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Measuring Economic Sustainability of Nations : Singapore As Case Study

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Measuring Economic Sustainability of Nations : Singapore As Case Study This document is downloaded from DR‑NTU (https://dr.ntu.edu.sg) Nanyang Technological University, Singapore. Measuring economic sustainability of nations : Singapore as case study Chew, Mona Poh Gek 2013 Chew, M. P. G. (2013). Measuring economic sustainability of nations : Singapore as case study. Doctoral thesis, Nanyang Technological University, Singapore. https://hdl.handle.net/10356/51139 https://doi.org/10.32657/10356/51139 Downloaded on 02 Oct 2021 19:15:38 SGT Measuring Economic Sustainability of Nations - Singapore as Case Study Mona Chew Poh Gek School of Humanities and Social Sciences A thesis submitted to the Nanyang Technological University in partial fulfillment of the requirement for the Degree of Doctor of Philosophy 2013 Acknowledgements I owe a special debt of gratitude to my dissertation supervisor, Emeritus Professor Lim Chong Yah for his confidence in me and with whom I had a continuous Socratic dialogue during the long course of this PhD pursuit. There is no wisdom and patience equal to Prof. Lim’s mentoring. The research scholarship of the Nanyang Technological University (NTU) is gratefully acknowledged. I would also like to acknowledge the helpful advice I have received from many of the professors of the Economics Division of NTU during my four years of PhD coursework and research, in particular: Prof Euston Quah, Prof Tan Kim Heng, Prof Chew Soon Beng, Prof David Riesman, Prof Huang Weihong, Prof Joseph Alba, Prof Tan Khye Chong, Prof Low Chan Kee and Prof Chang Youngho. Lastly, I thank God for granting me the privilege to be the ‘chosen one’ of my lovely parents so that I can spend a fruitful and meaningful life on Earth. The last four years of transition from corporate world to academia could not have been possible without the wonderful support of my husband, King Jet, and the invaluable companionship of my two children, affectionately known as ‘The Moosey and The Sqwerl’. As a strong believer in that the Sustainability of human race is in our children's hands, I dedicate this thesis to them. Mona Chew, B.A., B.Soc.Sc.(Hons) (NUS), PG.Dip.Ed. (NTU-NIE) August 2011 i Summary Concerns on economic sustainability started in the early 1800’s with the Malthusian theory on mankind’s possible collapse back to subsistence-level conditions due to population growth outpacing agricultural production. Though subsequent technological progresses have largely debunked this ‘doomsday’ scenario, the spectra of unsustainable development of modern global economy has gradually been revived in the last few decades; but this time is due to scientifically verified realization that planet Earth is unlikely to be ecologically sustainable in face of the massive depletion of natural resources and the environmental damage brought about by over-zealous and short-sighted economic development. Various piecemeal actions are being undertaken by various nations and international organizations to bring about a more responsible and greener form of sustainable development, with varying degrees of successes. There is also a growing realization that a holistic approach to sustainable economic development by each nation is necessary to bring underdeveloped nations out of poverty, to maintain sustainable economic growths in developed nations, and at the same time to ensure the global physical sustainability of the Earth in the long run. We termed this as economic sustainability and such a holistic approach may be guided by C.Y. Lim’s ‘Trinity’ development theory. There is also the need to develop a holistic index of economic sustainability of each nation which also reflects its contribution to global physical sustainability. The development of such an index is the main contribution of this thesis. An economic system is sustainable in the long term only if it accommodates the production eco-systems of the economy. Over expansion, unbalanced and pre-mature growth of the economy can lead to bottlenecks and structural strains, ultimately decreasing the net prosperity of the people. In the extreme, the eco-systems of production may be irreparably damaged, leading to economic collapse. An intuitive way to study the complex inter- relationships of the production eco-systems is based on the ‘EGOIN’ concept in the ‘Trinity’ development theory, which comes from the first letters of the five main domestic co- determinants of economic development: Entrepreneurship, Government, Ordinary labour, Investment and Natural resources. The main outcome of this research is a framework for the computation of the proposed EGOIN Composite Index. The core model of the index is a root- mean-square deviation weighted summation of five component indices for