Article

Book Review of Global Sustainability: Social and Environmental Conditions 1

The European Journal of Comparative Economics
Vol. 6, n. 2, p. 347-350
ISSN 1722-4667
Available online at http://eaces.liuc.it
Book Review of
Global Sustainability: Social and Environmental
Conditions1
Simone Borghesi and Alessandro Vercelli
by Vittorio Valli
The December 2009 Copenhagen Conference, despite its rather dismal results,
has focused the world’s attention on sustainable development and global warming.
Although the concept of sustainable development, introduced in the Brundtland
Report (1987), was based upon two conditions: the intra-generational social condition
(equity within a generation) and the inter-generational environmental condition, most of the
attention has thereafter been devoted to the second condition, overlooking the social
one.
Moreover there have been relatively few attempts to try to elucidate the complex
relations between the globalization process and both the social and the environmental
conditions of sustainable development.
Borghesi and Vercelli’s book is an important contribution which tries to analyze
these aspects and to outline possible economic therapies in a comparative perspective.
The main theses of the book are summarized in section 2 of Chapter 1 and in
the first section of chapter 9 and carefully detailed in the other chapters.
The authors maintain that “globalization offers important opportunities to
participating countries to increase the rate of growth of per capita income.” (pp. 206-7).
But this happens only in presence of “two main institutional conditions… the rule of
law and the necessary regulation of markets”. They strongly criticize “ the irrational
faith on the power of unregulated markets that blurred the necessary awareness of their
limits”.
As regards the social condition, the authors consider two main requisites of
sustainable development: inequality and poverty. First, they decompose the index of
global inequality of Bourguignon and Morrisson (2002) in two components: inequality
between nations and within nations. Then they note that between-country inequality
was positively correlated with globalization only in the first wave of globalization, before
the First world war, but not in the recent second globalization wave. In fact
globalization has tended to decrease the gap between globalizing countries and increase
the gap between these nations and all the other countries. In the second globalization
wave, very populous countries such as China and India succeeded in entering the
globalizing group thereby heavily influencing the overall trend of the between –
countries inequality index. Instead, the within- country inequality index show different
patterns in different countries and periods. In the last decades there was a marked
increase of the index in China, Russia and other transition countries, while in the 1950s
, the 1960s and the first part the 1970s there was in several industrialized countries a
moderate decrease of the within- country index, but since the late 1970 there was a
sharp increase of the index. The empirical validity of the inverted-U Kuznets curve
1 Palgrave Macmillan, Houndsmill , Basingstoke, UK and New York, 2008.
348 EJCE, vol. 6, n. 2 (2009)
Available online at http://eaces.liuc.it
regarding the relation between per capita GDP and within- country inequality
(Kuznets, 1955) is therefore doubtful.
As regards poverty, the authors maintain that while the poverty ratio decreased
during the second globalization wave “the absolute head--count number of poor
people continued to increase for most of the time so that their number is much higher
today than it used to be at the beginning of the globalization process..” (p. 209).
The authors thus conclude that “these time patterns of inequality and poverty
show that the actual process of growth at the global level is inconsistent with the social
requisites of sustainability. In order to avoid these undesired consequences we have to
fight poverty within the framework of a more egalitarian kind of growth” (p. 209).
In chapter 5, the authors try to extend their analysis also to the problems of
global health stressing the fact that some features of globalization, such as “…factor
mobility and financial integration tend to reduce the scope of state intervention that
promote health..” (p. 220). So not only a reduction in poverty and in income inequalities
which directly impact on health conditions would be necessary, but also a policy in
favour of the formation of social capital and of fighting environmental degradation. A
wise long-term, not myopic, global health policy would have to consider also a cheaper
and easier transmission of health care technologies and pharmaceutical products to
developing countries.
As regards the environmental condition of sustainability, the authors have focused “
on the indirect correlation of globalization, via the effect on per capita income, with a
battery of environmental indexes ”(p. 209). In Chapter 3, they have found that the
environmental Kuznets curve, in which, as per capita GDP increases, pollution increases up
to a certain point and then tends to decrease, is valid only for a few pollution indexes,
but not for most of them.
In Chapter 4 the authors critically analyze the validity of a energy intensity Kuznets
curve advocated by some rather optimistic experts. Their conclusion is that for energy
too, taking account of the intensity of environmental degradation and of the scale effect
induced by the growth of per capita world GDP and population, there is the risk of a
future sustainability gap.
The authors also consider, in Chapter 7, the microeconomic conditions for
sustainability and discuss the fact that the short-term vision of most top managers and
firms risk hampering the possibility of long-term sustainability. The authors advocate
instead a policy that takes into account the interest of all the stakeholder in a long-term
perspective.
Finally the authors discuss the relations between globalization and the history of
economic ideas, stating that the shortcomings of the second globalization wave are
strictly associated to the weaknesses of the paradigm of neo--liberalism prevailing in
industrialized countries since the late 1970s.
The policy implication suggested by the authors is that globalization may be
beneficial only if accompanied “by the establishment of a genuine competitive market at
the world level. This may be done only if (i) the conditions of a perfectly competitive
market are established or at least approximated in the countries involved, (ii) global
markets are regulated in such a way to minimize at the same time, market and state
failures” (p. 216).
