Cutting out a Sustainable Economy

The choice of who allocates resources is crucial. We see spectacular examples of government mismanagement. The market should be left free to allocate resources. Markets alone can assemble and convey essential information about security and value. Prices and profits will work to maximize production and minimize resource use.

Market mechanisms are sufficient to protect forests, for instance. Growing scarcity will drive up the price of wood, reduce consumption, as well as prompt landowners to plant more trees in anticipation of higher prices.

Traditional economics asks how to produce what for whom. Sustainable economics examines these same questions, but includes future generations in the ‘for whom.’ It asks how irreplaceable resources—water, air, soil, and fish and wildlife—can be adequately conserved. It also recognizes that economic mechanisms that do not efficiently and equitably satisfy human needs are not likely to be sustainable.

Sustainable economics analyze issues complicated by politics, ideology, and nationalism. It tries to ascertain what works to make resource use more efficient. How do people behave in relation to their, natural resources? How does a country’s economic system alter its prospects for survival? Measuring national performance in food security, energy efficiency, environmental pollution and equity can form the beginnings of an answer.

The issue is not socialism versus capitalism; it is the efficacy with which economic systems achieve their intended ends. Ideally nations could be graded for degree of market orientation and assessed for changes in resource use. But no one has invented a grading system for economic philosophy or environmental sustainability. It is instructive, nonetheless, to categorize nations as centrally planned or not and to assess their resource-use efficiency. A centrally planned economy is one that through price controls, state ownership, or allocation of capital effectively, managers more than half of a nation’s industrial and agricultural production.

From the end of World War 11 until a few years ago, centralized state planning has served as a model for almost half the world. Newly independent developing countries faced with the choice between centralized control and market orientation usually chose the former. That their foreign ruler had been capitalists turned them against market systems, while the tradition of colonialism eased the transition to tight central control. In the postwar era, many military states and even most market-orientated nations also expanded the role of government in the day-to-day management of their economies.

The world today is at a turning point in economic management. The abrupt Chinese shift to market mechanisms is the most dramatic example, not only because of the vast number of people affected, but because of the reform’s spectacular early successes. Many African nations, plagued with agricultural decline, have begun to extend market incentives for agriculture. Latin Americans, burdened with debt, have moved to sell off state-owned companies. Meanwhile the Soviet Union, its confidence in uninterrupted growth shaken, is debating the need for economic reform. Ironically, although Western governments have also begun to sell off state-owned concerns, they increasingly subsidize private agriculture, restrict trade, and permit concentration of economic power in industrial conglomerates.

The efficiency with which nations produce food and consume energy provides a useful indicator of their progress toward sustainability. Countries of all political stripes seek to avoid excessive dependence on food imports. Air and water pollution and land degradation are closely associated with agricultural production and energy-use efficiency. Thus, if market pricing and competition provide greater efficiency, both economists and environmentalists have a stake in the changing role of the market in the world’s economies.

Some environmentalists reject both markets and bureaucratic planning as incapable of dealing with the crisis of sustainability. Putting a sober twist on an old joke: ‘In capitalism, man exploits man; in socialism, it’s the other way around,’ they say both exploit nature. But important differences exist between systems, as shown by comparing their efficiency in agricultural production.

Agricultural production can critically affect the consumption and disruption of resources—water, wood, and air. Soil erosion and deforestation can result from low agricultural productivity if new, marginal lands are pressed into production to make up for lost potential. Overuse of chemicals can cause water pollution. Efficiency is consequently an essential ingredient of agricultural sustainability. Economists define efficiency, roughly, as maximizing output while minimizing input. When farmers produce a given value of grain with a least-cost combination of land, labor, fertilizer, and machinery, production is efficient. When grain production increases faster than consumption of the inputs, productivity and the outlook for sustained production improve. When productivity declines, a society is headed for trouble. Inflation, the need for costly imports, even famine can result.

