Economic Development & the Environment

What is economic development?

The process of raising the level of prosperity and material living in a society through increasing the productivity and efficiency of its economy. Sustained increase in the economic standard of living of a country's population, normally accomplished by increasing its stocks of physical and human capital and improving its technology. o Human Capital: The stock of knowledge and skill, embodied in an individual as a result of education, training, and experience, that makes him or her more productive. The stock of knowledge and skill embodied in the population of an economy.

What is economic growth?

A steady growth in the productive capacity of the economy (and so a growth of national income). An increase in the total wealth of a nation; if population grows faster than the economy, there may be real economic growth, but the share per person may decline.

What is the Environment?

The circumstances or conditions that surround an organism or group of organisms as well as the complex of social or cultural conditions that affect an individual or community.

What is Eco-Tourism?
A combination of adventure travel, cultural exploration, and nature appreciation in wild settings.

What is Absolute Advantage?

The ability to produce a good at lower cost, in terms of real resources, than another country. In a Ricardian model, cost is in terms of only labour. Absolute advantage is neither necessary nor sufficient for a country to export a good.

What is Comparative Advantage?

The ability to produce a good at lower cost, relative to other goods, compared to another country. In a Ricardian model, comparison is of unit labour requirements; more generally it is of relative autarky prices. With perfect competition and undistorted markets, countries tend to export goods in which they have comparative advantage.

Economic Development
Can be measured using indicators such as: Gross Domestic Product (GDP) Per Capita Infrastructure social measures (e.g. literacy, life expectancy)

The aim of economic development is to: Producing more life sustaining necessities such as food shelter & health care and broadening their distribution Raising standards of living and individual self-esteem

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When does economic development occur? Development occurs with the reduction and elimination of poverty, inequality and unemployment within a growing economy. When the economy becomes more efficient.

What is needed for economic development? Human Capital: Human Capital referees the skills of the population of that country. Europe is rich in Human Capital, which creates an economy of greater efficiency, where the costs of production are lower. o An example of where physical capital makes production cheaper/more expensive: South Africas Kouberg power station, which is our only Nuclear station in operation, runs on enriched uranium. However, despite our vast reserves of Uranium which are mined and exported globally, we still import enriched Uranium to run Kouberg. Thus the cost of running a Nuclear station in South Africa is more expensive than in Europe, where the Uranium Enrichment is done. Thus power generated by Kouberg is more expensive than it would be than if situated in Europe. In this case we see that exporting Uranium may lead to economic growth (a greater income for the nation), but without Human Capital it cannot lead to Economic Development. (The improvement of efficiency in the economy)

o Thus, Human Capital is necessary for the aggregation of efficiency an economy.

Physical Capital: Physical Capital refers to any already-manufactured asset that is applied in production, such as machinery, buildings, or vehicles. This has a direct bearing on the efficiency of an economy, and can be expressed in terms of technology. It can however be produced if enough Human Capital is available. o In the case of Russia under the rule of Stalin: Russia built its physical capital by trading Natural Resources and Agricultural products for produced goods for use in industry. Natural Resources: Resources occurring naturally in nature, such as minerals. These are either exported, which inevitably creates economic growth, or processed, which is reliant on the Human Capital at ones disposal. The exportation of processed goods rather than raw materials in terms of Natural Resources actually produces greater economic growth. Europe is poor in terms of Natural Resources, yet Africa is much richer in terms of those resources. Yet, financially, Europe is richer. This is because of the efficiency and Human Capital at the disposal of the Europeans. Labour: Sheer man-power in terms of workforce.

Traditionally economists have made little if any distinction between economic growth and economic development using the terms almost synonymously. As a concept, Economic development can be seen as a complex multi-dimensional concept involving improvements in human well-being, however defined Critics point out that GDP is a narrow measure of economic welfare that does not take account of important non-economic aspects Eg more leisure time, access to health & education, environment, freedom or social justice. Economic growth is a necessary but insufficient condition for economic development. Professor Dudley Seers argues development is about outcomes .ie: development occurs with the reduction and elimination of poverty, inequality and unemployment within a growing economy.

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Sustainable Development
The environment is the source of our Natural Resources. Sustainable development involves reducing the environmental impact of economic growth. It is to ensure that the development created now does not jeopardise the ability of future generations to develop. General examples of unsustainable development include: Rapid use of non-renewable resources. The depletion or damage of non-renewable resources, such as water. The degradation of land. o This makes human settlement in many areas impossible, or incredibly expensive. In the case of China, where air pollution levels 3.5 times higher than that of an average European town (140mg per Cubic metre compared to 40), the costs of housing workers near factories are much higher than they should be. The state has to provide more expensive and sophisticated healthcare in these areas to ensure that the workforce of those factories fan survive. Furthermore, the exorbitant use of water near Chinese factories (10 times higher than more efficient, but more expensive methods) means that the cost of living in those areas are higher.

Examples of economic activity which are unsustainable: Inefficient manufacturing processes that consume greater amounts of water and power than necessary, and thus strain the resources of the nation and land, thus reducing the carrying capacity of the earth.

Unsustainable development often does result in cheaper production of goods, but often by Externalising the costs. IE: The governments/people of a place are left to fit the bill for the damage done to the Human and Fixed capital of the world. Unsustainable development often results in pollution, which in turn affects the health of people. This then means that people are less productive, and in a developing economy, efficiency is the key. Chinas growth rates are slowly declining, which some attribute to a loss in productivity.

