SUSTAINABLE DEVELOPMENT AND POVERTY

In 1987, the World Commission on Environment and Development released a report entitled Our Common future, in which it stated
'Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.'

Most discussions of sustainable development have failed to give due attention to 'meeting the needs of the present' and many such discussions have focused not on promoting development but on restrictions it- typically in the name of the protecting the environment. Policies have focused on identifying specific outcomes, such as controlling the climate or saving periwinkles, and then setting about developing policies intended to achieve those outcomes. Usually these policies require stronger systems of global governance.

Good intentions are laudable but if good intentions were enough to alleviate poverty, malnutrition and disease, these dreadful problems would no longer plague us. Indeed, the fact that more than 10 million people each year die of preventable or curable diseases and that 800 million people survive on less than $1 per day are testament to the failure of good intentions- and the many billions of dollars are spent in their pursuit.

For over fifty years, governments in rich countries have been taking money from their tax payers and transferring it to governments in the poor countries. Hundreds of billions of dollars are spent on such 'aid', yet a balanced assessment indicates, that, although there many have been a few benefits, on average this 'aid' has caused harm.

The reason transfers of financial resources from the governments of rich countries to the governments of poor countries have been largely unsuccessful in stimulating economic development is that lack of resources is not the primary problem in the countries.

The more fundamental problem is that 'aid' is based on a largely false premise, namely that poverty itself is a barrier to development. In most cases this is not true. If countries are to develop sustainably, then institutional reforms, not aid, is the solution.

But what do we mean by 'institutional' reform? Institutions are the framework within which people act and interact – they are the rules, customs, norms and laws that bind us to one another and act as boundaries to our behavior. Institutions reduce number of decisions that we need to take; they remove the responsibility to calculate the effect of each of our actions on the rest of the humanity and replace it with a responsibility to abide by simple rules. In a system in which rules emerge spontaneously and are changed by evolutionary processes, good rules will tend to crowd out bad rules. That is to say, over time, rules that result in better outcomes will survive and rules that result in worse outcomes will become extinct.

It is the institution of private property that, more than any other, has enabled people to escape from the mire poverty. Property rights are capital; they give people incentives to invest in their land and they give people an asset against which to borrow, so that they might become entrepreneurs. Property also begets wealth. Use of property as a collateral against loan is a classic example.

Property rights and contracts are nothing if they are not enforceable. And enforcement is only possible if there are courts wherein disputes over the rights and duties of parties may be resolved and a legal system that will enforce those judgments.