Measured in sustainable development terms, she explains, the EU-27 comes out a winner When trying to gauge a nation’s well-being and its development prospects, experts are increasingly moving away from standard wealth indicators. A broader way to calculate a country’s position is to look at sustainable development by taking into account three pillars – environmental, social and economic factors – in a long-term framework. Looked at in these sustainable development terms, Europe leads the world.
Economic indicators on their own fail to capture the nuances of quality of life. The High-Level Commission on the Measurement of Economic Performance and Social Progress, set up in 2008 by France’s President Nicolas Sarkozy and chaired by Nobel Economics laureate Joseph Stiglitz, is devising ways to measure progress in terms other than gross domestic product. A wider range of indicators based on sustainable development’s three pillars shows that Europe does better in the social and environmental realms, and is catching up in economic terms when compared to countries in its income group. The Sustainable Society Index (SSI), one of several trying to link different indicators of progress, puts Norway, Switzerland, Sweden and Finland at the top and the United States in only 61st place.
Sustainable development is a political concept because it is primarily about good governance. To achieve sustainability, politicians need to remedy inter-related economic, social and environmental weaknesses. The European Union has a Sustainable Development Strategy, and almost all European countries have national strategies, the most recent ones to adopt one being Hungary, Spain and Switzerland. Among the OECD countries without a strategic vision are Australia, Canada, Japan and the U.S.
Sustainability requires a high level of political commitment to ensure that government ministries work together, a long-term vision and a willingness to open up policymaking to stakeholders outside government. Advancing on one pillar of sustainable development depends on improved performance on the other two. In the longer run, economic excellence alone risks being undermined by social and environmental failures. Ecological goals cannot be attained when there is poverty and inequality. Elevating social well-being is the ultimate sustainability goal, and both requires and drives progress in the other areas.
Sustainable development starts with economics. A country’s failure to move faster towards sustainability will be largely due to a misperception that it should start with the environment. Ecological and social progress will not occur without money, but how that money is distributed and used underlies sustainability. One of the main brakes on economic growth is a failure to adequately address the negative social and environmental impacts of progress.
Governments know they must act now to stop the trend towards drastic climate change, but they are worried about the effects of carbon taxes and trading schemes on their industries, their economies and their international competitiveness. So they hesitate, even though they know that doing something now will be far cheaper than waiting until later. Scenarios show that addressing climate change will cost five to ten times more in the near future than today, leaving aside the irretrievable loss of eco-systems and biodiversity.
The focus on immediate costs leads short-term politics to trump longer-term sustainability. This has been most evident in the United States, the only OECD country that has not signed the Kyoto Protocol. The U.S. fears jeopardising its economic position relative to other rich countries that it has led in growth and productivity since 1995. While consistently at the top of the economic pillar of sustainable development, the U.S. and other resource-rich countries like Canada and Australia has not put this wealth to work for the environment.
Nor has the U.S. put its wealth to work for all its citizens. It has the highest inequality and poverty rates in the OECD after Mexico and Turkey, and that gap between rich and poor has increased rapidly since 2000. In fact, it has widened over the past 20 years in nearly all OECD countries, so much so that Japan’s gap between rich and poor is now the fourth highest among OECD countries, with inequalities also growing in Australia, Canada and Korea.
Equity is at the core of sustainable development. Societies that are growing unequally are not on a sustainable footing. In many OECD countries, wages have stagnated, pensions have shrunk and income inequality has grown along with the economy. Although European countries may be poorer in GDP terms than some other rich countries, Europe has fewer poor people.
Europe is the bright light on this social measure of sustainable development. Nordic countries like Denmark and Sweden are the most equal societies in terms of income disparity. And in contrast to many other OECD countries, France, Greece and Spain have in the last 20 years enjoyed a narrowing of the gap between rich and poor. One of the worst inequality rates in Europe is in the United Kingdom, although the gap there between rich and poor has begun to narrow since 2000.