Land and labor productivity, two partial but important measures of performance, reveal several advantages of market orientation. Crop production per hectare is generally higher in market-orientated countries. Of course, factors others than the economic system affect these ratings, such as rainfall levels, inherent soil fertility, and farm price policies that may either encourage or discourage farm efficiency. Japan’s population pressure, for example, has pushed it to increase land productivity, but this explains only about a third of the more efficient record it has than the Soviet Union. The remainder is attributable to policies that, among other things, keep prices high, encourage larger numbers of people to farm, and keep farm size low. Similar policies have placed market oriented Hungary even higher in land productivity.

Ranking nations by agricultural labor productivity shows a dramatic advantage for market economies. European countries enjoy labor productivity rates often double of countries like Poland, Cuba and Lithuania.

Labor productivity naturally tends to be higher when farmers earn high incomes, which in turn indicates higher levels of development, a central goal of economic policy. Strictly regulated prices reduce profitability for farmers, and deprive them of capital to invest in machinery and fertilizers to raise productivity.

Land productivity says little about the ‘total factor’ productivity of an agricultural system, which also takes into account inputs of labor, fertilizer, and machinery or animals. Efficiency can be distorted and productivity diminished by poorly crafted policies. For example, high price subsidies and protective trade barriers account for part of the relatively high land productivity in Japan. Consumers bear the cost of these distortions, paying almost three times the import price of food commodities.

Total factor productivity is relatively easy to determine in a perfectly competitive economy. Ideally, price signals instruct farmers on how much to spend on production, and they maximize their earnings by choosing the least-cost combination of labor, land, machinery, and fertilizer. According to microeconomic theory, they produce at the level at which the cost of their last, or marginal, unit of production—their most expensive ton of grain—just equals the price they receive. They maximize profits in this case, making efficiency and productivity almost synonymous. In non-market economies, on the other hand, prices of resources usually do not reflect their scarcity, and so resources must be allocated by plan, a fact that directly affects productivity.

In Europe resource efficiency in agricultural sector is frequently undermined by heavy farm production subsidies, both with trade barriers and direct budgetary expenditures. The United States is by no means unique among market-oriented countries in failing to adjust agricultural policies properly.

Common Market countries’ agricultural policies drive prices one fourth above world market levels on most products. Such subsidies hurt not only domestic consumers but also exporters of developing countries who could produce more efficiently and sell cheaper. The policies have the aim of preserving and sustaining the farm sector and its way of life. Cut the goal could be equally well served without the damage caused by price distortions if governments substituted direct income transfers for agricultural price supports.

Western nations, nonetheless, have long satisfied basic and fiber needs, and government policies have played a major role in this success. When policies such as minimum price supports are introduced in order to ensure food security and stabilize markets—this is, when supports are set below international market levels—they can be useful. When supports exceed world market levels, however, they interfere with trade, stimulate environmentally disruptive over production, waste taxpayers’ and consumers’ money. These distortions, like their more pervasive counterparts in planned economies, have political motivations that may well be worthy. But their impact on environmental and economic sustainability cannot be ignored. Ultimately, they become counterproductive.Asif J. Mir, Organizational Transformation

Poverty and Development

It is widely recognized that development is about much more than growth of GDP. Equally, everyone appreciates that democracy is more than simply a matter of universal suffrage and the holding of regular multiparty elections, essential though these are. So we need to understand exactly what is meant by development and democracy today, in the twenty-first century.

There is a need to recognize the links between democracy and good governance on the one hand, and poverty, development and conflict on the other.

A strong, effective, accountable state is the first pillar of democracy and development. International institutions alone cannot and should not take responsibility for eradicating poverty, authoritarianism and conflict.

The foundations of a democratic state are worth recalling: a freely and fairly elected parliament that is broadly representative of the people; an executive (government) that is answerable to parliament; an independent judiciary; a police force that responds to the law for its operations and the government for its administration; and armed forces that are answerable to government and parliament.

The financial affairs of any democratic government should be monitored by parliament through a public accounts committee, and by an auditor-general answerable to parliament.

