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The Sustainable Growth Paradigm: Implications for Technology and Policy

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The Sustainable Growth Paradigm: Implications for Technology and Policy The Sustainable Growth Paradigm: Implications for Technology and Policy by Kyriakos Pierrakakis Master in Public Policy John F. Kennedy School of Government, Harvard University, 2007 Ptychion (B.Sc.) in Informatics Athens University of Economics and Business, 2005 Submitted to the Engineering Systems Division in Partial Fulfillment of the Requirements for the Degree of Master of Science in Technology and Policy at the Massachusetts Institute of Technology June 2009 2009 Massachusetts Institute of Technology. All rights reserved. Signature of Author…………………………………………………………………………………. Technology and Policy Program, Engineering Systems Division May 15, 2009 Certified by…………………………………………………………………………………….……. Nicholas A. Ashford Professor of Technology and Policy Director, Technology and Law Program Thesis Supervisor Accepted by…………………………………………………………………………………………. Dava J. Newman Professor of Aeronautics and Astronautics and Engineering Systems Director, Technology and Policy Program 2 The Sustainable Growth Paradigm: Implications for Technology and Policy by Kyriakos Pierrakakis Submitted to the Engineering Systems Division on May 15, 2009 in Partial Fulfillment of the Requirements for the Degree of Master of Science in Technology and Policy Abstract While some scholars continue to insist that the concept of sustainability is vague and unwieldy, this thesis seeks to explore multidimensional elements of sustainability and seeks to offer an integrative, transdisciplinary approach to policy design for its attainment. Sustainability and the related concepts of development, globalization, and economic and environmental justice are interwoven with technological, social and institutional change, and with trade as drivers of the transformation of industrial and industrializing societies. The discussion begins by an analysis of the dominant existing models of economic growth and innovation and advances to the effects of economic growth on sustainability. Included is an analysis of the limits of the GDP growth paradigm, the effects of growth on the developed and the developing world and the relationship between economic growth and ecological collapse. The focus of analysis then shifts from the domestic to the international. Trade and the International Financial System are examined both with respect to their primary theories and characteristics, but also in relation to their effects to sustainability. The discussion is then concluded by an examination of the different policy options and analytical tools that could be employed for a transition to a more sustainable economic model. Thesis Supervisor: Nicholas A. Ashford Professor of Technology and Policy 3 4 ACKNOWLEDGMENTS “We become what our fathers teach us in odd moments, when they are not trying to teach us” Umberto Eco, Foucault’s Pendulum One of the books I happened to read recently that had a significant impact on me was Malcolm Gladwell’s “Outliers”. Gladwell’s thesis is that success is more attributable to one’s social environment and personal effort, rather than to one’s inherent traits and talent. I could not agree more. These two years at MIT (and the previous two at Harvard) have been a life-changing experience for me. The people I met, interacted and worked with have made me a better scientist, a better thinker, a better person. I need to begin by thanking Dr. John E. Parsons, Executive Director of the Center for Energy and Environmental Policy Research at MIT. I worked under Dr. Parsons’ supervision as a research assistant for the last two years, studying the risks and regulation of the – yet nascent – carbon capture and sequestration industry. I am deeply grateful to Dr. Parsons and to the BP Advanced Conversion Research Project for funding my research and studies at MIT over the last two years. Dava Newman and Frank Field from the TPP program played a significant role in my MIT education, through classes, discussions and continuous support. Kenneth Oye’s class was a true inspiration, and convinced me that the realm of political economy constituted my natural habitat. Needless to say, Syndey Miller deserves my full gratitude for her help and guidance. Ed Ballo was particularly helpful as well. My thesis advisor, Professor Nicholas A. Ashford, has been the driving force behind this work, and deserves my heartfelt gratitude for his guidance, support and mentorship, which extended beyond the content of this thesis. I met Professor Ashford as a student in his Law, Technology and Public Policy class. His scholarship and strong views early challenged my thinking and forced me to approach old questions with different, perhaps “heretic” approaches. The heretics of yesterday, however, are often the leaders of tomorrow, and these difficult times merit new approaches outside the failed paradigms of the past. My old English teacher and mentor Emmanuel Ninos was the person who first ignited my interest to pursue graduate studies at MIT, by dedicating a book to me back in 2001 with the inscription “straight to MIT.” He was proven wrong in the respect that I first decided to spend two years at the Kennedy School, but I eventually made the cut. My Professor at the Athens University of Economics and Business Dimitris Gritzalis early located my interest in transdisciplinary problems and convinced me that even though I was a student in a highly specialized Department of Informatics, my trait was a virtue, rather than a vice. 5 During my four years in the US, Nikos Panteleakis and his family were a source of continuous support and encouragement. I spent numerous weekends in their home in Fair Lawn, New Jersey, and it always felt like being back in Greece among family. Finally, Elaine Papoulias, Director of the Kokkalis Program of which I was a fellow at Harvard, advised and supported me as if I continued being a Kokkalis fellow while at MIT, and played a central role in advising me to continue my studies at Oxford. But, above everyone else, there are Stefanos and Yota. My parents taught me more about life, effort, love, happiness and devotion than any university or book could ever teach me. It all started with them. This work, albeit too imperfect to match that measure, is dedicated to them. 6 Table of Contents 1. Introduction................................................................................................................... 9 1.1 Growth and Development Distinguished ...........................................................................9 1.2 The Meaning of Sustainable Development: Economic Welfare, Employment and Environment .............................................................................................................................10 1.3 Growth in the Context of Globalization ...........................................................................13 1.4 Structure of the Chapters ..................................................................................................20 Chapter 2: Economic Growth and Prosperity ............................................................. 22 2.1 Factor Endowments and the Classification of Capital....................................................22 2.2 Theories and Perspectives on Economic Growth ............................................................22 2.2.1 Linear Stages of Growth Models: The Harrod-Domar Model......................................23 2.2.2 Structural Change Models.............................................................................................24 2.2.3 The International Dependence Revolution ...................................................................26 2.2.4 Neoclassical Growth Theory: The Solow Model..........................................................27 2.2.5 New Growth Theory: Romer’s Model..........................................................................28 Chapter 3: Innovation & Economic Growth................................................................ 32 3.1 Technological Change ........................................................................................................32 3.2 The Long Waves .................................................................................................................32 3.3 The Information or Post-Industrial Revolution ..............................................................36 3.4 Joseph Schumpeter’s “creative destruction”...................................................................40 3.5 Market Structure and Innovation.....................................................................................44 3.6 Creative Destruction: The Case of Green Jobs ...............................................................46 4. The Effects of Economic Growth on Sustainability................................................. 50 4.1 The GDP Growth Paradigm..............................................................................................50 4.2 The End of Sustainable Growth?......................................................................................53 4.3 Growth in Developing Economies and the Washington Consensus ..............................55 4.4 Growth in the Developed World and its Impact on Employment .................................57 4.5 Ecology and Collapse .........................................................................................................59 5. Trade and Economic Development ........................................................................... 63 5.1 Free Trade: Winners and Losers......................................................................................63
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