SUSTAINABLE
DEVELOPMENT
Prepared by:
Ma. Janda Ira Felina M. Benedictos
Instructor 1
Philippine Merchant Marine
Academy
UN
Global Economy
CE K
RT S
AI RI
NT
Y
The first decade of the twenty-first
century saw the Global economy
face
Global Economy
The inability of modern
societies to produce enough
stability and sustainability are
the main reasons for the current
problems
Stability
- Firmness in position
- Permanence
- Resistance to change
Stability
IMF describes it as avoiding:
• Large swings in economic
activity
• High inflation
• Excessive volatility in
exchange rates and
financial markets
Stability
• The given definitions are pertaining to the
short term categories of the economy
• “Economy is stable” actually means that
the system is one of the calm phases of
the business cycle, neither going towards
boom nor towards depression
The Business Cycle
Steady
Growth
Peak Line
Recession
Expansion
Expansion
Prosperity Prosperity
Depression
Recovery
Line of Cycle
Trough
Stability
That challenge is that
excessive highs and
lows should be avoided
A clever stabilization policy could
flatten and shorten the phases of
the business cycle without
changing significantly long term
trends of growth
Global Economy
Periods of Economic Instability
• Great Depression of 1929
• 1970 Global Crisis (stagflation) * rise in
inflation and unemployment
• 1997 Asian Financial Crisis
• Russian Crisis and Disaster in Argentina
in 1999
2007 Global Financial
Crisis
After a couple of years of bubbling markets
crashed and then the crisis came.
Since 2007 countries had been trying to
restore stabilization with expensive
spending programs and generous monetary
polcy
Sustainability
• It considers the long term
capacities of a system to exist, not
its short term resistance to
change.
• Development that meets the
needs of the present without
compromising the ability of
future generations to meet their
own needs
- Bruntland Report, 1987
Sustainability
• Problems of Economics in terms
of Sustainability
Issue of Possible depletion of
resources
Price mechanisms in market
economies would translate
scarcity into higher costs and
reduced consumption of the
good
Sustainability
• Technology became a fantastic escape
from the sustainability dilemma
New techniques of production help
to expand size of output without
raising necessary input
The Solow-Swan model from the
1950s saw innovations as the answer
The new growth theory of Paul
Romer and Robert Lucas saw
endogenous factors such as
education and human capital as
crucial for growth.
Sustainability
• Sustainability played a
marginal role, it was
better to think primarily
about new technologies
making a better use of
resources instead of
literally saving resources
Sustainability
• The capitalist system
faced open/waste spaces
of the globe and was free
to expand and exploit
resources. The only
problem was to reach
them before other
competitors did.
Sustainability
Can we say that
the problem on
sustainability
was non
existent in the
past?
Sustainability
• Thomas Malthus published a book on the
grim consequences of a rising population
• In 1968 the debate in sustainability
focused on the environment came with
the work of Garret Hardin entitled the
Tragedy of Commons
• In 1972 the Club of Rome published The
Limits to Growth It dealt with the
connection between economic growth
and the scarcity of resources
How do we deal with the
problems of stability and
sustainability???
The issue of what is an efficient
market needs some clarification
Accept the fact that there
might be many different
institutional ways to efficient
systems
A redesign needs a
wider look at what is
economic growth and
what kind of growth
is compatible with the
idea of sustainability
Complexity Approach to Markets
There are difficulties with Strong Assumptions with
efficient economic policy and, theoretical models concerning
obviously with providing markets
stability and sustainability Individual actors are
because we are now dealing with generally driven by a one
biases in the functioning of dimensional motivation of
markets. profit.
Take advantage of all
necessary information
Not disturbed by other actors
who have power over the
market.
Markets tend always to a state
of equilibrium set out by
forces of demand and supply
Pluralism of Development Models
The neoliberal ideology brought Problems associated with the neo
about the issue of convergence of liberal agenda
national economic models. The Increased exposition of the
Washington Consensus world economic systems on
formulated a liberal agenda crisis and contagion effects
The tacit and widespread
assumption on superiority of
free market solutions has some
flows
Legitimacy of non market
solutions
‘Markets are the essence of
a market economy in the
same sense that lemons
are the essence of
lemonade’
Pluralism of Development Models
Pure lemon juice is
barely drinkable to
make good lemonade, This means that the
you need to mix it with market must be mixed
water and sugar with other mechanisms
-Rodrik, 2011 of social coordination.
The answer is the
Varieties of
Capitalism
Approach (VoC)
Pluralism of Development Models
VoC Theoretical Models
- It considers firms as the - Liberal market economy
- Characterized by dynamic
most important actors
access to resources
for welfare creation in - It is relatively inexpensive to
national economies change condition of
(Institutional transactions or resign from it
- Capital is from the stock
comparative advantage) market
- Labor Market has dynamic
relations, hire and fire is
relatively easy
- Coordinated Market Economy
- Transactions are more stable
and long term oriented.
- Capital is provided by banks
- Labor market has long term
contracts, low difference in
wage levels
Approaches to Growth
The Roll Over Effect Gross Domestic Product
- Modern Capitalism in the • It is used as an indicator of the
last 200 years based itself on output or income of a country.
the assumption of growth The estimate of GDP in one
period is often compared with
and expansion. The more
its past values to get an idea of
products we are able to the direction toward which a
deliver, the better for country is headed. This in turn
everybody. is compared with the GDP of
other countries. This is down in
order to look at the
performance of a country
relative to its neighbors.
Approaches to Growth
High GNP does not mean Today’s growth and
improved standards of living,
because it does not say about the consumption are
distribution of income and ‘innocent’ in terms of
poverty. In addition it also does
not directly present the costs of
GDP, but they flourish
achieving higher output e.g. due to ignoring the
stress, environmental degradation future; and this future
etc.
can bring not only
scarce, more expensive
resources, but a
catastrophe of the
entire system
Approaches to Growth
MORE
GROWTH !!!
Approaches to Growth
Amended Growth HDI (Human Development Index
- The second approach to - The only globally accepted measure of
growth which is a more amended growth and its quality
- It was created in 1990 by Mahbub ul
skeptical one
- Sees the GDP index as and Haq, the Pakistani economist and then
developed by the Indian Nobel Prize
important measure of human Laureate Amartya Sen and used by the
achievements, but it has to be United Nations Developing Program
combined with additional
indexes which refer to several
aspects of quality of life and
sustainability.
End of
Growth
We need to have an integrated approach to
growth
and development
“In a long term we all be dead”
- Keynes, 1923
