ECON 103: The Benefits and Costs of Economic Growth

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Biodiversity Conservation, Economic Growth and Sustainable Development: An Abridged Summary Richard E. Rice, Ph.D. University of Maryland Global Campus, Silver Spring, MD, USA. President, Conservation Agreement Fund, www.canservationagreementfund.org. The following is a summary of a longer paper published as: Rice. RE. Biodiversity Conservation, Economic Growth and Sustainable Development. In Biodiversity of Ecosystems. Intech Open. 9 August 2021. Open access, peer reviewed book chapter. http://dx.doi.org/10.5772/intechopen.99298 1. Introduction A growing economy has long been regarded as important for social and economic progress. And indeed, much of what we value in society is the product of economic growth. It is becoming increasingly clear, however, that our current pattern of growth involves significant social and environmental costs. This chapter examines the conflict between growth and the conservation of biological diversity. Included is a discussion of what growth means and a review of the connection between economic growth, sustainable development, and the conservation of nature. The chapter concludes with a discussion of the role that market-based economic policies can play in helping to catalyze necessary change. 2. What growth means The standard definition of economic growth is a sustained increase in a nation's real (inflation adjusted) gross domestic product (GDP). GDP is the monetary value of all goods and services produced in a country each year. In recent years, real GDP growth in the U.S. has averaged around 2% which means that the economy doubles in size every 36 years [1]. 2.1 Why grow? Proponents of economic growth focus on its many benefits, including higher standards of living and the ability to devote more resources to things like health care and education. Increases in sanitation, nutrition, and longevity have all been possible due to economic growth. Since 1800, life expectancy has grown from less than 30 years to more than 70 with eradication of childhood disease and improvements in medicine and nutrition [2]. Vast changes in material abundance have also been possible due to economic growth allowing many the things that only the wealthy could aspire to in the past. Though something we now take for granted economic growth is a very recent phenomenon. Widespread economic prosperity (as measured by GDP per capita) has only been achieved in the past couple hundred years and as shown in Figure 1, has only really taken off in the past 50 years [3]. 2.2 The downsides to growth Given its many benefits, it is little wonder that economic growth is a focus of global economic policy. Growth, however, has its costs. Environmental destruction and impacts on biodiversity are perhaps the most obvious, but there are also conflicts between economic growth and national security and international stability, and ultimately, economic sustainability itself. Growing economies consume natural resources and produce wastes. This results in habitat loss, air and water pollution, climate disruption, and other environmental threats, threats which are becoming more apparent as economic activity encounters more and more limits. The depletion of groundwater and ocean fisheries are examples as are shortages of fresh water, and the global spread of toxic compounds such as mercury, chlorofluorocarbons, and greenhouse gases. GDP/Capita (2011 $USD) 60,000 50,000 40,000 30,000 20,000 10,000 T 1820 1850 1900 1950 2000 2018 USA World Figure 1. The history of Economic growth: GDP/capita, 1820-2018 [3]. Environmental impacts, of course, are not unconnected to society at large. Things like climate change and the extinction crisis have economic impacts and these in turn can threaten national security and international stability. Such threats are often made worse by inequality. Not everyone benefits equally from growth and some have arguably not benefitted at all. The problem of growing inequality is certainly an issue in the U.S. where the nation's top 10 percent now average more income than the bottom 90 percent [4]. But it is also clearly a problem globally. Climate change, resource scarcity, and environmental degradation generally are certain to accentuate such inequalities in the future with unavoidable impacts on social unrest, national security, and international stability. The national security implications of these issues were starkly presented in a recent report commissioned by the U.S. Army [5]. According to the study, America could face a grim series of events triggered by climate change involving drought, disease, failure of the country's power grid and a threat to the integrity of the military itself, all within the next two decades. The report also projects that sea level rise in the future is likely to \"displace tens (if not hundreds) of millions of people, creating massive, enduring instability\" and the potential for costly regional conflicts [5]. All of the above issues have clear implications for economic sustainability a healthy environment and international stability, after all, are the foundations for a healthy economy. We need healthy soils for agriculture, healthy oceans for fisheries, clean air and water and a stable political environment for international trade, all of which are threatened by unrestrained growth [6]. 3. The quest for sustainable development Increasing awareness of the limitations of growth has led to much discussion of sustainable development. This concept is most commonly associated with a report published by the World Commission on Environment and Development in 1987. In that report sustainable development is defined as \"development that meets the needs of the present without compromising the ability of future generations to meet their own needs\" [7]. Since the publication of this report, the idea of sustainable development has gained a solid footing in the popular imagination. Despite its popularity, the precise meaning of sustainable development is somewhat elusive. From an economic perspective a simple definition might be that growth should proceed so long as the marginal benefits exceed the marginal costs (Figure 2). Marginal cost is the cost of a small increase in an activity and marginal benefit is the additional benefit from that increase. Figure 2 shows the marginal costs and benefits of growth in GDP. Since the benefits tend to decline and the costs to rise with additional GDP growth, the sweet spot is to grow until the marginal costs are exactly equal to the marginal benefits. Any increase in GDP up to this point is \"economic growth\" whereas growth in GDP past this point, where costs rise above benefits is uneconomic [6]. 3.1 The problems with GDP Such definitions are all well and good, but problems arise in discerning when and where costs begin to exceed benefits. This, in turn, is made more difficult by the way in which we measure growth.