TCWD Week 15-Sustainable Development

Sustainable Economic Systems
There was a strong impression that the global economy became the sphere of extreme uncertainty
and risk during the first decade of the twenty-first century. It can be recalled that there was a dimension of
crisis that began in 2007. It was not like another business cycle setback. It was a serious breakdown that
challenged the foundations of modern approaches to the creation of welfare.
Collapsing financial markets, rising unemployment, deeper inequalities, a shrinking middle class,
extreme indebtedness, and inability of governments to force through reforms were just some of the
symptoms of crisis around the globe. Moreover, the challenges of climate change and the unavailability of
resources that were important in the development of technologies to keep the economy growing continued
to surface. Ulrich Beck, a German sociologist, has predicted these things to happen years back, and has
coined the term, “risk society” (Beck, 1986).
Stability
• Firmness in position, permanence and resistance to change are the words associated with stability.
• The International Monetary Fund, 2012 defines it as ‘avoiding large swings in economic activity,
high inflation, and excessive volatility in exchange rates and financial markets.
• This refers to indexes that describe the economy in short term categories.
• Knoop (2009) expressed that within a few years, every economy moves through periods of rapid
growth with rising demand, higher inflation and dropping unemployment, followed by depression
with reversal phenomena.
• Excessive highs and lows should be avoided.
• There was a Great Depression that happened in 1929, when the economy collapsed in a dramatic
way after long years of post-war prosperity and overproduction.
• The global crisis in the 1970’s opened the gates of new economic ideas.
• Monetarism, which is premised on the idea that stabilization could be produced control of amount
of money in circulation.
• Milton Friedman started to dominate global capitalism.

• Global capitalism fitted well with neo-liberalism, which expanded with the free market reforms of
Ronald Reagan in the USA and Margaret Thatcher in the United Kingdom.
• The 1990’s still experienced world economy collapses such as the Asian financial crisis in 19987,
the Russian crisis followed by the disaster in Argentina that started in 1999.
• These crises were mainly attributed to major political mistakes, but particularly alarming with their
contagion effects.
• Since 2007, many countries had been trying to restore stabilization.
Sustainability
• It considers the long-term capacities of a system to exist, not its short term resistance to change
• Bruntland Report (World Commission on Environment and Development, 1987) said that
‘development that meets the needs of the present without compromising the ability of future
generations to meet their own needs’ deserves the label of sustainability.
• Technology became a fantastic escape from the sustainability dilemma.
• The Solow-Swan model from the 1950’s saw the only chance for innovations.
• A sheer increase of the amount of resources added to input could lead to diminishing marginal
returns only.
• New ideas in technology and organization made it possible to overtake the steady state of zero
growth and induce development without increasing resources.
• Paul Romer and Robert Lucas in 1980’s proposed a new theory called, the New Growth Theory.
• The endogenous factors like human capital and education were recognized as crucial for growth
and their application was free from the steady state of classical resources.
• In the 19th century, the issue of sustainability considered mainly social conditions in early industrial
capitalism.
• Modern debate on sustainability focused mainly on environmental questions.
• In 1968, Garret Hardin wrote the famous book, Tragedy of Commons that analyzed how public
goods got exhausted by actors in a free market economy (Hardin, 1968).

• The Club of Rome published, The Limits to Growth that dealt with the connection between
economic growth and the scarcity of resources.
• Rising awareness of the sustainability problem in environmental issues and resources translated
also into international cooperation.
• Sustainability perspectives started to be visible not only in the environmental area but also on the
theme of overpopulation.

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Sustainable Economic Systems

challenged the foundations of modern approaches to the creation of welfare.

coined the term, “risk society” (Beck, 1986).

with reversal phenomena.

• Excessive highs and lows should be avoided.

way after long years of post-war prosperity and overproduction.

• Milton Friedman started to dominate global capitalism.

• Since 2007, many countries had been trying to restore stabilization.

generations to meet their own needs’ deserves the label of sustainability.

• Technology became a fantastic escape from the sustainability dilemma.

growth and induce development without increasing resources.

• Modern debate on sustainability focused mainly on environmental questions.

goods got exhausted by actors in a free market economy (Hardin, 1968).

economic growth and the scarcity of resources.

also into international cooperation.

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