _ e / e n v t _ i n t r o _ e ship between per capita income and specifi c concerns, such as .htm (accessed June 8, 2010). The WTO’s statement implies that the percentage of threatened bird and mammal species in a coun- negative environmental impacts that result from economic try (McPherson and Nieswiadomy 2005), the rate of deforesta- growth can be addressed once income levels increase, which is tion of natural tropical forests (Bhattarai and Hammig 2004), the clearly the opposite of a precautionary approach to development. intensity of material consumption (Canas, Ferrao, et al. 2003), * The fi rst empirical EKC study is attributed to Gross- and consumption-based measures such as ecological footprint or man and Krueger (1993), who investigated whether the North number of hazardous- waste sites (Gawande, Berrens, et al. 2001; —-1 American Free Trade Agreement (NAFTA) would lead to envi- Rothman 1998). —0 —+1

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BOX 1.1: KEY POINTS RELATING TO THE ENVIRONMENTAL KUZNETS CURVE (EKC)

THE EKC HYPOTHESIS

The EKC hypothesis states that the relationship between a speciﬁ c environmental pollutant— such as sulfur dioxide

(SO2)— and per capita income follows an inverted- U shape. This relationship implies that environmental degradation will ﬁ rst increase with rising income per capita up to a turning point, after which it will start to fall with higher levels of income. If one accepts the EKC hypothesis, the solution to global environmental degradation would appear to be rapid economic growth.

POINTS OF CONCERN

1. The EKC does not seem to hold for CO2 or for toxics associated with increasing industrialization and especially increasing consumption.

2. The EKC may not even hold for regular pollutants like SO2. 3. The adoption of pollution- prevention and cleaner technology refl ecting sustainable practices may explain Kuznets- type behavior, but such behavior depends on the constant application of these sustainable practices that are promoted by regulation, not laissez- faire policies. 4. Late developers and those that decide to adopt cleaner technology late may seem to provide evidence for Kuznets- type behavior, but this action highlights a cultural shift in the importance of protecting a community’s livelihood and not an income effect. 5. The adoption of more effi cient technology that initially reduces environmental degradation, resource usage, and overall costs might eventually lead to higher levels of environmental impact through the Jevons paradox or rebound effect— that is, the lower cost of using a more effi cient technology increases its demand and (potentially) offsets the original effi ciency gains. 6. Even if per capita production of pollution declines, population increases could swamp any environmental gains.

particulate matter, SO2 and CO2 all originate from Using system dynamics techniques developed by Jay the use of fossil fuels for which environmental laws Forrester at MIT,* the 1972 Limits to Growth report eventually limit emissions through end- of- pipe abate-

ment technologies. The modernization of pollution * In 1971 the book World Dynamics presented the resources more generally requires substitution and more sults of a computer model developed by Professor Forrester and fundamental technological change than end- of- pipe his colleagues at MIT, called “World 2.” Forrester describes how traditional pollution control. Otherwise, increased the model was created to support a two- week workshop at MIT in 1970 during which the Executive Committee from the Club of wealth associated with economic growth increases Rome was invited to learn the pro cess of model formulation and the production of other kinds of pollution that can computer simulation. The World 2 model was designed to ana- only be offset by technology modernization and im- lyze the problems facing the “world system,” which was defi ned as incorporating humankind, humankind’s social systems, hu- provements in resource productivity that lead to an mankind’s technology, and the natural environment. Using fi ve absolute reduction in resource consumption. Com- key variables— population, capital investment, natural resources, menting that “wealth is not green,” Spangenberg the fraction of capital devoted to agriculture, and pollution— the model provided evidence that within the next one hundred years (2001) argues that the emphasis of ecological eco- “man may face choices from a four- pronged dilemma— nomics must be that resource productivity needs to suppression of modern industrial society by a natural- resource improve well beyond the economic growth rate for shortage; decline of world population from changes wrought by there to be a future positive effect of growth on pol- pollution; population limitation by food shortage; or pollution collapse from war, disease, and social stresses caused by physical lution reduction. and psychological crowding” (Forrester 1971, p. 11). The EKC hypothesis stood in stark contrast to the In addition, the simulations indicated that the high standard “limits- to- growth” debate of the early 1970s (see the of living in developed countries is likely to fall as industrialization reaches a “natural- resource limit,” and that developing Primer on Sustainable Development at this book’s countries might have “no realistic hope” of reaching the standard website for a discussion of The Limits to Growth and of living experienced in developed nations (Forrester 1971, p. other infl uential publications released before the 12). These predictions fueled the debate in developed and developing countries about the sovereign right to, and best process of, 1972 UN Conference on the Human Environment in development. Following the workshop at MIT, the Club of Rome, Stockholm). This debate centered on the notion that convinced that Forrester’s model had identifi ed many of the fac- sustained economic growth would eventually lead to tors behind the “world problematique,” decided to launch Phase the “overshoot and collapse” of critical ecosystems— One of its study of the predicament of humankind. This phase, headed by Dennis Meadows, led to the creation of the World 3 -1— that is, human activity moves beyond a “tipping point.” model, on which the Limits to Growth report was based. The 0— +1—

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discussed the results of a computer model (called in exponentially increasing amounts can rise past the “World 3”) designed to predict the future if current danger point, because the danger point is fi rst per- trends of increasing population, industrialization, ceived years after the offending pollution was re- pollution, food production, and resource depletion leased. A rapidly growing industrial system can build continued unabated. The report reached three sa- up a capital base dependent on a given resource and lient conclusions: then discover that the exponentially shrinking resources reserves cannot support it” (ibid., p. 145).* 1. If the present growth trends in world population, In 1992, the authors of The Limits to Growth pub- industrialization, pollution, food production, lished Beyond the Limits, which argued that the con- and resource depletion continue unchanged, the clusions they had reached in 1972 were still valid, but limits to growth on this planet will be reached the underlying logic needed to be strengthened (D. sometime within the next one hundred years. H. Meadows, D. L. Meadows, et al. 1992).† The 1992 The most probable result will be a rather sud- book painted an even more convincing picture of den and uncontrollable decline in both population and industrial capacity. 2. It is possible to alter these growth trends and to * For a recent study that explores whether it is possible to achieve a low- or no- growth economy, see Victor (2008). Vic- establish a condition of ecological and economic tor developed an interactive model of the Canadian economy, stability that is sustainable far into the future. called “LowGrow,” which he used to explore different assump- The state of global equilibrium could be de- tions, objectives, and policy mea sures designed to transition the economy toward zero economic growth. To avoid the criticisms signed so that the basic material needs of each levied at the World 3 systems model supporting the work of person on earth are satisfi ed and each person The Limits to Growth, the LowGrow model was based fi rmly on has an equal opportunity to realize his individ- standard economic theory. Victor concluded that the careless implementation of a “no- growth” strategy can be disastrous, ual human potential. bringing about signifi cant hardship. However, if a low-growth 3. If the world’s people decide to strive for this strategy, followed by a no-growth strategy, is pursued with high second outcome rather than the fi rst, the sooner investment, it is possible (in theory) to achieve (by 2035) a fu- they begin working to attain it, the greater will ture of full employment with low levels of poverty, increased leisure time, reduced greenhouse gas emissions, and fi scal bal- be their chances of success. (D. H. Meadows, ance. Although the LowGrow model has limitations, such as its D. L. Meadows, et al. 1972, pp. 23– 24) high level of aggregation, its value lies in its ability to enable analysts and decision makers to explore potential pathways to- The Limits to Growth raised the important idea ward a “no economic growth” future. What is evident from Vic- of “overshoot and collapse”—that is, to go inadver- tor’s (2008) work is that there are several pathways to achieving tently beyond a system’s limits, creating a situation such a goal. † The revised conclusions are as follows: “[1] Human use that is nearly impossible to reverse (D. H. Meadows, of many essential resources and generation of many kinds of pol- D. L. Meadows, et al. 1972, p. 144). Overshoot can lutants have already surpassed rates that are physically sustain- occur, the study’s authors opined, because (1) growth able. Without signifi cant reductions in material and energy fl ows, there will be in the coming decades an uncontrolled decline in can lead to rapid change within the system; (2) there per capita food output, energy use, and industrial production; . . . is a limit to the system beyond which it becomes un- [2] This decline is not inevitable. To avoid it two changes are nec- stable; and (3) delays in feedback mechanisms mean essary. The fi rst is a comprehensive revision of policies and practices that perpetuate growth in material consumption and in that the system’s limits are exceeded before the prob- population. The second is a rapid, drastic increase in the effi - lems are identifi ed. For example, “Pollution generated ciency with which materials and energy are used; . . . [3] A sustainable society is still technically and econom ical ly possible. It could be much more desirable than a society that tries to solve its World 3 model contained about three times as many mathemati- problems by constant expansion. The transition to a sustainable cal equations as its prede ces sor and used empirical data for many society requires a careful balance between long- term and short- of its numerical relationships (H. S. D. Cole 1973). (The phrase term goals and an emphasis on suffi ciency, equity, and quality of “world problematique” was created by the Club of Rome to de- life rather than on quantity of output. It requires more than pro- scribe the set of crucial problems— political, social, economic, ductivity and more than technology; it also requires maturity, technological, environmental, psychological, and cultural— compassion, and wisdom” (D. H. Meadows, D. L. Meadows, et facing humanity.) The most common criticism of the fi rst World 3 al. 1992, pp. xv– xvi). In 2004, the thirty- year update of The Lim- model was that it underestimated the infl uence of technology its to Growth was published (Meadows, Randers, et al. 2004a). and did not adequately represent the adaptive nature of the mar- “Now, three de cades later, we are into the 21st century within 20 ket. Some twenty years later, D. H. Meadows, D. L. Meadows, et years of the time when our scenarios suggest that growth will al. (1992) designed a new version of the model that did not rely near its end. The basic conclusions are still the same. . . . The solely on technology or solely on the market, but instead on a world’s use of materials and energy has grown past the levels that smooth interaction between the two. The outcome from the new can be supported indefi nitely. Pressures are mounting from the model showed that in many cases, resource and pollution fl ows environment that will force a reduction. Rising oil prices, cli- had already surpassed levels that are physically sustainable. mate change, declining forests, falling ground water levels—all of —-1 —0 —+1

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system collapse.* This newer work argues that the The idea that economic development and envi- limits to growth are not physical limits, such as limits ronmental protection could advance in unison be- to population growth or to the number of automo- came central to the vision of sustainable development biles on the road. Rather, they are limits to through- articulated by the World Commission on Environ- put, that is, limits to the fl ows of energy and materials ment and Development (WCED 1987) (see Chapter required to keep people alive, to build more automo- 2). In the classic text Our Common Future, the WCED biles, and the like. By this they mean that the limits (1987, p. 43), also known as the Brundtland Commis- to growth are not only the limits to the earth’s ability sion, defi ned sustainable development as develop- to provide the resource streams of energy and mate- ment that meets present needs without damaging the rials necessary to meet predicted consumption lev- environment or compromising the ability of future els, but also limits to its ability to absorb the pollution generations to meet their own needs. It viewed the and waste streams in natural sinks such as forests environment and development as being “inexorably and oceans. linked,” stating that “development cannot subsist upon Although the legitimacy of D. H. Meadows, D. L. a deteriorating environmental resource base; the en- Meadows, et al.’s (1972) limits-to- growth argument vironment cannot be protected when growth leaves was criticized (H. S. D. Cole, Freeman, et al. 1973; out of account the costs of environmental destruc- Kaysen 1972; Maddox 1972), the intellectual debate tion” (ibid., p. 37). Sanders (2006, p. 386) aptly de- surrounding the topic clearly informed Daly’s (1991b, scribes the WCED (or Brundtland) approach as 1996) notion of the SSE. “growth within limits.” When The Limits to Growth was published in This formulation of sustainable development meant 1972, the general consensus of the international com- that it could be incorporated into the conventional munity was that economic growth was a major cause economic paradigm through ideas such as “balanc- of environmental harm (see Chapter 2). However, to- ing social, economic, and environmental objectives,” ward the end of the 1970s, following two oil shocks the “triple bottom line,” “getting the pro cess right,” and amid a global recession, this perspective began “dematerialization,” and “ecological modernization.” to change. The emerging view of economic growth Sanders (2006) argues that formulating sustainable and its impact on the environment was perhaps most development in such a po liti cally palatable, rather clearly articulated in a United Nations Environment than scientifi c, manner has severely limited progress Programme (UNEP) report titled The Environment toward sustainability. in 1982: Retrospect and Prospect: “A decade ago the It is important to recognize that the Brundtland desirability of further economic growth was ques- Commission’s view of development is quite different tioned in some quarters but the negative effects of from that envisioned by proponents of the EKC hy- the recent slow- down in economic growth have rein- pothesis. The EKC hypothesis implies that environ- forced the view that it is an essential instrument in mental degradation is an unavoidable part of the achieving social goals. In developing countries par- early stages of economic development/growth. The ticularly, economic growth is vitally important and purely empirical nature of the hypothesis means that remains a major force for improving the health and it is not concerned with whether environmental deg- welfare of people. It is now perceived that economic radation exceeds critical ecological limits (K. Arrow, growth can often be managed not only to avoid envi- Bolin, et al. 1995; Munasinghe 1999; Tisdell 2001). In ronmental degradation but also, in many cases, to this regard, great care must be taken not to confuse improve the environment” (UNEP 1982, p. 37). the growth- and trade-liberalization (or “business-as- usual”) approach of the EKC hypothesis with a more “sustainable” approach to development. The former these are simply symptoms of the overshoot” (Meadows, Rand- adopts a laissez- faire view (that is, the market will ef- ers, et al. 2004b). * Oddly enough, even though there is evidence that lim- fi ciently respond to problems as they arise), whereas its are in fact now being surpassed—as shown by the destruction the latter takes explicit (interventionist) steps through of the ozone layer, global warming, widespread contamination of regulation, policies, and/or programs to protect im- drinking-water systems, and the possibility of widespread spe- portant natural and social systems. cies harm through endocrine disruption—Beyond the Limits did not receive serious attention. In the closing chapter of Beyond What is perhaps most interesting about the EKC the Limits, the authors argue that an environmental ethic backed hypothesis is that its proponents point to many as- by love is required to prevent system collapse. Given the tremen- pects of the sustainable approach to development dous challenge of living within ecological limits, it seems that the -1— authors hope that moral rectitude will one day save the environ- when they are describing the underlying dynamics 0— ment. behind the empirical relationship. In general, the logic +1—

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behind the EKC goes as follows. At very low levels the “rebound effect” or Jevons paradox (described of economic activity (that is, in a preindustrial and in the following section) can potentially overwhelm agricultural society), environmental degradation is any environmental benefi ts achieved through tech- relatively low.* As industrialization proceeds, the nological improvements. growing use of raw materials and relatively “dirty” The creation of environmental regulation that re- (less effi cient) technologies leads to increasing levels duces and caps pollution levels, the promotion of of pollution/waste and environmental degradation. highly effi cient technologies, and the reduction in use The objective of the industrial (or “adolescent”) phase of raw materials and shifts to renewable resources of development is to maximize economic growth by are all critical elements of a sustainable approach to expanding throughput with little consideration for development. The difference, however, between pro- the environmental consequences. Finally, as an econ- ponents of the EKC hypothesis and those of the sus- omy matures and transitions into the postindustrial tainable approach to development is that the former phase (also known as the service or information econ- do not actively promote these structural/technologi- omy), there is a gradual leveling off and decline in cal changes in the economy. Instead, they tend to environmental degradation. As Panayotou (1993, p. 1) treat them as an inevitable part of economic growth/ explains, environmental quality begins to improve be- development, viewing laissez- faire capitalism as the cause of “increased environmental awareness, en- most effective development pathway.† In contrast, forcement of environmental regulations, better tech- proponents of the sustainable approach tend to be nology, and higher environmental expenditures.” The more interventionist and to seek opportunities to halt growing societal demand and “willingness to pay” for and/or reverse clearly unsustainable activities. In their a healthy environment mean that governments are opinion, although pollution prevention and cleaner able to establish initiatives to protect and enhance the technologies may explain the EKC relationship, in environment. Such initiatives can be infl uential in many cases these sustainable practices are the result promoting the adoption (or creation) of technologies of regulation that needs to be constantly revised as to enhance production effi ciency and/or reduce emis- the economy evolves. sions. If these initiatives are designed in an integrated The validity and implications of the EKC hypoth- manner, they can also encourage a transition toward esis have been the subject of much critical debate (K. a less environmentally destructive “input mix” to the Arrow, Bolin, et al. 1995; Barbier 1997a; Cavlovic, economy— that is, environmentally damaging inputs Baker, et al. 2000; de Bruyn, van den Bergh, et al. are gradually replaced with less damaging inputs 1998; Dinda 2004; D. I. Stern 1998, 2003, 2004; D. I. (D. I. Stern 2003, 2004). In the absence of govern- Stern, Common, et al. 1996; Unruh and Moomaw ment intervention, a fi rm’s desire to lower costs 1998). Although the empirical support for the EKC re- (through effi ciency gains), combined with consumer lationship and its very existence have been disputed pressure for greener products and ser vices, can di- (Harbaugh, Levinson, et al. 2002; P. Lawn 2006; Per- rectly promote less environmentally destructive prac- man and Stern 2003), a more general criticism is that tices. However, without capping total emissions or EKCs have been shown to exist only for local air pol- constraining resource usage to sustainable levels, lutants and not for long-lived measures such as carbon

dioxide (CO2), municipal waste, and persis tent toxic

* The statement that low economic activity equates with low environmental degradation should be treated with care. For † The reader should be aware that this discussion at- example, ten years after the 1972 Stockholm Conference on the tempts to draw a clear distinction between proponents of the Human Environment, the UNEP’s Governing Council reached EKC hypothesis and proponents of the sustainable approach to “agreement on the need to make a direct attack on poverty, development. However, in reality, there is a clear spectrum of which was the main source of environmental degradation in the opinions that fall between these two extremes. The majority of third world[;] breaking the vicious circle of extreme poverty academics who support the existence of EKC curves are very would help to unravel the tangled interrelationships between careful when they are interpreting the results from their re- population, resources, development and the environment” (UNEP, search. For example, M. A. Cole (2003, p. 575) states that im- Report of the Governing Council on Its Tenth Session, General provement in air quality with increasing income per capita “is Debate, 51, www .unep .org/ Documents .multilingual/ Default .asp not an automatic procedure. Growth does not reduce pollution. ?DocumentID= 70 & ArticleID = 702 [accessed June 8, 2010]). In Rather, the evidence suggests that growth can facilitate the re- addition to the idea of the “poverty trap,” the argument that agri- quired legislation and investment to help reduce per capita cultural societies do not degrade the environment is also debat- emissions of some pollutants.” Thus the proponents of an EKC- able. Throughout the history of civilization, great societies such hypothesis approach to development—referred to in the main as the Polynesian cultures on Easter Island and the American text— are those who take the inverted- U relationship at face civilizations of the Anasazi and the Maya have fallen because of value and are not concerned about whether the theory holds true —-1 the degradation of their productive capacities (Diamond 2004). for all environmental indicators. —0 —+1