Unsustainable growth can be more expensive than its counterpart! Being resource efficient is actually better than plundering our resources. Sometimes it costs more to take the cheap approach: Eg: Itll less in the long run to develop better
technology power plants than to use the ones that are currently cheaper.

Examples:

Environmental degradation is costing Chine nearly 9%of its annual gross domestic product (GDP) (Turner & Zhi 153). Environmental costs, that is, turn into economic costs, as an unhealthy society cannot work as efficiently as a healthy one, a problem which China has just begun to face seriously. Pharmaceutical Companies rely heavily on Natural Forests for substances used in their medications. Furthermore, there are many plants with natural medicinal properties that are studied or harvested. The loss of these forests would reduce the supply of those plants, thus pushing up the price of pharmaceutical research. It could even wipe out some species of plants, meaning well never get to study their medicinal properties, no matter how useful they may be!
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The pollution of the Black Sea caused by industries in Ukraine in the early 90s polluted the sea to such an extent that it had its own distinct and putrid smell. Inhabitation along the coastline of the Black Sea (which is shared by Ukraine, Turkey, Romania and Bulgaria in the 90s was near impossible and hazardous. Furthermore, the tourism industry along those coastlines was killed off. It has taken millions of dollars worth of investment to clean the sea up, and make it a viable tourism area again. However, the damage done to the areas reputation has made it hard to bounce back as a tourism card.

More Chinese examples:

Illustrating how environmental spheres are connected, Chinas air quality has affected vegetation and agriculture. Sulfur dioxide has given China some of the worlds worst acid rain. An estimated 30 percent of Chinas cropland is suffering from acidification, and the resulting damage to farms, forests, and human health is projected at $13 billion (Flavin & Gardner, 7). One-quarter of Chinas land is desert, and desertification is proceeding at a pace of more than 1,300 square miles per year (Economy, 102). While de-sertification can be a natural occur-rence, in China human action has greatly accelerated it and changed its character. Practices such as overcultivation, overgrazing, and firewood collection, along with the destruction of natural vegetation, have intensified desertification (Tao & Wei, 238). Ground cover destruction reduces the capacity of soil to hold water, suppresses airflow rise and convergence, enhances surface albedo, intensifies downward airflow, and ultimately leads to climatic aridification (Tao & Wei, 237). Destruction of vegetation and land character, in turn, affects water quality through erosion and runoff, and air quality through severe dust storms, familiar in the United States through the dust bowl of the Great Depression. The current dust storms have played havoc with air quality and transportation in China and neighboring countries such as Japan and the Republic of Korea. Plumes of dust from these storms have been identified even in the mainland United States (Ferris & Zhang, 68). Environmental challenges become multifaceted and international. Water is another element, central to hu-man life, to agriculture, and to industry, suffering degradation in todays China. Water is a scarce resource in a country that has just 8 percent of the worlds fresh water to meet the needs of 22 per-cent of the worlds population (Flavin & Gardner, 7). Surface water is polluted, with an over-reliance on groundwater, and aquifers are depleting in northern China.

Cases where things can change:

Greater efficiency in mining coal, is possible, for instance in replacing small, poorly run mines with large ones operating under tightly controlled rules. Indeed, China is now planning to call a halt to building new coal-fire power plants below 300,000 kilowatts. This illustrates Chinas increasing acceptance of international environmental policies.

Overall: Unsustainable development threatens:

Food Security. Land Available for Economic Activity. Resource Scarcity, which will drives prices insane when they are near depletion. Loss of Human Capital and Loss of Life. (Costs to Human Life) Higher costs for future development.

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Politics in Sports
South Africa will no longer have quotas for non-white players in sports teams.
The policy has caused controversy in rugby and cricket, and was cited by England batsman Kevin Pietersen as the main reason he left the country. Sports minister Makhenkesi Stofile says the focus will switch to helping black athletes by investing 15m a year. "Quotas are out. We are not going to decide who must be on the team. All we are saying is expose everybody, give them an opportunity," Stofile said. The presence of only two non-white players in South Africa's World Cup-winning rugby team's starting line-up, 13 years after the end of apartheid, led to a new debate over the progress of black sportsmen and women. World Cup winning coach Jake White was not in favour of quotas, saying the team should be selected on merit. The BBC's correspondent in Cape Town, Mohammed Allie, said: "The idea of quotas is still favoured by a marginal majority, according to a survey." He added previous claims by political leaders that sporting success was not as important as bringing through black sporting talent had been revised after the Springboks' triumph in France. "The World Cup being paraded around for four days has brought home to people how important it is to have winning teams," Allie said. "And that's why so much is being put into the team for the 2010 football World Cup - it will be a disaster if the team does not get past the first stage." Stofile, previously a staunch supporter of quotas, said the experiment had failed but insisted black sporting success stories could be created with the correct funding. "Quotas were used only for window dressing for international consumption," he added. "We must kill the myth that black people cannot play certain sporting codes because they are black. "Let us put our resources into the development of talent." Why racial quotas dont work: Not enough opportunities for previously disadvantaged citizens to develop skills. o In South Africa, most sportsmen are developed at school level. Sadly, our schooling system is in such disarray in disadvantaged areas that sports development is the least of their focused. To a large extent then, sportsmen in South Africa are only developed when in a privileged environment, such as a previously all-white school. Thus, we are in a situation where finding enough black players to fufil quotas that have been developed sufficiently at a young age is hard. This is especially true with sports like Rugby & Cricket. Soccer is popular amongst black communities, and doesnt require many facilities. Hence it is the most transformed sport in SA.

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