Rising inequality threatens social mobility. Looking across generations, poor children born in Europe have the best chance of advancing beyond the status of their parents. This is most true of Denmark and Sweden but least true in the United Kingdom and Italy. Intergenerational mobility is also unlikely in the U.S.
Government steps to increase employment, earnings, education and healthcare have a bearing on the social outlook. Among OECD countries, reductions in inequality and redistribution of income that can be ascribed to government programmes is greatest in Europe, with Sweden, Belgium and Denmark in the lead. Unemployment benefits can mitigate the influence of family background on educational outcomes. Investments in health care and education can help children do better than their parents. And raising living standards is good for economic growth, helps allay fears about globalisation and leads to heightened concern about the environment.
OECD countries inevitably top the Human Development Index (HDI), another indicator of social progress. But there are contradictions in country rankings on the underlying measures. The U.S has the second highest income per head in the world, but it ranks 31st in terms of life expectancy. Its healthcare system, poverty and air pollution may be to blame. And although Japan ranks first in terms of life expectancy, it lingers at 42nd place on educational enrollment. European scores are higher and far more consistent across the HDI measures, with the EU’s newer member states moving rapidly up the scale.
Sustainable development also requires attention to be paid to the role of women. Europe has eight of the ten best rankings on the Gender Gap Index of the World Economic Forum, which assesses how countries divide their resources and opportunities among their male and female populations. The United States trails in 31st place out of 128 countries, while South Korea and Japan lag at 97 and 91 respectively. Enlightened childcare and family-friendly policies allow more European women to work and to occupy high-level managerial positions in business and government.
Not surprising, European countries are also at the top of the world environment league. The environmental pillar of sustainable development rests crucially on the economic and social pillars. Poor people – whether measured in terms of income or quality of life – cannot afford the luxury of saving the environment. Europeans tend to care more about their ecological, water and carbon footprints. Measuring everything from fisheries to forests, air pollution to water quality, the 2008 Environmental Performance Index (EPI) puts Europe on average as the world’s highest scoring region with 15 countries in the top 20 performers. Switzerland, Sweden, Norway and Finland lead the world in spending money to protect the environment, with other OECD countries ranking considerably lower on the ecological scale – Japan in 21st place, the United States at 39, Australia at 46, and South Korea at 51.
European countries attain their higher rankings for different reasons, with no direct correlation between wealth and the environment. Germany excels at recycling and alternative energy, but scores lower on preserving biodiversity. France’s place is due mostly to its reliance on nuclear energy, with its showing on fisheries pulling down its overall rank. The Swiss tend to be good in all areas, while Belgium, Denmark, Finland and the Netherlands do less well in protecting natural habitats.
In a climate-focused era, greenhouse gas emissions are the environmental indicator of choice. The U.S. scores poorly on the EPI due to very high absolute and per capita levels of greenhouse gas emissions. Europe performs far better on carbon emissions and has pledged to cut levels 20% by 2020 and by 30% if an international agreement is reached in Copenhagen at the end of this year. Leading the charge for a post-2012 climate agreement, Europe should not dampen its climate ambitions as these will enable it to realise long-term green economy benefits.
Though it performs well on sustainability measures, Europe nevertheless needs a better overall approach. There is a lacuna between the EU’s sustainable development strategy and its Lisbon strategy, weakening the economic underpinning of sustainability. Climate concerns are considered separately from competitiveness and jobs. All over Europe, information technology and innovation should be better harnessed to increase productivity and economic growth. More could be done to stablise social safety nets and health-care systems in the face of aging populations. Common strategies are essential to even out the still significant differences between countries environmental performances.
Once the global financial crisis is sorted out, Europe should reinforce its base in all types of capital for longer-term sustainability. In addition to financial capital, investments should be directed to produced capital (energy and transport infrastructure), natural capital (ecosystems and environment), human capital (education and health), and social capital (good public and private governance). The Obama administration is taking this approach to put the U.S. back on a sustainable path. Such spending can yield triple dividends – green jobs, equitable incomes and sustainable economies. Economic growth based on sustainable development, properly defined, is the only way forward.
By: N. Peter Kramer
