Presentation on Sustainable Tourism by UWI Sustainable Economic Development Unit (UWI/SEDU)

to the OAS IDSD Workshop

Module IEconomic Issues in Decision Making

Trinidad and Tobago

October 27th – 31, 2003

Presented by Sharon Hutchinson &Marlene Attzs

Economic Indicators in Decision Making Slide 2

Content of Presentation

Meaning and importance of growth The meaning and importance of development The role of sustainable development in Latin

America and the Caribbean The link between the environment and the economy Choices in the economy: Viewing the economy as an

economic good

Economic Indicators in Decision Making Slide 3

Economic Growth

Economic Growth… traditionally equated with increases in GDP/GNP

GDP… total output for final use produced by residents and non-residents of a country. GDP doesn’t include deductions for depreciation of physical capital or depletion/degradation of natural resources

Economic Indicators in Decision Making Slide 4

Economic Growth (cont’d)

GNP… GDP + net factor income from abroad which is income residents receive from abroad for factor services less payments to non-residents who contribute to the domestic economy.

Economic Indicators in Decision Making Slide 5

Economic Growth (cont’d)

Hence we could speak of : +tive (increasing) rates of economic growth –

if GDP increased from one period to another -tive (decreasing) rates of economic growth -

if GDP decreased from one period to another Constant rates of economic growth – if GDP

remained the same from one period to another

Economic Indicators in Decision Making Slide 6

From Economic Growth to Economic Development

Aristotle, “Wealth is evidently not the good we are seeking for it is merely useful for the sake of something else”

ED can be thought of as beginning where EG ends that is, at the heart of ED is the notion of human well being… how do we use economic performance, measured by EG, to enhance people’s lives? To improve their well being?

Economic Indicators in Decision Making Slide 7

Review of Economic Development

Development … creating conditions for the realisation of human personality

Development.. .based on three criteria: whether there has been a reduction in poverty, unemployment and inequality

Economic Indicators in Decision Making Slide 8

Indicators of Development

Adequate Educational Levels Freedom of Speech Citizenship of a country that is truly

independent (both economically and politically)

Others conditions – sense of security; freedom of worship etc…

Economic Indicators in Decision Making Slide 9

Development: which way now

The process of Economic development has to be concerned with what people can and cannot do e.g. whether they can live long, escape avoidable morbidity, be well nourished, be able to read and write and communicate, take part in literary and scientific pursuits etc.

Economic Indicators in Decision Making Slide 10

Other indicators of Development

Reduction in poverty. How do we measure if someone is poor?

Head count ratio… proportion of population below the poverty line

Income gap ratio…measures the depth of poverty by the extent of the gap between the poverty line and average income of the poor as a proportion of the poverty line

Economic Indicators in Decision Making Slide 11

Key definitions

Poverty Line …. The percentage of the population living below the specified poverty line. * $11 a day (per person for a family of three)—at 1994 international prices, adjusted for purchasing power parity.

Economic Indicators in Decision Making Slide 12

Other composite measures used to describe development

HDI … human development index

GDI.. Gender Development Index

GEM … Gender Empowerment Index

HPI.. Human Poverty Index

Economic Indicators in Decision Making Slide 13

Development Indices

HDI… measures average achievement of a

country in basic human capabilities, health,

income distribution, education

Economic Indicators in Decision Making Slide 14

Development Indices

GDI… measures achievements in same

capabilities as HDI but takes account of

inequalities between women and men. GDI

can be thought of as a discounted HDI

Economic Indicators in Decision Making Slide 15

Development Indices

Gender Empowerment Measure (GEM)…

examines whether women and men are able to

actively participate in economic and political life

and take part in decision making.

Economic Indicators in Decision Making Slide 16

Development Indices

Human Poverty Index (HPI)…focuses on the

way the poor and deprived fare in each

community. Uses the same indicators as HDI

but combines elements of “deprivation” to

provide an aggregate judgement on the extent of

poverty.

Economic Indicators in Decision Making Slide 17

Development Indices

HPI.. – Longevity : HPI uses the % of people expected to die

before age 40;

– Knowledge : HPI uses the rate of illiteracy

– Lack of a decent standard of living : a composite index which includes % of people with access to health service and safe water; % of malnourished children <5yrs old

Economic Indicators in Decision Making Slide 18

Sustainable Development

What do we mean by sustainable development?

Based on Seers’ definition of “development” i.e. to be concerned with “…creating conditions for the realisation of human personality…”

Economic Indicators in Decision Making Slide 19

Sustainability of Development

Sustainability … a characteristic of a process or a state that can be maintained indefinitely.

Sustainability therefore refers to a process or a state that is not constrained by time or space

Economic Indicators in Decision Making Slide 20

Why Sustainable Economic Development?

Why be concerned with sustainable economic development?

Economic Indicators in Decision Making Slide 21

Meaning of Sustainable Development

“Development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs. SD is not a fixed state of harmony but rather a process of change in which the exploitation of resources, the direction of investments … are made consistent with future as well as present needs.” (UNCED, 1987, p.8)

Economic Indicators in Decision Making Slide 22

SD vs ED

Exploitation of resources can either be “responsible” (and leave something for future generations) or “irresponsible (use it up now!!)

Economic Indicators in Decision Making Slide 23

What is Unsustainable Development?

Development which compromises future development possibilities either (a) via excessive resource depletion and waste generation or (b) imposing too heavy a burden of environmental degradation or cleanup © not ensuring that the rents that accrue from current exploitation are invested so that future generations can share

Economic Indicators in Decision Making Slide 24

Economic Growth (GDP)Increases in Material Output

Economic DevelopmentGreater emphasis on social objectives

e.g. poverty, education, health,

Sustainable Economic DevelopmentRecognising the need for environmental Protection, inter- and intra-generational

equity.

Economic Indicators in Decision Making Slide 25

SD and ED

SD adds to our understanding of ED by:– Providing an explicit recognition that development and

the environment are not mutually exclusive– Integrating environmental concerns into traditional

development economics– Incorporating social and environmental concerns into

economic decision-making– Seeking to ensure the economically efficient

management of natural resources

Economic Indicators in Decision Making Slide 26

Economic Efficiency

Social Equity Preservation of the Environment

Tradeoffs among the Three Main objectives of Sustainable Development

Economic Indicators in Decision Making Slide 27

The Economics of Sustainable Development

The economic goal is: “… to maximize the net welfare of economic activities while maintaining or increasing the stock of economic, ecological and sociocultural assets over time…. and providing a safety net to meet basic needs and protect the poor.”(Mohan Munasinghe, 1993:16)

The Economy

The Source Function of the Environment.

E.g. Minerals, Soils and Biodiversity

The Sink Function of the Environment from waste

from production and consumption

i.e. solid, liquid, gaseous,

Toxic waste

Natural Events / DisastersInterface-StormslHurricanes/Flooding

-Earthquakes-Volcanoes

-Viruses (HIV/ AIDS,SARS)

Figure : Interface between the economyand the environment