ECONOMY AND SUSTAINABILITY: WHAT IS THE MEANING OF “SUSTAINABLE DEVELOPMENT” IN TIMES OF AUSTERITY? Group C assignment presentation Tutor: Andrey Ivanov 13 July 2012 CEU

Outline  Introduction  Three pillars of SD times of austerity  Economic pillar  Social pillar  Environmental pillar  Conclusions

Introduction  What does “austerity” mean?  How it affects our day-to-day lives?  Definitions of austerity  Challenges brought by austerity  Three pillars of SD in times of austerity – possible policy response

Economic pillar Budget cuts as the only economic approach to austerity is not sustainable in the long-run

Challenges  Limited resources is the starting point  What does efficient government stimulus and how do we define “efficiency”?  Employment – where could it come from?  Economic structure and the demand – which are the destination markets?  Another consumption boost – is it possible economically?

 Internal redistribution – what are the limits of progressive taxation and approach of shadow economy?  Shadow economy – better than no economy or the long-term implications are too costly?  What could be the sound basis of the new economic cycle? What kind of diversification and how?  Going beyond budget cuts: is delivering more with less possible? Challenges (cont.)

Solutions and linkages to SD pillars  Efficient government stimulus  Enhancement of employment  Investment into renewable energy  Progressive tax system and approach of shadow economy  Formal jobs with social security  Economic diversification  Choices of employment  Green jobs creation, social enterprises

Social pillar Challenges  Pension system  Education (the stupid or the sick dilemma)  Health Care (the stupid or the sick dilemma)  Social benefits  Good Governance

Social pillar Hypothesis  austerity is as an opportunity to rationalize social expenditures and implement long awaited reforms.  what is a short term gain on the budgetary side might fire back on the long run and it leads to deteriorating human capital  the current, ‘European’ social model needs a reform as it is not sustainable

Social pillar Horizontal linkages to other areas:  Economic; Lack of resources cause lack of funds for social sector Lack of investments into social sector cause longer stagnation and lack of development  Environmental; Poor society lose interest in environmental protection Austerity can leads to suspension of investment into renewal energy, etc.

Social pillar  Pension system  How can we address the problem of ageing countries?  What kind of burden an ageing society puts on individuals and on the state? – financial + social  Can a one pillar pension system sustainable?  What could be the role of other actors?

Social pillar Solutions suggested – healthy life, active ageing, two-pillar pension system  Promoting a healthy lifestyle (not the current one! )  Promoting active ageing – also implies staying active longer in the labor market  Two-pillar system : private pension funds + state pension

Social pillar  Education  What is the aim of education?  Is the current education system in the region effective, in terms of providing skills and knowledge that are compatible at the job market and useful in other domains of life alike?  Shall we invest in education in times of austerity? If yes, how shall we do it?  Is the current education system in the region effective, in terms of providing skills and knowledge that are compatible at the job market and useful in other domains of life alike?  How can we make the current education system more effective?  Shall it be maintained by the state? Who could be the other actors and where should be the entry points for them?  How to ensure that education reduces and not increases existing inequalities?

Social pillar Solutions suggested - “You are learning for life”  reduce skill mismatch and promote lifelong learning – WB: Skill mismatch: „one of the most important constraints to firm expansion”, better chances at the job market, money spent on education are „well spent”, in close private-public partnership, choice of individuals should not limited extremely  Focus on skills and empowerment  Mixed system, in which CSOs, municipalities and the private sector have the necessary level playing field can be a solution – concrete solutions may vary from country to country

Social pillar  Health care  How to ensure the good quality and equal health service in time of austerity?  Should be the state the only provider of healt care?  How to prevent diseases to mineralize delivering of treatment  How to address public fear from the reform of the health care system? (US as the bad example, but Soviet model is not sustainable)

 „Man, he sacrifices his health in order to make money; then sacrifices his money to recuperate his health”

Social pillar Solutions suggested – Prevention and reform  Prevention is always cheaper! – individual benefits, family benefits, economic benefits (not staying out of work, not being dependant on the state) – medical check-ups, promoting healthy lifestyle  Day care instead of hospital care  Involving other actors – religious bodies have a long tradition to provide health care, private insurance companies – to provide extra services – eliminating corruption+ their tax should be reinvested in health care, involving medical staff,

Social pillar  Social benefits  What to do with unemployment allowances?  Can public work programmes be the proper response?  Challenges:  Cost a lot of money for the state  create social tensions  numerous disadvantages for the individuals  dependency on the state, act against agency  staying out of the labour market, long term unemployment contributing to their social exclusion and having detrimental effect also on family life.

Social pillar Solutions suggested – Social economy and enhanced private-public partnership  Private-public work programmes  Social corporates  Local government engagement

Social pillar  Good governance  Shall the country became centralized in times of austerity?  Can local government be more effective and respond?  How to ensure budget efficiency, transparency, accountability, lack of corruption, rule of law, etc.  What is the role of inernational organizations?

Social pillar Solutions suggested  Decentralization  Cooparation with civil society and private sector  International cooperation

Environmental pillar Austerity encourages to take more economically effective decisions that leads to the enhancement of environmental sustainability

Challenges  How to overcome the likely decrease of investment in renewable energy?  How to overcome the likely decrease in green good consumption?  How to ensure that funds are being spent for proper waste management and avoid the skip into unsustainable but cheap practices?

 Green Public Procurement  Don’t rise public expenditure for goods and services  Leveraging taxes on energy intense luxury goods and services  Revenues to budget  Change in consumption behavior  Waste reduce, reuse, recycle - 3R policies  Path of extractive industries and put to risk jobs associated  Assessment for investments Solutions and linkages to SD pillars

Conclusions

Good governance ?!

Thank you!