The West and Global Economic Development

It is interesting to compare Sachs's chapter 2 with Huntington's Part II, and Linden's essay in O'Meara (part 9), where Linden talks about the hazards surrounding the living environment in mega cities of the developing countries.   First, Sachs is much more sanguine about the future of Western economy than Huntington. Where Huntington talks about the shifts of civilizations, from a Western dominance of the world due to Western economic strength, to a more multi-faceted distribution of power and culture due to the rise of non-Western economic powers, Sachs talks about "convergence"--the growth of non-Western, especially Asian-Pacific economies at a faster pace than economic developments in Western countries, leading to a lesser gap between Western and other economies. Furthermore, Sachs argues that to a great extent, the world as a whole has potential for much greater economic development, not confined to recent centers, such as the West and Asia, but in the economies that have been less tapped and will be used more with a boost from new technological applications.

1. The future is bright despite problems of population and the environment

Like Linden, Sachs points out many hazards in urban living, which becomes an issue of growing importance as the world becomes more urbanized in the 21st century. Where Linden is concerned with urban slums, crime, and other problems hazardous to the urban environment, Sachs talks about the growing importance of urban ecology. Unlike Thomas Malthus who despaired at the thought of over-population and the exhaustion of resources, leading to wars for resource redistribution, Sachs is optimistic about the future and talks about "sustainable technologies," scientific and technological breakthroughs that will  drastically expand resources needed by human living. Sachs talks about using both market and non-market forces to achieve that goal. Where money can be a big concern, such as in scientific research, government funding should be tapped, but private patents should be encouraged to speed up the technological applications of the scientific discoveries. Market mechanisms could also be used to discourage waste emissions: e.g. through taxes on sulfur emissions that cause acid rains. Or waste emission exchanges, so that those companies that emit less waste get to trade their quotas to those that emit more.

Sachs's argument corresponds to a reality where increasingly, companies are complying with emission quotas and often voluntarily paying attention to environmental issues. This is a far cry from some years ago when environmentalists argued that a non-market solution had to be found in curbing pollution, because it will be against the rules of the market to expect companies to pay extra to clean up air and water that they pollute, which are free to begin with. Because many companies have recognized the present and future hazards of environmental degradation (e.g. insurance companies have to pay much more for houses and property damaged by extreme weather conditions), they are ready to concede that air and water are not really free and it is in the financial interests of private companies to reduce pollution and global warming. Regulation, to Sachs, is still necessary, to bring about standards to protect the environment, especially when the market value of something is not a good index of its real value, such as in the case of some large, slow-growing land or marine animals.

Sachs also has a realistic approach to present and future sources of energy. Unlike many who argue that the oil resources of the world will be depleted in the next forty or sixty years, Sachs argues that oil will not run out in the 21st century but will in the 22nd. And in the area of search for new sources of energy, Sachs calls for greater government participation in the research and development of solar energy and other energy sources.

2. Practical approaches to combat poverty

Extreme poverty is usually concentrated in land-locked areas untouched by globalization, such as regions in Africa, though poverty exists in varying extents in the areas touched by globalization as well, and even the latter may trigger off more poverty and social polarization. Poverty in these regions usually form a vicious cycle: poverty prevents governments from collecting sufficient taxes to build up an infrastructure for the country's development (roads, hospitals, schools, investments in export-oriented goods to attract foreign investments, etc), which locks the region/state in continued poverty. The ultimate way out of poverty is to develop an infrastructure as mentioned above, develop a commercial economy and finally employ technology for faster and greater economic development. Land-locked countries suffer from a disadvantage because they are less likely to trade with others and attract foreign investments than coastal countries/regions. On the other hand, we have countless examples of coastal countries/regions in disarray, such as Somalia and Sierra Leone, among others. Sachs points out four stages of economic development (p.222), which is actually based on the developmental model of East and Southeast Asian countries in the past 30-40 years, from a subsistence economy, to a commercial economy, and then to emerging-market economy that becomes more intertwined with the global market, and ultimately to an economy driven by technological innovations. It has so far proven to be a useful frame of reference for non-Western countries where industrialization comes as a reaction to the industrial developments of other parts of the world. Government policies are ultimately the most important factors in determining the success or failure of economies of individual countries, to Sachs.