the Entrepreneurship, Government, Ordinary Labor, Investment and Natural Resource eco- systems respectively. The proposed equations allow the weights to be automatically adjusted in favor of any economy whose production eco-systems are developing in balanced tandem and with global sustainability as one of its objective functions. The key variables for each of the five components have been identified and sample data sets have been collected and analyzed. The selected sets of variables are grouped under several main factors for each ii component index. The weights for each factor can be found using economic regression analysis. For E, G, O and I eco-systems, the objective functions are more related to economic performance, while that for the N eco-systems is more related to ecological sustainability. The composite index can thus served as an indicator of economic sustainability. For the E Index, the variables are grouped under the factors of market access, business environment, knowledge capital and entrepreneurial culture. For the G Index, the major factors are under governance institutions, political accountability, corruption freedom, and safety and security. The major factors for the O Index are labor market, education, health and social capital. The major factors for the I Index are domestic savings, foreign direct investments, infrastructural capital and macro-economic environment. For the N index, the variables are environmentally relevant and grouped under water sustainability, environmental pollutants, energy sustainability and climate change, and sustainable consumption. The EGOIN Composite Index has been computed for a selected group of over 100 countries including Singapore. The results are found to be consistent with generally accepted classifications of nations in terms of their economic sustainability, and with the S-Curve concept and the Triple-C concept of the ‘Trinity’ development theory. While Singapore is currently ranked relatively high according to its EGOIN Composite Index, the study revealed potential weaknesses in its Ordinary Labour (O) and Natural Resources (N) areas which may lower Singapore’s economic sustainability in future and which therefore should deserve careful attention from its policy makers. The economic sustainability of individual nations collectively affects the global ecological sustainability of whole world. If the global ecology is becoming unsustainable, it would drag down the N (natural resources) indices of all nations, and thus lowering the EGOIN composite indices of most nations. Nations which are most responsible for the deterioration of global ecology would see a larger decrease in their EGOIN composite indices. The EGOIN Composite Index of economic sustainability can serve as a useful tool for policy makers to plan sustainable economic development which is holistic and inclusive of ecological (environmental) sustainability. Having said this, it should also be noted that even if every nation is improving its economic sustainability, it does not necessary imply the ecological sustainability of the entire planet is improving. A more sophisticated dynamic tracking of ecology with time and apportioning of global ‘diswelfare’ may need to be included in the computation of N indices of individual nations. iii Table of Contents Page Acknowledgments i Summary ii Table of Contents iv List of Figures vii List of Tables ix Chapter One: Introduction 1.1 Background and Motivation 1 1.2 Objectives 5 1.3 Major Contributions of the Thesis 6 1.4 Organization of the Thesis 7 Chapter Two: Literature Review 2.1 Introduction 8 2.2 Concerns on Sustainable Development 9 2.2.1 The Classical Debate 9 2.2.2 Renewed Interest in Sustainability Issues 10 2.2.3 Current Actions on Sustainability for the Anthropocence 16 2.3 The ‘Trinity’ Development Model 22 2.3.1 The EGOIN Theory 23 2.3.2 The Triple-C Theory 28 2.3.3 The S-Curve Theory 31 2.4 Definitions, Models and Indicators of Sustainability 35 2.4.1 Strong and Weak Sustainability 35 2.4.2 The Need for Sustainability Indicators 37 2.4.3 System of Integrated Environmental and Economic Accounting 39 iv 2.4.4 Green Gross Domestic Product 40 2.4.5 Genuine/Adjusted Net Savings 41 2.4.6 Index of Sustainable Economic Welfare and Related Indicators 45 2.4.7 Indicators of Strong Sustainability 48 2.4.8 Measuring Sustainable Development: Challenge for the Future 55 2.5 Concluding Remarks 58 Chapter Three: Proposed Framework for EGOIN Composite Index as Indicator of Economic Sustainability 3.1 Introduction 60 3.2 Motivation for Development of EGOIN Composite Index 61 3.3 Model Structure of Proposed Composite Index 63 3.3.1 Model Core: EGOIN Composite Index 64 3.3.2 RMSD-Modulated Weights of the Component Indices 65 3.3.3 The Component Indices 69 3.4 Implementation and Application Issues 76 3.5 Concluding Remarks 78 Chapter Four: Identification and
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