Economic Development and Environmental Disaster

The controversial issues arising from the correlation between economics and the environment too often conceptualise economic growth as a trade-off for environmental degradation (Lee, Chung & Koo 2005, para.1). It is difficult to refute that the implementation of a ‘growth-orientated’ economic model has sacrificed environment for profits; however, growing social awareness and the development of sustainable technology are shaping the landscape to ensure that economic development does not become synonymous with environmental degradation. I will examine and attempt to elucidate a relationship between economic development and environmental consequences, vis-à-vis traditional and modern theories of economic development. I will also investigate their inter-play in the Asia region, with a view to demonstrating that the consequences of economic growth differ vastly depending on the factors such as social, cultural and political factors. Indeed, the correlation between the two is neither simple nor formulaic, but indeed requires a multi-faceted approach.

How can economic growth be decoupled from environmental pressures

Structural change, technological change and economic and environmental policies in the process of decoupling and the reconciliation of economic and environmental objectives

Panayotou and Islam, Vincent and Panayotou identify three distinct structural forces that affect the environment: i) the scale of economic activity; ii) the composition or structure of economic activity; and iii) the effect of income on the demand and supply of pollution abatement efforts

GROWTH ORIENTATED MODEL

What is growth orientated model and how is it perceived to affect environment

Economic growth is an increase in the production and consumption of goods and services, occurring as a consequence of an increase in the multiplied product of population and per capita consumption, operating in a free competitive market.

Economic growth has been a primary, perennial goal of government and society, reflecting a dominant expansionist philosophy. Some schools of thought believe that there is no limit to economic growth, particularly given that technological progress allows us to use fewer resources for greater returns.

The mechanisms of economic growth may impact the environment through many portals, such as pollution (contamination of natural resources), overexploitation of natural resources, degradation and loss of wildlife habitat, and climate change. Excessive consumption levels result in degradation and overexploitation of resources, which are evident in the decline of some fisheries, the growing number of threatened and endangered species, loss of natural habitats and inadvertent introduction of exotics. Decline in environmental quality and loss of biological diversity are not easily assessed in conventional economic models, where these consequences would be regarded as externalities (i.e., not accounted for in the balance sheet).

To assert that the growth orientated model of economic development logically results in environmental degradation implies that growth is homogenously pursued globally. Indeed, economic policy varies from region to region as the growth- orientated model is adapted to suit the environmental, social and cultural milieu, which are determinative of the availability and potential of national resources. There is a need to distinguish and recognise the “shift from energy and material-intensive industries to services” (Panayotou 2003 pp.59). The relationship between economic growth the environmental quality is further shaped by a number of different channels such as preferences, technology, economic structure and the particular means by which growth is pursued. Economies with a large services sector such as that of EXAMPLE has seen steady economic growth without sacrificing the natural landscape. The fact that pollution continues to be an issue can be attributed to general industry practice and not the consequence of the country’s pursuit for economic growth. Indeed EXAMPLE COUNTRY places a large emphasis on its service sector such as …………………, indicative that this is the preference by which economic activity will be stimulated. Indeed the relationship between environment and economic growth must not be examined within a vacuum, and needs to account for information-based industries and services, more efficient technologies, and increased demand for environmental quality. Even in countries where there growth is resource based and production intensive industries, the development of sustainable enterprises must be accounted for. Sustainable development is essentially the current generation taking a systematic approach to growth and development, to manage natural, produced and social capital for the welfare of their own generation, as well as future generations. The failure to recognise the diversity of the means by which economic growth can be achieved is an underlying theme for other issues to be discussed. In particular, it is specific economic theories that propound a link between economic growth and environmental degradation. The recognition of sustainable growth is an underlying theoretical paradigm for economic theories asserting a direct correlation between economic growth, and the growth in environmentally sustainable practices. Indeed, the challenge is to produce growth whilst not offending the natural carrying capacity of natural systems. The diverse natural landscapes of different countries and regions should therefore be indicative that growth economic growth cannot, and indeed is not, pursued the same way globally. The logical extrapolation therefore is that the pursuit of economy growth by way of a growth orientated model does not inevitably lead to environmental disaster due to the organic delineation with respect to how growth is pursued.

The capitalist philosophy of economic growth is the crux of incompatibility between economic growth and environmental sustainability. For some social and physical scientists such as Georgescu-Roegen and Meadows et al., growing economic activity (production and consumption) requires larger inputs of energy and material, and generates larger quantities of waste by-products. Increased extraction of natural resources, accumulation of waste and concentration of pollutants will therefore overwhelm the carrying capacity of the biosphere and result in the degradation of environmental quality and a decline in human welfare, despite rising incomes (Panayatou, pg 1). While not wholly irrelevant, such a theory exists within the narrow scope of traditionalist neoclassical economic theories based on utility or profit maximisation (Asafu-Adjaye 2005, pp.11), which necessarily limit environmental considerations. The characteristics of production and abatement technology, and of preferences and their evolution with income growth, underlie the shape of the income-environment relationship. Unquestioned reliance on this relationship necessarily gives rise to the false assumption that economic growth leads to environmental disaster. Significantly, resource and neoclassical economics focus primarily on the efficient allocation of resources. Furthermore, neo-classical theories shift the burden of production and industry away from Government oversight, to private investment and market theory. As a consequence, profit takes priority because the relationship required to regulate economic growth with respect to its social and environmental consequences has been severed. Indeed the State needs to play a greater role in regulating industry and investigate the means by which economic growth is being achieved in order to impose limitations where appropriate. As a result of the intense focus on economic growth by way of resource exploitation, new sciences have emerged, such as ecological economics. This stream of thought examines the interaction between environmental and economic systems with regard to social and ethical issues. When this is viewed in the context of growing recognition for sustainable development and the shifting of priorities from economic to social considerations, it is evident that the flaw lies in a capitalist theory for growth and economic development. There needs to be a paradigm shift to more cohesive and systematic interaction between economics and social concerns to prevent capitalist theory dominating, and consequently sacrificing resources for profit, leading to environmental disaster.