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chemicals (M. A. Cole, Rayner, et al. 1997; S. Das- mental improvements gained through production gupta, Laplante, et al. 2002; Hettige, Lucas, et al. effi ciencies can be overwhelmed by growing levels of 1992; Holtz- Eakin and Selden 1995; Rothman 1998). consumption in both developed and developing econ- These mainly consumption-based measures are omies. The deterministic nature of the EKC hypothe- shown to increase monotonically with per capita sis raises the question whether developing nations can income. learn from developed nations and adopt initiatives to Another important criticism is that EKCs are gen- “tunnel through” or “fl atten” the inverted- U relation- erated by a composition effect, whereby developed ship (S. Dasgupta, Laplante, et al. 2002; Munasinghe nations improve their environmental perfor mance by 1999; Panayotou 1997). These initiatives include the exporting energy- and pollution- intensive activities establishment and enforcement of sophisticated and to developing nations (K. Arrow, Bolin, et al. 1995; anticipative environmental regulation and the adop- M. A. Cole and Neumayer 2005; Rothman 1998; D. I. tion of cleaner technologies that allow developing na- Stern, Common, et al. 1996).* This criticism raises the tions to leapfrog over older, dirty technologies.† In question whether developing nations will be able to general, the idea that developing nations could “es- replicate the environmental improvements achieved cape the pattern of the EKC” is becoming more by developed nations. As their economies grow, their widely supported (M. A. Cole and Neumayer 2005, options for exporting energy- and pollution-intensive p. 316). activities are limited. A related problem mentioned In conclusion, one can argue that (1) technological earlier is that international trade creates a “distancing change is critical to enabling society to live within effect” (Conca 2002; Princen 2002), where consumers ecological limits, and (2) governments have a vital are spatially and temporally separated from industrial role in creating an innovative regulatory environment processes and their environmental impacts. Because that protects critical ecological systems and spurs the consumers (primarily in developed nations) are not necessary technological change. directly confronted by the impacts of their purchasing habits, their willingness to address the problems 1.3.3 Technological Optimism experienced elsewhere is limited. Thus to keep the pro cess of economic globalization from deteriorat- During the emergence of sustainable development, ing the global environment, the international com- the environmental discourse was strongest between munity has a vital role to play in halting and reversing the technological optimists,‡ on one side, and the self- unsustainable development (Tisdell 2001). proclaimed Malthusians, on the other, who could Other criticisms are that the EKC hypothesis is foresee no technological solution to the pending not directly concerned with the total impact of eco- problems of pollution and scarcity (Krier and Gil- nomic growth on the environment and whether this lette 1985). Although the technological optimists may (in some cases) be irreversible; that the earth’s were concerned about the environment, they be- stock of resources may not be able to support indefi - lieved that human scientifi c and technological inge- nite economic growth (K. Arrow, Bolin, et al. 1995; nuity would be able to extend any limits faced by Rothman 1998); and that the focus on economic society. growth ignores the more important issue of human As discussed in Chapter 3, the growth of new (and well- being (Daly and Cobb 1994; Max- Neef 1995). successful) technology tends to follow an S-curve. Even if one accepts that an EKC relationship may exist for specifi c pollutants such as local air pollut- † Interestingly, the decision of developing nations to ants, the vast majority of the world’s population lies adopt cleaner technologies may not be due to an income effect on the upward slope of EKC curves, which means but rather to a cultural shift in the importance of protecting a that considerable environmental damage is likely to community’s livelihood. ‡ Krier and Gillette (1985, p. 406) describe technologi- occur before any environmental improvement be- cal optimism as “a term of art, an article of faith, and a theory of comes visible (Ekins 1997). Similarly, any environ- politics.” They argue that technological optimism obtained its precise meaning as a result of the limits- to- growth model, which assumed that factors such as population, industrial production, * An issue closely related to the composition effect is the and pollution would continue to grow exponentially. Thus it fol- “pollution- haven hypothesis”: dirty industries relocate to devel- lows that the position of a technological optimist is “that expo- oping nations to take advantage of their lower environmental nential technological growth will allow us to expand resources standards (Ekins, Folke, et al. 1994; Hettige, Lucas, et al. 1992). ahead of exponentially increasing demands. This is the precise In practice, the pollution-haven hypothesis is not seen to be a meaning of technological optimism as a term of art” (ibid., p. 407). -1— signifi cant factor behind the EKC relationship (Grossman and There is also the implicit assumption that technological innova- 0— Krueger 1995; Rothman 1998). tion will not cause any further pollution or social problems. +1—

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Therefore, if we consider the entire fi eld of techno- Performance logical advance, it follows that it will be composed of a series of such curves. The question is, however, what shape will this series of S-curves follow? Technologi- cal optimists responded to this question by arguing that technological innovation will continue to advance at an exponential rate, thereby establishing a world of utopia as opposed to disaster (Boyd 1972; Kaysen 1972; Starr and Rudman 1973). Others, however, were not as convinced (K. J. Arrow 1969). In- Time deed, as Krier and Gillette (1985) argue, if the S-curve holds for a single technology, why should it not be true FIGURE 1.8: THE ACCUMULATION OF S-CURVES FOR A TECHNOLOGY SET for a set of technologies (Figure 1.8)? And if it holds for a set, should it not also be true for the entire fi eld development would surely have been lost “unless it of technology? Thus if we are experiencing rapid could be demonstrated that environmental conser- growth in technological per for mance, it might sim- vation were obviously good for business profi tability ply be due to the fact that we are in the center of a and economic growth everywhere, not just that these series of S-curves that together also form an S-curve competing values can be reconciled.” (Figure 1.8). As a result of the decision to focus more heav- The problem with this type of debate, as recog- ily on science and technology—as opposed to nized by Krier and Gillette (1985), is that the asser- market reforms and/or government policy to guide tions made are most likely unprovable. Although it is development—there has been a strong (Euro pe an possible to assess individual technologies, it is ex- and Japanese) research interest in what has been tremely diffi cult to assess (in any rigorous manner) termed “factor X” (Reijnders 1998). The idea of fac- whether technology as a whole is progressing at a tor X is similar to that of dematerialization, ecoeffi - faster or slower rate than before and whether this ciency, and enhanced natural resource productivity, means that we are reaching a plateau in per for mance but whereas these measures of environmental impact (however “per for mance” is defi ned). tend to be more open ended, the factor X debate at- With the publication of the World Commission on tempts to put an exact number on the level of effi - Environment and Development’s report Our Com- ciency to be achieved (ibid., p. 14). This willingness to mon Future (WCED 1987), it was clear to many that quantify implies that (1) the environmental problem is technological optimism had prevailed (Moser 1999). in fact quantifi able, and (2) that technological im- The WCED had chosen science and technological provements are required beyond what current tech- innovation— two mainstays of economic growth in nology is able to achieve.† The current set of factor X industrial (expansionist) societies—as central pillars values ranges from 4 to 50 (Factor 10 Club 1995, of the notion of sustainable development.* As Dry- 1997; Jansen and Vergragt 1992; Reijnders 1996; von zek (1997, p. 136) notes, the concept of sustainable Weizsäcker, Hargroves, et al. 2010; von Weizsäcker, Lovins, et al. 1997); however, there is no overall agreement on the environmental impact to which factor X * A retrospective analysis of Our Common Future con- relates (Reijnders 1998). This fact, combined with dif- cluded that the economic and environmental objectives put forward by the Brundtland Commission “cannot be achieved ferences in the perceived severity of the environmen- simultaneously” (Duchin and Lange 1994, p. 8). To address this tal threat, explains the wide range of factor X values. problem, Duchin and Lange (1994) put forward two paths of ac- It is helpful to connect the factor X debate to the tion. First, much broader technological and social changes are needed than those espoused in Our Common Future if sustain- I = PAT formula because they are closely interlinked. able development is to be brought within reach. Second, “devel- The factor X approach is clearly a technologically opment economics” (which includes factors such as international lending and advisory practices) need to focus on specifi c situations and move away from the conviction that there is only one † It is important to recognize that although the notion development path—that of liberalized markets that situate all of a factor X economy recognizes the inherent unsustainability of factors of production in the most privately profi table location for prevailing human activities, its proponents’ conceptualization of their exploitation. Duchin and Lange (1994) argue that a failure development remains fi rmly grounded in the “growth ethic and to consider national circumstances is likely to affect traditional technological fi x paradigm” (Rees 1995a, p. 355). An alternative social relationships in a way that (indirectly) leads to the rise of view of development is based on the idea of a steadystate econ- “both religious fundamentalism and urban misery in the devel- omy (SSE), whereby economic (human) activity remains within —-1 oping world” (ibid., p. 9). fi xed ecological limits. —0 —+1

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optimistic view of development. But technology is targets, it is recognized that the pace of rapid techno- only one factor that affects the environment. It is logical change and the presence of the Jevons para- quite plausible that the environmental benefi ts dox complicate the management of such a schema achieved by technological innovation will be coun- (Reijnders 1998). In this regard, movement in a more tered by growth in population and/or affl uence lead- sustainable direction might provide an alternative. ing to greater total consumption of materials and However, the problem here is what instrument will be energy (Herman, Ardekani, et al. 1989; Reijnders used to encourage such movement. Examples of types 1998; W. Sachs 1993).* In addition, there is also the of mechanisms that can be used to encourage the problem that although technological improvements in- adoption of factor X technology are demonstration crease the effi ciency with which resources are used, projects (for social learning), government-driven the total consumption of these resources might in- technology forcing (using legislation), fi nancial incen- crease rather than decrease. This phenomenon is tives, ecotaxation,‡ and market mechanisms (such as known as the rebound effect (Berkhout, Muskens, et tradable emissions permits) (ibid.). The role of govern- al. 2000) or the Jevons paradox (Clark and Foster ment in stimulating technological change is discussed 2001; Jevons 1965 [1865]). William Stanley Jevons in Chapter 8. was a nineteenth-century economist who observed that effi ciency gains in the use of coal did not neces- 1.4 A CONCEPTUAL FRAMEWORK FOR sarily lead to a reduction in its overall use.† More re- SUSTAINABLE DEVELOPMENT cently it has been observed that increases in the fuel effi ciency of vehicles have been accompanied by an The literature relating to sustainability has produced increase in vehicle- miles traveled and by an increase an extensive array of defi nitions, principles, and con- in sales of larger vehicles (Goldberg 1998). Therefore, ceptual frameworks to describe the concept (Hall the implementation of factor X (or highly effi cient) 2006; Holdren, Daily, et al. 1995; Murcott 1997; Rees technology needs to be part of a more comprehen- 1995a). Box 1.2 provides a selection of some of the sive process of environmental improvement or eco- better-known defi nitions that have arisen since 1980. logical modernization (Ashford, Ayers, et al. 1985; The most widely quoted defi nition of sustainable Kemp 1995; York, Rosa, et al. 2003). development—the Brundtland defi nition (Box 1.2)— When one is considering factor X targets, it is pos- centers on the concept of meeting human needs. This sible to focus on individual products/technologies or chapter began with an anthropocentric look at sus- the economy as a whole. Although factor X advocates tainable development in an attempt to understand support the notion of setting informed and modifi able what meeting human needs entails. Perhaps the most widely accepted notion of human development— though not ideal—is put forward by the UN’s Human * Here we should recognize that whereas the connection Development Index (HDI; see the discussion in Sec- between population growth and ecological decline is widely understood, the same cannot be said for increasing levels of affl u- tion 1.1.1). The HDI mea sures human development by ence and consumption and their associated impacts on the looking at health, education, and income. However, if environment. Indeed, consumption “is almost universally seen we are to begin to address the problems that confront as good, . . . [and] increasing it is the primary goal of national sustainable development, understanding human needs economic policy” (Durning 1994, p. 41). Although the environmental and psychological problems associated with consump- and how these motivate behavior is essential. tion are well documented (de Graaf, Wann, et al. 2002; Durning In 1992, the National Research Council (NRC) 1992, 1994; Goodwin, Ackerman, et al. 1997; Kasser 2002; Prin- undertook an assessment of research focused on eco- cen, Maniates, et al. 2002; J. C. Ryan and Durning 1997; Schlosser 2002; P. C. Stern, Dietz, et al. 1997), they have yet to logical degradation and concluded that “the quality gain traction in mainstream politi cal and economic decision making. For an insightful debate on the effects of economic growth and consumption on the environment, see Sagoff’s (1997) ‡ See Daly (1994a) and Rees (1995b) for a discussion of article in the Atlantic Monthly and its rebuttal by Ehrlich, Daily, how taxing the bads (such as resource extraction/depletion or et al. (1997). pollution) and not the goods (such as labor and income) provides † Jevons (2001 [1865]) observed that the consumption of a good example of considering both the environment and em- coal in England increased signifi cantly when the effi ciency of the ployment in one macroeconomic framework. The basic idea is to steam engine was improved by James Watt. Watt’s innovations, shift the tax burden away from the goods and onto the bads in a the condenser and the expansive mode of working, reduced the revenue- neutral manner. In addition to promoting a more sus- amount of coal needed to fuel the steam engine’s furnace, mak- tainable form of industrialization, ecotaxation would also reduce ing the engine a cost- effective power source that was soon ad- the price of labor, making it more attractive to retain existing opted by industry. As the number of industries using steam workers or employ more workers. See also Green Innovations -1— engines grew, so too did the amount of coal required to fuel these Inc., Ecotaxation, w w w . g r e e n - i n n o v a t i o n s . a s n . a u / e c o t a x . h t m ( a c - 0— engines, thereby increasing the overall usage of coal. cessed June 8, 2010). +1—

561-45401_ch01_8P.indd 88 6/23/11 9:49 AM BOX 1.2: SOME DEFINITIONS OF SUSTAINABLE DEVELOPMENT

Development is defi ned . . . as: the modifi cation of the biosphere and the application of human, fi nancial, living and non- living resources to satisfy human needs and improve the quality of human life. For development to be sustainable it must take account of social and ecological factors, as well as economic ones; of the living and non- living resource base; and of the long term as well as short term advantages and disadvantages of alternative actions. (IUCN, UNEP, et al. 1980, p. 1) Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts: • the concept of “needs”, in par tic u lar the essential needs of the world’s poor, to which overriding priority should be given; and • the idea of limitations imposed by the state of technology and social or ga ni za tion on the environment’s ability to meet present and future needs. (Brundtland defi nition; WCED 1987, p. 43) Improving the quality of human life while living within the carry ing capacity of supporting ecosystems. (IUCN, UNEP, et al. 1991, p. 10) Economic growth that provides fairness and opportunity for all the world’s people, not just the privileged few, without further destroying the world’s fi nite natural resources and carry ing capacity. (Pronk and ul Haq 1992) 1. The main principle [of sustainable development] is to limit the human scale (throughput) to a level which, if not optimal, is at least within carry ing capacity and therefore sustainable. . . . 2. Technological progress for sustainable development should be effi ciency- increasing rather than throughput- increasing. . . . 3. Renewable resources, in both their source and sink functions, should be exploited on a profi t- maximizing sustained yield basis and in general not driven to extinction (regardless of the dictates of present value maximization), since they will become ever more important as nonrenewables run out. . . . Specifi cally this means that: (a) harvesting rates should not exceed regenera- tion rates; and (b) waste emissions should not exceed the renewable assimilative capacity of the environment. 4. Nonrenewable resources should be exploited, but at a rate equal to the creation of renewable substitutes. (Daly 1991, pp. 44– 45).

Sustainable development “is an obligation to conduct ourselves so that we leave to the future the option or the capacity to be as well off as we are” (Solow 1993, p. 181).

Sustainability is a strategy for improving the quality of life while preserving the environmental potential for the future, of living off interest rather than consuming natural capital. Sustainable development mandates that the present generation must not narrow the choices of future generations but must strive to expand them by passing on an environment and an accumulation of resources that will allow its children to live at least as well as, and preferably better than, people today. Sustainable development is premised on living within Earth’s means. (National Commission on the Environment 1993, p. 2)

Necessary Conditions for Global Sustainability: Ecological stability requires that: • consumption by the economy of the products and ser vices of nature be compatible with rates of production by the ecosphere. • the production of wastes by the economy remain within the assimilative capacity of the ecosphere. • economic activity protect the essential life- support functions of the ecosphere and preserve the biodiversity and resilience of Earth’s ecological systems. Geopo liti cal security requires that: • society satisfy basic standards of material equity and social justice. • governance mechanisms be in place to enable an informed citizenry to have an effective participatory role in decision- making. • people share a positive sense of community cohesion (local and global) and a sense of collective responsibility for the future. (Rees 1995a, p. 356) An expanded set of principles for sustainable development Sustainability Development

Sa—preserving natural resources for future generations Da— improving quality of life for individuals Sb—preserving the option value of human and Db— ensuring a fair distribution of life- quality man- made capital for future generations (Gudmundsson and Hojer 1996, p. 273) The possibility that human and other forms of life will ﬂ o u r i s h on the Earth forever. (Ehrenfeld 2004, p. 8)

Sustainable development is the pro cess of meeting the needs of current and future generations without undermining the resilience of life- supporting properties or the integrity & cohesion of social systems.

Extending this deﬁ nition further, we differentiate among four dimensions of sustainability: 1. Ecological conﬁ guration 2. Economic production & consumption 3. Governance & politics 4. Institutions & per for mance (continued) —-1 —0 —+1

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BOX 1.2 (continued)

To become sustainable, a system must meet four conditions: (a) Ecological systems exhibit balance and resilience, (b) Economic production & consumption do not threaten ecological systems, (c) Governance modes reﬂ ect participation and responsiveness, (d) Institutions demonstrate adaptation and feedback. If, and only if, these conditions hold will a system dispose toward sustainability. (GSSD, 2004)a

aGlobal System for Sustainable Development (GSSD), http:// gssd .mit .edu (accessed June 8, 2010).

of environmental analyses is limited by the quality Over the past forty years, the drivers of sustainable of the behavioral analysis that it includes” (P. C. development have incorporated—to varying degrees Stern, Young, et al. 1992, p. 21). The NRC report and at different times— four environmentally different also suggested that there is a “need to build stronger concerns (see the challenges in Figure 1.9). The fi rst is links between the natural sciences and the social sci- the disruption of ecosystems and the loss of biological ences in efforts to understand global environmental diversity and the indirect effects these have on human changes and to devise public policies to respond to health and well- being. This concern was initially them in an effective manner” (ibid.). With this in raised in the early 1960s when industrial processes and mind, Figure 1.9 attempts to present a holistic view the use of pesticides led to environmental degradation of the drivers, challenges, and solutions for global- and a loss of wildlife (Carson 1962), and again more ization within a context of human needs. recently in the context of endocrine disrupters that af- In Section 1.1.2, the argument is made that our fect reproductive health in all species (Colborn, Du- perspective of human needs and our view of a fulfi ll- manowski, et al. 1996; Solomon and Schettler 1999). ing life is being affected (or put out of balance) by Signifi cant progress has been made in improving in- the forces of the market economy (that is, advertis- dustrial and agricultural practices; however, the nega- ing, as well as social competition for conspicuous tive impacts of these sectors still present a problem in consumption). As a result, Western society is in- both developed and developing countries.* creasingly becoming a throughput society in which The second concern relates to the world’s fi nite the consumption of products and ser vices (to satisfy resources and energy supplies and asks whether there needs and wants) supports the growth of the econ- are suffi cient resources to fuel the economy in its omy. Putting aside the question whether the current current form (R. U. Ayres 1978; R. Ayres and Warr forms of consumption are satisfying fundamental 2009; Georgescu- Roegen 1971; D. H. Meadows, physiological and psychological needs, it is possible D. L. Meadows, et al. 1972). A corollary concern is to identify the social and environmental challenges what the environmental impact will be from using a that are often associated with the unsustainable in- signifi cant proportion of the existing resources. dustrial state (see Figure 1.9). The third concern is that toxic pollution directly The fi rst challenge is the need to provide society affects human health and the health of other species with adequate and high- quality goods and services— (Ashford and Miller 1998; Baskin, Himes, et al. 2001; for example, food, health care, transportation, and Chivian, McCally, et al. 1993; Colborn, Dumanowski, security. The second, third, fourth, and fi fth chal- et al. 1996; Commoner, Bartlett, et al. 2000; Fagin and lenges (discussed below) relate to four environmen- Lavelle 1996; Geiser 2001; McCally 1999; Schettler, tally different concerns: (1) ecosystem integrity and Solomon, et al. 1999). As scientists began to under- the loss of biodiversity; (2) resource depletion; (3) stand how ecosystems, humans, and other organisms toxic pollution; and (4) climate change. The burden were affected by industrial and agricultural processes, of these environmental problems is felt unequally the issue of how toxic chemicals interact with biologi- within nations, among nations, and among genera- cal systems grew in importance. tions, leading to concerns for intranational, international, and intergenerational equity. These concerns for equity are often expressed under the heading of * Poor environmental standards and underresourced or “environmental justice.” The fi nal two challenges re- non ex is tent environmental agencies in developing countries mean that environmental problems from industrial pro cesses -1— late to economic and social concerns associated with and the mechanization of agriculture more frequently go un- 0— employment, wages, and economic in e qual ity. checked in these regions. +1—

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The satisfiers to our needs are defined by history, culture, HUMAN NEEDS and our economic, social, and Advertising political systems. designed to 1. Safety, Security, and Sustenance encourage the 2. Competence, Efficacy, and Self- sale of a firm’s Esteem product-service 3. Autonomy and Authenticity can influence human 4. Connectedness needs/wants.

