Sierra Leone – Sustainability News – 2
How did we get to where we are – Part 2
By the end of the 1980’s many countries had succumbed to the pressure applied by the IMF, the
World Bank and foreign investors. They had adopted what became known as the ‘Washington
Consensus’.
The package of policies was not an emergency programme but a policy mix that would determine
the destiny of nations for years to come.
It consisted of:
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Tight monetary policies to curb inflation
Fiscal policies dominated by debt servicing
Incomes policies to reduce aggregate demand
Financial de-regulation
Trade liberalisation
The abandonment of state-directed policies and large scale privitisation
Slow growth and the implementation of pro-cyclical macroeconomic policies centred on austerity
earned this decade the name ‘the lost decade’.
Then in 1992 a conference took place in Rio de Janeiro – it was an important event. It was the UN
Conference on the Environment and Development. Of the outcome emerging from this gathering
two are known to most of us. These were:
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UN Framework Convention on Climate Change (UNFCCC) and the Convention on BioDiversity (CBD).
The UN also announced Agenda 21 – an analysis of how human action was affected the
environment.
The ‘Washington Consensus’ was supposed to bring stability to the global macro environment but
what actually happened was a string of financial crises. These arose in Mexico, South-East Asia,
Brazil, Russia and Argentina. By the turn of the century a growing number of developing economies
had experienced yet another ‘lost decade’. Development was being affected and the environment
continued to deteriorate.
An example of the financial climate having a devastating effect on the climate took place in
Indonesia. The country suffered successive ‘hits’ on its currency and when the IMF moved in a cut
public expenditure the scene was set for a fatal decision – the lifting of the log export moratorium.
Deforestation rose, income fell and land rights were ignored.
The transition from limits to growth to ecological economics.
As far back as 1971 a Romanian economist, Nicolai Georgescu Roegen published a book ‘The Entropy
Law and Economic Process- - perhaps not the most attractive of titles but it noted that economists
had ignored the second law of thermodynamics or the entropy law. Put simply ‘resources on planet
earth are finite.’ The earth is entropically winding down naturally and the constant demand for
economic growth will only accelerate that process.
This simple but often ignored fact was picked up by others and the School of Ecological Economics’
was born.
The early exponents of this ‘School’ noted that modern economics can determine allocation but is
does not address with any accuracy the issue of scale. They also pointed out that in the debates of
the 1970’s, concerning stagflation and the Phillip’s Curve, macroeconomics ceased to be obsessed
with full employment and put inflation control as its main objective. They also noted that scale had
to be discussed with sustainable implications a major part of the narrative.
The debate continues – some believe that technology will allow us to grow economies without
jeopardising environmental quality.
Later studies have found clear evidence that developed economies displace environmental costs to
developing economies. The financial crisis of 2008 resulted in development being pushed back and
millions moving back into poverty.
A short look at the economy of India identifies some of the challenges facing a country such as Sierra
Leone. Though India has grown at an average rate of 7-8% in the last decade, some would refer to
this as’ predatory growth’ – in that it has achieved notable success but at what costs? The
correlation between higher growth and greater income inequality is one troubling an increasing
number of economists. To this must be added the increase in environmental degradation.
Bhaduri, a respected economist has noted that though growth has occurred the actual increase in
formal employment has been minimal – this is also seen in developed economies, where 0 hour
contacts have risen in number as growth has returned to these economies.
He also points to the opening up of the capital account, which uses monetary policy to control
inflation and attract capital flows. India’s exports have increased but not as much as imports. Its
trade deficit has been financed by incoming capital flows. China records the opposite – a trade
surplus and its currency reserves are State property. India’s reserves are made up of foreign capital
inflows and could be removed if the owners thought it prudent. To deter capital flight the
Government in India have maintained a ‘balanced budget’ principle cutting expenditure on such
investments as sanitation, rural development and environmental stewardship. This prevents debt
growing, reduces the size of government intervention in the economy and puts the control of
inflation top of the agenda. Fiscal policy is therefore dominated by considerations relating to capital
flows more than any other – a fact of globalisation that all developing countries need to remember.
We need to add to the above an awareness of corporate-led land acquisition. Many of these land
acquisitions displace the poorest members of society – the adivasis= original owners.
The problem we all face is as consumers want more and absorb ever more resources will efficiencies
allow us to meet such demands without decreasing the quality and quantity of the planet’s
resources? Can a democratic politician stand for ‘office’ stating that living styles will have to alter?
Will developed economies move to allow developing countries to satisfy the demand for a more
consumer-orientated society to emerge? Will technical efficiency continue to allow us to make
more from less? For how long can we ignore the ever increasing depletion of resources?
There has never been a more interesting or critical time to study sustainability.
John
9th June 2015.
Some sustainable development ideas
Climate Change – the debates continues and ‘deepens’
http://www.theguardian.com/environment/climate-consensus-97-per-cent/2015/jun/08/what-youneed-to-know-about-the-noaa-global-warming-faux-pause-paper
Africa and climate change
http://www.theguardian.com/global-development/2015/jun/06/poor-nations-cash-tackle-climatechange
Some good news
http://www.bbc.co.uk/news/science-environment-33040965
Sites to Visit
http://www.sciencedaily.com/news/earth_climate/sustainability/
http://www.greenbiz.com/
http://sustainabledevelopment2015.org/