Civil society is the third pillar of pro-poor development and democratization. Building the capacity of citizens’ organizations and a free and well-informed media are critical for promoting citizen participation, holding government to account and empowering poor communities. Poor people and poor communities, for example, are in the best position to understand and articulate their own needs, and their voices should be heard directly within government. But they are not and here political rights and opportunities can be bolstered through community action.

The media plays an important role both in giving voice to citizens and in holding government and the private sector to account on their behalf.

Where international economic organizations such as the IMF, the World Bank and the WTO set down conditionality or constraints on policy, it must be in the pursuit of pro-poor development, and must work in ways that do not erode democratic institutions and human rights at the national and sub-national levels.

There is a need for responsibility, partnership and concrete actions – from the government, private sector, civil society and international community. Without responsibility on all these levels, development and democracy will remain rhetoric rather than become reality.

The principal aim of development no longer focuses on maximizing marketable production of goods. The emphasis now is on expanding opportunities and strengthening human capacities to lead long, healthy, creative and fulfilling lives. Development is about enabling people to have the ‘capabilities’ to do and be the things that they have reason to value. Poverty is the deprivation of basic capabilities and development as the process of ensuring that the most basic capabilities are achieved by all.

Basic capabilities include: being adequately nourished, avoiding preventable morbidity and premature mortality, being effectively sheltered, having a basic education, being able to ensure security of the person, having equitable access to justice, being able to appear in public without shame, being able to earn a livelihood and being able to take part in the life of a community.

Developing countries have a weak administrative capacity. Public officials are poorly trained or lack experience in public expenditure management. State institutions, such as ministries and judiciaries lack sufficient resources or are plagued by entrenched systems of corruption. Inadequate numbers of women at decision-making levels in the civil service and judiciary means that women’s interests are not represented in policy formulation and implementation.

Ill-health is also a cause of poverty. A single experience of sickness in a family can divert energy and resources, leaving the household in deep poverty. Diseases such as malaria, and tuberculosis are not only personal tragedies; a high prevalence of such diseases is associated with significant reductions in economic growth.

Many anti-poverty plans are no more than vaguely formulated strategies. Developing countries need a genuine action plans - with explicit targets, adequate budgets and effective organizations. They do not have explicit poverty plans but incorporates poverty into national planning. And many of these then appear to forget the topic.

The governments have difficulty in reporting how much funding goes to poverty reduction - unable to distinguish between activities that are related to poverty and those that are not. They confuse social spending with poverty-related spending. But much government spending could be considered pro-poor if it disproportionately benefits the poor. Under these conditions it is probably best to set up a special poverty reduction fund - to give a better financial accounting and to allow government departments and ministries to apply to the fund for financing for their poverty-focused programs.

The scope of development policy has become broader, making ‘pro-poor development’ a vital additional analytical category that orients attention towards those people most in need. Recognizing that ‘development’ is still used loosely in the policy world to refer to development strategies, rather than particularly for poor people, it is important to distinguish and promote ‘pro-poor development’. Development policies aimed at the general population may have a more limited positive impact on particularly disadvantaged groups. Pro-poor development concerns those policies that are specifically designed to enhance the quality of the lives of the poor. Asif J. Mir, Organizational Transformation

A Dehydrated Future is coming

Water resources are declining and different UN reports confirm that serious shortages are occurring soon. Thus we see a future when there will be no or less drinking water.

Access to water is a human right. Current declarations on human rights include basic water needs sufficiently. Basic water rights focus only on water for domestic use, and speak only of amounts of the order of 30-50 liters per person per day. Nonetheless, for many poor people, access to water for productive purposes is a crucial basic need as well. This is because water is a key factor of production in agriculture and for most other forms of economic activity that are vital to the livelihoods and opportunities of the poor.

Some question the wisdom of providing water of drinking quality at great expense, only to have a large share flushed down toilets, to carry waste, where after it is cleaned again for the few that can afford this costly practice. Opinions differ: some water experts advocate ecological sanitation, others dry toilets, some people argue that only bottled water should be of drinking quality and piped water quality should be limited to fit all other use made of it. All these alternative approaches deserve more attention.

