SUSTAINABLE DEVELOPMENT

(ECONOMY,SOCIETY AND THE

ENVIRONMENT)

1. INTRODUCTION AND A HISTORICAL PERSPECTIVE

The “sustainable development” notion dates back to 1972. Sustainable

development, and the interdependence of the economy and the environment,
are increasingly important concepts to policy makers around the world. The
concepts grew out of the “Limits to Growth” debate of the early 1970s
(Meadows et al, 1972; Cole et al, 1973) which discussed whether or not
continuing economic growth would inevitably lead to severe environmental
degradation and societal collapse on a global scale.

Two decades prior to this saw a number of colonies transforming into

independent nations. Most of the colonies were endowed with vast amounts
of natural resources. These new nations seriously pursued ideals of co-
operation and sharing. Paradoxically, the 1970s slid slowly into moods of
reaction and isolation while at the same time a series of UN conferences
offered hope for co-operation on major issues.

The 1972 UN Stockholm Conference on the human Environment brought the

industrialized and developing nations together to delineate the “rights” of the
human family to a healthy and productive environment. The conference was
the first to put environment on the international agenda. This was followed by
a string of such meetings: on the rights of people to adequate food, to sound
housing, to safe water, to access means of choosing the size of family.

The broad concept of “sustainable development” was first widely publicized

by the World Conservation Strategy (IUCN, 1980). It has since become
central to thinking on environment and development, and is sponsored by
many leaders of World stature, the United Nations, international financial
institutions, and development agencies.

In 1986 the United Nations put together an independent commission – the

World Commission on Environment and Development (or Brundtland
Commission, named after Norway’s former Prime Minister, Gro Harlem
Brundtland). The task of the Commission came up with the first definition of
Sustainable Development. They defined Sustainable Development to be
development that meets the needs of the present without compromising the
ability of future generations to meet their own needs. The Commission

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 proposed a number of environmental strategies for achieving sustainable
development.

On 22 December 1989, the United National General Assembly passed

resolution 44/2228 that called for the United Nations Conference on
Environment and Development (UNCED) and on the need for the nations of
the world to take a balanced and integrated approach to environment and
development concerns. UNCED or the Earth Summit took place in June 1992
in Rio de Janeiro , Brazil. One of the important outcomes of UNCED was the
40-chapter document called Agenda 21. Agenda 21 is an Action Plan and
Strategy document for the world’s governments and citizens for achieving
sustainable development. Besides Agenda 21, four other documents were also
negotiated at UNCED, namely:

a) The Rio Declaration on Environment and Development (“The Each

Charter”)

 A statement of principles to provide a framework for the

integration of environment and development;

b) The Statement of Guiding Principles on Forests,

 A statement of principles on forest management

c) The Framework Convention on Climate Change,

 A framework for reducing and stabilizing greenhouse gas

concentration in the atmosphere;

d) The Convention on Biodiversity,

 A statement on biodiversity conservation.

2. MEASURING THE ECONOMY AND THE ENVIRONMENT

In order to address sustainability issues in the economy, it is necessary to

include the environment, even if we are not interested in environmental
issues for their own sake.

Traditionally, it has not always been accepted that environmental resources

have a significant role to play in models of economic growth. Until the
general reawakening of environmental awareness in the late 1960s,
economic output (Q) was considered to require only Capital (K), labour
(L) and technology (T) inputs. Technology was recognized as a separate
input only in the mid-1950s. Figure 1 below shows this purely economic
growth model.

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 Figure 1: A pure economic model

Capital Stock (K) Technology Stock (T)

Technology
Capital Services (K) Services (T)

Production Labour
Services (L)

Output (Q)

Capital Investment (Ik) Consumption (c) House holds

Population = (N)

Technology Investment (IT)

Unity (U)

From the model of Figure 1, the following relationships can be deduced:

Q = Q (K+, T+, L+) (1)

C = C(Q+,Lk-, IT = Q-Lk-IT (2)

U = U(C+) (3)

N = N(L+, C) (4)

A + or – superscript means that increasing the independent variable increases or

decreases the dependent variable.