Most of the analytical and policy aspects of the volume are indeed convincing.
I will consider only a few critical aspects.
Hans-Jürgen Wagener, Why Europe? On comparative long-term growth
Available online at http://eaces.liuc.it
349
First there is the problem of institutions. It is hard to say that in today’s China,
which has experienced an extraordinarily fast economic growth for more than three
decades, the rule of law prevails, although there have been significant changes in its legal
framework since 1978.
Secondly, globalization has certainly helped China to extend and consolidate the
phase of rapid growth from the mid 1990s up to now, but it has also contributed,
together with the growth model promoted by the government, to rapidly increase both
income inequalities and pollution in the country (Valli and Saccone, 2009).
Thirdly, if we consider the global between-country-inequality index excluding
China, we probably find a meaningful increase of the index also in the last three
decades.
Finally, the Copenhagen Conference on climate change has demonstrated that
several political leaders of the major countries are strongly influenced by the interest
groups of their country, so that an environmental policy, a health policy and a social
policy like the ones proposed by the authors, although sound and persuasive, are hard to
realize in today’s international political context.
However, the book is brilliant and full of useful insights and has the merit of
critically exploring the complex intersection of important economic and social
problems.
References
Bourguignon F. and Morrison C. ( 2002), ‘Income among world citizens: 1821-1992’, American
Economic Review, 92-4, 727-744.
Brundtland Report (1987), or WCED (The World Commission on Environment and
Development), Our Common Future, Oxford University Press, Oxford.
Kuznets S. (1955), ‘Economic Growth and Income Inequality’, American Economic Review, 45, 1-
28.
Valli V. and Saccone D. (2009) ‘Structural Change and Economic Development in China and
India’, European Journal of Comparative Economics, June 2009, 101-129.
... L'argomento è valido soltanto se assumiamo che il mercato sia perfettamente concorrenziale il che implica una batteria di assunzioni controfattuali molto stringenti che escludono gli squilibri, l'instabilità, l'incertezza radicale, la razionalità limitata degli agenti e tutte le altre patologie economiche che caratterizzano in particolare i periodi di crisi (cfr. Borghesi e Vercelli, 2008). ...
Article
Full-text available
The Great Recession triggered by the subprime mortgage crisis raised serious questions on the responsibility of the economists as intellectuals, advisors and decision makers. This essay focuses on the responsibility of the academic economist in his role of researcher, teacher, divulgator, inspirer and supporter of a specific ideology (sometimes malgré lui). In the light of this analysis, the author briefly discusses the limits of the institutionalized and centralized evaluation systems of research quality recently adopted in many countries, and suggests an alternative approach to the evaluation of the merit of academic economists centred on the zeal shown in complying with all their duties.
... In addition, the information efficiency attributed to competitive markets implies that specific information on the ethical standards of firms would be redundant, and thus unsubstantial. Real markets, however, are imperfectly competitive so that, in principle, CSR initiatives may affect social welfare for the better or for the worse (Borghesi and Vercelli, 2008, ch.7). A positive correlation is expected mainly because high CSR standards are believed to signal the high quality of management and/or to improve longterm returns (Derwall et al, 2005; Garz et al, 2002; Porter and Kramer, 2006). ...
Article
This experimental study aims to clarify to what extent and in which direction investors react to CSR (Corporate Social Responsibility) initiatives meant to upgrade the ethical standards of firms beyond the minimal requirements of law. Subjects in the laboratory were invited to invest their endowment in a portfolio of financial assets. We provided information on the expected returns of each stock and on its inclusion in an ethical index, or exclusion from it. Our findings show that subjects' behavior appears to be a function not only of their individual pay-offs but also of the information on the ethical standards of the firms issuing stocks. Most of them, however, did not show a fully irrational behavior as they consistently correlated the share of stocks with their expected returns. We may conclude that the sizeable reaction of our investors to the inclusion of a stock in the ethical index, or its exclusion from it, is the fruit of a deliberate choice.
Article
Full-text available
The comparison of the periods of rapid economic growth in China since 1978 and India since 1992 markedly show different patterns of development and structural change. However, both countries experienced some advantages of "relative economic backwardness" and some aspects of the "fordist model of growth". China had an anticipated and deeper structural change, spurred mainly by economic reforms and the growth of the internal market in the 1980s, and, since the mid-1990s, by a very rapid penetration of its industrial products in the world market. However, a substantial part of China's exports in medium and high tech sectors are due to joint-ventures with foreign multinationals. India had a more balanced structural change and a slower insertion in the world market, although some sectors, such as software, steel, automotive and pharmaceuticals are recently increasing their share in the world markets. Owing to the huge number of micro-enterprises and the great size of the informal sector, India benefited much less than China from the economies of scale and from the third wave of the "fordist model of growth". Both countries, but in particular China, experienced negative externalities of this recent phase of rapid growth, such as higher inequalities, pollution and urban congestion.
Income among world citizens: 1821-1992
  • F Bourguignon
  • C Morrison
Bourguignon F. and Morrison C. ( 2002), ‘Income among world citizens: 1821-1992’, American Economic Review, 92-4, 727-744