Water infrastructure of Pakistan is turning into archaic. Reservoirs are silting up irrigation networks and turning disrepair. Groundwater levels are falling in important aquifers that have contributed substantially to food security in recent years by providing water-on-demand to millions of farmers that tapped them using tube-wells to grow their crops. This situation has impacted adversely causing a serious scarcity of water resources. This scarcity has hit the poor and vulnerable-first and hardest.

Pakistan’s per capita water availability in 1951 was 5,650 which has fallen to around 1,200 cubic meters 1,200 and with current population growth rate, it will be reduced to 1,000 cubic meters by the year 2012. So the hard reality that we as people faced today is that Pakistan in the past fifty years has turned into a water-scarce from a water-sufficient country and the situation continues to go downhill. This is the specimen of a mismanaged case.

Pakistan is the victim of repeated wrong planning of its land and water resources to produce food. All this is due to the pathetic and inert attitude of the technocrats, bureaucrats, politicians and the government as no national policy on water development was framed.

Large-scale development of river and groundwater resources is less acceptable today, for environmental reasons. It is also less cost effective than it was in the 1960-1990 period, when the large majority of the world's 45,000 large dams were built.

Water can be distributed through government institutions or the market. Privatization of water service provision, however, does not imply privatization of water resources. Water is a public good, which should be treated as an economic good where it is used for economic purposes. The public-private sector role nevertheless does not imply the role of multinational companies but the role and significance of the small-scale private sector.

In agriculture, private farmers have been largely responsible for the major investments in groundwater development. This groundwater use has contributed significantly to food production and the creation of wealth in rural areas. But government has failed to elaborate rules and mechanism ensuring that groundwater is used in a way that minimizes the risks of over-use and protects groundwater quality.

Increasing the efficiency in irrigated agriculture can result in large water savings. The UN Secretary General once rightly uttered: We need a Blue Revolution in agriculture that focuses on increasing productivity per unit of water. Indeed, at the farm level, the focus on water productivity in physical terms, crop output per unit of water, is a necessary and useful framework. Likewise, appropriate soil fertility and plant nutrition management can be a way to achieve more crops per unit of water. Water productivity at the basin level must be defined to include crop, livestock and fishery yields, wider ecosystem services and social impacts such as health, together with the systems of resource governance that ensure equitable distribution of these benefits.

For sustainable development, it is clear that better water management should be a means to reduce poverty. Strategies to address water-poverty relationships need to improve the different capabilities of the poor in their battle against poverty. These strategies also need to address the pervasive gender issues in water. Those affected by water problems are too often women, while those deciding on solutions tend to be men. Building gender-equitable capabilities of the poor to manage their water resources should also be at the heart of capacity building in the water sector.

The Provinces should formulate a water supply master plan and continuous planning process to estimate demand for drinking water and identify alternative ways of meeting that demand.

They should also establish and allocate resources to local governments for the preparation of provincial-mandated water supply plans. The Provinces should also enact legislation requiring local governments to formulate and administer comprehensive watershed protection programs in designated future water supply watersheds.

A system needs also to be evolved to promote the adoption of best management practices to minimize agricultural erosion in designated future water supply watersheds by funding and extending existing state cost-sharing programs to those watersheds and by targeting federal, state, and local technical assistance programs to them. A framework also has to be in place to increase technical assistance to local governments to help them prepare and administer watershed protection programs for designated future drinking water sources.

In evaluating alternatives for conjunctive use, water managers should also view ground water as more than a supplement to surface supplies. In particular, managers should assess the value of ground water in optimizing storage capacity, enhancing transmission capabilities, and improving water quality of the system. Asif J. Mir Organizational Transformation

Dealing with Conflict

With the turn of economic wheel conflict has entered into our daily life as an indispensable impedimenta. Whether in domestic, professional or political living and breathing world we are dominated by lacking conflict management skills and hence dragging on with antipathy, bitter feelings and state of war. For creating a fraternal, congenial and harmonious environment we ought to master skills essential for dealing with conflict.

