Session 2Session 2

Sustainable DevelopmentSustainable Development

Sustainable Development

Development that meets the needs of the

present generation without compromising

the ability of the future generations to meet

their own needs Definition – World Conference on Environment & Development

(1987)

Intergeneration Equity

Intergeneration EquityMining Homeland Virtually out of Existence: Case of Nauru Islands

South Pacific Island State Total Land Area - 21.2 km2

Population: 10,200 One of the smallest republic Highest per capita Independence in 1968

Rich in Phosphate Deposits - Fertilizers Exploited since 1888 by

Germans, British, Australians & New Zealanders

Independence in 1968

Urban Area

Phosphate mine-works

Case of Nauru Islands: Current Situation

Reserves almost over Island uninhabitable & uncultivable (80%) No other resources

No energy supplies

Many settled in Australian Queensland What about freedom? Drop in living Standards

Present as well as future generation suffer

Lessons in Context of India?

Chilean Island in South Eastern Pacific Ocean (164 sq km; 4,000 popula)

World Heritage Site/Rapa Nui National Park

Youngest & once most isolated inhabitated territory

Destruction of ecosystemOnce forest of palms

Loss of forest in process of erecting statutes

Lost the means to construct fishing vessels

Decline of Civilization around 17th-18th century

Moai Statues in Easter Island

Drawback in the Definition of Sustainable Development

Intra-generation Equity

What about Equity with in a Generation?

Greater weight to needs of future generation

than needs of present generation

Copenhagen Summit - Alliance of Small Island States (Aosis) 43 of the smallest & most vulnerable countries

(including Tuvalu & Maldives) Any rise of more than 1.5C was not negotiable

Strong and Weak Sustainability

Strong Sustainability Requirement to keep natural capital intact overtime

Weak Sustainability Requirement to keep capital intact over time

Sustainable Development - Hartwick-Solow Rule “Development requires that proceeds from the mining of natural

assets be invested in other forms of assets, rather than consumed by

current generation”

Income for coming generations? (Norway)

Income from Oil from North Sea - Funds for future generations

Nauru prone to poor investments (Kuwait)

Depends on portfolio of assets & managerial capabilities

Productivity, Equity and Environmentally Sustainable = Sustainable Development The Conflicting objectives of Resource Management

Establishment of National Parks (& Special Economic Zones)

Environmentally sustainable but not socially equitable

Choices based on value judgments, political feasibility & social

acceptability

Green Revolution Intensive Agriculture using excessive Fertilizers & Irrigation

Technically & Economically Efficient but not Environmental

Friendly

Organic farming – Green Revolution II

Equitable distribution of benefits?

Focus of agriculture development in drylands

Socially Equitable

"Judging every action by its impact on the poorest person in

the society" - Mahatma Gandhi

“Any new benefits should be skewed toward poor people” –

Rawls Principle, 1971

Moving toward equity criteria may lead to reduced

productivity?

Distribution of land to poor

Land reforms in Kerala and West Bengal

Empowerment

Agriculture Sector: Economies of Scale

Equity an essential attribute of Sustainable Development

Justice, means equity In general, “everybody” agrees that Justice means equity, the

question is: equity in what? Rights (& liberties), possibilities,

resources, functioning (capability), income or other things? Possibilities

Obtaining (economic) wealth by taking advantage of the possibilities of exchange & specialization that the market offers.

Resources Entitlements to nature & especially natural resources for the poor

Functioning (capability) Elementary ones such as being in good health, nourished and sheltered, & The more complex social ones such as having self respect, taking part in the life

of the community etc

Source: Sen, Equity & Sustainable Development

http://www.unece.org/stats/documents/wgssd/zip.5.add.4.e.pdf

Is Sustainable Development Equitable? Production Possibility Frontier (transformation curve) for Current Generation (Whole Society)

Given: Natural Resources, Technological Knowledge

& Labour

What will be the Shape of this Curve in Next Generation?

Food

Non-food CO

A

fB

n

PP for current generation at time to

Change in Production Possibility in Next Generation

Consumption & Investment PatternHow Investment was Allocated?Accumulation of CapitalResource Base ChangesLand Degradation

Loss

Unsustainable Development

PP for next generation at time t1

Non-food

Food

O

A’

A

C C’

Unsustainable Development Soil erosion undermining agricultural basis for human society

Ecological un-sustainability Reasons

Ecological cause

Farming on marginal lands without adequate soil conservation measures

Social causes The phenomenon of marginalization of farmers may have

social roots which would then be the social causes of ecological unsustainability.

Source: Sharachchandra M. Lele (1991) Sustainable Development: A Critical Review. World Development 19(6): 607–621.

Caste system, capture of valuable resources by local elites pushing the poor to marginal lands

Sustainable Development

Is this Sustainable Development Equitable?

O

D”

B”

B

A

A”

C C”

Food

Non-food

PP for next generation at

time t1

Can not tell about equity

Consumption Pattern between Poor & Rich(Equitable Sustainable Development)

Sustainable & Equitable Path

(Social & Political Stability)

Sustainable but not Equitable Path

Efficiency vs. Equity in India?

B’’

D’’

Consumption of the Poor

Consumption of the Rich

D’’

B

O

People in India & Environmental Degradation

Who is responsible for environmental

degradation in India?