In the 1970s, economy – environment models were developed (d’Arge and Kogiku,
1973; Vousden, 1973; Maler, 1974) using the same conventional (neoclassical)
economic analysis as for the previous model. In this improved model, the production
of output (Q) depends on capital (K), Labour (L), resource in puts (S), technology (T)
and also on the “State of the environment”. The environment consists of stock of
natural resources (S) (or natural resource flow ® and pollution (P).

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The dependence of production on the environment is called environmental
productivity:

Q = Q(K+, T+, L+, R+, S+, P+) = Q(K+, T+, L+, R+, E+) (5)

Also

C = C (X-, I+, Kk, Q+) = Q-Lk-ITX (6)

N = N = N(L+, C) (7)

Utility or Social Welfare depends on consumption and on the state of the

environment. This is called the

Environmental amenity effect:

U = U(C+, S+, P-) = U(C+, E+) (8)

The boundary between the amenity and productivity effect of the environment is not
always clear because the boundary of commercialisation is variable. For example, if
you refrain from strolling in public park because the day is smoggy, that is an
amenity effect; but if you refrain from paying to enter an amusement part for the same
reason, that is a productivity effect.

3. DEFINITIONS OF GROWTH, DEVELOPMENT, AND

SUSTAINABILITY

The economy-environment model outlined in the preceding section can be used to

define (neoclassically) economic growth, development, and sustainability concepts as
follows:

Economic growth = increase in Q or C

Development (Process) I = increase in U

Development (process) II = increase in (C/N) per capita consumption

Development (process) III = min (C/N) > (C/N) basic needs

Optimal development path = path maximizing U(t)e-tdt where  is the

social discount rate.

Survivable growth = min (C/N) > (C/M) subsistence

Sustainable growth I = non-declining Q or C.

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Sustainable growth II = positive and non-declining
Q/Qt or C/Ct

Survivable development = min(C/N) > (C/N) subsistence and

G < G ecologically sustainable, where G is
goods prices.

Sustainable development I = non-declining U

Sustainable development II = non-declining U and min (C/N)

(C/N) basic needs and max
(C/N) < (C/N) ecologically sustainable

Sustainable resource use I = non-declining (Sa/N)

Sustainable resource use II - non-declining Sa

Sustainable resource III - Non-declining S

Sustainable resource use IV - non-declining (Sa/N) and

Non-increasing (P/N)

Lifetime sustainability = instead of non-declining X, non-declining

∫tt + x(τ)E - τd i.e. present value of X for
generation at time t with a time horizon
stretching  years into the future. X can be
U,Q,C, or S.

In terms of the utility (welfare) function (U) only, the formal distinctions between
optimal, sustainable and survivable development paths of welfare U(t) over time t
are:

a) Optimal U(t) maximizes ∫ο ∞U(t)- - τdt.

b) Sustainable U(t) is such that ΔU/Δt  0 for all time
c) Survivable U(t) is such that U  Umin for all time.

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Examples

Welfare Path is optimal but not

sustainable
U (t) And not survivable

Umin

Welfare Path is optimal and survivable

But not sustainable
U (t)

Umin

Welfare Path is sustainable and

Survivable, but not
U (t) optimal

Umin

4. CRITICISMS OF THE ENOCLASSICAL PARADIGM

The above models incorporate a wide range of assumptions from neoclassical

thinking based on the concepts of economic efficiency which prevailed before
the 1960s. Neoclassical thinking generally excluded issues of equitable
growth, environmental protection and sustainable development.

