Is contemporary economic development sustainable?

Abstract

Is our use of Earth's resources endangering the economic possibilities open to our descendents? There is a remarkable divergence of opinion on the question, ranging from a straightforward "yes" to a flat "no". There is also the opinion that the question misleads, in that it is so aggregative as to suggest that resource conflicts are to be found only between "us" and a sequence of future "thems", whereas, or so it is argued, large pockets of extreme poverty residing in what is otherwise an increasingly affluent world ensure that there are resource conflicts even among contemporaries. The environmental problems facing a society are a function of its demand for goods and services. Population size certainly contributes to that demand, but the average demand per person contributes to it too. Some have argued that per capita consumption in industrialized nations has reached levels that are socially very costly and irresponsible, while others have claimed that high per capita consumption is essential if prosperity is to be maintained and if poor countries are to prosper. Underlying these intellectual tensions are the conflicting intuitions that have arisen from different empirical perspectives on whether the character of contemporary economic development, both in the poor world and in industrialized countries, is sustainable. On the one hand, if we look at specific resources and services, e.g. fresh water, a wide variety of ecosystem services, and the atmosphere as a carbon sink, there is convincing evidence that continuing growth in the rates at which they are utilized is unsustainable. On the other hand, if we study historical trends in the prices of marketed resources, or the recorded growth in the conventionally measured indices of economic progress in those countries that are currently rich, resource scarcities seem not to have appeared. I make use of recent findings in economics to try to reconcile the conflicting intuitions. Such indicators of economic progress as GNP per head and the United Nations Human Development Index (HDI) suggest that there has been a steady improvement in the quality of life in much of the world over the past 30 years (1). However, these measures do not reflect what matters for a society's prospects, namely, its productive base. Movements in the productive bases of countries provide a clearer picture of the character of contemporary economic development. In what follows, I offer some rough and ready figures bearing on the productive base in various regions of the world. But I cannot emphasize strongly enough that, although the theory upon which this essay is based is firm, the empirical estimates are very tentative. There is a great deal to be learned before we obtain a reliable picture of the character of contemporary economic development and the economic possibilities that will be faced by future generations.