Managing social and natural wealth

Managing social and natural wealth
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First Published: Sat, Nov 12 2011. 12 49 AM IST

Updated: Sat, Nov 12 2011. 12 49 AM IST
India’s rapid growth at near double-digit rates in the years to come should bring hundreds of millions out of poverty and establish a 21st century economy underpinned by modern infrastructure, effective health and education systems.
The country’s successful transition depends on it securing and effectively using a huge volume of natural resources to deliver that growth in individual and collective prosperity. India is not alone in that, sharing one world with other emerging and already wealthy nations.
Redefining growth in this context is not a ploy to deny India its historic right to development and material prosperity, but an imperative to ensure that this right can be translated into practice and outcomes. Nobel Prize-winning economists Amartya Sen and Joseph Stiglitz, together with French economist Jean-Paul Fitoussi, set out the arguments for, and means of redefining progress in their recent report of the Commission on the Measurement of Economic Performance and Social Progress.
Truly remarkable progress, they compellingly argued, cannot be about valuing the sale of bottled water, which found ready buyers because of the toxicity or lack of simple tap water, or the sale of cars that diminishes the health and productivity of hundreds of millions of urban dwellers.
Growing prosperity and accompanying well-being were not, the economists concluded forcefully, adequately reflected in measures of growth of national financial income or gross domestic product (GDP).
Indeed, they are not the first to reach this conclusion. Nobel Prize-winning economist Simon Kuznets, famous for his theories of economic growth, wrote in a report to the US Congress: “The welfare of a nation can, therefore, scarcely be said to be inferred from a measure of national income...”
For India, this is neither a new message nor one that has been imported from elsewhere. Quite the reverse, it is one that is deeply embedded in its own historical narrative from politics to poetry.
Yet there is little doubt that the message about quality over quantity and warnings about environmental limits are being lost in the face of the continued material poverty of so many, the dash for wealth of the rising middle class of emerging nations, and the panicked call for more consumption by political and business leaders across the becalmed economies of Europe, Japan and North America.
Consumption, we are told, is both the means and the ends of a successful 21st century economy. We embrace this self-serving, moral and indeed, at times, nationalistic call to consume more, often against our better judgement, and in defiance of the plain facts of the matter that we are running out of resources and damaging the ecosystems that sustain us. Anyway, who in their right minds would consume less if that allowed other less publicly spirited folks to consume more?
Photo: Aniruddha Chowdhury/Mint
The World Economic Forum has long argued the case for embracing the need for sustainable growth. Yet, until now, its annual Global Competitiveness Index—the most authoritative international ranking of nations’ competitiveness—has not systematically taken sustainability issues into account.
This year, for the first time, the forum is beginning to integrate into this ranking the impact on nations’ competitiveness of their management of natural and social wealth. Seven new quantifiable variables— health, primary education, social cohesion, environmental policy, resource efficiency, management of renewable resources, and environmental degradation—were added into a methodology already packed with data on more traditional measures of economic health.
The impact on national rankings of introducing these new measures as drivers of long-term competitiveness has been in many instances dramatic, with long-time leaders falling down the table and others emerging as potential winners in the long-distance race for economic health and competitiveness. India, the US and China, applying these new measures, are all losers by rank, falling more than 10 places from their positions last year. In contrast, Brazil, Kenya and the Philippines rose more than 10 places on the Sustainable Competitiveness Index compared with the standard competitiveness ranking.
The bottom line is that the new Global Sustainable Competitiveness Index confirms the common sense view that healthy, competitive economies in this century will be those that effectively manage social and natural wealth. Mobilizing technology and finance, securing flexible and dynamic markets, engaging productive citizens and establishing the right institutional conditions are all needed as well, but will not happen unless there is effective management of a nation’s foundations, its people and natural assets. As other nations reach the same conclusions, one’s ability to trade and invest across borders will depend on one’s demonstrated capability of getting it right at home.
I am looking forward to discussing these issues at the World Economic Forum’s first Sustainable Growth Summit in Mumbai on 12 November. It will be through open dialogue about long-term competitiveness, as well as the challenges of near-term sustainable development that will enable us all to advance our thinking and shift our mindsets to explore a common vision of progress.
Redefining progress is far more than a shift in the headline measure of a nation’s aggregate product, and is in no way a sign of diminished ambitions and expectations. Far from it, being a curious, if not problematic, shifting of legitimate development goal posts, it marks a recognition of what will drive successful economies in an era of environmental limits and growing social demands. India will be a global leader this century, of that there is little doubt. What is yet to be determined is where it will lead us and with what consequences. The opportunity exists for it to establish the terms for its own sustainable growth and point the way for others. That would be a remarkable India indeed.
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First Published: Sat, Nov 12 2011. 12 49 AM IST
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