Pathways to Sustainable Development; Co-optimizing Economic Welfare, Employment and Environment

PATHWAYS TO SUSTAINABLE DEVELOPMENT: Co-optimizing Economic Welfare, Employment, and Environment Nicholas A. Ashford, PhD, JD Professor of Technology & Policy Massachusetts Institute of Technology

Extraction industries Consumer Manufacturing Consumption Agriculture Transportation Commercial Energy Consumption Services Government Housing Consumption ICT PROBLEMS Inadequate Goods & Services Toxic Pollution Climate Disruption Resource Depletion Biodiversity/Ecosystem Integrity Environmental Injustice Employment/Purchasing Power Economic Inequity SOLUTIONS Education & Human Resource Development Industry Initiatives Government Intervention/Regulation Stakeholder Involvement Financing Sustainable Development

MAJOR SYSTEMIC PROBLEMS Fragmentation of the knowledge base Inequality of access to economic & political power Tendency towards ‘Gerontocracy’ » technological and political ‘lock-in’ » usually, but not always, accompanied by concentration of economic wealth and political power Market imperfections -- prices don’t reflect real costs of goods and services Limitations of perfectly-working markets » Disparate time horizons - costs now, benefits later » Delay in recognizing problems (Limits to Growth) » Inappropriate production & consumption patterns Failure to engage individuals in the society to realize their human potential ~ social exclusion Corruption

Factor Endowments Land Material Resources (natural and physical capital) Energy Labor capable of performing physical labor Know-how (intellectual human capital) [innovation systems][1] Built capital (bridges, roads, rail systems, ports, dams ~ infrastructure) Information and Communication Technology (ICT) (Health and Environment)[2] Structural capital (knowledge and productive routines held by organizations) Networks and Outsiders (linking organizations, people, and entrepreneurs) Social capital (knowledge held by consumers and citizens) 1] Universities, research institutions, technology and knowledge transfer agencies, human resource development institutions. [2] Good human health (both physical and mental) and an unpolluted and preserved environment (what could be called ‘environmental capital’) are increasingly regarded as essential for maintaining the productiveness of human and natural/physical capital.

Economic Welfare, Employment, and the Environment Are all affected by both technological innovation and globalized trade Are in a fragile balance Are inter-related and need to be addressed together in a coherent and mutually reinforcing way

Environment Technological change & globalization (trade) Work Economy Copyright © 2006 by Nicholas A. Ashford. Technological change and globalization (trade) as drivers of change within and between three operationally-important dimensions of sustainability

The Importance of Work and the Workplace Work is combined with physical and natural capital to produce goods & services. The workplace is the place where comparative advantag is exchanged - i.e., a marketplace. Work is the main means of distributing wealth and creating purchasing power. Work provides a means of engagement in the society. The workplace provides an important social environment and mechanism for enhancing self esteem. Industrial & economic policy, trade policy, and environmental policy have important consequences for employment and OH&S

Improving labor Productivity increase worker skills » increase labor productiveness » rewards to workers are increased use/develop better hardware, software, and manufacturing systems » increase capital productiveness » workers’ share of profits are decreased better matching of labor with natural/physical capital, and with information & communication systems » increase joint labor and capital productiveness » rewards are increased for both owners and workers » human-centered knowledge-based work has the potential, if designed properly

Theoretical implications of decreasing labor conten for employment and for the environment Lower costs of goods and services Lower prices Increased demand and sale of goods and services » in the original industry/market » in new markets (influenced by increases in disposable income and producer-created demand) Are more workers hired than displaced? » It depends on whether growth in production outstrips (capital) productiveness growth May require or stimulate a continual throughput economy with increasing consumption » => adverse effects on environmental sustainability

Strategic Interventions Change Production & Service Systems (meet needs in a new wa – Dematerialization, energy-efficiency, new energy sources, pollution/waste prevention – Shift to re-manufacturing & product services (e,g, photocopy machines, cars) – System changes, e.g., in manufacturing, transportation, housing, agriculture – Tax/regulate pollution and energy use – Remove ‘head taxes’ from labor, e.g., health care, unemployment insurance – Change labor/capital mix from manufacturing to services utilize higher skills and labor inputs – Reward and incentivize innovation Change Demand – Education, use of counter-advertising & regulating commercial advertising – Constrain consumption by using tax policy Change Finance System – Banking, lending, and mortgage regulation – Tobin tax on currency speculation Education and Human Resource Development (supply & demand – Affecting political and purchasing choices/upskill workers Create meaningful, rewarding, and safe jobs (not by trickle-down)

I Toxic Pollution Climate Change Ecosystem Disruption Resource Depletion VI Environment II ● Increased environmental ● Development & environment footprint from the need to (industrialization) increase employment & ● Investment & environment industrial throughput ● Trade & environment ● Environmental/energy ● Regulation of Health, Safety & Technological improvements create or Environment Affects the Economy change & change the nature of and Growth. globalization employment. ● Skills Work Economy ● Wages ● Changing international ● Purchasing Power ● Improvements in competitiveness, division of labor ● Job Security productiveness, and the use of physical, ● Health and Safety natural, & human capital ● Changes in the nature of ● Job Satisfaction ● Economic changes (arising from labor work ● Number of Jobs replacement & capital relocation ● Financing growth and development V IV III

Roles of Government Roles of Corporations Continuum Continuum Minimal State/ Rawlsian Government Profit Maximization Corporate Social and Utilitarianism Government acts as Capitalist (laissez Environmental Capitalist (laissez trustee for stakeholders; faire) approach Responsibility (CSER) faire) approach to Interventionist approach Sustainable policy and markets to policy and markets Citizen & Industrialization NGO Concerns Shareholders’ Roles of Consumers Continuum Concerns ‘Value’ Consumers Green Consumers Purchasing based Purchasing based upon upon the price and the environmental and perceived value of social impacts of products and services products and services ifferent Operating Postures that might be adopted by Government, Corporations, Consumers in the Context of Citizen, NGO, & Shareholder Scrutiny

TECHNOLOGY-BASED STRATEGIES FOR IMPROVING PRODUCTIVENESS, EMPLOYMENT, and HEALTH, SAFETY, & THE ENVIRONMENT SHIFT ATTENTION FROM PROBLEMS TO SOLUTIONS » Technology Options Analysis vs.Technology/Risk Assessment DESIGN AND IMPLEMENT COMPREHENSIVE TECHNOLOGICAL CHANGES » to improve productiveness, employment and health, safety, and the environment ● EXPAND THE SCOPE OF INNOVATION AND THE DIMENSIONS OF THE ’DESIGN SPACE’ - ‘design space’ refers to the dimensions along which the designers of technical/social systems concern themselves - expanding the available socio-technical design space includes simultaneous consideratio of the determinants of competitiveness, environment, and employment - distinguish between ‘sustaining (incremental) innovation’ and ‘disrupting (radical) innovation’ - the needed major product, process, product services, and system transformations may be beyond those that the dominant industries and firms are capable of developing easily, at lea by themselves ● ADDRESS ALL DIMENSIONS OF INNOVATION: - technological, organizational, institutional, and social factors REQUISITES FOR CHANGE: Willingness, Opportunity/Motivation, & Capacity/Capability INTEGRATION, NOT MERELY COORDINATION, OF EFFORTS IS ESSENTIAL

Pathways to Sustainable Development; Co-optimizing Economic Welfare, Employment and Environment

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