1. Poverty Reduction and Ecological Resilience through Genuine Development
Jon D. Erickson
Rubenstein School of Environment & Natural Resources
Gund Institute for Ecological Economics
University of Vermont, Burlington, Vermont USA •

2. Poverty Reduction and Ecological Resilience through Genuine Development
Legacy of the Washington Consensus
Income Convergence or Cumulative Causation
Genuine Development Alternative
Strategies toward Genuine Development
Implications on Retooling Macroeconomic Policy

3. Legacy of the Washington Consensus
Bretton Woods mission drift
Harry Dexter White and
John Maynard Keynes
GENERAL
AGREEMENT
ON TARIFFS
AND TRADE

4. Legacy of the Washington Consensus
Consensus of IMF, World Bank, and US Treasury
Fiscal Austerity
Privatization
Market Liberalization
Application of the Consensus
Top-down
Industrial / resource extraction oriented
Export-led
Theory behind the Consensus  National growth would lead to trickle down development

5. Income Convergence or Cumulative Causation
Kaldor-Kuznets-Solow consensus
Marginal propensity to save of the wealthy
Inequality lead to growth
Income gap between rich and poor
 Greater incentives  Greater labor productivity
Growth-Inequality development paths
 Evidence from US and UK  Growth path eventually leads to greater equality
Income convergence between nations due to decreasing marginal returns

7. Income Convergence or Cumulative Causation
Possibility of increasing returns (Smith, Marx, Young, Myrdal)
Uneven development
Future development depends more on past investment (path dependency)
In the normal case a change does not call forth countervailing changes but, instead, supporting changes, which move the system in the same direction as the first change, but much further. Because of such circular causation a social process tends to become cumulative and often to gather speed at an accelerating rate. (Myrdal, 1957, p. 13)

8. Income Convergence or Cumulative Causation
Theoretical critique
Nelson (1956): Low-level equilibrium traps
Arrow (1962): Learning by doing
Romer (1986): Growth rates as function of attained level of development
Arthur (1999): Technology lock-ins
Galor (1996) and Quah (1996): Growth clubs

9. Income Convergence or Cumulative Causation
Empirical critique
Persson and Tabellini (1994): Inequality as impediment to growth
Benabou (1996): Inequality stunts national growth rates
Aghion et al. (1999): Redistribution towards equity would increase domestic investment and stimulate growth
Skott and Auerbach (1995): Low income countries not catching up.
Bourgninon and Morrison (2002): Income divergence at best decelerated over last 50 years. Global gini has increased by 30%.

10. Income Convergence or Cumulative Causation
Empirical critique
Barro (2000): Poor countries have had lower growth rates. Exceptions due to human capital investment.
Easterly and Levine (1997): Low income countries have similar characteristics such as low levels of schooling, political instability, and insufficient infrastructure.

11. Growth as Cumulative Causation
Income
82.7%
11.7%
2.3%
1.9%
1.4%
Population
20%
1950  1992
Over 5x increase in global output
Nearly 12x increase in world trade
1950 – Haves 30x over the Have Nots
1989 – Haves 60x over the Have Nots

16. Genuine Development Alternative
Genuine Development Indicators
Genuine Progress Indicator
Human Development Index
UN Millennium development goals:
Eradicate extreme poverty and hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS, malaria and other diseases
Ensure environmental sustainability
Develop a global partnership for development.

17. Genuine Development Alternative

18. Genuine Development Alternative

19. Genuine Development Alternative

20. Genuine Development Alternative

21. Genuine Development Alternative

22. Genuine Development Alternative
Ecological economic capital assets approach
Household
Fir ms
(production F
actor services
Goods I n v e s t m ( 3 ) P r o a l c u p i 4 S g 5 E x 2 G d T Go er
nment
Financial mar k
ets
Other countr
ies W , f 1

23. Genuine Development Alternative
Ecological economic capital assets approach

24. Genuine Development Alternative
Ecological economic capital assets approach

25. Genuine Development Alternative
Ecological economic capital assets approach

26. Genuine Development Alternative
Genuine Savings

27. Genuine Development Alternative
Natural Resource Curse
Sachs and Warner, 2001

28. Strategies toward Genuine Development
Reversing the resource curse through investing royalties in directed poverty eradication
Investing in natural capital through payments for ecosystem services
Capturing the carbon dividend
Human and social capital investment
National debt for international services
Regional economic development

29. Retooling Macroeconomic Policy
Fiscal Policies that invest broadly in natural, social, human, and built capital.
Monetary Policies that expand the role of local currency, increase internal velocity of money and plug the leaks of regional economies, favor domestic investment opportunities for long-term economic capacity.
Trade Policies that balance self-sufficiency and sectoral diversity with comparative advantage and export opportunities, and restrict capital mobility so that comparative advantages remain.