SOLUTIONS ECONOMY Education and Human Resource Supply Side Demand Side Development Agriculture Consumer, Industry Initiatives Manufacturing Commercial, and Energy Government Government Intervention/Regulation Transportation Consumption Stakeholder Involvement Extraction Industries Housing Financing Sustainable Development Services ICT CHALLENGES Adequate Goods and Services Biodiversity/Ecosystems Resource Depletion Toxic Pollution Climate Change Environmental Justice Employment/Purchasing Power Economic Inequality

FIGURE 1.9: DRIVERS, CHALLENGES, AND SOLUTIONS FOR GLOBALIZATION WITHIN A CONTEXT OF HUMAN NEEDS

The fi nal concern is that greenhouse gases from the era when the destruction of ecosystems was rec- anthropocentric (human- driven) sources are leading ognized as a signifi cant problem in the United States. to a disruption of the global climate (International The other three environmental concerns began to Climate Change Task Force 2005; IPCC 2001; Schmid- emerge to varying degrees during the 1970s.* In the heiny 1992). Scientists predict that these gases will 1980s, chemical toxicity began to be downplayed as cause the globally averaged surface air temperature to the chemical industry itself started to point the fi n- increase 1.8°C to 4.0°C by 2090–2099 relative to 1990– ger at climate change as the most important environ- 1999, and the globally averaged sea level to rise 1.1– mental problem, almost to the exclusion of toxicity. 2.9 m to 2.4–6.4 m by 2090–2099, respectively (IPCC The 1980s also mark a turning point when nations 2007), with consequent dramatic changes in weather, droughts, and fl oods. Such scenarios have led to the * The Stockholm Conference on the Human Environ- acknow ledg ment that immediate action must be taken ment in 1972 brought the topics of ecosystem integrity, biological to minimize the signifi cant long-term fi nancial and so- diversity, and human health and the issue of ecological and resource limits to growth to the attention of the international com- cial impacts of climate change (N. Stern 2007). munity. Although the conference did raise the potential problem The fi rst, third, and fourth environmental con- of toxic substances in its Action Plan, this third environmental cerns are connected with the unintended effects of concern remained the focus of national legislation during the human development/growth, while the second deals 1970s. The passage of the 1976 Toxic Substances Control Act in the United States is a prime example. Toward the end of the with increasing shortages of resources needed to fuel 1970s, the international community began to discuss the related development/growth. concerns of ozone depletion and greenhouse gas emissions—the It is noteworthy that the seeds of each of the four fourth environmental concern. However, it was not until the second half of the 1980s and the 1990s that international action was environmental concerns seem to have been planted taken to address ozone depletion and global climate change, —-1 during the 1960s and 1970s. The 1960s de cade was respectively. —0 —+1

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began to recognize that their environmental prob- tions between the 1972 Stockholm Declaration and lems extended beyond national boundaries and were the 1944 Declaration of Philadelphia. having impacts on a global scale. This realization The Stockholm Declaration focuses on the preser- spurred the formation of an international environ- vation and improvement of the human living environmental agenda, and the actions taken in the following ment. Several of the key principles of the declaration two decades as a result of this agenda can be consid- are shown in Table 1.7, which organizes them accord- ered the fi rst attempt at global environmental gover- ing to Dernbach’s (1998, 2004) fi ve components of sus- nance (Speth 2003). tainable development: peace and security; economic A detailed discussion of the historical evolution development; social development; national governance of the four environmental concerns reveals that dif- that ensures peace and development; and environ- ferent environmental groups and nations have priori- mental protection measures. In contrast, the Declara- tized the concerns at different times (see Chapter 2). tion of Philadelphia, developed by the ILO more than Po liti cal agendas are almost always focused on one twenty years earlier, was adopted to enhance the con- or two of the four major environmental concerns to dition of the human working environment. These two the exclusion of the others. Such a nonintegrated declarations provide the major intellectual underpin- planning approach means that nation-states and the nings of the concept of sustainable development. international community have been able to create only The Declaration of Philadelphia expands the aims partial solutions to growing environmental prob- and purposes of the ILO “based on the relationship lems.* This situation is further exacerbated by the between labor and social, and economic and fi nan- fact that each nation is at a different level of develop- cial problems” and outlines the principles that should ment and therefore has different needs, resulting in guide the national policies of its members (Bartolo- different politi cal agendas. In addition, even if two mei de la Cruz, von Potobsky, et al. 1996, p. 5).† A nations are alike from a development perspective, core belief behind the Declaration of Philadelphia is their values and beliefs might lead to disagreement that peace can be achieved only if it is based on “so- over what constitutes an appropriate solution. cial justice,” a concept that is much broader than “hu- What is perhaps most striking about the current man rights” and focuses on human aspirations as a conceptualization of sustainable development is the struggle between the individual and the state (Bar- inadequate treatment of employment. For example, tolomei de la Cruz, von Potobsky, et al. 1996). Social McEntire (2005) provides a succinct review of many justice is defi ned in terms of human values and of the publications and events that are commonly as- aspirations: “All human beings, irrespective of race, sociated with environmental sustainability; however, creed or sex, have the right to pursue both their mate- like many commentators on the subject, he does not rial well-being and their spiritual development in identify employment as an important aspect. The rea- conditions of freedom and dignity, of economic secu- son for this is the strong emphasis given to environ- rity and equal opportunity.”19 In addition, achieving mental challenges at the 1972 Stockholm and 1992 these conditions “must constitute the central aim of Rio conferences, which effectively locked sustainabil- national and international policy,” and these “poli- ity thinking into an environment and development cies and mea sures, in par tic u lar those of an economic (that is, economic) framework. Early expressions of and fi nancial character,” should be assessed against sustainability in terms of working conditions and eco- the fundamental objective of social justice.20 nomic welfare do exist—for example, in the 1944 Dec- The notion of social justice supports the funda- laration of Philadelphia developed at the creation of mental principles on which the ILO was based, t h e I n t e r n a t i o n a l L a b o u r O r g a n i z a t i o n ( I L O ) — b u t namely, that these have yet to be formally integrated into the envi- (a) labour is not a commodity; ronmental sustainability perspective. The separation (b) freedom of expression and of association are and isolation of these approaches to development essential to sustained progress; must obviously be bridged for a successful modern approach to sustainable development. One step toward this objective is to highlight several connec- † On November 1, 1945, all members of the UN auto- matically became members of the International Labour Orga ni- zation (ILO). In addition, any nation-state that subsequently joined the UN could also become a member of the ILO if it ac- * Indeed, all “environmental” problems are related. Large cepted the obligations under the ILO’s Constitution. States that transformations of materials and use of energy create resource were not members of the UN could join the ILO by a majority -1— shortages, toxic pollution, and greenhouse gases that lead to cli- vote of the ILO Conference (Bartolomei de la Cruz, von Potob- 0— mate change and the destruction of ecosystems and biodiversity. sky, et al. 1996). +1—

561-45401_ch01_8P.indd 92 6/23/11 9:49 AM TABLE 1.7: DERNBACH’S (1998) FIVE COMPONENTS OF SUSTAINABLE DEVELOPMENT AND THE PRINCIPLES OF THE STOCKHOLM AND RIO DECLARATIONS

COMPONENT OF SUSTAINABLE DEVELOPMENT PRINCIPLES OF THE STOCKHOLM DECLARATIONa PRINCIPLES OF THE RIO DECLARATIONb

Peace and security Principle 26— Man and his environment must be Principle 24—Warfare is inherently destructive of spared the effects of nuclear weapons and all sustainable development. States shall therefore other means of mass destruction. States must respect international law providing protection for strive to reach prompt agreement, in the relevant the environment in times of armed confl ict and international organs, on the elimination and cooperate in its further development, as necessary. complete destruction of such weapons. Principle 25—Peace, development and environmental protection are interdependent and indivisible. Principle 26—States shall resolve all their environmental disputes peacefully and by appropriate means in accordance with the Charter of the United Nations. Economic development Principle 8—Economic and social development is Principle 5— All States and all people shall essential for ensuring a favorable living and cooperate in the essential task of eradicating working environment for man and for creating poverty as an indispensable requirement for conditions on earth that are necessary for the sustainable development, in order to decrease the improvement of the quality of life. disparities in standards of living and better meet Principle 18—Science and technology, as part of the needs of the majority of the people of the their contribution to economic and social world. development, must be applied to the identifi ca- Principle 12— States should cooperate to promote tion, avoidance and control of environmental risks a supportive and open international economic and the solution of environmental problems and system that would lead to economic growth and for the common good of mankind. sustainable development in all countries, to better address the problems of environmental degradation. Trade policy mea sures for environmental purposes should not constitute a means of arbitrary or unjustifi able discrimination or a disguised restriction on international trade. . . . Principle 25—see above. Social development Principle 1— Man has the fundamental right to Principle 1— Human beings are at the centre of freedom, equality and adequate conditions of life, concerns for sustainable development. They are in an environment of a quality that permits a life entitled to a healthy and productive life in of dignity and well- being, and he bears a solemn harmony with nature. responsibility to protect and improve the Principle 8—To achieve sustainable development environment for present and future generations. and a higher quality of life for all people, States In this respect, policies promoting or perpetuat- should reduce and eliminate unsustainable ing apartheid, racial segregation, discrimination, patterns of production and consumption and colonial and other forms of oppression and promote appropriate demographic policies. foreign domination stand condemned and must be eliminated. Principle 20— Women have a vital role in environmental management and development. Principle 16— Demographic policies which are Their full participation is therefore essential to without prejudice to basic human rights and achieve sustainable development. which are deemed appropriate by Governments concerned should be applied in those regions Principle 21— The creativity, ideals and courage of where the rate of population growth or excessive the youth of the world should be mobilized to population concentrations are likely to have forge a global partnership in order to achieve adverse effects on . . . the human environment sustainable development and ensure a better and impede development. future for all. Principles 8 and 18—see above. Principle 25—see above. National governance Principle 13— In order to achieve a more rational Principle 3— The right to development must be that ensures peace and management of resources and thus to improve fulfi lled so as to equitably meet developmental development the environment, States should adopt an and environmental needs of present and future integrated and coordinated approach to their generations. development planning so as to ensure that Principle 10— Environmental issues are best development is compatible with the need to handled with participation of all concerned protect and improve [the] environment for the citizens, at the relevant level. At the national level, benefi t of their population. each individual shall have appropriate access to Principle 14— Rational planning constitutes an information concerning the environment that is essential tool for reconciling any confl ict between held by public authorities, including information the needs of development and the need to protect on hazardous materials and activities in their and improve the environment. communities, and the opportunity to —-1 (continued) —0 —+1

561-45401_ch01_8P.indd 93 6/23/11 9:49 AM TABLE 1.7 (continued)

COMPONENT OF SUSTAINABLE DEVELOPMENT PRINCIPLES OF THE STOCKHOLM DECLARATIONa PRINCIPLES OF THE RIO DECLARATIONb

Principle 15— Planning must be applied to human participate in decision- making pro cesses. States settlements and urbanization with a view to shall facilitate and encourage public awareness avoiding adverse effects on the environment and and participation by making information widely obtaining maximum social, economic and available. Effective access to judicial and adminis- environmental benefi ts for all. In this respect trative proceedings, including redress and remedy, projects which are designed for colonialist and shall be provided. racist domination must be abandoned. Principle 11—States shall enact effective environ- Principle 17— Appropriate national institutions mental legislation. Environmental standards, must be entrusted with the task of planning, management objectives and priorities should managing or controlling the environmental refl ect the environmental and development resources of States with a view to enhancing context to which they apply. Standards applied by environmental quality. some countries may be inappropriate and of Principles 16 and 26— see above. The preamble to unwarranted economic and social cost to other the declaration also reinforces the importance of countries, in par tic u lar developing countries. national governance. Principle 13— States shall develop national law regarding liability and compensation for the victims of pollution and other environmental damage. States shall also cooperate in an expeditious and more determined manner to develop further international law regarding liability and compensation for adverse effects of environmental damage caused by activities within their jurisdiction or control to areas beyond their jurisdiction. Principle 22—Indigenous people and their communities and other local communities have a vital role in environmental management and development because of their knowledge and traditional practices. States should recognize and duly support their identity, culture and interests and enable their effective participation in the achievement of sustainable development. Environmental Principle 2— The natural resources of the earth, Principle 4—In order to achieve sustainable protection mea sures including the air, water, land, fl ora and fauna and development, environmental protection shall especially representative samples of natural constitute an integral part of the development ecosystems, must be safeguarded for the benefi t pro cess and cannot be considered in isolation of present and future generations through careful from it. planning or management, as appropriate. Principle 7— States shall cooperate in a spirit of Principle 3— The capacity of the earth to produce global partnership to conserve, protect and vital renewable resources must be maintained restore the health and integrity of the Earth’s and, wherever practicable, restored or improved. ecosystem. In view of the different contributions Principle 4— Man has a special responsibility to to global environmental degradation, States have safeguard and wisely manage the heritage of common but differentiated responsibilities. The wildlife and its habitat, which are now gravely developed countries acknowledge the responsibil- imperilled by a combination of adverse factors. ity that they bear in the international pursuit of Nature conservation, including wildlife, must sustainable development in view of the pressures therefore receive importance in planning for their societies place on the global environment economic development. and of the technologies and fi nancial resources they command. Principle 5— The nonrenewable resources of the earth must be employed in such a way as to guard Principles 8, 11, and 13—see above. against the danger of their future exhaustion and Principle 14—States should effectively cooperate to to ensure that benefi ts from such employment are discourage or prevent the relocation and transfer to shared by all mankind. other States of any activities and substances that Principle 6— The discharge of toxic substances or cause severe environmental degradation or are of other substances and the release of heat, in found to be harmful to human health. such quantities or concentrations as to exceed the Principle 15—In order to protect the environment, capacity of the environment to render them the precautionary approach shall be widely harmless, must be halted in order to ensure that applied by States according to their capabilities. serious or irreversible damage is not infl icted Where there are threats of serious or irreversible upon ecosystems. The just struggle of the peoples damage, lack of full scientifi c certainty shall not be of ill[- affected] countries against pollution should used as a reason for postponing cost- effective be supported. mea sures to prevent environmental degradation. -1— 0— +1—

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COMPONENT OF SUSTAINABLE DEVELOPMENT PRINCIPLES OF THE STOCKHOLM DECLARATIONa PRINCIPLES OF THE RIO DECLARATIONb

Principle 7— States shall take all possible steps to Principle 16—National authorities should endeav- prevent pollution of the seas by substances that our to promote the internalization of environmental are liable to create hazards to human health, to costs and the use of economic instruments, taking harm living resources and marine life, to damage into account the approach that the polluter should, amenities or to interfere with other legitimate in principle, bear the cost of pollution, with due uses of the sea. regard to the public interest and without distorting international trade and investment. Principle 17—Environmental impact assessment, as a national instrument, shall be undertaken for proposed activities that are likely to have a signifi cant adverse impact on the environment and are subject to a decision of a competent national authority. Principle 18— States shall immediately notify other States of any natural disasters or other emergen- cies that are likely to produce sudden harmful effects on the environment of those States. Every effort shall be made by the international community to help States so affl icted. Principle 19— States shall provide prior and timely notifi cation and relevant information to potentially affected States on activities that may have a signifi cant adverse transboundary environmental effect and shall consult with those States at an early stage and in good faith. Principle 23— The environment and natural resources of people under oppression, domination and occupation shall be protected. Principles 25 and 26—see above.

a Principles 9, 10, 11, 12, 19, 20, 21, 22, 23, 24, and 25 of the Stockholm Declaration are not included in the table because they do not ﬁ t within any of the categories listed. b Principles 2, 6, 9, and 27 of the Rio Declaration are not included in the table because they do not ﬁ t within any of the categories listed.

(c) poverty anywhere constitutes a danger to products [see Principle 10 from the Stockholm Dec- prosperity everywhere; laration22], and to promote a high and steady volume (d) the war against want requires to be carried on of international trade.”23 However, whereas the Dec- with unrelenting vigor within each nation, and by laration of Philadelphia explicitly links development continuous and concerted international effort in concerns to human welfare, including the protection which the representatives of workers and employ- of workers in all occupations, the Stockholm Decla- ers, enjoying equal status with those of govern- ration links such concerns to the protection and im- ments, join with them in free discussion and provement of the natural environment. Hence, taken demo cratic decision with a view to the promotion together, the declarations protect both aspects of the of the common welfare.21 human environment— that in which we live and that in which we work. In concert with the Stockholm Declaration, the There is also a positive tension between the two Declaration of Philadelphia supports economic and declarations with regard to economic growth. The social development and the creation of a stable inter- Declaration of Philadelphia calls for the expansion national market. In par tic u lar, it calls for interna- of the international economy to improve human wel- tional and national “measures to expand production fare and to create more jobs,* but the Stockholm and consumption, to avoid severe economic fl uctuations to promote the economic and social advancement of the less developed regions of the world [see * This position was recently reaffi rmed in a report by the ILO, which suggests that globalization’s “potential for good is im- Principle 8 from the Stockholm Declaration], to as- mense. . . . Wisely managed, [the global market economy] can de- sure greater stability in world prices of primary liver unpre ce dented material progress, generate more productive —-1 —0 —+1

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Declaration qualifi es this by stating that economic focuses on making Europe a smart (knowledge- development should occur in such a way that the en- based), sustainable, and inclusive economy. See Sec- vironment is protected. In many ways it is surpris- tion 1.5 below for a discussion of Europe 2020 and ing that it took the international community so how this is likely to impact the EU’s progress toward long to connect these two different strains of human sustainable development. welfare— employment and a healthy environment— To return to Figure 1.9, the environmental prob- with economic development. lems discussed in detail above occur from activities The 1992 Rio Declaration reaffi rmed and built within the supply side of the economy that are driven on the 1972 Stockholm Declaration. Although some by consumer, commercial, and governmental demands of the principles included in these two declarations (or needs).‡ In addition to these problems, there are cover the same subject matter—compare the prin- social problems that result from industrial activi- ciples in Table 1.7—the Rio Declaration effectively ties— in par tic u lar, from rapid technological change broadened the notion of “conventional development” and globalization (see Chapter 5). For example, the or “ecodevelopment”* to “sustainable development” creation of global communication networks and the by integrating environmental protection into the de- spread of industrial capacity are changing the interna- velopment pro cess. Principles 3 and 4 of the declara- tional division of labor, affecting the amount, secu- tion speak directly to this end. For a critical discussion rity, and skill of employment and also the conditions of the Rio Declaration, see Box 2.1 in Chapter 2. of work and purchasing power. In addition, eco- If one considers the 1972 Stockholm and 1992 nomic in e qual ity that arises through inadequate and Rio declarations alongside the 1944 Declaration of unequal purchasing power within and between na- Philadelphia and other relevant documents such as tions remains an important problem of our time. Agenda 21, the positive tensions generated between The solutions to these environmental and social these instruments begin to provide a more robust problems are likely to be found in education and and comprehensive formulation of the notion of sus- human resource development, industry initiatives, tainable development.† government intervention/regulation, stakeholder in- More recently, the most signifi cant effort to inte- volvement, and fi nancing for sustainable develop- grate employment into a development strategy has ment, and through changes in the (culturally defi ned) been occurring within the Euro pe an Union (EU). In satisfi ers of our basic needs. However, if solutions 2010, the EU launched Eu rope 2020, the next step or within these categories are to be successful, they must successor of the EU Lisbon Strategy that was cre- address a number of fundamental problems within ated to make “growth” and “employment” the main the industrial state (Ashford 2004). Some of these development objectives of the Euro pe an community problems are presented in Table 1.8 along with rec- within the context of a sustainable environment. Eu- ommended solutions. rope 2020 is the next evolution of the strategy that In addition to the industrial state, as the international economy continues to expand and reach deeper into untapped/underdeveloped regions of the and better jobs for all, and contribute signifi cantly to reducing world poverty” (WCSDG 2004, p. x). For a discussion of how globalization affects employment, see Section 5.2 in Chapter 5. ‡ In economics, the term “demand” refers to effective * The concept of ecodevelopment was a precursor to demand, or the ability to pay, and not to human needs, however sustainable development. Its objective was to achieve sustainabil- urgent and acute (Gilpin 2000). Thus the 2.5 to 3 billion people ity at the local or regional scale by responding to the potentials of on earth with virtually no purchasing power (less than $2 per day the area involved, using available natural resources in a rational/ PPP; WBG 2002) are not represented by the “economy” depicted ecologically sound manner, and working with indigenous tech- in Figure 1.9. Because these people have no real role in the nology styles (UNEP 1975). An important idea central to ecode- “economy,” it follows that they cannot have played a direct role velopment was self-reliance (I. Sachs 1976, 1984), which ran in causing the environmental impacts that result from economic counter to the forces of rapid technological change and global- activity. However, with the possible exception of toxic pollution, ization that ultimately redefi ned ecodevelopment as sustainable it is understood that poverty (like economic activity) can also af- development during the 1980s. Today, many scholars argue that fect biodiversity/ecosystem health and resource availability and economic globalization is producing the exact opposite results contribute to climate change (all of which are listed in Figure of those promised (IFG 2002; Mander and Goldsmith 2000). 1.9), although the mechanisms through which the impacts occur As an alternative, these opponents of trade liberalization are likely to be considerably different. Therefore, it is important call for a return to forms of development that revitalize democ- to recognize the difference between the environmental impacts racy, basic human rights, local self- suffi ciency, and ecological caused by economic activity and those caused by poverty. It can sustainability— arguably the core principles of ecodevelopment. be argued that the former occur as a result of the aggregate † See Chapter 2 for a discussion of the Stockholm, Rio, choices made by consumers, whereas the latter occur through the -1— and Philadelphia declarations and important documents such as actions taken by individuals struggling to survive (i.e., to satisfy 0— Agenda 21. their most fundamental human needs). +1—

