Economic growth vs environmental sustainability

While teaching environmental and sustainability courses to management students, I find it interesting to see how often and how strongly the opinion emerges that India, at its current stage of development, should ignore the costs. environment to achieve its development objectives. This view seems to be consistent with the wider public opinion in India. When the World Values ​​Survey, conducted in more than 80 countries, reported its findings to India in 2014, about half of those surveyed agreed that we should focus on economic growth even if it comes at the expense. environment, while just over a third of respondents indicated a preference for environmental protection over economic growth. Public opinion at large is perhaps shaped by the discourse on the debate between growth and environment in India.

The country’s low rank in the World Bank’s Ease of Doing Business index is often mentioned in the media and people at the highest levels of government have decided to improve our ranking. Powerful committees made up of senior officials and industry leaders are tasked with reporting on streamlining and speeding up regulatory approvals, especially those related to the environment and forests. Over the past fifteen years, there have been at least five such committees, which have formulated recommendations to improve the climate for private investment in industry and infrastructure.

Compare that with the reaction to surveys of the state of our environment. No government official has come forward and none of the media has questioned what the government plans to do to improve India’s ranking on the Yale University Environmental Performance Index (EPI), which ranked us 155 out of 178 countries in 2014. Regarding air quality, the survey ranked India 174 out of 178. In fact, it is common for the government to respond to such surveys by questioning their methodology or, worse, their motivations. We saw this when in May 2014 the World Health Organization declared Delhi the city with the worst air quality in the world. It was as if the common man was unaware of the pollution in the city.

The basis for this point of view is the idea that environmental quality only comes after basic needs such as food and shelter are met. Thus, countries should focus initially on economic growth even if it comes at the expense of environmental quality. As countries get richer, they can afford to clean up pollution from the past, and as public demand for a cleaner environment increases, governments can enact and enforce stricter pollution control regulations. pollution. This is the Environmental Kuznets Curve (EKC) hypothesis and is believed to explain why environmental quality has improved in richer countries. The argument is simple: “pollute first; clean up later “.

The validity of the EKC hypothesis, however, has been seriously questioned. In an article published in Science in 1995, a team of researchers led by Nobel Prize-winning economist Kenneth Arrow argued that “pollute first; clean up later “is wrong. First, in the case of global pollutants such as carbon dioxide, there is not enough evidence that its levels start to drop after countries get richer. Second, it doesn’t. is not clear how much damage we can cause to our ecological systems before which they begin to undergo irreversible changes. These irreversible changes can lead to changes in the life support systems of the earth, with unforeseeable consequences. Third, improving the quality of the environment after an income threshold may have more to do with the ability of developed countries to move polluting industries to developing countries at low economic cost and less to do with public demand for policies that lead to a cleaner environment The emergence of China as a global manufacturing hub can have many p to do with this reasoning.

Thus, our policy should not be based on the principle of “pollute first; “clean up later”. What could be an alternative approach? We could start by refusing to sweep the dirt under the rug and instead explicitly recognize the ecological costs (not necessarily in monetary terms) of economic growth. For example, we might want to recognize that the growth of the automotive sector, often seen as an indicator of a strong economy, or our thirst for cheap energy comes at the cost of the air pollution to which the inhabitants of our cities are on display. that development projects in mining and infrastructure often come at the expense of natural forests that we may never be able to recreate.

The first implication for the policy is that in planning development projects, we should explicitly identify the trade-offs between economic benefits and ecological impact. Second, to determine which compromises are acceptable, we need to design transparent mechanisms that allow meaningful discussion through a participatory process, in which all groups affected by the projects are involved. We need to strengthen participatory processes such as public hearings in the process of environmental and forest clearing. Research shows that meaningful public participation in decision-making in various environmental and natural resource management contexts will, in the long run, build trust among various stakeholders and reduce conflict.

We need to monitor these tradeoffs not only for individual projects, but also at the macroeconomic level. Environmental economists increasingly argue that countries should consider developing and reporting measures of human well-being other than gross domestic product (GDP) that better reflect the environmental and social costs of resource use. . Although no single indicator has yet emerged as an alternative, several have been proposed. In an article published in Nature in 2014, a research team led by renowned environmental economist Robert Costanza identified 14 indicators of well-being as alternatives to GDP, including real savings, an index of sustainable economic well-being, a real progress indicator and a gross national rate. joy.

The idea of ​​sustainable development cannot be a mere rhetoric; it must be accompanied by transparent and participatory mechanisms allowing a constructive debate on the development paths that make growth truly sustainable.

Rama Mohana R. Turaga is a faculty member of the Public Systems Group at IIM Ahmedabad. He teaches environmental management, sustainability and public policies.

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