Institution Building for Sustainable development

Jeffrey Sachs has an article in The Economist in which he states:

CLIMATE science tells us unequivocally that we need to “decarbonise” much of the energy system by the middle of this century. Yet advanced techniques for extracting fossil fuels—fracking, new deep-ocean drilling and the like—dominate today’s economic and political discussion. These measures may temporarily boost the economy but they would end up crowding out investments in low-carbon technologies. A boomlet in fossil fuels is bound to be a dead end. Short-term priorities and long-term needs are at odds. 

This disconnect also exists in the realm of jobs policy. Youth unemployment is stuck in the stratosphere in part because conventional jobs have succumbed to advances in information technology, robotics and outsourcing, leading to lower employment and a decline in earnings among unskilled youth in particular. In response economists obsess about policies to manage demand. But that will not address these structural changes. New strategies in education and training, and in smoothing the tricky school-to-work transition, are also needed. 

These examples illustrate the difference between mainstream economics and the policies that are needed to deliver sustainable development. Standard economic policies aim for growth, full stop. Sustainable development aims for growth that is broadly shared across the income scale and that is also environmentally sound. Mainstream economics divorces the short term from the long term. There may be big problems ahead—climate change, food scarcity, demographic shifts and poorly trained young people—but macroeconomists prefer to improvise today and worry about the future later. That approach also suits politicians, aligning the policy cycle with the electoral cycle. But it is not a recipe for producing robust, inclusive growth.

As the United Nations approaches the topic of "Sustainable Development Goals" for the next few decades, Sachs recommends "overhauling our technological systems" using a system that consists of:

• "backcasting" from desired end goals to identify the steps needed to achieve each goal;
• "road-mapping" to map out the way to accomplish each step toward the goal achievement; and
• "global cooperation" to actually follow the road map and achieve the goals.

He is modelling his approach after that which was used to first put a man on the moon and to plot the human genome. Of course, that approach has value and is useful in many applications. In the ones identified, where money was available, the institutional problems were relatively simple. I fear the institutional problems in achieving sustainable development over the long term are more intractable.

Think about restoring economic growth to the United States. Here are some of the issues I see before us:

• We will have to tame the influence of the greedy one percent. Over decades we have moved to a point in which a tiny group of the super rich is appropriating all the increases in productivity of our economy. It is clear from history that "trickle down" is not a sustainable economic growth strategy, but the super rich have achieved such influence over our political policy makers that trickle down is institutionalized as our development policy.
• We will have to reverse the thinning of the middle class. We believe that a robust middle class is the key to robust, sustainable economic growth, but the median real income of the middle class is decreasing. Other countries have shown that it is possible to institutionalize policies that preserve the middle class, but doing so seems to be out of our reach.
• We are a consumer society. We would rather let the government borrow and spend rather than pay the taxes or forego government services, so the public debt increases. We would rather import more than we export so that we can enjoy cheap imported goods, and are seeing our nation's debt to other countries increase. As individuals we have for decades spent more than we earn, building a huge consumer debt. As a result, we are not accumulating capital needed to rejuvenate our infrastructure, build productive capacity, and innovate technologically at a rapid enough rate. How do we institutionalize an society that invests adequately in its own future?
• When my son studied in Ireland a couple of decades ago he was struck by the attitude of the Irish students who were studying not so much the things that most interested them as the things that were most likely to lead to productive professional careers. In the United States we have millions unemployed who need jobs and a million jobs for which we can not find qualified applicants. Part of the problem is that our education and training system is not producing people with the right skills, and part is that our culture is not demanding enough of that service from the education system. How do we institutionalize a system that produces the workforce needed for a dynamic economy?
• We are a prejudiced society. Women in the workforce still face a glass ceiling. So too do our minorities. Blacks and Hispanics face discrimination. Worse, too many young blacks and Hispanics are on the streets or in jails, rather than in schools or in entry jobs that will lead to careers as productive citizens. How do we institutionalize a more fair and just society in which we waste none of our human potential?

Sustainable development over the 21st century will require major institution building that will be far more difficult than building NASA or the Human Genome Project. Jeff Sachs prescription is useful, but falls short of the mark.