The criticisms of the neoclassical paradigm focus particularly on the form of

the utility or social welfare function (U) and also on the production function
(Q). This paradigm makes the following assumptions;

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 a) The functional form of welfare (U) is determined exogeneously, i.e.
tastes and preferences appear when we are born and not formed by
culture, education or advertising.

b) The U function assumes that individuals derive happiness from

absolute, rather than relative, levels of individual consumption (C) and
environmental quality (E).

c) The utility (welfare) function excludes important variables (though

unquantifiable) such as cultural disruption, social instability and basic
freedoms.

d) The welfare function allow for trade-offs or substitutions within our

own generation and between our generation and future generations.

The existence of a differentiable U(C,E) function implies, for example, that we

can make mental trade-offs such as calculating how much extra consumption
we would require to compensate for a substantially increased risk of cancer
due to higher radiation levels in the environment. A differentiable U function
also implies that we have the right to degrade the natural environment for
future generations, and offer them increased man-made capital and
technological knowledge as compensation.

5. SUSTAINABLE DEVELOPMENT: A MODERN VIEWPOINT

5.1. A Triple objective

The development paradigm of today is one that recognises the

importance of economic efficiency objectives in addition to social-
importance of economic efficiency objectives in addition to social-
cultural (distributional) and environmental objectives (Munasingle and
McNealy, 1992). The concept of sustainable development has therefore
evolved to encompass three major points of view, namely: economic,
social-cultural and environmental, as shown below in Figure 3.

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Figure 3: Main objectives of sustainable development

Economic objectives
(Efficiency, growth, stability)


- Income distribution - Environmental assessment
- Employment - Economic valuation
- Targeted - Internalisation
assistance

Environmental objective
  (Natural resources)
Social objective - Popular participation
(Poverty/Equity) - Consultation
- Pluralism

The economic approach to sustainability is based on the Hicks-Lindhahl concept of

the maximum flow of income that could be generated while at least maintaining the
stock of assets (or capital) which yield these benefits (Solow, 1986).

In this approach, there is an underlying concept of optimality and economic efficiency

applied to the use of scarce resources. Problems of interpretation arise along the lines
of the neoclassical criticisms outlined in the preceding section.

The environmental approach to sustainability focuses on the stability of biological and

physical systems. The emphasis is on preserving the resilience and dynamic ability of
such systems to adapt to change, rather than conservation of some “ideal” static state
of the environmental system or subsystem.

The social-cultural approach to sustainable development aims at maintaining the

stability of social and cultural systems, including the reduction of destructive political
conflicts. Both intergenerational equity (especially elimination of poverty), and
intergenerational equity (involving the rights of future generations) are important
components of this concept. Preservation of cultural diversity across the globe, and
the better use of knowledge concerning sustainable practices embedded in less
dominant cultures, should be encouraged. Modern society should encourage and
harness pluralism and popular (grass-roots) participation into a more effective
decision making framework for sustainable development which is socio-culturally
sound.

5.2. The Concept of Sustainable Development Defined

The Brundtland Commission defined Sustainable Development as

development that meets the needs of the present without compromising the

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 ability of future generation to meet their own needs. The definition contains
within it two key concepts:

a) The concept of “needs”, in particular the essential needs of the world’s

poor, to which overriding priority should be given; and

b) The idea of limitations imposed by the state of technology and social

organization on the environment’s ability to meet present and future
needs. Or put in another way, to say that a development path is
“sustainable” means, at least, that its patterns of production and
consumption can be reproduced indefinitely without doing increasing
or irreparable damage to natural ecosystems.

The goals of economic and social development must be defined in terms of

sustainability at all levels of government. Development involves a progressive
transformation of economy and society. Development policies must ensure
that there is equity in accessing resources and in the distribution of costs and
benefits between generations and within each generation. These policies must
also address issues of social equity. This can also be viewed in terms of the
concept of capital, which must be sustained between and within generations.

Capital which must be sustained include:

a) Manmade capital, both physical and immaterial (such as information);

b) Natural capital, with proper valuation of the environmental services

that natural resources provide (not just as inputs into productive
processes);

c) Social capital, not only in the conventional terms of investing in people

but also in terms of institutional and cultural framework that makes
civilized transactions possible. The disintegration of societal
institutions and structures in Somalia is a stark example of what
extreme neglect of that aspect can lead to. This also links up with
concerns of poverty reduction and equity.