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world, international institutions will have an increas- social cohesion” (Eurofound 2006a, p. 1).24 The Lis- ingly important role in promoting progress toward bon Strategy, as it was known, is of partic u lar inter- sustainable development (see Chapter 10). est because it represents perhaps one of the most Although this chapter has introduced many im- serious attempts to create a strategy for sustainable portant ideas incorporated into the concept of sus- development. Although the initial intention of the tainable development, what is missing is the historical strategy was clear, its ability to initiate change within evolution of how these ideas became central pillars of Eu rope was found wanting. A midpoint review of the concept. This shortcoming is addressed in Chap- progress toward achieving the strategy’s objectives ter 2. By tracking key events, publications, U.S. legis- concluded that the “disappointing delivery is due to lation, and international conventions from the 1960s an overloaded agenda, poor coordination and con- until 2002, it has been possible to trace the concept of fl icting priorities” (Euro pe an Commission High sustainable development from the formation of the Level Group 2004, p. 6). The lack of urgency given to U.S. environmental movement in the 1960s to the the strategy by EU member states was also seen as a rise of international concern for the environment major barrier to progress. (and ecodevelopment) in the 1970s and its fi nal emer- Against the backdrop of continued growth in the gence in the 1980s and 1990s. What is perhaps most United States and Asia, in 2005 a new urgency was important is that the concept is still evolving today. placed on a more streamlined Lisbon Strategy as a We hope that this book will contribute to a better model for “growth and employment.” The rationale understanding of the concept of sustainable develop- behind the new approach was that “improved eco- ment and shape its future evolution. nomic growth and increased employment provide the means to sustain social cohesion and environmental sustainability. In their turn, social cohesion 1.5 THE EU RO PE AN UNION’S STRATEGY and environmental sustainability can contribute to a FOR SUSTAINABLE DEVELOPMENT: higher growth and employment” (Eu ro pe an Com- THE LISBON STRATEGY AND mission High Level Group 2004, p. 6). To achieve its EUROPE 2020 objectives, the revised Lisbon Strategy promoted In March 2000, the Council of the Eu ro pe an Union two types of structural reform. The fi rst was to cre- established the goal of making Europe by 2010 “the ate a liberalized internal Eu ro pe an market. The sec- most competitive and dynamic knowledge- based ond focused on developing factors that promote economy in the world, capable of sustainable eco- endogenous growth—that is, R&D that can enhance nomic growth with more and better jobs and greater scientifi c, technological, and intellectual capital and

TABLE 1.8: FUNDAMENTAL PROBLEMS WITH THE INDUSTRIAL STATE AND THEIR SOLUTIONS

PROBLEMS WITH THE INDUSTRIAL STATE SOLUTION

The fragmentation and inadequacy of the knowledge base leads Adopt an integrative (or transdisciplinary) approach to problem to a myopic understanding of problems and the creation of framing and to the creation of solutions to environmental and insufﬁ cient single- purpose or narrowly- focused solutions by social problems and apply the precautionary principle when the technical and po liti cal decision- makers. negative impacts of a human activity are uncertain. There is in e qual ity of access to economic and po liti cal power. Establish mechanisms for demo cratic, participatory governance. There is a tendency to govern industrial systems using old Stimulate technological, organ i za tion al, institutional, and social ideas— that is, “gerontocracy” innovation.a Markets fail to price the adverse consequences of industrial Internalize as far as possible the external environmental and activity correctly. social costs. Markets fail to deal sensibly with social and environmental Transcend markets and implement far- sighted and integrated problems that span long time horizons, which pricing and government policies. markets are inherently incapable of solving.

a These four types of innovation can be defi ned in the following manner (Ashford 2005; Rennings 2000). Technological innovation is defi ned as the fi rst commercially successful application of a new technical idea (or an invention). Organ i za tion al innovation is defi ned as changes in and among various or gan i za tion al aspects of a fi rm’s functions, such as R&D and product development, marketing, environmental and governmental affairs, industrial relations, worker health and safety, and customer and community relations. Institu- tional innovation is defi ned as changes in and among various legal norms, as well as institutions/departments within a government, with regard to their functions and goals and the working relationships and shared visions among them. Social innovation is defi ned as changes in the preferences of consumers, citizens, and workers for the types of products, ser vices, environmental quality, leisure activities, and work they require, and changes in the processes by which the new preferences are selected. Social innovations can alter both the supply and demand for products/ser vices. —-1 Source: Adapted from Ashford (2004). —0 —+1

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improved levels of education. The revised strategy The ability of the original Lisbon Strategy, and also established two headline targets: (1) an annual its successor Eu rope 2020, to promote sustainable total (public and private) investment of 3 percent of development will ultimately depend on how EU Europe’s GDP in R&D by 2010, and (2) an overall countries approach competitiveness. Clearly, any employment rate (that is, the proportion of Europe’s weakening of environmental and social policies in working-age population in employment) of 70 per- the name of industrial competitiveness would be a cent by the same time (Blanke 2006). In addition to step backward. Therefore, what is needed is an ap- the emphasis on growth and employment, the Lis- proach to policy design (and development more bon Strategy also anticipated a revision of the rules broadly) that seeks “substantive” (or simultaneous) that govern the EU’s twenty-seven members, rules improvements in environmental, social, and eco- that were previously designed for the EU 15. In De- nomic per for mance (Dernbach 2003). One approach cember 2007, the revised Treaty of Lisbon (not to that has signifi cant potential is the creative use of be confused with the Lisbon Strategy) was signed government policy as a mechanism to encouraging by EU leaders. It then needed to be ratifi ed by all disrupting or radical technological (as well as politi- twenty-seven member states by the deadline of Jan- cal and social) changes. We explore this idea in de- uary 1, 2009. After an initial setback when Ireland tail in Chapters 8 and 9. rejected the treaty in a public referendum in 2008, a The formulation of Eu rope 2020 occurred within revised treaty was ratifi ed by a 2:1 margin by Ire- the aftermath of the 2008 fi nancial crisis, which high- land in October 2009. The treaty was signed by the lighted the fact that the Lisbon Strategy had “been requisite number of Member States on November 3, too inward- looking, focusing on preparing the EU for 2009. globalization rather than trying to shape it” (EC The emphasis the Lisbon Strategy gives to “growth” 2010a, p. 7). As a result, the EU has taken a proactive (via industrial competitiveness) and “employment” stance within the G20 in an effort to shape the new raises some important questions about sustainable post-crisis fi nancial architecture under development. development. In 2001, the EU’s Strategy for Sustain- This new role for the EU, to shape the future through able Development was adopted in Gothenburg. The leadership and example, is also refl ected in the Eu ro- SSD adopted a long-term perspective to development pean Commission’s consultation document on the fu- and included a wider array of issues such as pandemic ture Europe 2020 strategy: diseases, whereas the Lisbon Strategy had a more Eu rope needs a strengthened and competitive medium- term focus of ten years and was EU centric. industrial base, a modern ser vice sector and a thriving The formulation of the SSD added an environmental agriculture, rural economy, and maritime sector. As dimension to the initial Lisbon commitments, creat- “fi rst mover” in building this society of the future, ing a framework to address environmental, social, Eu rope can derive important benefi ts by developing and economic concerns in an integrated way. competitive, innovative products, rolling out the This expansion of the Lisbon Strategy agenda infrastructures of the future, entering new markets also began to blur the distinction between the two and creating new, high- quality jobs. But the benefi ts go much wider. A Eu rope that is open to the world strategies. The reformulation of the Lisbon Strategy will continue to be a model for others to follow, toward “competitiveness” in 2005 raised some con- projecting its values and fostering stronger labour, cerns that social and environmental policies could environmental, and safety standards around the be weakened if they are found to hinder this objec- globe” (EC 2009, p. 4). tive (Hochfeld, Schmitt, et al. 2006; Wolff, Schmitt, et al. 2006). Others similarly question whether social We believe such a vision of a future Europe could be and competitive policies designed to create a “com- achieved by following the strategies discussed and pro- petitive social market economy” would actually sup- moted throughout this text (see especially Chapter 13). port or confl ict with each other (Eurofound 2006a). Europe 2020 retains the growth and jobs focus of It seems that a high degree of competitiveness can the Lisbon Strategy. The growth dimension is di- coexist with extensive and expensive social models, vided into two priority areas of Smart and Sustain- but this situation is limited to the Nordic countries able Growth. The Smart Growth priority focuses on within the EU (ibid.). The critical question is whether (1) education, (2) research and innovation to create the Nordic model— which is based on high levels of products and services that create jobs and address civic responsibility and institutional trust— can be major social challenges, and (3) laying the foundation for a digital society. The Sustainable Growth priority -1— transferred to other EU nations. 0— +1—

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focuses on creating a resource effi cient, greener, and — greenhouse gas emissions 20% (or even more competitive economy. A critical component of 30%, if a satisfactory international agree- this priority is the EU’s Industrial Policy for the Glo- ment can be achieved to follow Kyoto) balization Era (EC 2010b). The policy centers around lower than 1990 — 20% of energy from renewables creating a competitive economy—which nurtures — 20% increase in energy effi ciency small businesses—that delivers on the promise of sus- 4. Education tainability. The policy calls for a broad evaluation of — Reducing school drop- out rates below 10% the competitiveness effects of all other policy initia- — at least 40% of 30–34-year- olds complet- tives in sectors such as transportation and energy, and ing third level education (or equivalent) single-market and trade policies. It is likely that such 5. Poverty/social exclusion an approach will promote the co-optimization (or in- — at least 20 million fewer people in or at risk tegration) of policy between economic sectors, but of poverty and social exclusion care must be taken not to compromise labor in the An important policy development under the Lis- pursuit of competiveness.* bon Strategy that will be continued in Eu rope 2020, The third priority of Eu rope 2020 is Inclusive is the notion of “fl exicurity”: Growth, described as promoting a high- employment economy delivering economic, social, and territo- Flexicurity represents a new way of looking at rial cohesion. The fi rst initiative in this priority area fl exibility and security in the labour market. The concept recognises that globalisation and technologi- is directed at developing new worker skills and jobs cal progress are rapidly changing the needs of work- through education/training and modernizing labor ers and enterprises. Companies are under increasing markets, respectively. The modernization of labor pressure to adapt and develop their products and markets, embodied in the term “fl exicurity,” is disser vices more quickly; while workers are aware that cussed in more detail below. The second initiative is company restructurings no longer occur incidentally to establish an EU platform against poverty that en- but are becoming a fact of everyday life. Rather than sures a social safety net is provided for those people protecting a job, which will ultimately disappear, experiencing poverty and social exclusion. fl exicurity starts from the assumption that it is the worker who needs protection and assistance to either Europe 2020 incorporates a more nuanced ap- transition successfully in his/her existing job or move proach to EU- level per for mance targets; moving to a new job. Flexicurity therefore provides the right away from the one- size fi ts all indicators of the Lis- reform agenda to help create more adaptable labour bon Strategy (EC 2010a). The signifi cant differences markets and in partic u lar to tackle often substantial in starting positions and capabilities of EU member labour market segmentation (EC 2010a, pp. 16– 17). states (as evidenced by the range of HDI values The modernization of the labor market to pro- shown in Table 1.1 in Section 1.1.1) means that any mote the notion of fl exicurity is one component of development agenda needs to account for what is re- Eu rope 2020 that could seriously undermine the abil- alistic and fair in any given context. This approach ity of the EU economy to sustain well-paid, meaning- should also promote greater national own ership of ful, and secure employment. Rather than fl exicurity, Eu rope 2020, which was a problem with the Lisbon we advocate “fl ex- capacity,” which means that work- Strategy. Eu rope 2020 has established fi ve targets ers have a broader set of training and skills to enable (below) that are to be translated into national targets them to adapt and to innovate—in a technological in each EU country, refl ecting their different situa- and or ga ni za tion sense (see Chapter 7)— to allow a tions and circumstances.25 fi rm to remain completive in a dynamic global econ- 1. Employment omy without shedding its workers. In this approach, — 75% of the 20–64-year- olds to be employed workers have broadly applicable skills and capabili- 2. R&D/innovation ties and comprise the competitive advantage of fi rms — 3% of the EU’s GDP (public and private operating at the leading edge of an economy. While combined) to be invested in R&D/innova- some workers may require assistance to transition tion between employment, a Eu ro pe an workforce that is 3. Climate change/energy formed upon the notion of fl ex- capacity should have a natural ability to adjust to changing circumstances * See Section 1.9 for a discussion of the need to think in innovative ways. This has serious implications for holistically when designing policy to promote sustainable devel- how we educate people for work. opment. —-1 —0 —+1

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The dynamic forces of rapid technological change increase in the international visibility of the climate and globalization (that is, the integration of markets problem. The release of Al Gore’s documentary An for goods, services, and fi nance both within and out- Inconve nient Truth, followed by the award of the 2007 side the EU) are likely to present challenges for Nobel Peace Prize to him and the International Panel increasing and maintaining employment levels. As on Climate Change “for their efforts to build up and production relocates to areas of comparative advan- disseminate greater knowledge about man-made cli- tage and innovative and effi cient companies gain mate change,”26 did much to raise global concern market share, the pressure on companies to become about the issue. Equally important was the publica- competitive increases. The way in which the EU de- tion of the Stern Review on the Economics of Climate fi nes or approaches the idea of competitiveness is, Change (known as the Stern Review) by the U.K. therefore, important. There is a signifi cant difference Trea sury on October 30, 2006 (N. Stern 2007). Al- between the idea of competitiveness that supports though the review was not the fi rst economic analysis the effective delivery of essential goods and ser vices of climate change (Cline 1992; Mendelsohn, Morri- to most or all of its citizens, and competitiveness as son, et al. 1998; Nordhaus and Boyer 2000), its status “competition” that is focused on achieving greater as an offi cial government document signifi cantly profi ts, revenues, and market share, often accompa- raised its importance and made it one of the most nied by unemployment or underutilization of hu- widely known and debated studies of its kind. man capital on a wide scale. A focus on competition, The Stern Review focuses on the impact of global rather than economic welfare of a nation’s citizens, is climate change on the world economy. More specifi - likely to promote economies of scale and greater cally, it argues that if governments fail to take action throughput and be less concerned with the nature of today, “the overall costs and risks of climate change the goods and ser vices that are being provided— and will be equivalent to losing at least 5 percent of global to whom. It also relies more on the market economy GDP each year, now and forever. If a wider range of for the provision of these goods and ser vices, which risks and impacts is taken into account, the estimates may fall beyond the reach of many who are unable to of damage could rise to 20 percent of GDP or more” afford them. (N. Stern 2007, p. vi). The study fi nds that the poten- The growing levels of competition faced by EU- tial future impacts of inaction on social and economic based companies from economic globalization are systems will be “on a scale similar to those associated likely to result in job losses in those industries unable with the great wars and the economic depression of to complete. Although public opinion within the EU the fi rst half of the 20th century” (ibid.). The study about the promise of globalization was once positive, concludes by arguing that these impacts could be this position has now reversed, with many becoming signifi cantly reduced if 1 percent of global GDP is increasingly concerned as EU jobs are exported over- invested each year in mitigation activities. Such activi- seas (Eurofound 2008). The challenge facing the EU ties include the pricing of carbon (via taxes, carbon will be whether these concerns will limit policies de- trading, and/or regulation), mechanisms to support signed to liberalize the internal market and open it to innovation for low-carbon technologies, and actions global competition. A critical factor in the success of to remove perverse incentives or barriers to energy the Eu rope 2020 Strategy will be whether the promo- effi ciency gains. tion of competitiveness in the sense of providing The enthusiastic response by many politicians and domestically- needed goods and ser vices and employ- environmental groups to the Stern Review has been ment will create new forms of employment that are tempered somewhat by heavy criticism of the study less susceptible to global competition. from several well- known economists (P. Dasgupta 2006; Mendelsohn 2006– 2007; Nordhaus 2006; Tol 2006; Tol and Yohe 2006; Yohe 2006; Yohe and Tol 1.6 THE REFORMULATION OF 2007). Others, while critical of the study’s basic as- SUSTAINABLE DEVELOPMENT AS sumptions and analysis, gave more positive commen- A PROBLEM OF GLOBAL CLIMATE taries (K. J. Arrow 2007; Neumayer 2007; Weitzman CHANGE 2007). The concerns with the study tend to center on Anyone new to the concept of sustainable develop- several key issues. First, the review relies on exist- ment might be led to believe that the only major ening data sources and does not develop any new esti- vironmental concern related to the concept is global mates of the impacts or costs of climate change. -1— climate change. In recent years, starting with the Thus it is surprising to some that the review develops 0— Kyoto Protocol in 1997, there has been a dramatic numbers that lie far outside the range of estimates +1—

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found in previously published literature (Men- cerns are at risk of being excluded from sustainable delsohn 2006– 2007; Tol and Yohe 2006). development strategies, marginalized, or even exac- Second, a dual critique of the science and eco- erbated.† An important argument made in Section nomic aspects of the Stern Review concluded that the 1.4 is that the concern for sustainable development is study “greatly understates the extent of uncertainty, based on four broad environment-related concerns. for there are strict limits to what can be said with The fi rst concern relates to the disruption of eco- assurance about the evolution of complex systems systems and the loss of biological diversity and the that are not well understood” (Carter, de Freitas, et indirect effects these have on human health and well- al. 2007, p. 168). These authors were also greatly con- being. The second highlights the world’s fi nite re- cerned about the treatment of sources and evidence, sources and energy supplies and raises the question which they perceived as “per sis tent ly selective and whether there are suffi cient resources to fuel the biased” (ibid., p. 224). Their general opinion of the economy in its current form. A corollary concern is Stern Review is that it is “a vehicle for speculative what the environmental impact will be from using a alarmism” (ibid.). signifi cant proportion of the remaining resources. A fi nal criticism worth mentioning, which is per- The third concern is that toxic pollution directly af- haps the most controversial issue, was the Stern Re- fects human health and the health of other species. view’s selection of a low discount rate.* The study The fi nal concern is that green house gases from an- selected a rate that was 0.1 percent above the global thropocentric (human-driven) sources are leading to rate of growth of consumption. Because the rate of con- a disruption of the global climate. In this context, it sumption is assumed to increase at 1.3 percent per is worrisome that the concern for climate change ap- year, the chosen discount rate was 1.4 percent. This pears to be dominating the sustainable development value falls below the conventional range used by many debate. That preoccupation also makes it much more economists when considering measures to mitigate cli- diffi cult to develop coordinated (or, at best, inte- mate change (Weitzman 2001). It is also lower than the grated) environmental and social policies to address discount rates used by HM Treasury, which decline the four environmental problems. from 3.5 percent (for years 0 to 30) to 1 percent (after The point here is not to devalue the signifi cant 300 years) (HM Treasury 2003). The Stern Review ar- progress that has been made in raising concern about gued that selecting a higher discount rate would be climate change. It is to make the argument that cli- unethical because it would reduce the importance mate change is one of several critical environmental given to the welfare of future generations who are challenges that must be addressed simultaneously to likely to bear the brunt of climate change. A higher prevent the unforeseen occurrence of a non-climate- discount rate would also reduce the pressure for im- related tipping point (the focus of the next section). mediate and aggressive action to reduce greenhouse gas emissions. As Mendelsohn (2006–2007, p. 43) 1.7 BROADENING OUR AWARENESS comments, “The low discount rate implies far future OF TIPPING POINTS events are important in the near term.” Although there are clearly reasons to treat the A “tipping point” can be described as the point be- recommendations of the Stern Review with caution, yond which it becomes extremely diffi cult (if not im- this does not detract from the impact the study has possible) to reverse a negative trend. An alternative had on refocusing government agendas and the ac- way to think about tipping points is to consider the tions of environmental and social organizations to- idea of “overshoot”— that is, to inadvertently go be- ward the mitigation of climate change. The problem yond a system’s limits, creating a situation that is with the growing momentum behind climate change, nearly impossible to reverse (see Section 1.3.2 for a however, is that other critical environmental con- discussion of limits to growth and the concept of “overshooting”). The key argument articulated in the previous sec- * A discount rate is used to translate future benefi ts/ tion is that the current discourse on sustainable devel- costs into present-day values. The choice of the discount rate can opment is becoming dominated by concerns about have a dramatic effect on the benefi t/cost estimates used to evaluate the desirability of a policy. Because many government initiatives involve an investment of resources in early periods that generate benefi ts/costs in later periods, the major effect of dis- † Consider, for example, the increased concerns that counting is to reduce the magnitude of future benefi ts/costs. The ethanol and other biofuels are expected to produce toxic air pol- larger the discount rate, the larger the reduction in future bene- lutants and also result in a reallocation of food- growing land to —-1 fi ts/costs, and vice versa. growing energy- producing crops. —0 —+1