Conflict is a natural disagreement resulting from individuals or groups that differ in attitudes, beliefs, values or needs. It can also originate from past rivalries and personality differences.

The first step in managing conflict is to analyze the nature and type of conflict. To do this, you'll find it helpful to ask questions.

Collaboration results from a high concern for your group's own interests, matched with a high concern for the interests of other partners. The outcome is win/win. This strategy is generally used when concerns for others are important. This approach helps build commitment and reduce bad feelings. Some partners may take advantage of the others' trust and openness. Generally regarded as the best approach for managing conflict, the objective of collaboration is to reach consensus.

Compromise strategy results from a high concern for your group's own interests along with a moderate concern for the interests of other partners. The outcome is win some/lose some. This strategy is generally used to achieve temporary solutions, to avoid destructive power struggles or when time pressures exist.

Competition strategy results from a high concern for your group's own interests with less concern for others. The outcome is win/lose. This strategy includes most attempts at bargaining. It is generally used when basic rights are at stake or to set a precedent. It can cause the conflict to escalate and losers may try to retaliate.

Accommodation results from a low concern for your group's own interests combined with a high concern for the interests of other partners. The outcome is lose/win. This strategy is generally used when the issue is more important to others than to you. It is a goodwill gesture. It is also appropriate when you recognize that you are wrong. The drawbacks are that your own ideas and concerns don't get attention. You may also lose credibility and future influence.

Avoidance results from a low concern for your group's own interests coupled with a low concern for the interests of others. The outcome is lose/lose. This strategy is generally used when the issue is trivial or other issues are more pressing. It is also used when confrontation has a high potential for damage or more information is needed.

Several enemies often combine to create contention. The first enemy is the natural need to want to explain the side first. After all, we reason, if they understood our perspective, they would come to the same conclusions we did. The second enemy is ineffectiveness as listeners. Listening is much more than being quiet so we can have our turn. The third enemy is fear. Fear that we will not get our way. Fear of losing something we cherish. Fear we will be made to look foolish. The fourth enemy is the assumption that one of us has to lose if the other is going to win. Differences can only be solved competitively.

Two principles have contributed so much to the productive handling of disagreements that it is difficult to read about the subject in scholarly works without their mention. The first principle: Seek first to understand, then to be understood, was introduced by Steven Covey, in Seven Habits of Highly Effective People. If we encourage others to explain their side first, they will be more apt to listen to ours.

Roger Fisher and William Ury introduced the second communication principle in their seminal work, Getting to Yes. Simply stated, it is that people in disagreement focus on their positions when instead they should be focusing on their needs. By focusing on positions we tend to underscore our disagreements. When we concentrate on needs, we find we have more in common than what we had assumed. Ury and Fisher then went on to say that when we focus on needs we can attempt to satisfy the sum of both our needs and their needs.

The parties to Kashmir conflict can also explore a problem-solving approach inspired by an ancient Tibetan Buddhist teaching known as the four karmas. These four karmas follow a developmental sequence that begins with pacifying or calming the situation, enriching positive aspects by bringing in multiple perspectives, magnetizing larger perspectives or additional resources, and finally, if necessary, destroying old patterns and behaviors that no longer serve.

Traditionally the four karmas is a personal practice that allows one to become attuned to the natural energies in a situation, and to transform confusion and aggression into creativity, compassion, and intelligent action.

How can we solve our tough problems without resorting to force? How can we overcome the apartheid syndrome in our homes, workplaces, communities, countries, and even globally? How can we heal our world's gaping wounds? To answer these questions is simple, but it is not easy. We have to bring together the people who are co-creating the current reality to co-create new realities. We have to shift from downloading and debating to reflective and generative dialogue. We have to choose an open way over a closed way.

It is good to talk about the past. A discussion of past behaviors is essential to analyze patterns of conflict and help conflicting parties to find constructive ways of handling future disagreements. Without understanding the past, it is hard to prepare for the future. At some point, however, the focus of discussion turns to that of future behaviors, rather than past injuries. The sooner the participants can focus on the future, the greater the chances of successful resolution. (www.asifjmir.com)