Chapter 11: Development & Sustainability Poverty

When income is below the level that would allow someone to enjoy some agreed minimum standard of living. The world bank defines extreme poverty as living on less that $ per day !at """# and moderate poverty as living on less than $%$& per day at """ The process of improving peoples economic well'being and (uality of life )ountries with *+" per capita of $,-. or less )ountries with *+" per capita of $,-/ ' $01.,. )ountries with *+" per capita of $01.,/ ' $ 1 . )ountries with *+" per capita of $ 1 / or more Where the 2+3 is -.4 and above Where the 2+3 is between -.. 5 -.4 Where 2+3 is less that -.. 6 measure that1 recognising limitations of *+" per capita as a measure1 combines outcomes that might be valued in the development process7 life expectancy at birth8 adult literacy 5 percentage of the relevant population enrolled in primary1 secondary and tertiary education8 and *+" per capita in $%$ at """

Economic development Low-income countries Low middle-middle income countries Upper middle-middle income countries i!her-income countries i!h human development "edium human development Low human development uman development inde# $ D%&

%nde# o' sustainable economic wel'are $%SE(&

Environmental )ootprint

6n index1 first constructed in ,4, by & economists1 2erman 9. +aly and :ohn ;. )obb1 that adds to national expenditure things that raise the (uality of life !ore well'being# and deducts things that reduce well being. +aly 5 )obb have added to and refined the measure to produce a *enuine "rogress 3ndicator !*+3# The effect a person1 company1 activity1 etc. has on the environment < e.g. the amount of natural resources they use and the amount of harmful gas they produce

De'inition o' Development

6 process resulting in an improvement in peoples well being *odaro+s De'inition The process of development must seek to achieve7 6n increase in the sustainability 5 distribution of basic life sustaining goods 6n increase in the standards of living 6n expansion of the economic 5 social choices available to people +evelopment can1 in part1 be achieved by economic growth. 3ncreases in a nations income can enable greater spending on healthcare1 education 5 the reduction of poverty ,rowth: necessary condition of development -U* the wrong kind of growth can limit or reduce development - 9.g. capital'intensive growth does not generate jobs - 3ncreased income for the wealthy widens the gap between rich 5 poor - *rowth through the depletion of national resources - 2arms future generation - "ollution created in the creating of economic growth reduces standards of living ow is development measured. $= >illennium +evelopment *oals "D ,oals / resulted 'rom 0111 meetin!

,oal 17 9radicate extreme hunger and poverty ,oal 0: 6chieve universal primary education ,oal 2: "romote gender e(uality and empower women ,oal 3: ?educe child mortality ,oal 4: 3mprove maternal health ,oal 5: )ombat 23@A63+%1 malaria and other diseases ,oal 6: 9nsure environmental sustainability ,oal 7: +evelop a global partnership for development

Sustainable development
(hat is sustainability.
The capacity to provide non'declining future welfare - +evelopment is only sustainable if future generations are left with a stock of capital at least e(ual to that used to generate todays output

E#amples o' unsustainable practices

+epleting fish stocks "ollution of airAwater Boss of natural habitat Boss of farmland +epletion of non'renewable resources

"easurin! sustainable development

6lternatives *="A*+" have been proposed to take into account sustainable economic welfare >9W ! ,C&# was the first measure of 9conomic welfare 3%9W is the furthest advanced Dindex of sustainable economic welfareE

Criticisms o' ,8P main7 does not take into account7

. The value of household labour &. The welfare effects of income ine(uality 0. The welfare loss due to environmental degration 6nd considers Ddefensive expendituresE wrongly as contributions to welfare The 3%9W 5 forerunners aim to provide a remedy for these 5 other shortcomings to provide a move reliable monetary indicator of welfare 5 sustainability - 3%9W makes a subtraction for air pollution caused by economic activity - 3t makes an addition to count unpaid household labour e.g. cleaning - 6lso covers income ine(uality1 other environmental damage 5 depletion of environmental assets

%SE( is made up o':

%SE(9 personal e#penditure : Public e#penditure : ;alue o' unpaid wor< : %ncrease in man made capital / Private de'ence - Environmental dama!e - %ncome ine=uality - Decrease in natural capital

Criticism o' %SE(

3%9W too subjective 5 too susceptible to changes in the assumption which underpin it - Back of agreement on the choice of adjustments made to *+" - )hoice of weightings is subjective - +ifficult to assign a monetary value to some components

Environmental ta#ation
%ummary of the main advantages of environmental taxes . They can provide incentives for behaviour that protects or improves the environment1 and deter actions that are damaging to the environment.

