Economic growth is normally seen as the most important long-term macroeconomic objective. Without economic growth, so it is argued, people will be unable to achieve rising living standards. But, according to Nicholas Stern, Professor of Economics and Government at the London School of Economics, former head of the Government Economic Service, former World Bank chief economist and author of the 2006 Stern Review on the Economics of Climate Change, countries will need to reconsider making growth the goal of their societies.
Speaking to students at the People’s University of Beijing, Lord Stern warned that unless substantial cuts were made in carbon emissions, the effects of global warming would have devastating effects on people’s lives. As the Stern report stated, “Climate change will affect the basic elements of life for people around the world – access to water, food production, health, and the environment. Hundreds of millions of people could suffer hunger, water shortages and coastal flooding as the world warms.” The implications are that countries must making cutting carbon emissions a priority and must reconsider their growth strategies. In his speech he said that “Beijing should shift the economy away from heavy industry, manufacturing for exports and other high-emission activities. Instead, it should focus more on domestic consumption, service industries and low-carbon technology.”
So should countries rethink their economic objectives? Is economic growth either a necessary or sufficient condition for an increase in human welfare? Read the articles and then consider the questions below.
World must help China shift to clean growth-Stern Reuters (11/9/09)
Stern Truths: Some Parts of China Have Western-Style Emissions Wall Street Journal (11/9/09)
Stern: Rich nations will have to forget about growth to stop climate change Guardian (11/9/09)
Stern words in Beijing Hot Topic (New Zealand) (13/9/09)
Questions
- Are the objectives of economic growth and tackling gobal warming necessarily incompatible?
- What would a low carbon growth strategy look like?
- What would you include in the opportunity costs of maintaining a high growth strategy compared with switching to a lower carbon, lower growth one?
- Consider whether economic growth is (a) a necessary condition; (b) a sufficient condition for a growth in the wellbeing of the human race.
Are businesses concerned solely with profits or sales, or do they take broader social objectives into account? Is ‘corporate social responsibility’ (CSR) a key part of their decision-making? In other words, do they care about the welfare of their employees, about being honest with shareholders and customers, about being energy efficient and non-polluting and about caring for local communities? In general, do they make a genuine attempt to be ethical? One view is that they should do this because, in the end, it’s profitable to do so. Another view is that they should be socially responsible because they have a duty to be so.
In the current economic climate, CSR is being tested. Is CSR something that should be inextricably part of everything a firm does? Or is it a luxury that can be dispensed with when times get tough? The first article below looks at this issue and comes to a fairly optimistic conclusion. The other articles look at approaches to CSR in various countries.
A stress test for good intentions The Economist (14/5/09)
The Future of CSR: 2009 report CSR Asia (05/09) (This may take a little while to load: try right clicking and saving it before opening)
CSR efforts score well in trusted brand poll BusinessMirror (Philippines) (29/5/09)
Minister Presents Corporate Responsibility Index Awards Australia.TO (28/5/09)
CSRwire Welcomes New Members to its Global Network of CSR News and Information CRSwire (27/5/09)
Straight Talk about Corporate Social Responsibility The Huffington Post (13/5/09)
Social Responsibility WA Today
See also the UK government’s CSR site Corporate Social Responsibility
and Business in the Community’s Corporate Responsibility Index
Questions
- Explain how self-interest can go some way to making companies more socially responsible.
- Why may the free market fail to provide the optimum level of CSR?
- To what extent does the current recession threaten CSR? Are there any ways in which it could encourage companies to be more socially responsible?
EU leaders at a Brussels summit have agreed a plan to cut emissions. This will involve the 27 EU countries cutting greenhouse gas emissions by 20% by 2020 compared with 1990 levels. The aim is also to try to raise renewable energy sources to 20% of total energy use. The package has become known as the 20/20/20 package, but scientists have already argued that these measures may not be sufficient to prevent serious climate change.
Fiddling with words as the world melts The Economist (18/12/08)
Climate deal is far too little too late Guardian (15/12/08)
EU leaders claim historic agreement on cutting pollution Guardian (13/12/08)
Climate change: EU leaders reach compromise deal on emissions Guardian (12/12/08)
World needs ‘climate revolution’ BBC News Online (11/12/08)
EU climate package explained BBC News Online (5/12/08)
EU leaders reach new climate deal BBC News Online (12/12/08)
Questions
- Identify two external costs that result from climate change.
- Using diagrams as appropriate, illustrate the impact of the EU climate change deal on the market for electricity.
- Discuss the extent to which the EU climate change deal will lead to an increase in the supply of renewable energy sources. How quickly are these changes in supply likely to take effect?
- Examine two other policies that national governments could implement to reduce carbon emissions.
Billions of plastic bags are used and discarded each year around the world and these cause considerable environmental damage – a form of market failure. In this podcast we consider the extent of the problem and policies that countries around the world are adopting to try to minimise this market failure. Many countries, including China, have banned single-use plastic bags completely, while others, such as Ireland, have chosen to tax them to try to limit their use.
“The economic crisis is petty by comparison to the nature crunch. But they have the same cause.” This is how George Monbiot starts his article below. The comparison between the financial crisis may seem an unlikely one, but global warming and the resultant economic costs could also have a significant effect on the world economy.
This is what denial does Monbiot.com (14/10/08)
Green shoots of recovery Guardian (8/10/08)
Independence from the street up Guardian (23/9/08)
Questions
| 1. |
Define the terms (i) external cost (ii) private cost (iii) social costs. |
| 2. |
Using diagrams as appropriate show the reasons why the market economy may fail to allocate scarce resources appropriately. |
| 3. |
“If the global economy keeps growing at 3% a year (or 1700% a century) it too will hit the wall.”. Discuss possible policies that may help prevent this situation arising. |
