Economic Sustainability

Economic sustainability iconThe general definition of economic sustainability is the ability of an economy to support a defined level of economic production indefinitely.

How then do you define "a defined level of economic production?" There's the wrong way and the right way.

The wrong definition of economic sustainability

The world's nations presently define their top economic goal in terms of Gross Domestic Product (GDP). This is the total amount of production produced within a nation, usually within one year. In 2010 GDP varied from $16 trillion for the European Union, $15 trillion for the US, and $6 trillion for China to $16 billion for Afghanistan, $7 billion for Haiti, and $105 million for the Faukland Islands. 1

The top economic goal of most nations is a constant, never ending rise in total GDP of several percent per year. It's their economic growth target. Nothing is more important except for war. If a country's GDP goes flat, that's stagnation. If it falls for more than two quarters is a row that's a recession. Both are to be avoided at all costs.

The official GDP growth targets for several countries are: (Data sources vary per nation)

GDP for Selected Countries
Country
Total Annual Target
India
9%
China
8%
Vietnam
7%
United States (implied target)
2%
Japan
2%
England
1.7%

Sustainability is what people want to happen indefintely. No country has a GDP growth target less than about 2%, except when recovering from a recession. Thus the defacto defintion of economic sustainability is steady growth in total national GDP of a minimum of about 2% per year.

But this is the wrong defintion. Total national GDP doesn't tell you how much the average person's income is. Nor does it tell how many people are at the low end of the distribution of income and are thus starving. Nor is steady growth even possible forever. Steadily growing total GDP is thus a flawed goal that can lead a country, and the world, terriby astray.

The right defintion of economic sustainability

Let's add a column to the table for average GDP per person. This takes us closer to what matters. (Data source for last column)

GDP for Selected Countries
Country
Total Annual Target
Average GDP per Person
India
9%
3,500
China
8%
7,600
Vietnam
7%
3,100
United States (implied target)
2%
47,200
Japan
2%
34,000
England
1.7%
34,800

This perspective shows a large gap between the developing and developed nations. The high growth rates are an effort to catch up in average GDP per person.

For a pillar of sustainability to be strong it must answer these questions with a yes:

1. Can it be sustainable?

2. Does it well support the goal of the system?

For the first question, can steady GDP growth be sustainable? No. But average GDP per person can, it it doesn't clash with the goals of the other pillars or the goal of the system.

Now for the second question. As Thwink.org sees it, the goal of Homo sapiens is (or should be) to optimize quality of life for those living and their descendents. That's the goal of the human system. Does average GDP per person support that goal? Not quite. There's nothing in average GDP per person that allows comparison to the goal of quality of life. To do that we need the so called poverty threshold.

The poverty threshold or poverty line is defined as “the minimum level of income deemed necessary to achieve an adequate standard of living in a given country.” 2 In poor countries the threshold is defined quite low, as low as $1.25 per day. Below the threshold you suffer malnutrition and frequently die. Developed countres define the poverty threshold so much higher that it's no longer a "poverty threshold." It's the preferred minimum standard of living level. For example, in the US it's $30 a day. 3 This is widely called the “national poverty line,” a confusing term. The more accurate term is "preferred minimum standard of living level," which is the one we will use.

Does the preferred minimum standard of living level (in monetary units) well support the goal of the system? Yes. So at last we have the correct definition. Economic sustainability occurs when a political unit, such as a nation, has the preferred percent of its population below its preferred minimum standard of living level. The percent needs to very low, somwhere around 5% or less, because everyone below the level is suffering, either physically due to poor health or psychologically.

Solving the economic sustainability problem

How far the world is from economic sustainability is shown below. (Data source for last column. The CIA Factbook column was used for the developed countries. The International Poverty Line of $2 per day was used for the three developing countries.)

GDP for Selected Countries
Country
Total Annual Target
Average GDP per Person
Percent Below Preferred Minimum Standard of Living Level
India
9%
3,500
76%
China
8%
7,600
36%
Vietnam
7%
3,100
48%
United States (implied target)
2%
47,200
15%
Japan
2%
34,000
16%
England or UK
1.7%
34,800
14%

The last column shows how impossibly far the world is from economic sustainability. It's impossible for India, China, and other undeveloped countries to catch up with developed countries in terms of average GDP per person and be sustainable with today's technology. Even with 50 years from now technology it looks impossible. Here's why:

The Ecological Footprint is the measure of consumption of the earth's carrying capacity. Total global capacity is estimated at 12 bilion hectacres. In 2007 18 billion hectacres were being consumed by the world's population, which is 50% overshoot.

Looking at the latest Ecological Footprint statistics, we see an average of about 7 hectacres per person for European Union countries. They have an adequate standard of living and are the world's best at living sustainably, for developed nations. Suppose the entire world emulated the European Union countries. At a global population of 7 billion people (today's population) that would be a 49 billion hectacre footprint. Global carrying capacity is 12 billion hectacres, so at that point the planet would be in 49 / 12 = 400% capacity utilization. Above 100% is overshoot, so the overshoot would be 300%. That level of environmental impact would destoy the environment instantly.

There is little evidence that as the footprint grew that environment impact per person would fall correspondingly due to new technology and conservation practices. It has already proven impossible to get the world's top two greenhouse gas emitters, China and the United States, to even sign the Kyoto Protocol treaty. World greehouse gas emission grew 6% in 2010 over 2009. Climate change is only one of many environmental sustainability problems, like freshwater supply, pollution of many kinds, soil fertility lost, deforestation, and so on.

If you put all these trends and data together, economic sustainability looks impossible.

So what are we to do?

The analysis at Thwink.org has pondered this question for ten years of research. It appears that the world's present solution strategies have not been successful because they do not resolve root causes. Instead, they attempt to resolve intermediate causes. As a result they fail.

But if problem solvers took up the principle that the only way to solve a difficult problem is to resolve its root causes, everything could change. The economic sustainability pillar problem could become solvable.

 

(1) GDP data from List of Countries by GDP. The third column (CIA World Factbook) was used.

(2) The quote about the poverty threshold is from the Wikipedia entry for standard of living.

(3) According to the Wikipedia entry for poverty threshold, "In 2009, in the United States of America, the poverty threshold for a single person under 65 was US$11,161." $11,1161 / 365 = $30.

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