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Human Development and Economic Sustainability

maggio 18, 2011

Over time the concept of sustainability has become increasingly popular to get to be a key objective of all policies in the world. It has passed nearly twenty years since, inRio de Janeiroconference of 1992, we began to interact with the concepts of environmental conservation and human progress. “The growing concern with sustainable development reflects a basic belief that the interest of future generations should receive the same kind of attention that those in the present generation get” (S. Anand & A. Sen, Human Development and Economic Sustainability).

But the path to achieve this has been long and troubled. Man has always behaved with great inequality, both for the environment and towards other human beings. Since the ancient Greeks any analysis on human development has left out the slaves, women, and any individual who was part of exploited social classes. Nowadays the problems have weakened, especially through the works of writers such as Thomas Pain and Mary Wollstonecraft (1972), but has not yet arrived at one of the ultimate goals, equality among human beings. Still in many parts of the world people live in poverty, they live short lives full of limitations, such as a lot of women who live life dependent on many obligations and little chance of success. All this demonstrates the failure of the modern world to bring the most basic capabilities within the reach of all. And just the inadmissibility of discrimination and injustice are the subject of the most fierce battles that are fought by human development.

The problem concerns the present and the future. We can not exploit natural resources so as to jeopardize the ability of future generations to enjoy the same opportunities as we had. And therein lies the biggest challenge, that is to allow the less privileged today to improve their standard of living, without compromising the ability of future generations to do the same. This is the central idea of sustainable development which is to give to posterity the chance to live worthwhile lives that are enjoyed by generations that precede them and also to make people’s lives less miserable today. ‘Ethical Universalism’ is the need to make more similar to each other’s lives between generations and within generations. It is a need for equity, a need to improve the world.

There are traces of human development in the most important work in economics, from the founders of quantitative economics to those of political economy. And in this sense has not done anything new and revolutionary, but incorporated all together the heritage of many different economic. The problem concerning the prosecution of human development as main objective is that it has faced the competition of other factors, including commodity production, opulence and financial success. Among these it is important to analyze the differences and connections between the opulence-oriented approach and human development.

Make society richer as possible without worrying about equity of distribution and where the richness goes though, is the main objective of those who seek to maximize the wealth. Of course, this approach has been considerable criticism, but it has a minimum of truth: being rich, wealthy and affluent significantly influence on the welfare of people and certainly no one would contradict that having a lot of money in his wallet is a good thing. Instead the criticism regards to the obsessive search of wealth that leaves no place for other crucial factors, such as public care and social organization. Furthermore, it neglects the individual predicaments to give attention only to conglomerative achievement and not to the real opportunities that people have to live worthwhile lives. The opulence-oriented approach  ignores the plurality of influences that differentiate the real opportunities of people, and implicitly assumes away the variations in the possibility of converting the means of income into the ends of good and livable lives which people have reason to value” (S. Anand & A. Sen, Human Development and Economic Sustainability).

For what concerns the relationship between wealth and human development can be noted big differences already by economists from which different theories are built on. On one side Thomas Mun has based his study mainly on the value of material richness, the other part, more than 2 millennia ago, Aristotle argued that “wealth is evidently not the good we are seeking, for it is merely useful and for the sake of something else”. But the fundamental debate regards the capacity of the opulence to turn into capabilities that are sought. Hence it can see that wealth would seem to be the means and human development the ends. An example of this is given by W. Arthur Lewis whose objective to pursue is increasing the range of human choice concentrating his studies on the growth of output per head. His interest is growth not distribution. But in practice this theory has not found success: many countries have achieved a high GNP or GDP per head at the detriment of a very low level of living condition, while other countries (such as Sri Lanka, China, Jamaica, Costa Rica, and the state of Kerala in India) have a much higher level of human development compared to their incomes. Despite that Lewis has not gone very far from the right way. Indeed economic growth not only allows to be richer, but allows the creation of resources that can lead to improve some basic social services (like education, public healthcare, etc.). But what is problematic is the effective use of wealth for these purposes: in many cases the issue is the distribution of the newly generated income. In conclusion we can say that economic growth is important in itself but not sufficient to create human development. It is therefore an effective means but not unique in the search for improve human life.