Today, natural capital and possibly social capital are being depleted
rapidly. For example, tropical forests are being lost at the of 17
million hectares annually, 60 per cent of this due to agriculture
(shifting cultivation). Therefore our children will have less capital from
which to derive their income. Presently, there is a downward trend.
Even after the right policies and technologies are in place, it will take
time to build up a capital stock compatible with a new way of doing
things.

5.3. Strategies and Policies

There is an urgent need for nations to move from their present, often
destructive, processes of growth and development into sustainable
development paths. This requires policy changes in all countries. Critical

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 objectives for environment and development policies that follow from the
concept of sustainable development include:

a) Revival of economic growth – development that is sustainable must

address the problem of the large number of people living in absolute
poverty, that is, people who cannot even satisfy their most basic of
their needs. In Africa, growth can be revived if a minimum overall
national per capita growth rate of 6 per cent is achieved.

b) Changing the quality of growth – sustainable development involves

more that growth. It requires a change in the content of growth, to
make it less material and energy-intensive, and more equitable in its
impact.

c) Meeting essential human needs for jobs, food, energy, shelter, water
and sanitation.

d) Ensuring a sustainable level of population – the sustainability of

development is intimately linked to the dynamics of population
growth. Sustainable development can be pursued more easily when
population size is stabilized at a level consistent with the productive
capacity of the ecosystem.

e) Conserving and enhancing the resource base – if needs are to be met

on sustainable basis, the earth’s natural resource base must be
conserved and enhanced.

f) Reorienting technology and managing risks – there is great need to

integrate economic and ecological considerations in decision making.
This requires a change in attitudes, objectives and in institutional
arrangements at every level.

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REFERENCES AND USEFUL BIBLIOGRAPHY

1. Meadows, Donella H. et al (1972). The limits to Growth. Universe Books, New

York.

2. Cole, H.S.D. et al (1973). Models of Doom: A critique of the Lomits to

Growth. Universe Books, New York.

3. IUCN (International Union for the Conservation of Nature and Natural

Resources) (1980). World Conservation Strategy: Living Resource
Conservation for Sustainable Development. IUCN-UNEP-WWF, Gland,
Switzerland.

4. Pigon, A.C. (1932). The Economics of Welfare. Macmillan, London.

5. WCED (The World Commission on Environment and Development) (1987).

Our Common Future. Oxford University Press, Oxford.

6. World Bank (1987). Environment, Growth, and Development. Development

Committee Pamphlet 14, World Bank, Washington D.C.

7. World Bank (1992). World Development Report: Development and the

Environment. Oxford University Press, Oxford.

8. D’Arge, R.C. and Kogiku, K.C. (1973). Economic Growth and the
Environment. Review of Economic Studies 40, 61-77.

9. Vousden, Neil (1973). Basic theoretical issues of resource depletion. Journal of

Economic Theory 6, 126-143.

10. Maler, K.G. (1974). Environmental Economics: A Theoretical Enquiry. Johns

Hopkins University Press, Baltimore.

11. Munasinghe, M. and McNealy, J. (1992). Key Concepts and Terminology of

Sustainable Development. UNU Conference on sustainability, 22-25 June,
1992, Washington, D.C.

12. Solow, R. (1986). On the intergenerational allocation of natural resources.

Scandinavian Journal of Economics, 88 (1), pp.141-149.

13. Pezzey, J. (1992). Sustainable Development Concepts, World Bank

Environment Paper No.2, World Bank, Washington, D.C.

14. Munasinghe, M. (1993). Environmental Economics and Sustainable

Development. World Bank Environment Paper No.3, World Bank, Washington
D.C.

15. IDRC (1993). Agenda 21: Abstracts, Reviews and Commentaries, IDRC,
Ottawa.

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