Reconciling economic and social goals in development

If you boil it down to its most basic propositions, sustainability can be achieved by reconciling economic and broad social goals. However, striking a good balance between the – often – conflicting goals is a lot easier said than done. The World Bank is acting a little schizophrenic in South Asia:

The World Bank Group’s board appears to be operating under a severe case of cognitive dissonance, supporting efforts to save tigers – threatened in India and Bangladesh by habitat loss due to climate change – while helping build coal-fired power plants that will only speed up this process.

I think the term “cognitive dissonance” is very appropriate. The Center for Global Development calls the IFC’s plan to help finance the power plant is an “ultra mega mistake“. The latter article indirectly contributes to the debate concerning the rights of developing nations to consume as much energy in their development as richer nations did. This situation has lead to complicated negotiations over climate change strategy at a transnational level (a “social” goal), because of the economic implications – the relative impact of reducing carbon emissions matters hugely when it comes to economic development.

We have to acknowledge at least the a priori validity of the claim that developing nations should not have to be “unfairly” constrained in their economic development. One of the commenters on the CGD blog says this: “I worry about folks perched in fancy offices in DC, enjoying all the comforts that life can offer, trying to deprive other countries the opportunity to grow and prosper.” The issue, however, is not about “depriving” countries of “opportunities”, but to push for investment in clean energy everywhere, not just in developed countries. It seems to me that investing in monumental coal-fired power plants is likely to be a good short term solution: indeed, it will increase the energy production capacity in the region, which is a desirable goal.

However, the long term consequences are being ignored… Eventually, this power plant will really be obsolete, as new, cleaner, more efficient technologies are developed. The whole project costs $4 billion – I can’t help but wonder why these billions can’t be invested in research and development, instead of “old fashioned” power plants? I suppose that for now the answer is that the economic and financial returns on investing in R&D are not as attractive as what can be expected from the power plant investment.

So it goes – we continue to pursue short term solutions, even though we have acknowledged the need to reconcile social and economic goals, long term and short ones (in my mind, there is a correlation between short/long term and economic/social goals).

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