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global climate change. Within the climate-change de- development on human health. This new dimension bate, several possible tipping points have emerged. is different from the impacts of environmental deg- These include the sudden disintegration of the Green- radation on human health, which could be consid- land and Antarctic ice sheets (Alley, Clark, et al. ered as a negative side effect of industrialization. 2005), the collapse of coral reefs due to “coral bleach- The concern is that the products and services associ- ing” caused by rising sea temperatures (Knowlton ated with the current form of industrialization are 2001), and the shutting down of the Atlantic thermo- themselves directly causing harm. haline circulation that conveys warm surface water to A fi nal mode of possible collapse relates to social northern Europe and returns cold, deep-ocean water systems, such as the global fi nancial system or the south (Vellinga and Wood 2004). Although these po- ability of the nation-state to provide gainful em- tential system collapses are of great concern, there are ployment.* Although these tipping points are infl u- other tipping points not far on the horizon that de- enced by external environmental factors, the modes serve equal attention. Examples of these other modes of failure are fi rmly embedded within social net- of collapse include the following: works. Another example of a “social tipping point” could be increasing social tensions that lead to per- • Limits on the ability of conventional antibiotics sis tent regional/global confl icts due to increasing and pesticides (through antibiotic and pesticide re- sis tance) to prevent virulent disease and pestilence, shortages of resources such as fresh water or oil leading to a rapid decline in population and food (Myers 1993). crops • Damage to reproductive health (through endo- 1.8 THE 2008 FINANCIAL CRISIS crine disruption) to the extent that all species (in- AND OPPORTUNITIES FOR cluding humans) no longer reproduce or reproduce RECONCEPTUALIZATION OF THE with reproductive anomalies, such as sterility and hermaphroditism (Colborn, Dumanowski, et al. GROWTH PARADIGM 1996; Cordier 2008; Saey 2008) As this book is being written, the world is experienc- • The widespread decline of human health due to ing the worst economic crisis since the 1930s. In es- increasing levels of toxic chemical exposures that sence, what the world is facing today is what some cause cancer, autoimmune diseases, neurological would describe as a “Minsky” moment. The late harm such as autism, attention- defi cit/hyperactiv- economist Hyman Minsky asserted in his 1986 book ity disorder, and general toxic-induced loss of tolerance (Ashford and Miller 1998; Sasco 2008) Stabilizing an Unstable Economy that an extended period of rapid growth, low infl ation, low interest • Signifi cant growth in the incidence of human disease and deaths in regions experiencing rapid popu- rates, and macroeconomic stability did not consti- lation growth, worsening levels of malnutrition, and tute an equilibrium but bred complacency and an environmental degradation (D. H. Meadows, Rand- increased willingness to bear risks (Minsky 1986). ers, et al. 2004; Pimentel, Cooperstein, et al. 2007) Instability, in his view, was a hidden element of stability, and an undue faith in unregulated markets, Supporting or driving these modes of collapse are along with securitization, off- balance- sheet fi nanc- the processes of rapid technological change and eco- ing, and other fi nancial innovations, would create a nomic globalization. For example, more effi cient and particularly dangerous and disruptive mix. affordable transportation systems are increasing the Galbraith observed in A Short History of Finan- ease with which diseases can be transmitted between cial Euphoria that “the more obvious features of the populations. The signifi cant growth in trade between speculative episode are manifestly clear to anyone regions has also exposed previously healthy popula- open to understanding . . . and especially so after the tions to new health risk factors (Yach and Bettcher fact” (Galbraith 1990, p. 4). On July 19, 2007, the Dow 1998a, 1998b). Indigenous societies that are becom- Jones Industrial Average rose above 14,000 points ing interconnected with the global economy are now for the fi rst time in its history. Less than a month exposed to modern diets, additive products, pharma- later, however, the French bank BNP Paribas sus- ceuticals, and toxic products that signifi cantly in- pended withdrawals from three of its funds. Accord- crease cancer risks (Sasco 2008). In this context, the historic debate between economic development and environmental degradation (questioning the logic of * Lester Brown of the Earth Policy Institute also dis- the environmental Kuznets curve—see Section 1.3.2) cusses the tipping points related to the world’s politi cal system, -1— must be expanded to include the impacts of economic such as population growth, leading to “failing states” (Brown 0— 2008, pp. 5– 6, 18– 20). +1—

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ing to Krugman, this was the moment “the fi rst great percent in the third quarter of 2008, while savings fi nancial crisis of the twenty-fi rst century had behave started moving upward (Walker 2009).* How- gun” (Krugman 2009, p. 165). ever, contrary to Walker’s interpretation, it is not The exact characteristics of the 2008 crisis can po- necessary for this short- term response to the crisis to tentially tempt one to observe that this crisis is like constitute a signifi cant cultural shift, one that would nothing we have ever seen before. This is, after all, be essential for a transition to a more sustainable what expert fi gures such as George Soros seem to as- economic model. sert (Soros 2008). Perhaps more accurate observation, Apart from the structural shift in consumption, sav- however, would lead us to the conclusion that this cri- ings, and trade, the U.S. economy has also experienced sis is exactly like everything we have seen before, only a growing imbalance in the relationship between busi- this time simultaneously: a real estate bubble, remi- ness and government, especially during the past thirty niscent of Japan at the end of the 1980s; a wave of years. In the 1950s, Galbraith (1952) coined the term bank runs similar to those of the Great Depression in “countervailing power” to describe the idea that in the early 1930s (but which now mainly involved the market economies, both government and orga nized la- “shadow” banking system of derivatives, hedge funds, bor must be strong in order to balance the power of and the like rather than conventional banking organi- large corporations. Galbraith’s analysis dictated that zations); a liquidity trap in the United States, again economic life was not governed by small fi rms battling similar to what happened in Japan; and fi nally, a dis- one another through price competition to serve con- ruption of international capital fl ows and a wave of sumers, but by large corporations in oligopolistic mar- currency crises, comparable to what happened in East kets that had the power to dictate the terms of their Asia in the late 1990s (Krugman 2009). engagement with both buyers and suppliers (Auer- It is important, however, to underline that more swald and Acs 2009). Galbraith believed that the domi- than anything else, the 2008 crisis is the outcome of nance of large corporations in the economy would lead a culmination of problems inherent in the unsustain- to a countervailing response from workers and con- able nature of the economic system (see especially sumers that would decrease their infl uence. At the Stiglitz 2010). Some facts are particularly elucidat- same time, government would be the force responsible ing. Between 1951 and 1983, consumption as a pro- for balancing interests in markets and moderating the portion of GDP remained within the range of 60–64 adverse effects of business cycles (ibid.). percent (Walker 2009). However, after 1983, con- This balance was termed by some policy scholars sumption grew to 66 percent in 1990, 68 percent in an “iron triangle.” However, it was not meant to last, 1998, 70 percent in 2001, and 71 percent by the end because the or gan i za tion al realities of the mid- of 2007 (ibid.). It is particularly interesting to ob- twentieth century were going to change in the coming serve the evolution of the savings rate and the trade de cades. In the mid- 1970s, rising infl ation and unem- defi cit as consumption was increasing. Walker (2009) ployment, high energy prices, increasing international cites an analysis by Wen and Shimek (2007) that ex- competition, and the fall in innovation and productiv- plains that the trade defi cit was at a maximum of 1 ity were forces that undermined the profi tability of percent of GDP until 1983, moved to 3 percent in large corporations and started changing the balance of 1986, decreased again during the recession of 1991– the “iron triangle” (Auerswald and Acs 2009). The de- 1992, and then rose to 5 percent in 2004, where it has regulatory mea sures of the Reagan administration remained. At the same time, savings fell from 10 were the beginning of the end for countervailing power. percent of GDP in 1980 to 0.4 percent in 2006, In the fi nancial industry, deregulation, along with the house hold consumption’s share of disposable income emergence of information technologies, drove new in- grew from 87.5 percent to 95.8 percent, and revolv- novative business models. Although these models had ing credit (mainly credit cards) grew from about 2.7 certain positive effects in the short run, their complex- percent of personal income to 9.8 percent of perity increased, while government supervision eroded. sonal income (Walker 2009; Wen and Shimek 2007). As Wen and Shimek (2007) note, the increase in the trade defi cit ($762 billion), the increase in con- * This element corroborates the fears of those commentators who have a structural preference for infrastructure spend- sumption’s share of personal income ($802 billion), ing instead of tax cuts. A central irony of the crisis is that the and the increase in revolving credit outstanding consumption vice becomes a virtue in the Keynesian space ($800 billion) are strikingly similar to earlier prob- because more spending is necessary to come out of the crisis. Increased savings, on the other hand, will be a sine qua non of lem periods. The 2008 crisis has, of course, had an sustainable development, but this is an “equilibrium” condition, —-1 effect on these fi gures; consumption declined by 3.7 under a different growth regime. —0 —+1

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Competitiveness (effective and efficient Resource delivery of goods and Depletion services) and Environ Health ment g and Urban Housin Dev. ufactu Employment Man ring (job creation)& Transportation Biodiversity/ Purchasing Agriculture Ecosystems Power loym Emp ent

Defense r Ene gy

Economic DOE Toxic Inequality DOD/ Pollution DHS DOL/ ED USDA

DOT

DOC

HUD Peace and Climate HHS/ Security EPA Change

Environmental Justice

Key: Government activity areas (e.g., transportation, health, energy) DHS: Department of Homeland Security ED: Department of Education DOC: Department of Commerce EPA: Environmental Protection Agency Challenges confronting sustainable DOD: Department of Defense HHS: Department of Health and Human Services DOE: Department of Energy HUD: Department of Housing and Urban development (e.g., climate change, DOL: Department of Labor Development resource depletion, toxic pollution) DOT: Department of Transportation USDA: US Department of Agriculture

FIGURE 1.10: GOVERNMENT ACTIVITY AREAS AND CHALLENGES CONFRONTING SUSTAINABLE DEVELOPMENT

The consequences of that trend have never been more The 2008 fi nancial crisis presents a challenge to pronounced than in today’s fi nancial crisis.* rethink the growth paradigm within the context of

* Of course, the “iron triangle” was probably destined to collapse despite government policy. Galbraith’s observation was tions are no longer suffi ciently eco nom ical ly dominant to dictate particularly valid in the 1950s, when large corporations were in- the terms of engagement with buyers and suppliers (Auerswald deed dominant. However, despite the fact that some corporations and Acs 2009). As Auerswald and Acs point out, this is most obvi- are still large today, the economy of the twenty- fi rst century is ous in the fact that government’s greatest challenge at the mo- -1— highly networked and distributed. In most cases, large corpora- ment is not restraining the biggest fi rms but keeping them afl oat. 0— +1—

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environmental and social sustainability. It is toward mental, social, and economic challenges. In addition, this goal that the present book is dedicated.* single-purpose policies designed to confront climate change may inadvertently worsen problems in other areas. For example, increasing the percentage of eth- 1.9 THE NECESSITY OF SOLVING PROBLEMS anol in gasoline to reduce CO emissions might lead ON A COMPREHENSIVE BASIS 2 to the production of additional toxic air pollutants Figure 1.10 has been created to help visualize the and to an increased use of pesticides, worsening the need to broaden the current discourse on sustain- toxics problem, as well as raising the cost of food and able development to include concerns in addition to actually increasing green house emissions through global climate change. The fi gure highlights all four additional land use (Searchinger, Heimlich, et al. of the critical environmental concerns related to sus- 2008). Thus a major advance in confronting sustain- tainable development. In addition, it captures impor- able development would be the integration of gov- tant social concerns such as the need for peace and ernment decision making to address environmental, security and equality, both in terms of environmen- social, and economic problems that are not con- tal justice and of income. Employment is also placed strained by institutional missions or the fragmenta- alongside these concerns, given its critical role in tion of activities within government agencies (Hall raising purchasing power and providing suffi cient in- 2006). Specifi c recommendations for achieving inte- come to make essential goods and ser vices accessi- gration are addressed in the last chapter. ble to all. The “competitiveness” wedge was included in the diagram to account for the economic chal- 1.10 NOTES lenge of delivering effective and effi cient goods and services†— a challenge that is central to the Lisbon 1. The Cocoyoc Declaration can be viewed at www .jstor Strategy. The rationale is that competitiveness is a .org/ stable/ 2706353 (accessed June 8, 2010). 2. To gain some insight into the various theories on—or ap- critical factor of economic growth and one that is proaches to considering— human needs, see Doyal and Gough closely related to technological innovation—an issue (1991); Erikson (1963); Kasser (2002); Maslow (1943); Max-Neef, of direct interest to virtually all government activity Elizalde, et al. (1989); R. M. Ryan (1995); and R. M. Ryan and areas. Deci (2000a, 2000b). In addition, see the following websites: University of Rochester, Department of Clinical and Social Sci- The three arrows that follow the circumference of ences in Psychology, Self Determination Theory, an Approach to the outer circle in Figure 1.10 identify which chal- Human Motivation and Personality, www .psych .rochester .edu/ lenges relate to environmental protection, social de- SDT/ (accessed June 8, 2010); and George Boeree, The Ultimate Theory of Personality, http:// webspace .ship .edu/ cgboer/ conclu velopment, and economic development. Figure 1.10 sions .html (accessed June 8, 2010). also highlights the critical need for integrated deci- 3. See Jha and Murthy (2003) for a critique of the 2002 ESI sion making by representing several U.S. federal and Appendix H, “Critiques and Responses,” of Esty, Levy, et al. (2005) for a discussion of the strengths and weaknesses of the 2005 government activity areas (that is, those areas where ESI. government provides basic goods and ser vices) with 4. For an insightful discussion of the historical and theoreti- the major challenges confronting sustainable devel- cal foundations of the consumer society and consumerism, see opment. There is no hierarchy to the activity areas Firat and Dholakia (1998); Krishnan, Harris, et al. (1995); Miles (1998); Miles, Anderson, et al. (2002); and Stearns (2001). shown. Thus those located near the center of the cir- 5. See the programs of the Eu ro pe an Foundation for the cle are not necessarily more or less important than Improvement of Working and Living Conditions (Eurofound) for those located near the edge. linkages between work and other life activities, www .eurofound .europa .eu/ (accessed June 8, 2010). Figure 1.10 shows that focusing on climate change 6. The Penn World Table can be accessed from the Center for as the major challenge confronting sustainable de- International Comparisons of Production, University of Pennsyl- velopment ignores the importance of other environ- vania, http:// pwt .econ .upenn .edu/ php _site/ pwt _index .php (accessed June 8, 2010). 7. Two classic texts that address the topic of deindustrialization are The Deindustrialization of America by Bluestone and * See Section 3.6 in Chapter 3 for a discussion of the Harrison (1982) and The Second Industrial Divide by Piore and “new economics.” Sable (1984). † The decision to highlight competitiveness as an impor- 8. For a similar (historical) discussion of whether we are tant issue rather than economic growth is intentional. The basic “inventing ourselves out of jobs,” see Bix (2000). argument is that focusing on the competitive delivery of goods 9. The data presented by Mishel, Bernstein, et al. (2005) and services is more likely to lead to long-term economic benefi ts seem to support this position. than a focus on short-term economic growth. See Chapter 7 for a 10. For critiques of the Department of Health, Education, discussion of how technological innovation can enhance competi- and Welfare’s (HEW) infl uential report Work in America, see tiveness and lead to economic growth. Karsh (1974) and Koo (1973). —-1 —0 —+1

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2.1 Notes 138 2.2 Additional Readings 139 2.3 References 139

his chapter provides an abbreviated over- The U.S. environmental movement began when view of the emergence of the concept of the nation’s communities became increasingly aware sustainable development during the latter that the industrial and agricultural processes that part of the twentieth century. For a more contributed to the nation’s economic growth were detailed discussion, see the extended simultaneously distressing ecosystem integrity and TPrimer on Sustainable Development found at the biological diversity (Table 2.1). In essence, as large- website associated with this book. scale productive capacities in industry and agricul- The concept of sustainable development obtained ture increased, so did the rates at which these sectors formal international recognition at the 1992 United discharged pollution and waste into the environment. Nations Conference on Environment and Develop- Once the environment surrounding the industrial and ment (UNCED) in Rio de Janeiro, Brazil. However, agricultural land was no longer able to assimilate or it is possible to trace the modern environmental move- store this waste, negative impacts soon began to ment back to the 1950s, when developed nations— emerge. In some cases, the pollution was clearly visi- for example, the United States, Japan, and several ble; in others, its manifestation occurred through the nations in what is now the Euro pe an Union— became gradual loss or deterioration of wildlife. Hence the increasingly aware that the local or regional envi- concern for the environment was driven primarily by ronment was being stressed by rapid industrializa- local issues, such as air, water, and noise pollution, tion. Here, we focus our attention on the United States toxic- waste disposal sites, oil spills, highway con- because the environmental policy and laws enacted struction, and suburban sprawl, and by a concern for during the early environmental movement (of the the integrity of ecosystems. 1960s and 1970s) played an infl uential role in shaping Before the 1960s, communities had turned some- the actions of other nations.* what of a blind eye to pollution from industrial activities because of the perception that economic * Other countries in the Eu ro pe an Union may now have advanced beyond the United States in certain areas with regard -1— to innovative environmental policy and law designed to promote cussion of regional and international regimes to protect health, 0— sustainable development (Vogel 2003). See Chapter 10 for a dis- safety, and the environment. +1—

561-45401_ch01_8P.indd 122 6/23/11 9:49 AM TABLE 2.1: THE CREATION OF A NATIONAL ENVIRONMENT AND DEVELOPMENT AGENDA— 1951 TO 1970

YEAR EVENTS PUBLICATIONS U.S. LEGISLATION

1951 President Truman appoints the Paley Commission to study the long- range aspects of the national resource base. 1952 Resources for the Future is established. Resources for Freedom—The President’s Material Policy Commission 1954 The Nation Looks at Its Resources: Report of the Mid- century Conference on Resources for the Future— Resources for the Future 1960 World population— 3 billion. The World Energy in the American Economy, 1850– 1975: Bank creates the International Develop- An Economic Study of Its History and ment Association (IDA). Prospects— S. H. Schurr and B. C. Netschert 1961 The OECD (Organisation for Economic Co- operation and Development) is created from the OEEC (Organisation for Eu ro pe an Economic Co-operation). The World Wildlife Fund (WWF) is established. 1962 Silent Spring—R. Carson Resources in America’s: Future patterns of requirements and availabilities, 1960– 2000—H. H. Landsberg, L. L. Fischman, and J. L. Fisher 1963 Scarcity and Growth: The Economics of Natural Resource Availability— H. J. Barnett and C. Morse 1964 The UN Conference on Trade and Development (UNCTAD) is established. 1965 Unsafe at Any Speed: The Designed-in Dangers of the American Automobile— R. Nader 1966 Environmental Quality in a Growing Economy: The Freedom of Information Essays from the Sixth RFF Forum— K. E. Act (FOIA) Boulding, H. J. Barnett, R. Dubos, L. J. Duhl, R. Turvey, R. N. McKean, A. V. Kneese, M. M. Gaffney, G. F. White, D. Lowenthal, N. E. Long, J. H. Beuscher, and J. Jarrett (eds.) 1967 The Environmental Defense Fund (EDF) is created. 1968 The Biosphere Conference is held in Paris The Tragedy of the Commons—G. Hardin under the auspices of the UN Educational, The Population Bomb—P. Ehrlich Scientifi c, and Cultural Orga ni za tion (UNESCO). The topic of “the human environment” is addressed by the UN Economic and Social Council (ECOSOC). ECOSOC Resolution 1364 (XLV) eventually leads to the 1972 Stockholm Conference. An explosion occurs at a mine in Farmington, West Virginia, killing seventy- eight people. 1969 An oil spill on the Cuyahoga River in Ohio Partners in Development—Report prepared The Coal Mine Health and catches fi re. by the Commission on International Safety Act Development The National Environmental An oil spill occurs off the coast of Santa Policy Act (NEPA) Barbara, California, discharging some 200,000 gallons of crude oil into the sea. United Mine Workers strike over coal workers’ pneumoconiosis, or “black lung.” Friends of the Earth is formed. 1970 First Earth Day— April 22. Economics and the Environment: A Materials The Clean Air Act (CAA) The Natural Resources Defense Council Balance Approach—R. U. Ayres, R. C. D’Arge, The Occupational and (NRDC) is formed. and A. V. Kneese Safety Health Act (OSH President Nixon creates the Environmen- Man’s Impact on the Global Environment— Act) tal Protection Agency (EPA) in the United Report prepared by a scientifi c group States by executive order. assembled at MIT —-1 —0 —+1

