From Crisis to Sustainability

COMMENT

The key component continually omitted even from the presentations of some ofthe best thinkers is how the shift to sustainability can be the spark andfuel that reignites the economy and simultaneously shifts the economytowards the sustainability transformation.

The developed world's international development funding of developed world sustainability investment would come back to the developed world's economies as demand for new goods and services, thereby, if done correctly, setting the world economy on a new trajectory to a transformed economy that enhances ecological integrityand leverages it into the design of the sustainability economy's tools andprocesses.

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From: sfp@igc.org [mailto:sfp@igc.org] Sent: Wednesday, March 25, 2009 10:10 AMTo: Scott EdmondsonSubject: FYI: From crisis to sustainability

From crisis to sustainability -- It is in the long-term interest of wealthy countries for developing nationsto truly develop, By Jeffrey D. SachsThursday, Mar 26, 2009, Page 9

The global economic crisis will be with us for a generation, not just a yearor two, because it is really a transition to sustainability. The scarcity ofprimary commodities and damage from climate change in recent years contributed to the destabilization of the world economy that gave rise tothe current crisis. Soaring food and fuel prices and major natural disastersplayed an important role in undermining financial markets, household purchasing power and even political stability. Viewed in this way, anessential policy that developed and developing countries should pursue inovercoming the crisis is to build infrastructure suitable for the 21st century. This includes an efficient electricity grid fed by renewableenergy; fiber and wireless networks that carry telephony and broadbandInternet; water, irrigation and sewerage systems that efficiently use andrecycle fresh water; urban and inter-city public transit systems; saferhighways; and networks of protected natural areas that conserve biodiversityand the habitats of threatened species.

"In practice, the global crisis means that sustainable investments are beingcurtailed rather than expanded in the developing world."

These investments are needed in the short term to offset the decline inworldwide consumption spending that underlies the global recession. Moreimportantly, they are needed in the long term because a world crowded with6.8 billion people (and rising) simply cannot sustain economic growth unlessit adopts sustainable technologies that economize on scarce naturalresources.

In practice, the global crisis means that sustainable investments are beingcurtailed rather than expanded in the developing world. As access tointernational bank loans, bond flotations and foreign direct investment islost, infrastructure projects talked about in the past are now beingshelved, threatening the political and economic stability of dozens ofdeveloping countries.

In fact, every part of the world has a huge backlog of vital infrastructureinvestments. It is time for a concerted global effort to bring thoseprojects online. This is not easy to do. Most infrastructure investmentrequires public-sector leadership to forge partnerships with the privatesector. Typically, the public sector must enter into contractual agreementswith private firms not only to build the infrastructure, but also to operateit as a regulated monopoly or on a concession basis.

Governments generally lack the needed technical capacity to design suchprojects, opening up possibilities of favoritism and corruption when majorcontracts are awarded. Such charges are likely to be hurled at governmentseven when they are not true, though all too often they are.

Still, the backlog of such projects is now wreaking havoc with the worldeconomy. The world's major cities are clogged with traffic jams andpollution. The atmosphere is filling with greenhouse gases from heavy use offossil fuels. Water scarcity is hitting virtually every major economiccenter, from North America to Europe, Africa, India and China.

Governments should thus strengthen their ministries of infrastructure(including power, roads, water and sanitation, and information andcommunication technologies), as well as their national development banks, sothat they can properly design long-term infrastructure projects andprograms. The ability to offset the crisis in a constructive manner throughexpanded public-private partnerships will determine the subsequent successof countries and regions. Interestingly, the US is about to create aNational Infrastructure Bank for the first time.

Nevertheless, US and European economic advisers generally believe that ashort, sharp stimulus will be enough to restore economic growth. This iswrong. What will be needed is an overhaul of the world economy towardsustainability.

Moreover, policymakers in the rich world believe that they can continue toneglect the developing world, or leave it to its fate in global markets.This is also a recipe for global failure, and even future conflict.Developed countries will have to do far more to help poor countries throughthe transition to sustainability. Whereas most of the "stimulus" legislationto date has been short-term and inward-looking, increased funding forsustainable infrastructure in poor countries would provide a powerful boostto rich-world economies.

Developed countries should agree to channel considerable savings todeveloping countries to finance the scale-up of sustainable investments.This can be done directly on a bilateral basis, for example, throughlong-term loans from developed countries' export-credit agencies. It canalso be done multilaterally by raising infrastructure investment flows fromthe World Bank and the regional development banks (including theInter-American Development Bank, the European Investment Bank, the AfricanDevelopment Bank and the Asian Development Bank). Both channels should beused.

Developed countries also fail to recognize that without much greaterfinancing of sustainable infrastructure in the developing world - especiallysustainable power generation and transmission - a global agreement onclimate change later this year, or any time soon, will be impossible. Therich world expects poor countries to restrict use of fossil fuels withoutany significant help in financing new and sustainable sources of energy. Inalmost all of the rich-country proposals about targets, limits, commitmentsand permits for greenhouse gases, there is hardly a word about helping poorcountries to finance the transition to sustainable technologies.

The G-20 meeting in London next Thursday offers hope for a true globaleffort to repair the failing world economy. This is the time and place tolaunch the global drive toward sustainability. If we fail to meet thechallenge, the global crisis will endanger the world for years to come.

Jeffrey D. Sachs is professor of economics and director of the EarthInstitute at Columbia University.  COPYRIGHT: PROJECT SYNDICATE