People in India (Madhav Gadgil – Well known ecologist)

Basis of Classification Size of their respective resource catchments

Relative ability to transform nature into artifacts

Power to influence state policy

Ecosystem People

Ecological Refugees

Biosphere People

Ecosystem People

Four-Fifth of India’s Rural Population Around 50% of total population Excluding prosperous farmers – Getting subsidies

Dependent on Natural Environment Limited resource catchment

Natural World Recedes – Dams, Mines, Industrial expansion Tata Power - Hydroelectric projects at Lonavala

No compensation

Mulsi Satyagraha 1921

Compensation, landlords vis-à-vis tenants

Tata Motor - Car project at Singur

Sharecroppers

Problem boils down to property rights

Ecological Refugees

One-Third of the India’s Population

Live on Margins of Islands of Prosperity (Slums)

Farm Laborers in Punjab, Domestic Help

Low Purchasing Power

Why slums are not beautiful?

Biosphere People

One-Sixth of the India’s Population

Real Beneficiaries of Economic Development

Bigger Landlords, Urban Professionals

High Purchasing Power

Ensure that Goods come to them Cheap

Enjoy the Produce of entire Biosphere

Economics

&

Environment

Concept of Natural Resource Scarcity

Definition of Economics Allocation of Scarce Resources

Scarcity is translated into Prices

Resources & Scarcity Resource: By a resource, we mean something that is useful and valuable in the

condition which it is found Endowed by nature (land, water, air) or Created (parks, hospitals)

An input or final good consumed directly

In economic Sense, anything valuable which commands a price Conversely, Anything that Commands a Price is Scarce (Demand > Supply)

Resource is a dynamic concept in sense that changes in technology, information and

relative scarcity may make a valuable resource out if something that previously had

no value

Concept of Natural Resource Scarcity

Relative Scarcity WPI - Timber vs. All Commodities

1950s – Same movement

1960s to 1970s, Timber (600%) vs All Commodities (164%)

Resource Known Reserve Annual Use A 15 M Tons 1 M Tons B 1,000 Kg 1 Kg A is Relatively Scarce

If all the markets function well. A rise in the price of X relative to other goods would indicate that X have become relatively more scarce

Factors Influencing Natural Resource Scarcity

Population, income growth, market forces & technology

Market forces

Demand for Apples from Himachal Pradesh

Two way forest degradation

Establishing orchards & packaging

Scarcity of timber during 1970s to 1980s; WPI for timber vs. all commodities

Rise of timber production on private lands in plains - Punjab, Haryana

Timber for packaging

Technological intervention

Cardboard packaging

Importance of Marginal Analysis in Solving Environmental Problems

Marginal Utilities of Goods & Environmental Amenities & the Rise of Environmental Movement

Inverse Trends

The Water & Diamonds Paradox

o

Production is a function of

Land (Rent)

Labour (Wages)

Capital (Interest)

Entrepreneur (Profit)

What about free environmental services of

biosphere?

Natural Resources Considered Inexhaustible

Environment was far less of an issue Industrial Revolution – profound impact on economic theory

Relationship between Labour & Capital

Low Wages and Working Conditions of Laborers

Nature A Spontaneous Gift

Labour is the father and nature is the mother of wealth

Failure to Weave Environmental Sensitivity into Economics (1800s) Karl Marx

Law of Comparative Advantage, Theory of Rent

Opponent of protectionism for national economies

particularly Agriculture

Nature–A Fixed Asset in Economic Models

An increase in production can never be accompanied by a

decrease in availability of natural resources

Failure to Weave Environmental Sensitivity into Economics (1800s) David Ricardo

Principle of Population Population would outrun food supply

Population if unchecked increases at Geometric Rate

Food supply grows at an Arithmetical Rate

Predicted starvation of Human Population Paul Ehrlich: ‘The Population Bomb’ 1968: Predicted Starvation in 1970s

Promoted the idea of National Population Census in UK

In the Present Context - Theory Fails Since 1961 world population has increased by 112%

Global production of grains up by 164% & meats up by 700%

Agricult. production in Developing Countries increased by 52% / person

Starvation Cases in India due to Policy Failures?

Failure to Weave Environmental Sensitivity into Economics Thomas Malthus

Wealth and Welfare Welfare Economics into the scope of economic analysis

Distinction between private & social marginal costs: Negative

externality

Study of Market Failures

Mixture of taxes (Pigovian Tax) & subsidies to correct negative externalities

_______________________________

After World War II & Onset of Cold War Maximize Growth of Production as a Strategy with Political & Military

Significance

Erstwhile Soviet Union: An ecological Disaster in Siberia

Weaving Environmental Sensitivity into Economics Arthur Cecil Pigou

“Anyone who believes exponential growth can go on forever in a finite

world is either a madman or an economist"

1964 – “The Economics of the Coming Spaceship Earth”

http://www.eoearth.org/article/

The_Economics_of_the_Coming_Spaceship_Earth_(historical)

Cowboy Econ. (Infinite & inexhaustible resources)

Spaceship Economy (Limited resources)

Non-economic Set–Economic Set–Non-economic Set

Calculation of Macro-economic Indicators

Natural Resource Accounting / Green Accounting

Green NDP = GDP - Depreciation on Man-Made Goods – Depreciation of

Natural Resources

1962: Silent Spring – Rachel Carson

1960s: Opinions ChangedKenneth Boulding

1987: World Conference in Environment and Development -

Sustainable Development

1989: Exxon Valdez Oil Spill

Prince William Sound’s Bligh Reef - Alaska $1.1 Billion Settlement - Valuation of negative externalities

1992: United Nations Conference in Environment and

Development – Rio Conference Global Warming - Market-based Instruments to reduce CO2

emissions, & Biodiversity Conservation

1980s & 1990s: Factoring Environment into Economic Analysis