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gains were considered to outweigh the environmen- • The 1974 Safe Drinking Water Act (SDWA) tal and health costs. This perception began to change • The 1976 Resource Conservation and Recovery in 1962 with the publication of Rachel Carson’s book Act (RCRA) Silent Spring. Carson described the potential dangers • The 1976 Toxic Substances Control Act (TSCA) of the pesticide DDT (dichlorodiphenyl trichloroeth- • The 1977 Clean Air Act Amendments (CAAA) ane) and argued that its development and continued use served the interests of chemical companies, indus- • The 1980 Superfund legislation. trial agriculture, the military, and universities. The These pieces of legislation directly refl ect three of fi erce opposition to her book by the chemical industry four environmental concerns that can be associated had the effect of strengthening the public resolve be- with sustainable development—(1) that industrializa- hind her work. “Silent Spring altered a balance of tion negatively affects ecosystem integrity and bio- power in the world. No one since would be able to sell logical diversity and indirectly affects human health; pollution as the necessary underside of progress so (2) that the world’s resources and energy supplies are easily or uncritically” (Hynes 1989, p. 3). fi nite; and (3) that toxic pollution directly affects hu- The growing concern about the adverse effects on man health and the health of other species. The fourth the environment was paralleled by an increasing con- environmental concern—that greenhouse gases from cern that available national resources might not be anthropocentric sources are leading to the disruption suffi cient to sustain economic growth into the future. of the global climate—is somewhat loosely connected Although this concern was tempered by several infl u- to the CAAA of 1977 and 1990.* ential studies (Barnett and Morse 1963; President’s On April 22, 1970, almost four months after the Material Policy Commission 1952; RFF 1954), the is- signing of the NEPA, the fi rst Earth Day was held. sue returned with a vengeance in 1972 with the publi- Some 20 million Americans peacefully demonstrated cation of The Limits to Growth (Meadows, Meadows, in streets, parks, and auditoriums for a healthy envi- et al. 1972). ronment and in support of environmental reform.1 Accompanied by a growing distrust of government- The event crystallized the views of those who had been industrial coziness during the 1960s, arguments warn- protesting against harm to the environment and to ing of the environmental problems associated with humans and enabled them to articulate a shared set of the prevailing development model of rapid industrial- common values. ization and economic growth began to surface. Two It has been argued that the 1960s’ infl uence on classic publications which supported this movement modern environmentalism is what the 1970s were to were “The Tragedy of the Commons” by Garrett the formulation of sustainable development (Speth Hardin and The Population Bomb by Paul Ehrlich, 2002, 2003). As national environmental agendas be- both written in 1968. In addition to these publica- gan to be established throughout the world, the 1970s tions, the late 1960s experienced two environmental witnessed the emergence of a concern for the human disasters— the Santa Barbara oil spill and the oil fi re environment in the international arena (Table 2.2). on the Cuyahoga River—that increased the pressure on the U.S. government for action. * In the mid-1970s, scientists concluded that chlorofl uo- In response to the growing public concern, the U.S. rocarbons (CFCs) had the potential to deplete stratospheric Congress passed the National Environmental Policy ozone that provides an essential barrier to the damaging UV-B Act (NEPA), which was signed by President Nixon in radiation emitted from the sun (Molina and Rowland 1974). In response to this research, the CAAA of 1977 included a congres- 1970. This act was followed by other key environmen- sional directive to undertake further research on ozone deple- tal and worker health and safety regulations, such as tion, and the later CAAA of 1990 called for a reduction in the the following: amount of CFCs that were being used. The recognition that human activity could change the thermal radiative pro cess of the • The 1970 Clean Air Act (CAA) atmosphere led scientists to consider the potential impact of the vast amount of carbon dioxide (CO2) that had entered (and con- • The 1970 Occupational Safety and Health Act tinues to enter) the atmosphere since the start of the Industrial (OSH Act) Revolution. A 2007 Supreme Court decision found that greenhouse gases such as CO could be regulated under the Clean Air • The 1972 Federal Water Pollution Control Act 2 Act (Ashford and Caldart 2008), and in December 2009 (at the • The 1972 Federal Environmental Pesticide Con- beginning of the UN climate-change conference in Copenhagen, trol Act (now known as the Federal Insecticide, COP- 15), the Environmental Protection Agency (EPA) issued a Fungicide, and Rodenticide Act) fi nal ruling that greenhouse gases were a danger to human health and the environment, paving the way for regulation of carbon -1— • The 1973 Endangered Species Act (ESA) dioxide emissions. 0— +1—

561-45401_ch01_8P.indd 124 6/23/11 9:49 AM TABLE 2.2: THE CREATION OF AN INTERNATIONAL ENVIRONMENTAL AGENDA— 1971 TO 1980

YEAR EVENTS PUBLICATIONS U.S. LEGISLATION

1971 The Man and the Biosphere program Founex Report— Report by the Preparatory (MAB) is founded by UNESCO (UN Committee for the United Nations Confer- Educational, Scientifi c, and Cultural ence on the Human Environment O r g a n i z a t i o n ) . Greenpeace starts in Canada. The OECD Only One Earth— B. Ward and R. Dubos The creates the Environment Committee (now Closing Circle: Nature, Man, and the Environment Policy Committee— Technology—B. Commoner EPOC) and the Environment Directorate. The Entropy Law and the Economic Pro- President Nixon closes the gold window cess—N. Georgescu-Roegen and unilaterally terminates the international gold exchange standard established by the Bretton Woods agreements. Thus the dollar is no longer effectively linked— directly or indirectly— to gold. 1972 The UN Conference on the Human The Limits to Growth: A Report for the Club of The Federal Water Pollution Environment is held in Stockholm, Sweden Rome’s Project on the Predicament of Control Act Amendments (this (known as the Stockholm Conference). Mankind— D.H. Meadows, D.L. Meadows, J. law is amended in 1977 and The United Nations Environment Pro- Randers, and W.W. Behrens III becomes known as the Clean gramme (UNEP) is formed following the Blueprint for Survival—The Ecologist Water Act— CWA) Stockholm Conference. Exploring New Ethics for Survival: The Voyage The Federal Environmental of the Spaceship Beagle— G. J. Hardin Pesticide Control Act, which amended the 1947 Federal Only One Earth: The Care and Maintenance of Insecticide, Fungicide, and a Small Planet—B. Ward Rodenticide Act (FIFRA) 1973 OPEC oil embargo begins. Small Is Beautiful— E. F. Schumacher The Endangered Species Act (ESA) 1974 World population— 4 billion. Cocoyoc Declaration— Prepared by a The Safe Drinking Water Act The World Food Council is formed and a UN- sponsored meeting in Cocoyoc, Mexico, (SDWA) reconstituted World Food Programme (WFP) called to discuss how development can be is established following the World Food focused on achieving basic human needs Conference in Rome. Stratospheric Sink for Chlorofl uoromethanes: Chlorine Atom- Catalysed Destruction of Ozone— F. S. Rowland and M. J. Molina 1975 The Worldwatch Institute is established. What Now: Another Development— Report by the Dag Hammarskjöld Foundation, Sweden 1976 The UN Habitat program is created Crisis in the Workplace: Occupational Disease The Resource Conservation and following the UN Conference on Human and Injury— N. A. Ashford Recovery Act (RCRA) Settlements (Habitat I) in Vancouver, The Toxic Substances Control Canada. Act (TSCA) 1977 The UN adopts a Plan of Action to Combat Desertifi cation (PACD) following the UN Conference on Desertifi cation in Nairobi, Kenya. 1978 World Development Report (WDR)— The WDR is fi rst published by the World Bank The Human Future Revisited— H. Brown The Twenty- Ninth Day—L. Brown 1979 The World Meteorological Orga ni za tion Banking on the Biosphere—International (WMO) sponsors the fi rst World Climate Institute of Environment and Development Conference held in Geneva, Switzerland. (IIED) Three Mile Island nuclear accident occurs Progress for a Small Planet—B. Ward in Pennsylvania. Scarcity and Growth Reconsidered— Second oil shock occurs as the Ira ni an oil V. K. Smith (ed.) sector reduces its oil exports. 1980 World Conservation Strategy— Published by The Comprehensive Environmen- the IUCN (International Union for Conserva- tal Response, Compensation, and tion of Nature and Natural Resources), the Liability Act (CERCLA)—also UNEP, and the WWF known as Superfund North- South: A Program for Survival— Report by the In de pen dent Commission on International Development Issues The Global 2000 Report to the President— Report by the U.S. Council on Environmental —-1 Quality and the Department of State —0 —+1

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The impetus for this development was the UN Con- sense, ecodevelopment could be described as the ference on the Human Environment that was held pre de ces sor to sustainable development. The UNEP in Stockholm on June 5–16, 1972 (McEntire 2005). defi ned ecodevelopment as “development at regional Caldwell and Weiland (1996) attribute such impor- and local levels . . . consistent with the potentials of tance to the Stockholm Conference for two reasons. the area involved, with attention given to the ade- First, it legitimized the critical need for all nation- quate and rational use of the natural resources, and states to establish environmental policy at the na- to applications of technological styles” (UNEP 1975, tional level. Second, it informed the world society of quoted in Redclift 1987, p. 34). Hence ecodevelop- the vital role that a healthy biosphere plays in sustain- ment focused on satisfying basic human needs in an ing life, and hence it placed a concern for the environ- “environmentally sound [regional] production sys- ment on national agendas. Both of these developments tem” (Nayar 1994, p. 1327). were deemed necessary for the international commu- Although the Stockholm Conference placed a con- nity to address environmental concerns legitimately cern for the environment on the international agenda, (ibid.). its offi cial agreements sidestepped a number of im- Although the Stockholm Conference and its agree- portant issues raised by developing nations. A notable ments were infl uential in advancing concerns for the case is the call by developed nations for global eco- human environment, many suggest that the confer- nomic reforms to address the declining terms of trade ence’s major impact came from the intense preconfer- faced by many raw- commodity exporters in develop- ence deliberations and the explosion of literature that ing economies (Clapp and Dauvergne 2005). By en- raised the world’s consciousness about the natural enabling developing nations to realize higher returns on vironment (Emmelin 1972; Dernbach 1998; Strong their exports, poverty and the related environmental 1972; UNEP 1982b, 1982c). One notable example degradation could be addressed. The issue of global was the preconference deliberation that occurred at economic reforms continued to be debated during Founex, Switzerland (UN 1972), on the relationship the 1970s, but calls for a new international economic between the environment and development. The order did not lead to substantive changes. meeting recognized that because almost all nations Ten years after Stockholm, the UN held a meet- needed to undergo some form of development, sound ing in Nairobi to review progress in implementing approaches to environmental planning needed to be the Stockholm Action Plan and to make recommen- established (UNEP 1982c). The meeting broadened dations with respect to prevailing environmental the dialogue beyond environmental concerns in trends for the future actions of the UNEP. The pre- industrialized regions by making an explicit link conference reports prepared by the UNEP (1982b, between poverty and environmental degradation, 1982d) and the Nairobi Declaration presented a clear highlighting the need for economic growth in devel- message that although nation- states had made prog- oping regions. This latter recognition is considered a ress toward environmental protection, their actions key reason that many developing nations partici- were insuffi cient to reverse the rate of environmen- pated in the Stockholm Conference (UNEP 1982d). tal degradation occurring throughout the world. From the deliberations at Founex and the debates The Nairobi meeting raised several important is- that ensued during the Stockholm Conference, the sues that warrant discussion. First, the negative im- term “ecodevelopment” emerged to describe the pro- pacts of overpopulation were formally recognized as cess of “ecologically sound development,” which in- a growing problem. Whereas population had been cluded the “positive management of the environment largely overlooked at the Stockholm Conference, it for human benefi t” (UNEP 1982c, p. 7). The prefi x played a much more prominent role at the Nairobi “eco” is used to signify both “economic” and “eco- meeting. In par tic u lar, the Nairobi Declaration made logical” because both words stem from the Greek root an explicit connection between population, resources, oikos, meaning house or home (Colby 1991). The and the health of the environment: “During the last term “ecodevelopment” was subsequently adopted decade, new perceptions have emerged: the need and advocated by the UNEP during the 1970s.* In a for environmental management and assessment, the [proposition of a] . . . complex interrelationship between environment, development, population and re- * Although the UNEP was an advocate of ecodevelop- sources and the strain on the environment generated, ment, Colby (1991, p. 200) argues that its predominant practices were still locked in the realm of environmental protection that -1— focused on “damage control: on repairing and setting limits to development actions and ecological resilience, this approach was 0— harmful activity. Rather than focusing on ways to improve both inherently remedial in practice.” +1—

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particularly in urban areas, by increasing population Because the initial concerns for the human envi- have become widely recognized” (UNEP 1982a). ronment grew from the negative impacts of industri- Second, during the decade since Stockholm, de- alization in developed countries, the shift in the veloping countries that had previously rejected the international focus toward the environmental prob- imposition of strict environmental standards had now lems faced by developing nations is signifi cant. The become worried about the damage that was being identifi cation of poverty as a major contributor to en- done to their environment (Redclift 1984, p. 49). Their vironmental degradation increased the importance of concern was that this environmental damage was af- economic growth because it was the only pragmatic fecting both the health of their people and their fu- way to alleviate poverty. Developing countries argued ture development prospects. This transition in that if poverty and underdevelopment were made a opinion is most clearly refl ected in the report of the priority, this would enable them to break free from Governing Council of the UNEP on the general de- the poverty trap in which poverty and environmental bate at the Nairobi meeting: “Differences of views degradation were continually worsening. However, between developed and developing countries with re- because no progress had been made during the 1970s gard to environmental perceptions had to a large ex- in creating a new form of environmentally sound de- tent faded over the last 10 years, and the concepts of velopment, the only way to grow the economy was to sustainable development and rational management follow the path of conventional development. This of natural resources were now widely accepted as the meant a reliance on technology that was fueled by cornerstones of environmental policies.”2 Hence it nonrenewable resources and generated a signifi cant was unlikely that developing nations would continue amount of pollution, which would likely damage eco- to disagree in principle with the creation of stan- systems and human health. Whereas developing na- dards to protect the environment on which their live- tions made the case in the 1971 Founex report that lihoods depended. because their environment had not been burdened by Finally and most important, the Nairobi meeting industrial pollution they could carry a certain amount highlighted a reversal of the perceived impacts of of industrial activity (UN 1972), their position changed economic growth. The UNEP report titled The En- during the next de cade as studies revealed the worsen- vironment in 1982: Retrospect and Prospect provides ing condition of their environment (UNEP 1982c, a succinct description of the turnaround in opinion: 1982d). Thus developing countries faced a paradox. “A decade ago the desirability of further economic They needed to develop to protect and improve their growth was questioned in some quarters, but the environment— on which their future depended— but negative effects of the recent slow-down in economic in doing so, they would ultimately damage the very growth have reinforced the view that it is an essential environment they wished to safeguard. This contradic- instrument in achieving social goals. In develop- tion led to the birth of sustainable development, the ing countries particularly, economic growth is vitally idea that development and environmental protection important and remains a major force for improving could advance in unison. Hence sustainable develop- the health and welfare of people. It is now perceived ment would be able not only to meet the needs of the that economic growth can often be managed not present but also to do so in a manner that did not dam- only to avoid environmental degradation but also, in age the environment and compromise the ability of many cases, to improve the environment” (UNEP future generations to meet their needs (WCED 1987, 1982b, p. 37).* p. 43). The WCED (Brundtland) defi nition of sustainable development is discussed in more detail later. * The slow growth of the world economy during the early The 1980s marked a turning point when nations 1980s, combined with rising debt-service obligations and a reduc- began to recognize that their environmental prob- tion in the infl ow of fi nance, meant that many developing nations lems extended beyond national boundaries and were faced severe economic crises and were forced to reduce social spending and curtail environmental protection efforts (Redclift having impacts on a global scale (Table 2.3). This 1996; WCED 1987). The 1991 UNEP report The State of the realization further spurred the development of an World Environment described the 1980s as being the “lost de- international environmental agenda, and the actions cade” (UNEP 1991, p. 2). The report criticized the structural ad- taken in the following two de cades as a result of this justment policies of developing nations that were designed to dampen demand, devalue currencies, remove subsidies from fuel agenda can be considered the fi rst attempt at global and foodstuffs, and reduce government spending (ibid., p. 3). In environmental governance (Speth 2003). partic u lar, it stated that the poor tended to bear the brunt of such policies, which had the result of increasing malnutrition and reducing health ser vices and school enrollment rates. It concluded and ultimately ineffi cient” and that future adjustment policies —-1 that these negative effects of structural adjustment were “inhuman must have a “human face—which protects the poor” (ibid., p. 4). —0 —+1

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YEAR EVENTS PUBLICATIONS U.S. LEGISLATION

1981 Global Strategy for Health for All by the Year 2000— Prepared by the World Health O r g a n i z a t i o n 1982 The International debt crisis erupts and threatens the The Environment in 1982: Retrospect and world ﬁ nancial system. World Resource Institute Prospect—UNEP (WRI) is established. The World Environment: 1972–1982 —UNEP World Charter for Nature— Adopted by the UN General Assembly 1983 The World Commission on Environment and Environmental Research and Management Development (WCED) is formed. Priorities for the 1980s— Report prepared by an international group of scientists on behalf of the Royal Swedish Academy of Sciences 1984 Drought in Ethiopia— between 250,000 and 1 million people die from starvation. Bhopal incident— a leak of deadly methyl isocyanate at a Union Carbide pesticide plant in Bhopal, India, kills thousands of people. The OECD International Conference on Environment and Economics is held in Paris, France. 1985 British scientists discover an ozone hole over the Antarctic. The World Meteorological Society, the UNEP, and the International Council of Scientiﬁ c Unions meet in

Villach, Austria, to report on the buildup of CO2 and other green house gases in the atmosphere. 1986 A nuclear reactor meltdown at the Chernobyl power The Superfund Amendments station releases radioactive material throughout the and Reauthorization Act (SARA), Northern Hemi sphere. which amended CERCLA The IUCN (International Union for Conservation of The Emergency Planning and Nature and Natural Resources) Conference on Community Right-to- Know Act Environment and Development is held in Ottawa, (EPCRA) Canada. The Uruguay Round of the General Agreement on Tariffs and Trade (GATT) lays the foundation for the establishment of the World Trade Or ga ni za tion (WTO) in 1995. 1987 World population—5 billion. Our Common Future—WCED The IMF (International Monetary Fund) establishes the Enhanced Structural Adjustment Facility (ESAF). 1988 The Intergovernmental Panel on Climate Change (IPCC) is established. 1989 The Exxon Valdez oil tanker runs aground spilling 11 Valdez Principles (later renamed the CERES million gallons of oil into Alaska’s Prince William Sound. Principles)— CERES 1990 The International Institute for Sustainable The Oil Pollution Act (OPA) Development (IISD) is established in Canada. The Pollution Prevention Act (PPA) 1991 The Global Environmental Facility (GEF) is Caring for the Earth: A Strategy for The Intermodal Surface established. Sustainable Living— Published by the Transportation Efﬁ ciency Act The Eu ro pe an Bank for Reconstruction and IUCN, the UNEP, and the WWF (ISTEA) Development (EBRD) is established. Ecological Economics: The Science and Management of Sustainability— R. Costanza 1992 The UN Conference on Environment and Development Agenda 21— UN Department of Economic (UNCED) is held in Rio de Janeiro, Brazil. and Social Affairs (DESA) The Earth Council is established in Costa Rica. Changing Course— S. Schmidheiny 1993 The UN World Conference on Human Rights is held Beyond the Limits: Confronting Global in Vienna, Austria. Collapse, Envisioning a Sustainable The UN Commission on Sustainable Development Future— D. H. Meadows, D. L. Meadows, that was created at the UNCED holds its ﬁ rst meeting. and J. Randers The North American Free Trade Agreement (NAFTA) is signed by Canada, Mexico, and the United States. President Bill Clinton announces the creation of the President’s Council for Sustainable Development (PCSD). 1994 The UN International Conference on Population and -1— Development is held in Cairo, Egypt. 0— +1—

