Download Poverty Reduction and Ecological Resilience through Genuine

Poverty Reduction
and
Ecological Resilience
through
Genuine Development
Jon D. Erickson
Rubenstein School of Environment & Natural Resources
Gund Institute for Ecological Economics
University of Vermont, Burlington, Vermont USA
[email protected] • www.uvm.edu/~jdericks/
Poverty Reduction and Ecological
Resilience through Genuine Development
•
•
•
•
•
Legacy of the Washington Consensus
Income Convergence or Cumulative Causation
Genuine Development Alternative
Strategies toward Genuine Development
Implications on Retooling Macroeconomic Policy
Legacy of the Washington Consensus
• Bretton Woods mission drift
GENERAL
AGREEMENT
ON TARIFFS
AND TRADE
Harry Dexter White and
John Maynard Keynes
Legacy of the Washington Consensus
• Consensus of IMF, World Bank, and US Treasury
– Fiscal Austerity
– Privatization
– Market Liberalization
• Application of the Consensus
– Top-down
– Industrial / resource extraction oriented
– Export-led
• Theory behind the Consensus  National growth
would lead to trickle down development
Income Convergence or
Cumulative Causation
• Kaldor-Kuznets-Solow consensus
– Marginal propensity to save of the wealthy
Inequality lead to growth
Income gap between rich and poor
 Greater incentives  Greater labor productivity
– Growth-Inequality development paths
 Evidence from US and UK  Growth path
eventually leads to greater equality
– Income convergence between nations due to
decreasing marginal returns
http://www.cr1.dircon.co.uk/TB/2/dreturns.htm
Income Convergence or
Cumulative Causation
• Cumulative Causation
– Possibility of increasing returns (Smith, Marx,
Young, Myrdal)
Uneven development
Future development depends more on past
investment (path dependency)
In the normal case a change does not call forth countervailing
changes but, instead, supporting changes, which move the
system in the same direction as the first change, but much
further. Because of such circular causation a social process
tends to become cumulative and often to gather speed at an
accelerating rate. (Myrdal, 1957, p. 13)
Income Convergence or
Cumulative Causation
• Theoretical critique
– Nelson (1956): Low-level equilibrium traps
– Arrow (1962): Learning by doing
– Romer (1986): Growth rates as function of attained
level of development
– Arthur (1999): Technology lock-ins
– Galor (1996) and Quah (1996): Growth clubs
Income Convergence or
Cumulative Causation
• Empirical critique
– Persson and Tabellini (1994): Inequality as
impediment to growth
– Benabou (1996): Inequality stunts national growth
rates
– Aghion et al. (1999): Redistribution towards equity
would increase domestic investment and stimulate
growth
– Skott and Auerbach (1995): Low income countries
not catching up.
– Bourgninon and Morrison (2002): Income
divergence at best decelerated over last 50 years.
Global gini has increased by 30%.
Income Convergence or
Cumulative Causation
• Empirical critique
– Barro (2000): Poor countries have had lower
growth rates. Exceptions due to human capital
investment.
– Easterly and Levine (1997): Low income countries
have similar characteristics such as low levels of
schooling, political instability, and insufficient
infrastructure.
Growth as Cumulative Causation
Population
20%
Income
82.7%
1950  1992
20%
20%
11.7%
Over 5x increase in global output
Nearly 12x increase in world trade2.3%
1950 – Haves 30x over the Have Nots
20%
1.9%
1989 – Haves 60x
20%
over the Have Nots
1.4%
US
UK
Indices of ISEW
140
140
90
90
40
1940
40
1940
1960
1980
2000
German y
(Index of Sustainable
Economic Welfare)
1960
1980
2000
and GDP
(1970 = 100)
Austri a
Chile
240
140
140
90
90
40
1940
40
1940
1960
1980
2000
Netherland s
140
90
90
1960
1980
140
90
1960
1980
2000
Swede n
140
40
1940
190
2000
40
1940
1960
1980
2000
40
1940
1960
1980
2000
Genuine Development Alternative
•
Genuine Development Indicators
– Genuine Progress Indicator
– Human Development Index
– UN Millennium development goals:
1.
2.
3.
4.
5.
6.
7.
8.
Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS, malaria and other diseases
Ensure environmental sustainability
Develop a global partnership for development.
Genuine Development Alternative
Genuine Development Alternative
Genuine Development Alternative
Genuine Development Alternative
Genuine Development Alternative
Genuine Development Alternative
•
Ecological economic capital assets approach
nt
Factor services
Goods
Household
Firms
(production
Government )G
Financial markets
al consumptio
Other countr
ies
Genuine Development Alternative
•
Ecological economic capital assets approach
Genuine Development Alternative
•
Ecological economic capital assets approach
Genuine Development Alternative
•
Ecological economic capital assets approach
“Full W orld” Model of the Ecological Economic System
positive impacts on human capital capacity
being, doing, relating
Ecological
services/
amenities
Complex property
rights regimes
having, being
doing, relating
- having,
- being
Restoration,
Conservation
Education, training,
research.
Institutional
rules, norms, etc.
Building
Natural Capital
Human Capital
SocialCapital
Manufactured
Capital
Limited Substitutability
Between Capital Forms
Individual Common Public
Solar
Energy
Well Being
(Individual and
Community)
having
Consumption
(based on changing,
adapting
preferences)
Wastes
Economic GNP
Production
Process
Goods
and
Services
Evolving
Cultural
Norms and
Policy
Investment
(decisions about, taxes
community spending,
education, science and
technology policy, etc., based
on complex property
rights regimes)
negative impacts on all forms of capital
Materially closed earth system
Waste heat
Genuine Development Alternative
•
Genuine Savings
Genuine Development Alternative
•
Natural Resource Curse
Sachs and Warner, 2001
Strategies toward Genuine Development
• Reversing the resource curse through investing
royalties in directed poverty eradication
• Investing in natural capital through payments for
ecosystem services
• Capturing the carbon dividend
• Human and social capital investment
• National debt for international services
• Regional economic development
Retooling Macroeconomic Policy
• Fiscal Policies that invest broadly in natural, social,
human, and built capital.
• Monetary Policies that expand the role of local
currency, increase internal velocity of money and
plug the leaks of regional economies, favor
domestic investment opportunities for long-term
economic capacity.
• Trade Policies that balance self-sufficiency and
sectoral diversity with comparative advantage and
export opportunities, and restrict capital mobility so
that comparative advantages remain.