What are we doing to the Earth?
We have consumed from Earth in seven months what we should have in 12! How did we manage to this? Both global and local (glolocalization) factors have contributed to this over consumption. Let us look at globalization.The present version of globalization has promoted intra-industry trade that hassled to convergence of incomes among trading partners. Trade between nations happens in two ways: inter-industry and intra-industry. Inter industry trade takes place between dissimilar economies, is based on the Ricardo’s theory of comparative advantage, and is skewed in its outcomes, that is, advantageous to one partner.
On the other hand, intra-industry trade occurs between similar economies, is based on Krugman’s model of competitive advantage of nations, and leads to convergence of incomes. In intra-industry domestic and international firms compete to manufacture similar products to sell in the local market. For example, rising wages in Japan and Europe increased demand for goods and services similar to the U.S. In turn, this led to increased intra-industry trade among U.S., Europe, and Japan.
A major part of the Indian and Chinese growth story is also explained by increased access to intra-industry trade. Modernization of production technology permitted production processes to be split to be located in different parts of the world, and China benefited. On the other hand, outsourcing of services due to advances in information technology was advantageous to India because service outsourcing, unlike free trade earlier, had the potential to equalize “non-tradables” (e.g. wages).
Services in the developed nations command high wages, and the advantage of high wages could only be enjoyed by physical migration to the high-income countries, which was available to a few only. Now, software professionals produce services in India and are paid high wages without actually shifting to high-income countries. In turn, high wages earned by software professionals has led to market demand for products, similar to the products consumed in developed nations, thus, accelerating intra-industry trade with multiplier effects on job creation and income enhancement.
At the local level, the idea of growth at any cost has led to formation of growth machines.Typical machines manufacture products efficiently and consist of moving parts that accomplish production goals efficiently, add value to inputs, and overcome resistance at one point by applying force at another point (leverage). Similarly, the growth machine produces high levels of consistent economic growth and the organization consists of groups of industrial firms, local businesses, realtors, business organizations, and the “entrepreneurial state”. The growth machine also adds value, efficiently, to land by erecting new structures – tourist facilities anywhere, river dams, hydroelectric power projects.
The Government has become an entrepreneur and pro-actively promotes business activities through regulatory and planning support, institutionalizing pro-growth strategies and practices and promoting connections through intermediaries. This promotion of business activities occurs within a broader vision of public interest. Moreover, the entrepreneurial state attracts “footloose capital” by a slew of incentives and benefits to boost economic development. Finally, the attitude of the local officials is also focused on growth “partly because most accept the dominant ideology of growth, partly because some may personally benefit from increases in land rents”. Therefore, the dominant theme of the glolocalization is that “growth feeds upon growth” and has put the notion of sustainable development on the back burner.
What is required is to make operable the idea of sustainable development. One practical way to do this is to use the sustainability triangle to benchmark all growth machines induced policies and programs. The sustainability triangle consists of 3Es (economic development, equity and environment preservation) represented by three corners of a triangle and the purpose of policy design should be to work at the centre.
Simply, policy design has to include an evaluation of the winners and losers, among the 3Es, and informed, knowledgeable decisions made. Importantly, sustainable development goes beyond existing paradigms that are founded on either/or terms. For example, environment degradation has to be ignored during the process of economic development, the poor cannot wait for delays caused by including environment concerns in programs, etc. A different kind of a development paradigm is required in which initiatives should lead to triple positive outcomes (3Es), not zero-sum outcomes.
(Views are personal)
Additional Secretary(Smart Cities),
Ministry of Urban Development