The opulence-oriented approach has shifted the focus on income. But with the passage of time, economists have begun to discuss the proper use of it, and one of them, Robert Repetto, said that people should consume the income without compromising the ability of future use. Something similar was said also to the environment when Robert Solow argued that “the duty imposed by sustainability is to bequeath to posterity not any particular thing but rather to endow them with whatever it takes to achieve a standard of living at least as good as our own and to look after their next generation similarly” (S. Anand & A. Sen, Human Development and Economic Sustainability).The common feature of both definitions is the interest in the future and in un-born generations. This is underlined by another concept that summarizes the previous that is sustainable development. It is the development that supports the needs of today’s generation without compromising the ability of future generations to meet their ones. This obligation is not only of people or market, but also of the state that, through government policies must protect the environment and basic resource from their excessive use.

What are our obligations to future generations? This question has been answered by Frank Ramsey with the optimal growth theory, a theory that provided the foundation for economic development and social cost-benefit analysis in the less developed country. His work is based on maximizing the total welfare of different generations. “If  the benefit to us from economic activities which continue to emit greenhouse gases at the present rates outweighs the harm done to future generations from global warming, then the criterion would recommend no change in our activities” (S. Anand & A. Sen, Human Development and Economic Sustainability).If the rate of pure time preference is positive (thus the well-being today is favorite to the future ones) and if the social rate of return to investing in environmental capital is not large, then it is preferable to continue to consume rather than invest, because otherwise there would be a decrease in welfare over time. This result can also be reached if we introduce non-renewable natural resources. So according to this model of inter-temporal allocation optimality does not imply sustainability.

According to Robert Solow sustainability concerns empower future generations to live worthwhile lives. At the base of his speech is the usufruct rights, that is to enjoy what we have inherited, without compromising its future property. We have an obligation to give them the ability to generate wealth. We should preserve the environment and resources, not increase them. We need to do what our ancestors have done, that, although they were living worse than the today, have allowed us to enjoy ample opportunities. The problem then is not what but how much preserve. Indeed if the good to preserve is specified in excessive detail, there will be problems over-specification. In the opposite case in which the good is described in a too brief way there will be a problem of under-specification.

What Solow has done was to develop the thought of John Hicks, who said that we should not keep intact all the resources but replace them, if they exhaust. In this case the entire of wasting asset should be reinvested to compensate, through a reallocation, the disadvantages resulting by a wrong use of environment. In support of this there is also the Hartwick’s rule, according to which the investment of revenue from a waste of resources allows a constant and perpetual maintenance of consumption. “”Solow suggests that Hartwick’s rule can be given the interpretation that an appropriately defined stock of capital is being maintained intact, and that income is the interest of that patrimony” (S. Anand & A. Sen, Human Development and Economic Sustainability).

But to focus attention towards the future should not distract us from the conditions of the present generation. It’s a moral obligation to preserve the world for posterity, but it is also to improving the conditions of people living today. So the theory of inter-generational equity should be accompanied by intra-generational equity ones. Here comes the principle that the human development is not only a goal but also a means. Enhancing the living conditions of the poor increases their human capital, which will have positive effects on the future of the same people. Therefore human development makes a huge contribution to the achievement of sustainability. As the World Bank, poverty reduction is fundamental to the sustainability of the environment, because the poor, using the few resources available to them in an exaggerated way, create an environmental damage and thus have a role in both active and passive in its degradation. An example of the importance of human development, not only as an end but as a means, was given by the ‘East Asian miracle’, in which a key role was played by the improvement of the quality and skill of labor. But emphasizing too much the human capital as a means, it risks of making the inverse process and therefore to forget the role of end played by the rising of living standards. “We have to see human development as having both direct and indirect importance. Since education, health, and quality of life have intrinsic value, human development has direct importance. In addition, since the quality of human agency is enhanced by better education, health, etc., it is also the case that human development has great indirect importance” (S. Anand & A. Sen, Human Development and Economic Sustainability).

In conclusion, the road traveled has shown the fundamental role of human development as means as end to create well-being and sustainability. Also it is useful but not decisive the contribution of wealth to achieve a better standard of living. This is in contrast with what happens in real life, where money and other material goods have a prominent position in the scale of values ​​of people, particularly in the western world. What is important is to increase the capabilities so that everyone, from Europe to South America from Asia toAfrica, can live and not merely survive. And to do that, we must change our mentality. The world must have two objectives: to reduce poverty (as seen not only economic poverty but also, and mainly, as poverty of capabilities, poverty of choices), and protect the Earth from the destruction that humanity itself is taking. Everything else is just egocentricity.

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