An alternate contention is that environmental decline is ‘best cured not by restricting economic growth, but by accelerating it’ (2003, Lomborg). The notion of an organic “limit to growth” (Tisdell, 1990 pp.57) based on finite natural resource reserves is considered and compared to the Environmental Kuznets Curve hypothesis (“EKC”). Both theories reiterate that the relationship between economy and ecology is intrinsic, and suggest that sustainability is an organic process that will evolve naturally from economic and technological advancement. The EKC relationship is essentially a ‘reduced form function that aims to capture the “net effect” of income on the environment'(??), depicting an empirical pattern that at relatively low levels of income per capita, pollution level (and intensity) initially increases with rising income, but then reaches a maximum and falls thereafter. The data is supported by examples such as the air in London, Tokyo and New York being far more polluted in the 1960s than they are today. The dominant theoretical explanation for the EKC phenomenon is that once a certain point of income per capita is reached, the demand for health and environmental quality rises with income which can translate into environmental regulation, thus resulting in ‘favourable shifts in the composition of output and in the techniques of production’ (pg 3 Lee, Chung, Koo Paper). While the EKC theory has its merits and is backed by statistical data, the fallacy of the theory lies in the fact that it is in fact too broad and fails to recognise the potential of regression and other external factors such as the impact of per capita land size, civil and political liberty, which all hold a positive relationship with the overall index of environmental sustainability. Furthermore, while there is a statistically significant positive relationship between per capita income and pollution-related indicators, there is a statistically significant negative relationship between per capita income and eco-efficiency indicators of environmental sustainability such as GIVE EXAMPLES SILLY. Thus, while income appears to have a beneficial effect on pollution measures, conversely it has a detrimental effect on most eco-efficiency measures of environmental sustainability, ceteris paribus (pg 9 Lee, Chung, Koo). Thus, despite its theoretic microfoundations, the EKC is ultimately an empirical relationship; indeed it does not represent an inevitable or optimal relationship as its is necessarily limited to theoretical assumptions. Indeed there is substance in the argument that theories of this nature fail to account for potential accumulated damage from activities such as deforestation, lead poisoning and destruction of natural sites which will be irreversible and too great to address if intervention is not implemented now. Essentially,

while an inverted-Ushaped relationship between environmental degradation and income per capita is an empirical reality for many pollutants and an inevitable result of structural and behavioural changes accompanying economic growth, it is not necessarily optimal (Panayatou Pg 11). Faith in technological development to present the solution for global economiv growth versus ecological sustainability dilemma is not sound reasoning to support unlimited economic growth.

The manifestation of “nervous compromise between economic development and environmental protection” is an apt descriptor for Japan. Responding to the legacy of pollution of the post World War II era, the Japanese have combined their technological and economic prowess to push Japan to the global forefront of developing environmentally friendly technology, which draws comparisons to Lomborg’s theory of organic sustainability (as above). Furthermore, the “voluntary approaches to industrial pollution control” (Schreurs 2003, pp.242) as opposed to market-based Government imposed mechanisms of countries like the US, exemplifies the influence of the cultural paradigm in creating national policy with respect to the environment. That is, a cultural psyche is a determining factor in respect of the significance attributed to the environment in the pursuit of economic growth.

What was Japan’s economic policy re growth? – how did they go about achieving it?

What were they not careful about?

Reducing production and the exploitation of natural resources to minimise waste is not the panacea to environmental issues. The subsisting problem is the lack of a holistic and co-operative approach by different sectors to promote sustainable practices. Optimistically, appropriate intervention can lead to a “radical reorganization of production in order to create a more sustainable…world” (Foster 2007, pp.24). Government intervention may be the most authoritative, but this would require delineation from neo-classical theories of economic growth that idealise a laissez faire policy.

Need to focus on eco-efficiency aspects of environmental sustainability in the process of economic development (kuznet’s curve reflects pollution/income relationship – so there needs to be actual focus on other aspects to prevent environmental degradation)

Do political systems and political economy have an autonomous influence on environmental quality – or at any rate mediate the income-environment relationship

Decoupling environmental pollution and resource use from economic growth. This can be done through structural, technological or policy change, or a combination of all three.

Current economic policies usually do not take into account the value of natural resources in contributing to biological processes such as flood control by wetlands, climate regulation by forests and open space through oxygen production and carbon dioxide consumption, and pollination by insects, birds, and mammals. Thus, economic health is not measured accurately by gross domestic product alone. Instead, because of the inevitable reliance on natural resources to achieve economic growth, the strength of the economy must incorporate the condition and sustainability of natural resources. This is not happening, and those concerned about wildlife conservation believe greater attention needs to be given to the erosive impact of economic growth on wildlife.

The relationship between economic growth and environmental quality is weighty and controversial. I hope the notion that economic development irrefutably results in environmental disaster has been dispelled. One does not have to look far to see that sustainable growth and economic preservation are issues at the forefront of the modern social psyche. It would be careless to adopt a radical approach on either side of the argument – but awareness of their costs and benefits will go a long to ensuring that the ideal of ecologically sustainable economic growth is ingrained as the communal and global objective.