Understanding sustainable growth

Amlan Dutta The Statesman Asia News Network Calcutta

In a global perspective, the second half of the 20th century was a period of remarkable economic growth, riding the waves of a new technological and industrial revolution. With its innovative base in electronics and bio-engineering, this revolution continues to dominate the scene today. Unsurprisingly, the process of economic growth has not been smooth all along. Signs of instability were more marked at certain times, particularly towards the end of the century, for diverse reasons. There was the "oil crisis" and, more recently, several countries have been hit by acute financial crisis.

However financial crises are usually symptoms of deeper disorder, so we have to look behind what the classical economists called the monetary veil. This deeper probe brings us face to face with a reality which is radically different from anything that received serious attention in earlier epochs of economic history. The beginning of the 21st century is a suitable time for development economists to look before and after and try to arrive at an understanding of the nature of sustainable growth for the future.

The present epoch is in many ways significantly different from earlier epochs. Let us take note of some of these differences and consider their consequences. The first half of the 20th century saw two world wars. There was an interval of 21 years between the end of World War I and the outbreak of World War II. More than half a century has passed since the end of the last world war. During this period there have been many local military encounters, but there has been no hot war between the superpowers. In a manner of speaking, this has been a period of comparative peace. But the level of military preparedness has remained extraordinarily high.

Defense expenditure has never been so high in earlier times. Now, add to this an additional fact. High military preparedness, as measured by the level of defense expenditure, has gone hand in hand with a high tide of consumerism. This is an extraordinary combination. During a hot military encounter, it is normal to take measures to restrain civilian consumption. Rations are a normal feature of a war economy. Nearly four decades of cold war has left behind this strong legacy of a combination of militarism and consumerism. Conspicuous consumption among a small elite was by no means unknown before. But in its broad sweep, the current consumerist tide has no parallel in the past.

There are many examples in the distant past of great empires breaking up and ruling aristocracies coming to grief when a policy of military adventurism was joined with an unbridled indulgence in ostentatious living. This does not simply tell us something about the evolution of ancient society: It has also a message for modern policy makers. An inordinately large defense expenditure represents in effect a high level of unproductive investment.

When this goes with a high propensity to consume, the national economy can only be expected to get unbalanced. This imbalance produces inflation, budgetary deficit and adverse balance of payments even when the nation concerned is as rich as the USA. For poorer countries in a similar situation, the resulting distress can only be more acute.

It is arguable that these same circumstances also provide an impetus to growth. The industrial revolution of our time has been propelled by major technological innovations derived in very large part from defense-oriented research. Growth and instability can very well go together and have a common causation. There is nothing wrong with this argument except that it leans towards shortsightedness.

For an adequate consideration of the theme of sustainable development, the horizons of our inquiry have to be widened. It is necessary to include within our purview matters pertaining to a number of allied disciplines along with and beyond economics. A line of development can be unsustainable for a variety of reasons. To take a simple case, it may be critically dependent on a natural resource which is limited in supply, non-renewable and without any suitable substitute.

The "oil crisis" of the 1970s brought into view such a situation. This highlighted a question of "limits to growth". The trouble with fossil fuel is not simply that it is limited in supply. It has other disadvantages too. It is amenable to monopolistic control by a small number of states. Moreover it is "unclean".

Imagine a situation where petroleum is readily available all over the world. Even then it will be hazardous to burn it in unlimited quantity. Obviously, economic growth based on conventional use of fossil fuel is not sustainable beyond a limit. So people are looking for methods of more economical use of fossil fuel and, what is more important, alternative sources of energy. Atomic energy is one such alternative.

It promises to make available a virtually unlimited supply of energy. But, it is not "clean". The fact that its production cannot be easily limited to a small number of states counts as a grave disadvantage. It carries with it an enormous risk of polluting the physical as well as the political environment.

When we look at problems of economic development in this wide perspective, we begin to realize that humanity has arrived at a stage of evolution, technological and political, when defense- oriented research can no longer provide a reliable roadmap for the way ahead.

Some economists of late have significantly drawn attention to the importance of improving the quality of life of the common people and pleaded for restoring to the word "wealth" its original meaning of well-being. However, development planning in the Third World continues to be dominated by a nearly single- minded concern for a high rate of growth of national income. There are some simple arguments in support of this line of thought.

With a high rate of growth, it should be easier for the government to collect a large revenue. This will make it possible to sanction larger public outlays on education, health and, more generally, the infrastructure for economic and social development. Moreover, a high rate of growth will generate more jobs and so reduce unemployment and poverty. This line of reasoning deserves a hearing.

However, this is still a flawed and incomplete reasoning. A system of political economy rooted in the Bismarckian tradition is positively disposed towards a state-sponsored program of social security supported by a high level of public expenditure on health and education.

This is seen to help a nation achieve both power and a prominent rank in what is now called human resource development. Market-driven "socialism" cheerfully accepts this new orientation of economies. Yet this falls seriously short of the full requirements of a new concept of development adequately designed to achieve a breakthrough from the evolutionary impasse which the world economic order has reached today.

A closely related point is also worth noting here. There are certain patterns of community relationship which play a protective role in society. When an indefinite extension of the commercial spirit tears apart this protective cover, a bruised human psyche takes fearful revenge.