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1995 The UN World Summit for Social Development is held in Copenhagen, Denmark. The UN Fourth World Conference for Women is held in Beijing, China. The WTO is established. The World Business Council for Sustainable Development (WBCSD) is established in Geneva, Switzerland. 1996 The Summit of the Americas on Sustainable Sustainable America: A New Consensus The Food Quality Protection Development is held in Santa Cruz, Bolivia. for Prosperity, Opportunity, and a Healthy Act (FQPA) ISO 14001 is formally adopted as the voluntary Environment for the Future— Report by international standard for corporate environmental the President’s Council for Sustainable management systems. Development The Second United Nations Conference on Human Beyond Growth— H. E. Daly Settlements (Habitat II) is held in Istanbul, Turkey. How Much Is Enough?— A. T. Durning Our Stolen Future: Are We Threatening Our Fertility, Intelligence, and Survival? A Scientifi c Detective Story— T. Colburn, D. Dumanoski, and J. P. Myers 1997 The IMF establishes the Supplemental Reserve Do We Consume Too Much?—M. Sagoff Facility (SRF). The Special Session of the UN General Assembly to No Middle Way on the Environment—P. R. Review and Appraise the Implementation of Agenda Ehrlich, G. C. Daily, S. C. Daily, and J. 21 is held. Salzman 1998 World population— 6 billion. Cradle to Cradle: Remaking the Way We The Transportation Equity Act The IMF activates General Arrangements to Borrow Make Things— W. McDonough and M. for the 21st Century (TEA- 21) for the fi rst time in twenty years. Braungart 1999 The fi rst Dow Jones global sustainability index is Our Common Journey— National Research The Chemical Safety launched. Council Information, Site Security, and Fuels Act Natural Capitalism: Creating the Next Industrial Revolution— P. Hawken, A. Lovins, and L. H. Lovins 2000 The UN Millennium Summit is held in New York The EU establishes the Lisbon Strategy to promote sustainable economic growth (via competitiveness) and employment while respecting the environment. 2001 The IMF announces that it will establish the International Capital Markets Department to enhance its surveillance, crisis- prevention, and crisis- management activities. 2002 The UN World Summit on Sustainable Development (WSSD) is held in Johannesburg, South Africa. 2004 Limits to Growth: The 30- Year Update—D. H. Meadows, J. Randers, and D. L. Meadows 2005 Scarcity and Growth Revisited: Natural Resources and the Environment in the New Millennium—R. D. Simpson, M. A. Toman, and R. U. Ayres (eds.) 2006 Stern Review on the Economics of Climate Change—N. Stern 2008 The Bridge at the Edge of the World: Capitalism, the Environment, and Crossing from Crisis to Sustainability— J. G. Speth Managing without Growth: Slow by Design, Not Disaster— P. A. Victor 2009 Treaty of Lisbon is signed by the requisite number of EU member states. 2010 The Eu ro pe an Commission established the Eu rope Cents and Sustainability: Securing Our 2020 Strategy to promote sustainable growth and Common Future by Decoupling Economic employment. Growth from Environmental Pressure—M. H. Smith, K. C. Hargroves, C. Desha 2010 The Preparatory Committee for the UN Confer- ence on Sustainable Development held its fi rst meeting in preparation for the Rio + 20 Earth Summit in 2012. —-1 2010 The BP Gulf oil spill occurs. —0 —+1

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One of the foundational texts on sustainable de- nations; (b) to establish a more dynamic, more stable velopment, which was published two years before the and less vulnerable world economy, in which all Nairobi meeting, was the International Union for countries have opportunities to participate on a fuller Conservation of Nature and Natural Resources and more equal basis; (c) to stimulate accelerated eco- (IUCN), UNEP, et al.’s (1980) World Conservation nomic growth in the poorer countries of the world; Strategy (WCS). The WCS is an eloquent synthesis and (d) to reduce and eventually overcome the worst of a decade of intense debate in the international aspects of poverty by improving the lot of the hun- community over the need to protect the environ- dreds of millions of people now living in abject pov- ment while continuing the pro cess of development. erty and despair” (IUCN, UNEP, et al. 1980, p. 62). The WCS used the term “sustainable” to describe To achieve this strategy, the WCS called for the liber- development that takes “account of social and eco- alization of trade and the removal of all trade barri- logical factors, as well as economic ones; of the living ers to goods from developing countries. In addition, and non- living resource base; and of the long term as it recommended that economic and social growth be well as short term advantages and disadvantages of accelerated in developing nations.† Hence the WCS alternative actions” (IUCN, UNEP, et al. 1980, did more than simply rename ecodevelopment as p. 18). Acknowledging that “conservation and devel- sustainable development; it connected local, re- opment have so seldom been combined that they gional, and national economic and social develop- often appear—and are sometimes represented as ment with the conservation of living resources and being—incompatible” (ibid.), the WCS proceeds to the need for a stable, equitable, and more liberalized develop its case why conservation and economic and (that is, less regulated or subsidized) international social development are mutually supportive endeav- economic system in which developing countries could ors. In using the word “sustainable” to describe the participate on a more equal footing. development pro cess, the WCS effectively rechris- The WCS’s notion of sustainable development— the tened “ecodevelopment” (the term previously used idea that economic and social development can occur to describe ecologically sound socioeconomic devel- in unison with the conservation of living resources— opment) as “sustainable development” (Caldwell and presented a different perspective on global problems. Weiland 1996, p. 243). However, this rechristening Although the WCS did not fully integrate develop- was more than simply a name change. ment and environmental considerations (Clapp and A central aspect of ecodevelopment was national Dauvergne 2005), their use of the term “sustainable self-reliance , which focused on local and regional development” gave it greater recognition and increased development to meet human needs. National self- its use in the international arena. The term became reliance also implied that nation-states should be able the central theme of the World Commission on Envi- to detach themselves from the international economic ronment and Development’s report Our Common system temporarily if they were adversely affected by, Future and was the integrating theme of the 1992 for example, fl uctuations in the world commodity UN Conference on Environment and Development market.* However, the oil shocks of the 1970s led to (Caldwell and Weiland 1996). economic recessions throughout the world, drastically In light of the evidence that environmental condi- reducing trade and the availability of aid for develop- tions around the world were deteriorating (Brandt ing nations. During this period, environmental degra- 1980; CEQ 1980; IUNC, UNEP, et al. 1980; UNEP dation in developing nations worsened, highlighting 1982b) and population and economic growth—two the essential role that the international economy plays critical factors affecting the environment—were con- in national development (UNEP 1982b). Recogniz- tinuing to increase (Strong 2003), the Governing ing that conservation and development are closely Council of the UNEP called for the creation of a interlinked, the WCS highlighted the importance of “global strategy for sustainable development.”3 The a “New International Development Strategy.” The purpose of this strategy was “(a) to redress the inequalities in the relations between richer and poorer † This recommendation can be traced back to the 1974 Declaration on the Establishment of a New International Eco- nomic Order (NIEO), which states that the purpose of the new international economic order is to “ensure steadily accelerating * Such fl uctuations might occur because of the dumping economic and social development.” Declaration on the Estab- of a heavily subsidized agricultural product onto the interna- lishment of a New International Economic Order, Resolution tional market. This action reduces the price of the commodity, 3201 (S-VI), May 1, 1974, www .un .org/ Depts/ dhl/ resguide/ resins -1— making it impossible for the farmers of nations that do not (or are .htm (accessed May 13, 2010). The declaration was released in 0— unable to) subsidize the agricultural sector to compete. 1974, the year the fi rst oil crisis ended. +1—

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following year, the UN General Assembly passed • the concept of “needs,” in par tic u lar the essen- Resolution 38/161, approving the creation of a spe- tial needs of the world’s poor, to which overrid- cial in de pen dent commission on the environment to ing priority should be given; and propose “long-term environmental strategies for • the idea of limitations imposed by the state of technology and social orga ni za tion on the envi- achieving sustainable development to the year 2000 ronment’s ability to meet present and future 4 and beyond.” As part of its terms of reference, the needs. commission was required to consider the interrela- Thus the goals of economic and social development tionships between developed and developing nations must be defi ned in terms of sustainability in all and between people, resources, the environment, and countries— developed or developing, market- orientated development. In short, the commission was required or centrally planned. Interpretations will vary, but must to do nothing less than rethink and articulate a new share certain general features and must fl ow from a consensus on the basic concept of sustainable develop- vision of development. ment and on a broad strategic framework for achieving Under the chairmanship of then Prime Minister it. (WCED 1987, p. 43) Gro Harlem Brundtland of Norway, the World Com- mission on Environment and Development (WCED, This defi nition highlights what has since become one also known as the Brundtland Commission) was of the major issues of contention about sustainable subsequently formed and held its fi rst meeting in Ge- development: the interpretation of sustainable devel- neva, Switzerland, in October 1984. The commission opment by one nation might be seen as leading to consisted of twenty-three members: four from cen- “unsustainable” development by another. The ongo- tral Eu ro pe an countries, seven from developed na- ing debate between developed and developing nations tions (including Maurice Strong, the chairman of the reveals that the commission’s objective to fi nd middle 1972 Stockholm Conference), and twelve from devel- ground between developed and developing nations’ oping nations (WCED 1987). positions was largely unsuccessful (Cock 2002). Between 1984 and 1987, the Brundtland Commis- In keeping with the approach to development artic- sion received advice and support from thousands of ulated by the 1974 Cocoyoc Declaration and infl uential individuals, institutions, and organizations from all publications such as Small Is Beautiful (Schumacher over the world (WCED 1987, p. 359). The commis- 1999)* and What Now: Another Development (Dag sion also visited each world region to obtain a fi rst- Hammarskjöld Foundation 1975),† Our Common hand view of environment and development issues Future defi ned the major objective of development and to hold deliberative meetings and open public as the “satisfaction of human needs and aspirations” hearings. On December 11, 1987, the commission’s (WCED 1987, p. 43). Further, it saw sustainable report, Environmental Perspective to the Year 2000 and Beyond, was submitted to, and adopted by, the * Schumacher (1999, p. 139) rejected the idea that what UN General Assembly via Resolution 42/186 as a “is best for the rich must be best for the poor” and redefi ned the conventional view of development toward human needs. “Devel- “broad framework to guide national action and inter- opment does not start with goods; it starts with people and their national cooperation on policies and programmes education, orga ni za tion, and discipline. Without these three, all aimed at achieving environmentally sound develop- resources remain latent, untapped, potential” (ibid.). Schumach- ment.”5 That same year, the commission’s report was er’s ideas are clearly refl ected by the Cocoyoc Declaration, which establishes human needs as the focus of development efforts. published as Our Common Future. † The Cocoyoc Declaration, Small Is Beautiful, and Benefi ting from more than a de cade of debate What Now: Another Development all present a consistent mes- over the notion of ecodevelopment and then of sus- sage of the need to redefi ne the whole purpose of development. They reject development that is focused on economic growth in tainable development, the Brundtland Commission favor of development that aims to satisfy the basic physiological sought to effectively integrate social and economic and psychological needs of humankind. Although the primary development with the need for environmental protec- focus is on meeting the basic needs of the poorest sections of each society, there is recognition that the needs of affl uent section. By combining these elements with the important tions of society are also not being satisfi ed. Free trade is rejected notion of intergenerational equity, the commission in favor of an international economic system that allows nation- created what has become the fi rst widely accepted states to enter and exit the economic system in concert with their defi nition of sustainable development. own development strategies. Such an economic system is also seen to promote a more equitable distribution of economic gains Sustainable development is development that meets and respond to concerns about environmental justice. In parallel, national sovereignty, the right to diversity, self-reliance, and the needs of the present without compromising the endogenous development are all recognized as essential compo- ability of future generations to meet their own needs. nents of the satisfaction of human needs. Finally, there is a unan- It contains within it two key concepts: imous recognition that development must be in harmony with the —-1 environment. —0 —+1

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development not as an end state but rather as “a pro- support of both developed and developing nations. As cess of change in which the exploitation of resources, Dryzek (1997, p. 136) notes, “Sustainable develop- the direction of investments, the orientation of tech- ment would surely lose unless it could be demon- nological development, and institutional change are strated that environmental conservation . . . [was] made consistent with future as well as present needs” obviously good for business profi tability and eco- (ibid., p. 9). The Brundtland Commission adopted a nomic growth everywhere, not just that these com- highly politi cal agenda by viewing “sustainable de- peting values can be reconciled.” Hence unless science velopment as a policy objective, rather than a meth- and technological innovation— two mainstays of eco- odology. It is an over- arching concept. . . . Such an nomic growth in industrial societies—were a central approach is unapologetically normative, and places theme of sustainable development, national govern- both the responsibility for problems, and the politi- ments (primarily of the North) would most likely have cal will to overcome them, in the hands of human rejected the concept as another radical and politi- actors” (ibid., p. 37). cally unrealistic form of environmentalism. The Brundtland Commission made a convincing By explicitly bringing science and technology into argument that the environment and development are the development equation, the technologically opti- “inexorably linked” and cannot be treated as sepa- mistic Brundtland Commission sought to articulate rate challenges (WCED 1987, p. 37). It concluded: a new era of economic growth where policies were “Development cannot subsist upon a deteriorating designed to release human ingenuity to expand and environmental resource base; the environment can- increase the natural resource base. Hence economic not be protected when growth leaves out of account growth could continue, and the environment could the costs of environmental destruction” (ibid.). This be protected. The commission stipulated, however, recognition that the “costs of environmental destruc- that for this to be achieved, the protection of ecosys- tion” need to be considered in the development equa- tems “must be guaranteed,” and all “economic part- tion provided the fi eld of environmental economics ners must be satisfi ed that the basis of exchange is with a strong endorsement. Further, the commission equitable” (WCED 1987, p. 17). highlighted the role public policy could play in using Having articulated a bold new development “incentives and disincentives” to guide commercial agenda, the Brundtland Commission highlighted organizations to develop environmentally sound a major problem with the institutional frameworks technologies (ibid., p. 60). Redclift (1996, p. 18) ar- that would implement the new era of economic and gues that the endorsement of economic mechanisms social development. It argued that most governmen- as valid policy tools to protect the environment “ef- tal environment agencies, especially those in devel- fectively opened the door to environmental econom- oping nations, “tend to be inde pen dent, fragmented, ics which sought to fi ll the policy vacuum.” [and] working to relatively narrow mandates with Our Common Future appeared at a time when closed decision processes” (WCED 1987, p. 9). It the po liti cal climate was beginning to become more stated that the same was true for many international receptive to the issues raised by the report. Future agencies responsible for areas such as development prospects for economic growth in industrialized na- lending, trade regulation, and agricultural develop- tions were beginning to look positive, while global ment. The commission believed that the solution to ecosystems were beginning to show signs of distress these problems lay in ensuring that national and in- (Engfeldt 2002). Hence there was an international ternational institutions consider the ecological di- audience eager to learn how to embrace economic mensions of policy together with economic, social, growth while reducing pressure on ecosystems. The trade, energy, agricultural, and other dimensions. commission’s insistence that science and technology Such integration would close “institutional gaps” could be used to meet human needs and solve envi- and bring environmental concerns into the center of ronmental problems was the answer many were decision making. The idea was to develop a more pro- looking for. Toward the end of the 1980s, many gov- active approach to environmental protection, rather ernments were committed to market liberalization than the more expensive “react-and- cure” approach as a means of solving their economic problems. They that was typical of many government policies in the saw trade as a way of stimulating ordinary (and unsus- post- Stockholm era (Runnalls 2008). In parallel with tainable) economic growth. Therefore, by focusing on this approach, the commission called for the strength- technological improvements that could support eco- ening of international law and conventions and -1— nomic growth, conserve natural resources, and pro- for better implementation of these mechanisms for 0— tect the environment, the commission gained the change. +1—

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Our Common Future was the fi rst rigorous attempt in a developing nation—especially one that had to formulate the concept of sustainable development. made signifi cant progress on environmental issues A major part of its success was due to the commis- since the 1972 Stockholm Conference—“had enor- sion’s efforts to base its recommendations on institu- mous po liti cal relevance and symbolism” (McCor- tional and politi cal realities and on what needed to be mick 1995, p. 254). In addition, the importance of accomplished in the short term. The endorsement of the UNCED was reinforced when it was decided an equitable and liberal international economy, fueled that the conference should be held at the “summit by scientifi c advance and technological progress that level,” meaning that heads of state should be present. conserved resources and minimized environmental This decision had the effect of renaming the harm, resonated well with those who were struggling UNCED in the media as the Earth Summit (Strong to reconcile development with the environment. De- 2003). veloped nations could continue along their develop- The UNCED was subsequently held in Rio de ment paths guided by economic incentives encouraging Janerio on June 3–14, 1992, and attracted some 178 sustainable development. Simultaneously, developing nation-states, including 110 heads of state who at- nations could look forward to rapid economic growth tended the fi nal two-day meeting (UN 1993b, 1993c, by joining a more equitable international economic 1993d). The Earth Summit (also known as the Rio system. Summit) was much larger than the Stockholm Con- However, even before the report’s publication, ference and was the fi rst time in history that so many some commentators remained skeptical whether infl uential people had gathered in one place. nation- states could implement the recommendations The main objectives of the UNCED were to re- put forward (Redclift 1987). See also Runnalls view the progress that had been made since the Stock- (2008), who argues that the failure to dramatically holm Conference and to identify strategies, programs, reform domestic institutions and establish an inter- legal mechanisms, fi nancial resources, and regional/ national framework to address sustainability con- national/global institutional frameworks that could cerns is the core reason for the per sis tent worsening protect and enhance the environment in the socioeco- global threats. nomic development process of all nation states.7 Its In response mainly to the Brundtland Com- purpose was nothing less than to develop ways to pro- mission’s call for an international conference to “re- tect the planet and ensure the welfare and future of view progress made, and to promote follow-up humankind. Further, the UNCED planned to bridge arrangements . . . [to Our Common Future] to set the major confl icts between developed and develop- benchmarks and to maintain human progress within ing nations in order to increase the likelihood that its the guidelines of human needs and natural laws” outcomes would be implemented (Linner and Selin (WCED 1987, p. 343), the UN General Assembly 2003). For this objective to be achieved, the impact decided to “convene the United Nations Conference that both poverty and affl uence, individually and on Environment and Development”6 (UNCED) in together, have on the environment needed to be ad- Brazil in 1992.* The decision to hold the conference dressed in the search for sustainable forms of economic development (South Centre 2002a). The UNCED produced three offi cial agreements: * Although the 1980s had witnessed a rise in the use of the term “sustainable development,” it was not used in the title of (1) the Rio Declaration on Environment and Devel- the conference because infl uential developing countries feared opment; (2) Agenda 21; and (3) the Statement on For- that doing so would reduce their freedom of action. Their posi- est Principles.8 In keeping with the Stockholm format, tion was that the title “Environment and Development” provided a level of ambiguity that strengthened their case that the environ- the Rio Declaration provided a statement of princi- mental destruction witnessed during the latter part of the twenti- ples that was supported by an action plan (Agenda 21) eth century was caused primarily by developed countries. Hence for its implementation. In addition, two conventions developed nations should take the lead in rectifying the environmental destruction experienced around the world (Engfeldt were opened for signature— the Convention on Bio- 2002). In a similar context, Sachs (2001) argues that the word logical Diversity and the Framework Convention on “development” in the title of the conference was a code word Climate Change. These conventions were a response used by developing countries to express their desire for “recognition and justice” (ibid., p. 5). Following the aborted negotiations for a new international economic order in the 1970s and the in- ture generations”—speaks directly to these concerns. Notwith- ternational debt crisis of the 1980s, developing nations had a standing the politics behind the offi cial title of the Earth Summit, strong case for placing their “right to development” at the fore- Dernbach (1998) argues that the international community’s ef- front of discussion (ibid.). Principle 3 of the Rio Declaration— forts to “synthesize and integrate environment and development “the right to development must be fulfi lled so as to equitably issues” (ibid., p. 21) provided a strong endorsement to the notion —-1 meet developmental and environmental needs of present and fu- of sustainable development. —0 —+1

