Sustainability

The concept of sustainability includes...

Sustained growth is growth that continues following the model Rostow suggested. Whilst sustainable growth and sustained growth are linked concepts sustainable growth has many more implications that Rostow and his generation were not aware of. Factors such as the environment were not an issue in the 50s and 60s.

Sustainable and unsustainable growth
  1. This development is not sustainable as welfare decreases after a given time.
  2. This development is sustainable as there is no slowing growth. Slower growth may be more sustainable.
  3. This economy is in a sustainable state however it is questionable as to if there is any development. This is the minimum form of sustainability.

Welfare is used on the above graph to compare sustainability and not per capita GDP as welfare is a much broader term including access to health and education services. Welfare is a flow from a stock in the same way income is a flow from a stock of capital (productive capacity) to a stock of personal wealth, welfare can be thought of as a flow from four categories of capital.

  1. Physical capital - machines, physical infrastructure etc.
  2. Human capital - skills/abilities in the labour force.
  3. Natural capital - the raw materials and assets of an economy including clean air and access to clean water supplies. Essentially the environmental.
  4. Social capital - community, family and social relationships and social structures such as the family, community, schools and the legal system. During the period after the USSR's break-up Russia is a good example of an economy with poor social capital where warlords were in power.

Strong sustainability rule

If development causes a fall off in any of the four above capital stocks the future of the flow of welfare is threatened so the development is not sustainable. Current growth in economies can be analysed as follows.

  1. Physical capital increases under economic growth.
  2. Human capital improves as the provision of education increases the skills base in an economy.
  3. Natural capital is used up. Non-renewable resources such as fossil fuels but also other resources such as clean air and access to clean water are likely to be compromised by industrialisation. This is why most of the issues of sustainability focus on the environment.
  4. Social capital arguably also deteriorates.

Natural capital is the most vulnerable capital stock to being depleted.

Weak sustainability rule

If overall the level of capital in an economy falls the development is not sustainable. For example, building on green belt land causes a reduction in natural capital so the strong development rule does not see this development as sustainable. The weak development rule may suggest this development to be sustainable, as overall capital will increase probably social capital in particular.

Homework

Read responses for sustainable development in the study guide, on page 25. Also answer the first data response question in Appendix 4 in the development study guide.

(a) (i) How does the world ranking of these countries change if it is measured by the human development index (HDI) rather than GNP per head ($)?

All economies are ranked higher by the HDI method except Uganda, which is ranked lower. Relatively all the economies remain ranked in the same order, again except Uganda, which is ranked lower.

(ii) Explain two reasons why GNP is a poor measure of relative living standards.

Any two from

Subsistence activity is not recorded, as it is no marketed. In low-income economies the subsistence sector such as agriculture is relatively large.

Per capita gives an average GNP, which tells us nothing about variation within the population so a few high income earners may distort the average income.

The composition of output and expenditure is not revealed by GNP per capita as spending on consumer goods is likely to yield a high standard of living whereas high spending on military hardware is unlikely to yield the same increase in standard of living.

Externalities are not taken into account and the valuation excludes negative externalities such as pollution, which may cause an increase in GNP due to the cleanup costs which will increase the GNP figure further distorting it.

(b) Further indicators might be included in the human development index to make it an even better measure of a country’s standard of living. Suggest two further indicators which you might use and explain your choice.

An appropriate addition would be an indicator of income distribution such as a Gini coefficient of HPI figure to take account for income distribution and access to health and education, as these are merit goods.

A measure of infrastructure such as proportion of paves roads or access to communication networks such as access to Internet or phone lines per 1000 people. Communications networks are important because they carry positive externalities.

(c) (i) Explain the relationship you would expect to find between the level of adult literacy and the GNP per head.

There is a positive relationship between GNP per head and adult literacy rate as when one increases the other increases as high levels of literacy lead to a more productive workforce and so a higher GNP.

(ii) To what extent does the data on adult literacy and GNP per head ($) confirm this relationship?

The data confirms the positive relationship in general but Ethiopia and Uganda represent higher adult literacy rates than their GDP per capita would suggest.

(d) Economic development often produces a change in average life expectancy and the age distribution of the population. Discuss how this might affect average living standards.

See later work on population.

These notes form a homework given in a lesson on 27/09/2004.

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