EXECUTIVE SUMMARY
A sustainable economy for New Zealand can no longer be achieved purely within the confines of national monetary and fiscal policy. National sustainability for every country today has to take into account the broader context of the global economy.
The impact of human activity on the planet has transformed in the past two centuries. The global population explosion and increases in per capita production and consumption have generated a sixty-fold increase in the size of the global economy. Many aspects of the global ecosystem are facing serious strain as a result, and this is being exacerbated now by climate change (and perhaps ‘peak oil’).
Authoritative studies conclude that human activity is colliding with certain global ecological limits and causing a decline in Earth’s biodiversity. Unless redressed, these problems will substantially diminish the benefits which future generations can obtain from the natural resource base. Reversing the degradation of the global ecosystem while meeting increasing demands for ecological services will involve significant change in policies, institutions and practices.
Authoritative studies conclude that human activity is colliding with certain global ecological limits and causing a decline in Earth’s biodiversity. Unless redressed, these problems will substantially diminish the benefits which future generations can obtain from the natural resource base. Reversing the degradation of the global ecosystem while meeting increasing demands for ecological services will involve significant change in policies, institutions and practices.
Since the Rio Earth Summit in 1992, the goal of international policy has been ‘sustainable development’. With a serious ecological overshoot of the planet’s natural resource base today yet extreme human poverty and wealth, the international community faces difficult decisions over the question of continued economic growth for the richer economies.
Much depends on reaching agreement on the underlying economic models that drive policy-making. Two alternative economic models are currently juxtaposed in what is an emerging 21st century debate: the conventional neo-classical model and the new, trans-disciplinary ecological model.
- The neo-classical economic model, building on the principles of private property, market competition and free trade, promotes economic growth as the central goal, achievable through micro-economic concepts of market equilibrium, marginal utility, and optimal resource efficiency. The neo-classical response to the ecological crisis is to encourage the market to self-correct through pricing of externalities, thereby ensuring a ‘genuine savings’ in national capital at the macro-level.
- The ecological economic model, in contrast, stresses ‘throughput’ of matter and energy in the productive process. It sees the economy as a sub-set of the environment whose limits cannot be breached. Rather than optimal efficiency, it postulates optimal scale as the criterion of economic success. Rather than indefinite growth, it proposes a steady-state global economy, within which sustainable development of a qualitative kind can occur, broadening the measure of economic success from Gross Domestic Product to Quality of Life. ‘Prosperity without growth’ is an option, and may become an imperative. And it advocates broader instruments for measuring economic success than simply using GDP, such as the Genuine Progress Indicator and the Ecological Footprint.
New Zealand’s economic challenges are modest in comparison to elsewhere. The population density is low, the national ecosystem services abundant, the technological level advanced, and the people relatively prosperous. Ours is one of the few countries to run a national ecological surplus. There is, as a consequence, limited national appreciation of the magnitude of the global challenge.
Yet the national economy is small, open and vulnerable, and the country’s debt is mounting to alarming levels. The challenge to fiscal and monetary policy – achieving national sustainability while regenerating post-recession progress towards the conventional goals of employment security, price stability and commodity availability – is immense.
Indeed, the close inter-dependence among all national economies today through trade, currency and investment transactions makes the goal of ‘national sustainability’ almost prohibitively complex. Because the ecosystem, rather than the nation-state, is the natural entity, it is easier to identify, and probably to attain, global sustainability than national sustainability.
The distinction between ‘strong’ and ‘weak’ sustainability will have a critical effect on future governmental decisions. Each nation will need to decide whether to maintain its capital stock of all natural resources at existing levels or whether it is free to substitute resource inputs for greater national output.
There is a need for political parties in the NZ Parliament to generate a serious dialogue, removed from the usual daily competitive exchange, and search for common ground in future macro-economic policy for a sustainable future, irrespective of philosophical persuasion. A series of questions designed to generate discussion along these lines is set out in Part IV.
