Global Economic Development
Chapter Thirty-Three
Syllabus topic 2, "Sustainable Development."
Pages 98 to 99 of 663
In one line
Global economic development is the growth of world output and its distribution between countries, and for this paper the fact that matters is that its environmental cost and its benefits fall in different places.
In exam wording: global economic development is the aggregate growth of production and consumption across the world economy, driven since 1945 by trade liberalisation, technological change and the integration of financial markets; its environmental significance lies in the divergence between where resources are extracted, where goods are produced, where they are consumed, and where the environmental cost falls.
Why MU sets this as a short note so often
She has set "Global Economic Development" as a short-note head on three of the seven printed papers, and once as a whole question, "How Global Economic Development will take place keeping in mind on Environmental related issues". It is her most frequent short note.
A short note wants: what it is, the four features that matter environmentally, the legal response, and one example. Not a general essay on economics.
The four features that matter environmentally
One: separation of extraction from consumption. Copper is mined in one continent, refined in a second, made into a product in a third and consumed in a fourth. The environmental damage occurs in the first two and the demand originates in the fourth. Nobody in the chain is doing anything unlawful.
Two: scale. World output has grown many times since 1950 and material use with it. A five per cent improvement in efficiency is wiped out by a six per cent increase in volume. Economists call that the rebound effect.
Three: speed. Capital moves in seconds and a regulatory decision takes years. A State that tightens a standard may find the activity has relocated before the rule takes effect.
Four: divergence in capacity. The States that most need to invest in cleaner production are the ones least able to finance it, which is the whole basis of the financial mechanisms in Module II.
The legal response, in one table
| Feature | Legal response | Instrument |
|---|---|---|
| Separation of extraction from consumption | Prior informed consent and permit systems, so the importing State must agree | Basel Convention articles 4 and 6; Rotterdam Convention article 10; CITES Articles III and IV |
| Scale | Absolute caps rather than efficiency standards | Montreal Protocol article 2; Kyoto Protocol article 3 |
| Speed | Non-regression and standstill obligations, and the duty not to lower standards to attract investment | Rio Principle 11; the Paris Agreement's progression requirement in article 4, paragraph 3 |
| Divergence in capacity | Differentiated obligations and financial mechanisms | Framework Convention articles 3, 4 and 11; Montreal Protocol articles 5 and 10 |
That table is the answer to MU's whole question about how global economic development can take place with environmental issues in mind. Each row names the problem and the instrument that addresses it.
Global Economic Development
Worked example
A garment industry moves from country D to country E because labour and effluent treatment are cheaper in E.
- Is anything unlawful? No. E has lower standards, lawfully set. Permanent sovereignty over natural resources includes the right to set one's own environmental policies, which is the first half of Stockholm Principle 21.
- Has the world's pollution fallen? No. It has moved, and it may have risen if E's treatment is worse.
- Has D's pollution fallen? Yes, and D's consumption has not, which is why consumption-based accounting shows a very different picture from production-based accounting.
- What does international law offer? Rio Principle 11 says States shall enact effective environmental legislation, that standards should reflect the environmental and developmental context to which they apply, and that standards applied by some countries may be inappropriate and of unwarranted economic and social cost to others. Rio Principle 14 asks States to cooperate to discourage or prevent the relocation and transfer of activities and substances that cause severe environmental degradation or are found to be harmful to human health.
Principle 14 is the one most students have never read, and it is precisely on point.
What it does NOT mean
It does not mean trade is bad for the environment. Trade in more efficient technology reduces emissions, and the treaties in this book use trade restrictions as their main enforcement tool, which only works because trade matters.
It does not mean the relocation argument is proved. The evidence that firms relocate mainly because of environmental cost is weak; labour cost and market access dominate. Say so, and say that the argument's legal significance survives anyway, because Rio Principle 14 addresses it directly.
Quick revision
- Four features: separation of extraction from consumption, scale, speed, divergence in capacity.
- Rebound effect: efficiency gains offset by volume growth.
- Rio Principle 11 on standards reflecting context; Rio Principle 14 on discouraging relocation of harmful activities.
- Four legal responses: consent and permits, absolute caps, non-regression, differentiation and finance.
- Consumption-based accounting shows a different picture from production-based accounting.
Test yourself
1. Name the four environmentally significant features of global economic development. Separation of extraction from consumption, scale, speed of capital movement against the pace of regulation, and divergence in the capacity to invest.
2. Which Rio principle addresses the relocation of harmful activities? Principle 14, which asks States to cooperate to discourage or prevent the relocation and transfer of activities and substances causing severe environmental degradation or found to be harmful to human health.
3. Why does an efficiency standard sometimes fail where a cap succeeds? Because of the rebound effect: an efficiency gain reduces cost, cost reduction increases volume, and the increase in volume can exceed the saving. A cap limits the total regardless of efficiency.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.