Lesson 5: Economics and the Environment
In this lesson, we will study the relationship between Economics and the
Environment. We will also look at the types of economic systems and the varying
roles of governments, and how international trade has affected global decisions
on environmental concerns. Finally, we will discuss the need for a new,
‘green,' sustainable economy.
Economics and the environment have a strong impact upon each other. Economics
is the social science that deals with the production, distribution and
consumption of goods and services, and with the theory and management of
economies or economic systems.
Having a strong economy offers greater opportunities along with more income for
individuals. In the past 40 years, China has led the world in economic growth,
creating millions of jobs and becoming the factory of the world, producing
almost everything imaginable. With a population of 1.35 billion, China has a
massive pool of labor and a growing middle class of 100-150 million. Chinese
schools are also growing at an accelerated rate and there is a lot of social
mobility with this economic boom. However, the country also has some of the
most polluted cities in the world where you have to wear a mask to protect from
the air pollution, and cancer and respiratory diseases have increased
substantially due to toxic water and pollution. In recent years, China has
started developing environmental policies to stop toxic waste from being dumped
into local rivers. Having an environmental policy is thus imperative to
protect natural systems and people.
Since economic systems are
connected to and dependent upon environmental goods and services, economies
need to be grounded in an understanding of the biological and physical world.
When the economy improves, there is more capital and other resources available
to address serious environmental problems such as sanitation. However, other
problems may increase as there is more economic activity. Industrial production
by factories leads to air pollution and can lead to respiratory diseases.
Economic activity is vital to a nation's growth but it does require some
planning and checks and balances. Natural resources are limited. With increased
economic activity, there is increased encroachment on lands, biodiversity and
ecosystems. Without any regulation or policy, economic activity can destroy
natural habitats and deplete available resources. They can also lead to urban
sprawl, CO2 emissions, and have negative effects on health.
Economic systems are social and legal arrangements that
people construct in order to
satisfy their needs and wants and improve their well being. Every country has
an economic system. Today there are principally 2 main systems in effect:
- centrally planned economy (dictatorships)
- free market capitalist economy (democracies)
Economic activity is based on production using three factors - land, labor and
capital.
Most economies are
hybrid systems with a varying role of government. Some governments like China
have state capitalism, where they use their country's resources (labor, land
and capital) to build up their own country and state-owned corporations. They
restrict democracy.
In free-market economies,
governments exert influence over financial systems while owning and operating
infrastructure and public transport systems.
Trade is an essential economic activity. The exchange of goods drives the free
market economy. Trade has become increasingly globalized and world trade today
dominates society.
In 1993,
the World Trade Organization (WTO) was founded to
implement trade rules. The WTO also enforces these trade rules and can add or
eliminate trade barriers (tariffs).
While the WTO has encouraged global economic trade,
it has also developed a reputation for choosing free trade over human rights or
environmental issues.
There have been many protests at WTO talks, and also failure to come to
consensus, with key players - US, Japan and Europe - refusing to budge from
their positions.
The global economy has been successful in
mobilizing people to
improve their quality of life. China is a great example of this as increased
economic activity has pulled millions out of poverty.
However, it also has caused lots of problems ranging from
poverty and hunger in
developing countries to declining ecosystems, rising sea temperatures, and more.
There is a vital connection between the environment and the economy. There is
also a need to develop a new â€˜green' sustainable economy where ecosystems are
preserved, resources are sustainably harvested and the main goal of the economy
is improving human well-being.