th th The Hague International Model United Nations 2021 | 25 ​ January 2021 – 29 ​ January 2021 ​ ​ ​ ​ ​ Forum: The Economic Committee Issue: Measures to Promote Sustainable Capitalism Student Officer: Arav Dalwani Position: Head Chair Introduction Be it the diminishing oil reserves or the deforestation of thousands of acres of forested land every passing minute, most of us today live in an economic system that is increasingly proving itself to be unsustainable. Sustainability as a concept, defined as the long-term maintenance of the well-being of society across generations, is one that has eluded humanity throughout its history. Human society will always have to consume resources and energy for its development and functioning, as they are essential for even the most basic activities. Under capitalism, humanity has sought to maximise resource allocation and energy extraction. However, we must take a step back and ask: If resources continue to be depleted at the current rate under our modern capitalist system, will future generations of humanity be able to survive and sustain themselves at all? If we continue consuming these resources in the same manner, how can we justify the unsustainable and relentless pollution and damage to our environment? And further, in light of the various socio-economic disparities present today, how sustainable is capitalism itself as a system of human development? It is the existence of these very questions and problems that have brought forth the urgent need for Measures to Promote Sustainable Capitalism worldwide. Capitalism has always been based on the tenet that private actors who own the means of production will act out of their self-interests to maximise profit and satisfaction. The competition between these individual agents to achieve their interests largely leads to economic growth and expansion. The extent of economic freedom and competition in these markets are matters of politics and policy and vary across different models of capitalism. Most of the existing capitalist economies are mixed economic systems that combine the main elements of free markets with government intervention and with central planning in some regions. This capitalist system, premised largely on laissez-faire or free-market economics, is strongly correlated with economic growth. With the disintegration of the former Soviet Union in 1991, capitalism became the dominant global economic system. Most nations, including those that have retained socialistic political systems, Research Report | Page 1 of 16 ​ ​ th th The Hague International Model United Nations 2021 | 25 ​ January 2021 – 29 ​ January 2021 ​ ​ ​ ​ ​ have moved towards a market-based, capitalistic economy. The popularity of capitalism is supported by more than two centuries of unparalleled economic productivity in industrial economies around the world. The combination of capitalism and industrialism has resulted in the most productive economies ever witnessed in human history, at least in terms of material wealth. st As we entered the 21 ​ century, however, the ecological and social impacts of capitalism raised ​ major questions about sustainability. Despite impressive records of productivity, many people worldwide are concerned about whether capitalistic economies are sustainable over time, ecologically, socially, or even economically. The introduction of capitalism was accompanied by the introduction of fossil fuels as the primary source of energy. During the industrial revolution, the economic growth from capitalism was largely spurred by using these fuels (oil, coal, and gas). However, the emission of toxic gases from the combustion of fossil fuels results in the unsustainability of energy production in capitalism, with 85% of the energy generated coming from non-renewable sources. Further, capitalism creates a host of other environmental problems due to its emphasis on growth, efficiency and consumption. The damage done from capitalism to different areas concerning the environment has the potential of harming human populations themselves. This highlights how our current system of capitalism needs to be modified if there are any hopes for environmental sustainability. At the same time, capitalism may fail to address socio-economic problems across different sections of society because of its nature. Wealth accumulation is one of the most significant problems with capitalism in the last 40 years because of the imbalance of prosperity that it creates. A large proportion of wealth is controlled by a few individuals at the top, while others at the bottom may struggle to even meet ends. The way capitalism works also creates inequity, as relatively poor people often have access to fewer opportunities and information. This means that poor individuals often stay stuck in poverty, working lower-paying jobs and sometimes being exploited by firms for their labour. Market dominance is another problematic aspect of capitalism, as gaining control or power over a particular industry allows a firm to abuse the system and suppress their competition. Capitalism has unquestionably led to unprecedented economic progress in the past but these unsustainable socio-economic problems that capitalism may fail to address must be tackled. In an economic world focused on maximising profit and satisfaction, we cannot lose sight of our purpose as a human race. Our purpose is to develop as a community without putting our future in danger and without leaving other people behind. This is the essence behind changing established economic practices to establish a more sustainability centric model of capitalism, with nations working together to adopt appropriate measures. Definition of Key Terms Research Report | Page 2 of 16 ​ ​ th th The Hague International Model United Nations 2021 | 25 ​ January 2021 – 29 ​ January 2021 ​ ​ ​ ​ ​ Capitalism Capitalism is an economic system in which a society’s trade and industry are controlled by private individuals and firms with ownership of resources. The production of goods and services is based on supply and demand in the market rather than on the state. 1 ​ Sustainability Sustainability was defined as the ability to meet the needs of the present without compromising or hampering the ability of future generations to meet their own needs by the United Nations Brundtland Commission in 1987. 2 ​ Sustainable Capitalism Sustainable capitalism is a conceptual form of capitalism based upon sustainable practices that seek to preserve the environment and reduce externalities while bearing a resemblance of capitalist economic policy. 3 ​ Market Failure Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. It occurs when individuals acting in rational self-interest produce a less than optimal or economically inefficient outcome because of externalities or other factors. 4 ​ Negative Externalities Negative externalities occur when the consumption or production of a good causes a harmful effect to a third party or to society as a whole. They can also be said to have spillover costs generated in the consumption or production of a commodity. 5 ​ Allocation of Resources 1 Investopedia Staff, “Capitalism,” Investopedia, April 6, 2020, https://www.investopedia.com/terms/c/capitalism.asp. ​ ​ 2 “Sustainability,” Text, April 1, 2014, https://academicimpact.un.org/content/sustainability. ​ ​ 3 B. Mitra et al., “The Convergence of Sustainable Capitalism,” in 2011 IEEE International Professional Communication ​ Conference, 2011, 1–7, https://doi.org/10.1109/IPCC.2011.6087226. ​ ​ ​ 4 Micheal Boyle, “Market Failure Definition,” Investopedia, accessed December 11, 2020, https://www.investopedia.com/terms/m/marketfailure.asp. ​ 5 Tejvan Pettinger, “Negative Externalities,” Economics Help, accessed December 11, 2020, https://www.economicshelp.org/micro-economic-essays/marketfailure/negative-externality/. Research​ Report | Page 3 of 16 ​ ​ th th The Hague International Model United Nations 2021 | 25 ​ January 2021 – 29 ​ January 2021 ​ ​ ​ ​ ​ In economics, resource allocation is the assignment of available resources to various uses. In the context of an entire economy, resources can be allocated by various means, such as markets or planning.6 ​ Taxation Taxation is a term for when a taxing authority, usually a government, levies or imposes a tax. The term "taxation" applies to all types of involuntary levies, from income to capital gains to estate ​ taxes. ​ Eco-Capitalism Eco-capitalism, also known as green capitalism, is the view that capital exists in nature as "natural capital" and governments should use creative policy instruments to resolve environmental problems where natural resources are difficult to protect. 7 ​ Circular Economy A circular economy is defined as one that seeks to: maximise the value of the materials that circulate within the economy; minimise material consumption, prevent waste from being generated; reduce hazardous components in waste and products. 8 ​ Monopoly A monopoly refers to when a company and its products dominate the market for an industry. Monopolies are considered to be an extreme result of free-market capitalism where the absence of any restrictions, a single firm becomes powerful enough to own all of the market. 9 ​ Market Dominance Market dominance is defined as the excess strength of a brand, product, service, or firm, relative to the competition, exemplified by control of a large proportion of power in a particular market. Background Information 6 “Allocation