&. 9conomic instruments such as tax can enable environmental goals to be achieved at the lowest cost and in the most efficient way 0. ;y internalising environmental costs into prices1 they help to signal the structural economic changes needed to move to a more sustainable economy. F. They can encourage innovation and the development of new technology .. The revenue raised by environmental taxes can also be used to reduce the level of other taxes1 which can help to reduce distortions in the economy1 while raising the efficiency with which resources are used. *he >Polluter Pays Principle? - The main aim of an environmental tax is to increase the firms private marginal cost !">)# until it e(uates with social marginal cost curve !%>)#. - This will result in a socially efficient level of output. - 3n the diagram below this would mean setting a tax e(ual to the vertical distance cd1 which is e(ual to the level of environmental damage caused at the optimum level of output.

Evaluation: *he Problems with Environmental *a#ation - >any economists argue that explicit pollution taxes create further problems1 which lead to government failure and little sustainable improvement in environmental conditions. The main problems are as follows7 . @ssi!nin! the ri!ht level o' ta#ation: - There are problems in setting a tax so that the ">) will exactly e(uate with the %>). - The government cannot accurately value the private benefits and cost of firms let alone put a monetary value on externalities such as the cost to natural habitat and the value of human life. - Without accurate information setting the tax at the correct level is virtually impossible. - 3n reality1 therefore1 all that governments and regulatory agencies can hope to achieve is a movement towards the optimum level of output. &. Consumer wel'are e''ects $issues o' e=uity&: - Taxes reduce output and raise prices1 and this might have an adverse effect on

consumer welfare. - "roducers may be able to pass on the tax to the consumers if the demand for the good is inelastic and1 as result1 the tax may only have a marginal effect in reducing demand and final output - Taxes on some de'merit goods !for example cigarettes# may have a regressive effect on lower'income consumers and leader to a widening of ine(ualities in the distribution of income. - 2aving said this1 it should be possible for authorities to develop Dsmart tariffs or taxesE where account is taken of the economic impact of pollution taxes on vulnerable households such as low income consumers

0. Employment and investment conse=uences: - 3f pollution taxes are raised in one country1 producers may shift production to countries with lower taxes. - This will not reduce global pollution1 and may create problems such as structural unemployment and a loss of international competitiveness. - %imilarly higher taxation might lead to a decline in profits and a fall in the volume of investment projects that in the long term might have beneficial spill'over effects in reducing the energy intensity of an industry or might lead to innovation which enhance the environment. - D 9co'taxE reformers often argue that the introduction of pollution taxes should be revenue neutral < so for example1 an increase in environmental taxation might be accompanied by reductions in employment taxes such as national insurance contributions so that the employment conse(uences of higher taxation are minimiGed

F. %t mi!ht be more cost e''ective for governments7 - To switch away from pollution taxation to direct subsidies to encourage greater innovation in designing cleaner production technologies

.. *he impact o' !reen ta#es depends crucially on what is done with the revenuesA - 3f they are balanced by reducing other taxes through revenue recycling1 research suggests that green taxes could result in an overall economic improvement

UB sustainable development
$H performance on sustainable development is currently measured against F criteria7

%ustainable consumption 5 production )limate change 5 energy =atural resource protection 5 enhancing the environment )reating sustainable communities 5 a fairer world

*he common and diverse characteristics o' developin! countries < pg &44 )ommon characteristics o Bow living standards o Bow levels of labour productivity o 2igh rate of population growth o 9conomic structure dominated by primary sector production o 2igh degree of market failure o Back of economic power in international markets and dependence