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A fundamental shift in the global economy



Inertia is as powerful a force in human affairs as it is in the physical world. And the shift in inertia required to move us on to a pathway to a sustainable future has not yet occurred. The longer it takes, the harder it will be to do so in time.

Article by Maurice Strong for the New York Times (19 January 1995)

A fundamental shift is evolving in north-south relations that could have an even more profound effect on the geo-political landscape than the demise of the Cold War. The resurgence of economic growth is being led by the rapidly developing countries of Southeast Asia and Latin America. World Bank forecasts project that by the year 2020 nine of these will be amongst the 15 largest economies in the world. China would replace the United States in first place; India and Indonesia would move Germany and France out of fourth and fifth place respectively; and Brazil would bypass Russia and Britain.

But many will still be left by the wayside, and poverty will remain one of the principal challenges of the 21st century. In both industrialized and developing countries the rich-poor gap is widening as the benefits of growth accrue largely to those with the capital and knowledge that are the primary sources of added value and competitive advantage in the new international economy.

The world that will emerge from these changes will be much more complex and in many respects more difficult to manage. But if we manage it effectively, it could also lead to the more secure and equitable world to which we have long aspired.

Ultimately. the greatest danger will be to the global environment. If the growth of developing countries proceeds along the same pathway as that taken by those who were first to industrialize, the consequences will be devastating for them - and for us. Yet developing countries cannot be denied their right to grow. Neither can they be expected to respond to exhortations to reduce their population growth and adopt stringent environmental controls from those whose patterns of production and consumption have largely given rise to global environmental risks.

What, then, can be done to deal with this dilemma?

Agenda 21, agreed by world leaders at the Earth Summit held in Rio de Janeiro in June 1992, provides a basic framework for solutions. All too little has been done in industrialized countries to make the fundamental changes called for by this agenda. But there have been encouraging; signs that it is being taken seriously in many developing countries, despite the fact that additional financial assistance they expected has not materialized.

Recently China launched its own National Agenda 21 based on the Rio agreements. Other countries have taken similar action. Yet on the ground most of their rapid economic growth is still based on the destructive and wasteful northern model, while the northern countries have done little to set an example of change.

Clearly developing countries must devise their own development model. There are signs that they are beginning to do so. China has attempted to stem the flow of rural people to the cities by initiating its economic reforms first in the agricultural sector. India is re-thinking the need for a new development model based on a synthesis of Gandhi's principles of Sarvodaya and people-centred rural development with Nehru's commitment to science, technology and modernization.

The transition to sustainable development requires a greater ethos of cooperation and shared responsibility, both within and amongst societies. And it can best be achieved by harnessing marker forces - incentives to private investment and tradeable emission permits which channel funds for pollution control to the places where they will buy the most.

It need not require costly new taxes, but rather more efficient deployment of existing resources. Hundreds of billions of dollars are being spent today by governments, north and south, on direct and indirect subsidies which, while designed to meet other purposes, provide incentives to environmentally unsound behaviour. Governments everywhere must now make the shift to a system of positive incentives for sustainable development.

Such measures would be of much greater help to developing countries in making the transition than simply more "foreign aid" in traditional terms. And helping them to mobilize such funds is the best investment industrialized countries can make in global environmental security.

It is not inevitable that the rapid economic growth of developing countries will lead to global environmental and social breakdown any more than its political consequences for north-south relations will prove to be unmanageable. But inertia is as powerful a force in human affairs as it is in the physical world. And the shift in inertia required to move us on to a pathway to a sustainable future has not yet occurred. The longer it takes, the harder it will be to do so in time.