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to events of the late 1980s that raised concerns about the international notion of development (Dernbach the continuing extinction of species and depletion of 1998, p. 21). biodiversity (the fi rst environmental concern under- Whereas the Rio Declaration provided a vision of lying sustainable development in our framework) and sustainable development, Agenda 21 provided a com- about ozone depletion and global climate change* prehensive plan of action that was created to guide (the fourth environmental concern). and coordinate the work of the UN, governments, The UNCED agreements highlight a transition in and other major groups in their efforts to transition the international community’s conceptualization of society toward sustainable development. In this re- development. The notion that prevailing economic gard, Agenda 21 is often described as the fi rst blue- policies were deepening economic divisions between print for sustainable development. The preamble to developed and developing nations was widely under- Agenda 21 states that national strategies, plans, poli- stood by the Earth Summit delegates (UN 1993a). cies, and pro cesses are crucial to achieving its suc- Therefore, the UNCED agreements sought to man- cessful implementation, and the responsibility for age and protect ecosystems so as to establish a pros- sustainable development consequently lies with na- perous future for humankind. Further, it was widely tional governments. With the emergence of global- accepted that no nation- state could achieve the objec- ization and regional integration over the past two tive of sustainable development on its own. As Caldwell de cades, the idea of making national governments and Weiland (1996, p. 107) note, the recognition that responsible for achieving sustainable development is global international action would be required to ad- open to debate. For example, the formation of the dress issues such as climate change meant that “Only Eu ro pe an Union (EU) provides an alternative re- One Earth”—the title of the Stockholm Conference— gional model for international engagement. The EU “became an operational reality at Rio.” Lisbon Strategy—not to be confused with the Lisbon Continuing the Brundtland Commission’s concep- Treaty—is briefl y discussed later (also see Section tion of sustainable development, the Rio Declara- 1.5 in Chapter 1). tion and Agenda 21 did not supplant prior approaches Although the UNCED is considered a watershed to development; rather, they revised (in fundamental event in the formation of sustainable development, ways) the conventional development approach. Be- Box 2.1 provides a discussion of several important fore the 1990s, the conventional development model dissenting views. (promoted by the international community) incor- In 1997, fi ve years after the Earth Summit, the porated four related concepts: (1) peace and security; UN held a General Assembly Special Session (other- (2) economic development; (3) social development; wise known as the Earth Summit II or Earth Sum- and (4) national governance that secures peace and mit +5) to review and appraise the implementation development (Dernbach 1998, 2004). The Brundtland of Agenda 21. The evidence presented indicated that Commission and the UNCED agreements called for the condition of the global environment had contin- environmental concerns to be integrated into the ued to deteriorate and looked set to worsen (UNCSD conventional development model. Principles 3 and 4 1997). Although some nations had been able to re- of the Rio Declaration speak directly to this aim:9 duce pollution levels and the degradation of resources through institutional change and capacity-building ef- Principle 3: The right to development must be fulfi lled forts (involving both public participation and private- so as to equitably meet developmental and environmental needs of present and future generations. sector actions), these actions were not suffi cient to counteract the sheer scale of human activity that Principle 4: In order to achieve sustainable develop- fed negative environment and development trends ment, environmental protection shall constitute an (ibid., p. 5). integral part of the development process and cannot The 2002 Johannesburg Summit (or the Earth be considered in isolation from it. Summit III) was held to review progress since the The recognition of the need to protect the UNCED. During the ten years since Rio, the world en vironment—on which the development pro cess had experienced a new phase of economic growth that depends—can be considered the “fi fth element” of was largely based on patterns of development, consumption, and lifestyles that had the effect of widening the gap between affl uent and poor nations (South * The decision to develop the Convention on Climate Centre 2002b). Although many developed nations had Change was made at the fi rst meeting of the Intergovernmental -1— Panel on Climate Change (IPCC), established by the World Me- experienced enhancements in their overall quality of 0— teorological Or ga ni za tion (WMO) and the UNEP, in 1988. life, the direct or indirect effects of globalization led +1—

561-45401_ch01_8P.indd 134 6/23/11 9:50 AM BOX 2.1: CRITIQUES OF THE EARTH SUMMIT AND THE RIO DECLARATION

The 1992 United Nations Conference on Environment and Development (UNCED), commonly known as the Earth Summit, is seen as a seminal event, when the international community gathered to recognize and articulate the concept of sustainable development. Indeed, the summit was unpre ce dented in its scale and scope. Its mission was to revolutionize the way we think and live so as to protect the planet and ensure the welfare and future of humankind. A major part of this vision was to bridge the confl icts between developed and developing nations that had preoccupied many of the “development” discussions of the previous twenty years. However, although the Earth Summit was perceived by many to have addressed these issues successfully (given the challenge of achieving consensus among so many nation- states), there were those who argued that the summit had sidestepped vitally important and po liti cally volatile questions. In their review of the Rio Declaration, Grubb, Koch et al. (1993) argue that the principles reveal weaknesses in the compromises that were agreed on to make the declaration po liti cally palatable. “Far from a timeless ethic, it was . . . a snapshot of history” (ibid., p. 85). A signifi cant turning point in the negotiations of the declaration was the success of developing nations in placing their “right to development” at the forefront of considerations (Sachs 2001). The recognition that less developed nations needed to “develop” meant that the Rio Declaration effectively turned into a “declaration on development, rather than on environment” (ibid., p. 5). Further, because “development” can be defi ned in multiple ways, it can be argued that the Rio Declaration supports a business- as- usual approach to development where the environment is more of an afterthought. On the eve of the UNCED, David Korten, found er and president of the People- Centered Development Forum, published a column that highlighted three questions that he argued had not been asked in the pre- summit discussions: 1. “Is sustained economic growth possible within a fi nite ecosystem?” 2. “Is the removal of barriers to the free international fl ow of trade and capital consistent with the essential need for community and environmental stewardship?” 3. “Is offi cial international assistance part of the solution or part of the problem?”a The fi rst two questions addressed the conviction that economic growth would be suffi cient to alleviate the world’s problems of poverty and environmental degradation. Korten argued that even a smarter (more environmentally sound) approach to sustained economic growth ignores data that indicate that the earth cannot support the scale of economic (that is, industrial) expansion envisioned by its proponents. Second, a reliance on free trade is likely to enable goods and capital to move freely across national borders, weakening the ability of governments to regulate their own economies and protect their citizens against fl uctuations in the international economy. “Where corporate globalists tell of the spread of democracy and vibrant market economies, civil society tells of the power to govern shifting away from people and communities to fi nancial speculators and global corporations dedicated to the blind pursuit of short- term profi t in disregard of human and natural concerns.”b Korten saw the UNCED pro cess as being dominated by nation- states whose po liti cal power and social systems were grounded in market capitalism. Hence there was no incentive for them to consider alternative forms of development that moved away from economic growth through industrialization.c Those nations, groups, or individuals who questioned the economic belief that a “rising tide will raise all boats” faced ridicule for being insensitive to the needs of the poor. Korten’s third question was based on the fact that although the amount of aid given to developing nations had increased over the previous four de cades, environmental conditions in these nations had consistently worsened. Therefore, it seemed only logical to ask whether there were alternative international mechanisms through which developing nations could be assisted. In response to Korten’s column, Herman Daly (1992) suggested that the fi rst question was becoming impossible to ignore because of an increasing volume of data on the declining vitality of the earth’s ecosystems. He also suggested that Korten’s second and third questions were vitally important and would be the most challenging to address. Rather than attempting to tackle them at Rio, he recommended that they be resolved through further research after the summit and that the UNCED focus its attention on the fi rst question. A look at both the Rio Declaration and Agenda 21 provides some evidence that the UNCED did attempt to address the fi rst question directly. For example, Rio Principle 8 calls for nation- states to try to “reduce and eliminate unsustainable patterns of production and consumption.” In support of this principle, Agenda 21 dedicates an entire section to promoting “patterns of consumption and production that reduce environmental stress” (UN 1993a, p. 31). (continued) —-1 —0 —+1

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BOX 2.1 (continued)

One year after the Earth Summit, the Ecologist magazine published Whose Common Future? (1993), which addressed questions similar to those raised by Korten. However, its critique of the summit was rather more scathing. A main conclusion of Whose Common Future? is that communities should be reinstated as sources of social and po liti cal authority, and the idea that the modern CEO faces the same common future as the peasant in Bihar should be rejected. A critical question raised by the book is, who will manage the environment for whose interest? It argues that how the environment should be managed is known through past experience and indigenous/local knowledge— both of which are becoming lost in the international economy. Further, the book’s arguments highlight the importance of balancing the role of national/local government with the role of the market, both of which must be held accountable to the people’s interests by the legal/institutional frameworks of civil society. Finally, Michael Redclift (1996) provides a valuable retrospective on the Earth Summit. His main criticism is that its spectators might have been convinced that the principal environmental problems facing the world were “climate change, a loss of forests and, with them, biodiversity” (ibid., p. 19). Redclift argues that the UNCED neglected to address important questions relating to population, trade, poverty, the debt crisis (faced by many oil-importing developing nations), and distributional ine qual ity more generally. In addition, he raises the important question whether the “development” of industrialized nations is what the developing world should be aspiring to achieve.

a D. Korten (1991), People- Centered Development Forum, “The UN Conference on Environment and Development: Unasked Questions,” Column no. 12, April 15, http:// livingeconomiesforum .org/ 1991/ 12KORTEN (accessed January 13, 2011). b D. Korten (2003), Global Economics, Environmental Integrity, and Justice: Reﬂ ections of an “Economic Missionary,” National Council of Churches, Enough for All: Sustainable Living in a Global World, Seattle University, June 20– 23, www .pcdf .org/ 2003/ NCC .htm (accessed May 13, 2010). c In a speech to the World Business Council on Sustainable Development (WBCSD) on November 4, 1999, Gro Harlem Brundtland admitted that markets are not always right. To provide an example, she quoted a former prime minister of India who “saw no multinational companies willing to invest in educating the children of India, or immunising them and helping them to grow up” (Saha 2002, p. 23).

to the gradual degradation of the social, economic, considered necessary to transition the world toward politi cal, and natural environment in many develop- sustainable development. The Johannesburg Decla- ing nations (ibid., pp. 6–7). Further, the international ration states that “the rapid integration of markets, economic system was still far from being equitable. mobility of capital and signifi cant increases in in- Differing levels of development and bargaining vestment fl ows around the world have opened new power throughout the world meant that the interna- challenges and opportunities for the pursuit of sus- tional economy tended to be dominated by those tainable development” (UN 2002). In addition to with excessive economic and po liti cal power. reaffi rming a commitment to sustainable develop- Although there was a clear high- level commitment, the declaration specifi cally urges developed ment to make progress at Johannesburg, the intrac- nations to provide the internationally agreed-on lev- table problems identifi ed at the time of the 1997 els of offi cial development assistance (ODA) to de- Earth Summit II continued to be a problem during veloping nations. Further, and for the fi rst time in the Johannesburg plenary sessions (see Section 2.10 such a declaration, the private sector is called on to in the Primer on Sustainable Development). The fi - recognize its role in achieving sustainable develop- nal meeting of the Preparatory Committee for the ment. Finally, the declaration states that the goals of Johannesburg Summit, held in Bali, Indonesia, from sustainable development will be achieved through May 27 to June 7, 2002,10 failed to break the dead- “effective, democratic and accountable interna- lock between developed and developing nations on tional and multilateral institutions,” putting multi- how to reconcile the confl icting goals of economic lateralism at the center of sustainable development development, poverty reduction, and environmental efforts (ibid.). protection (New Scientist 2002a, 2002c). A signifi cant outcome from the Johannesburg An important development at the Johannesburg process was the international community’s commit- -1— Summit was the recognition that the new era of eco- ment to market mechanisms and capacity building (or 0— nomic globalization had changed the approaches capacity development) as critical mea sures to achieve +1—

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sustainable development. Developing nations, how- for a future battle on economic globalization (New ever, were concerned about the nature of this tran- Scientist 2002b). sition because it reduced the pressure on (and Two other notable documents that contribute to responsibility of) developed nations to provide their an understanding of sustainable development are agreed- on share of overseas development assistance the Earth Charter (launched by the Earth Charter since “the market” would make up for any short- Commission in 2000) and the United Nations Mil- fall.* Although the creation of a fair (or equitable) lennium Declaration. Interestingly, the structures of trade regime is essential for development in less de- both the Earth Charter11 and the Millennium Decla- veloped regions, the assistance that industrialized ration‡ align closely with the fi ve components of sus- nations provide to less developed nations is likely to tainable development: peace and security; economic remain an important aspect to their early progress. development; social development; national gover- Further, the transition toward reliance on the mar- nance that ensures peace and development; and en- ket refl ects a continuing ideological shift away from vironmental protection. Because the two publications the role of the government as a policy driver.† In ef- are produced by different sources (the UN and a non- fect, the trend to greater trade liberalization allows g o v e r n m e n t a l o rga ni za ti o n [ N G O ] ) , i t p r o v i d e s a d - industry (in theory) to escape or minimize the social ditional support for the notion that “sustainable” costs of production by locating its operations in development can be broadly defi ned using these fi ve places where national laws of environmental protec- critical elements. tion are weak and good health and the environment As should be evident from this brief overview are less valued. chapter, the concept of sustainable development is The decisions by the United States to withdraw not static and continues to be shaped by key events, from many multilateral agreements and, instead, fo- new knowledge, and the actions of nations, regions, cus on voluntary partnerships, is a signal to many and the international community. One example of a environmental organizations that the United States new dynamic that could further shape the concept is is attempting to redefi ne sustainable development the Eu ro pe an Union’s efforts to address sustain- away from environment and development issues to- able development. More specifi cally, the Europe 2020 ward trade liberalization (James 2002). The fact that Strategy provides the foundation for a regional—as the Johannesburg delegates were able to reject a sen- opposed to a national or international— approach to tence from the summit’s fi nal resolution that would sustainable development (see Section 1.5 in Chapter have given the WTO a judicial role in trade and envi- 1 for a discussion of Eu rope 2020). The strategy is ronment disputes, indicates that the lines are drawn focused on establishing a competitive and greener economy that creates employment.12 In this regard, the strategy aligns well with the ideas discussed throughout this text and the argument that employ- * Given the fact that few developed nations have been able to meet their commitments to provide 0.7 percent of their ment considerations are as central to sustainability GNP for offi cial development assistance (Martens 2001; UNCSD as environmental concerns. 1997), developing nations have had no real option but to compete Although there are some concerns that the focus for “private capital” to assist with their development. This transi- on “competitiveness” could undermine social and tion to a reliance on transnational corporations for capital has undermined the notion of the social contract between developed environmental policies (Hochfeld, Schmitt, et al. 2006; and developing nations (Sachs 2001). There is also a parallel con- Wolff, Schmitt, et al. 2006), the regional focus of the cern that in order to secure private capital, recipient businesses, Lisbon Strategy provides an example of how other organizations, and institutions within nation-states might be forced to accept unfavorable terms of agreement. Alternatively, govern- world regions could work together to create strategies ments might be coerced into adjusting regulations to lower the for moving toward sustainable development. The EU fi nancial risk of investing in their nation compared with other strategy will also reveal whether it is possible—in the nation-states. If such regulatory adjustments have the effect of lowering environmental and worker health and safety standards, this outcome would clearly be a shift away from the objectives of ‡ The major headings of the United Nations Millennium sustainable development. The need to look to the international Declaration are the following: (1) values and principles (specifi - economy for development assistance further reinforces the inter- cally: freedom; equality; solidarity; tolerance; respect for nature; national economy as the mechanism through which nation- states and shared responsibility); (2) peace, security, and disarmament; should follow their “right to development.” In this regard, Sachs (3) development and poverty eradication; (4) protecting our com- (2001) suggests that a more accurate name for the 1992 Earth mon environment; (5) human rights, democracy, and good gover- Summit would have been “Environment, Development, and the nance; (6) protecting the vulnerable; (7) meeting the special Global Economy” (ibid., p. 11). needs of Africa; and (8) strengthening the United Nations. United † See the discussion of the so-called Washington Con- Nations, United Nations Millennium Declaration, www .un .org/ —-1 sensus in Section 3.4.1 of Chapter 3. millennium/ declaration/ ares552e .htm (accessed May 13, 2010). —0 —+1

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context of economic globalization and rapid techno- Sustainability (Smith, Hargroves, et al. 2010), has logical change— to create a competitive (regional) been released. The principal argument of Cents and economy that provides good job opportunities with- Sustainability is that economic growth can be signifi - out degrading the environment, or, conversely, that cantly decoupled from environmental pressures— maintains a good environment without compromis- continuing the message of Our Common Future that ing employment and economic opportunity. economic growth and environmental protection Although sustainable development emerged as a can advance in unison while reducing poverty. The concept acknowledging the nexus between economic premise of the book is that progress toward decou- development (loosely defi ned) and the environment, pling can and has been made and that since there is there were other more international expressions that currently no po liti cal commitment to “slow” eco- focused explicitly on employment as a major concern nomic growth, a decoupling agenda presents the most related to achieving social justice.* The earliest no- viable pathway toward sustainable development.§ We table event was the 1944 Declaration of Philadel- would argue that Cents and Sustainability falls within phia creating the International Labour Orga ni za tion † the realm of evolutionary change. A critical question that emphasized the essential need to obtain agree- therefore, is how can a revolutionary, rather than evo- ment on policies to address the terms and conditions lutionary, decoupling agenda be achieved. of employment, safe and satisfying employment, pur- While Cents and Sustainability is an important chasing power, and unfair exploitation of human text that promotes some of the policy instruments capital, such as child labor. As a result of the recent discussed throughout this work, we believe more is global economic upheaval, fair employment with needed. In this text, we have argued that a sustainable adequate purchasing power has emerged as an es- development approach must be fashioned to create a sential third pillar of the concept of sustainable de- competitive and green economy that creates safe, velopment. meaningful, and well-paid employment and suffi cient Finally, some critics associated with ecological earning capacity within the context of rapid techno- economics go so far as to state that sustainable devel- logical change and globalization. This approach is opment cannot be achieved unless the current North- grounded upon the belief that current rates of change ern model of economic development is abandoned are too slow to make serious inroads into the environ- (Sanders 2006). mental and social challenges discussed in this chapter. During May 2010, the Preparatory Committee for What is needed is revolutionary change—both of a the UN Conference on Sustainable Development technical and strategic nature, and of a politi cal and held its fi rst meeting in preparation for the Rio+20 social nature— and it is to this end that this work is Earth Summit in 2012.13 The focus of Rio+20 is on a directed. green economy in the context of sustainable development and poverty eradication, and on creating an 2.1 NOTES international framework for sustainable development.14 The stark realities brought about by the fi - 1. Earth Day Network, www .earthday .net/ about/ default nancial meltdown in 2008 are sure to infl uence a .aspx (accessed April 8, 2006). 2. UNEP, Report of the Governing Council on Its Tenth Ses- reexamination of the neoliberal Washington Con- sion, General Debate, 36, www .unep .org/ Documents .multilingual/ sensus and question whether the largely unregulated Default.asp ?DocumentID = 70 & ArticleID = 702 (accessed May 13, control of economic development by fi nancial insti- 2010). tutions and powerful corporations can be reconciled 3. UNEP, Report of the Governing Council on Its Tenth Ses- sion, General Debate, 49, www .unep .org/ Documents .multilin- ‡ with sustainable development. gual/ Default .asp ?DocumentID = 70 & ArticleID = 702 (accessed As this work goes to press, the twenty-year up- May 13, 2010). date to Our Common Future, entitled Cents and 4. UN General Assembly, Resolution 38/161, Process of Preparation of the Environmental Perspective to the Year 2000 and Beyond, December 19, 1983, sec. 8(a), www .un .org/ docu ments/ ga/ res/ 38/ a38r161 .htm (accessed May 13, 2010). * Indeed, Principle 8 of the Stockholm Declaration 5. UN General Assembly, Resolution 42/186, Environmental clearly recognizes that “economic and social development is es- Perspective to the Year 2000 and Beyond, December 11, 1987, p. sential for ensuring a favorable living and working environment 2, http:// www .un .org/ documents/ ga/ res/ 42/ a42r186 .htm (accessed for man.” May 13, 2010). † See the discussion in the extended Primer on the Emergence of Sustainable Development at the website associated with this book. § See Section 3.6 in Chapter 3 for a discussion of the -1— ‡ See especially the discussion of the “new economics” “new economics” and whether continuous economic growth is 0— in Section 3.6 in Chapter 3. possible. +1—

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6. UN General Assembly, Resolution 44/228, United Na- Barnett, H. J., and C. Morse (1963). Scarcity and Growth: tions Conference on Environment and Development, December The Economics of Natural Resource Availability. Balti- 22, 1989, p. 1, www .un .org/ documents/ ga/ res/ 44/ a44r228 .htm more, Johns Hopkins University Press for Resources (accessed May 13, 2010). for the Future. 7. UN General Assembly, Resolution 44/228, United Nations Brandt, W. (1980). North-South: A Programme for Survival; Conference on Environment and Development, December 22, Report by the Inde pen dent Commission on International 1 9 8 9 , s e c s . 1 5 ( a ) – 1 5 ( w ) , w w w . u n . o r g / d o c u m e n t s / g a / r e s / 4 4 / a 4 4 r 2 2 8 .htm (accessed May 13, 2010). Development Issues. Cambridge, MA, MIT Press. 8. For an informative discussion of the UNCED agree- Caldwell, L. K., and P. S. Weiland (1996). International ments, see Grubb, Koch et al. (1993). 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