Europe consistently ranks amongst the most developed regions in the world and countries in the region record constantly high development ratings, based on the Human Development Index. Yet, the question of achieving economic growth is one that continues to trouble the region, particularly given the relative “lack of productivity” and “business dynamism” in Europe.
As emphasized in Mario Draghi’s detailed September 2024 competitiveness report to the European Commission, income per person in Europe is about 30% less than income per person in the US. Clearly, the region needs to ensure sustained growth if Europe is to harness the significant economic advantages available to it.
However, how can Europe achieve the much desired growth without sacrificing social equity on the altar of higher per capita income? Sustainable economic growth can be the answer. Although, I think there are many questions to ponder and pitfalls to avoid.
Achieving sustainable economic growth
Sustainable economic growth refers to a rate of growth that can be maintained over the long term without creating significant economic, social, or environmental problems for future generations. It aims to meet the needs of the present population while ensuring that natural resources and the environment are preserved and protected for future use. Here are some key aspects of sustainable economic growth:
- Environmental Sustainability: Sustainable growth involves using natural resources efficiently and responsibly to avoid depletion. This includes practices like sustainable agriculture, forestry, and fishing. Minimizing pollution and reducing greenhouse gas emissions are crucial for protecting ecosystems and human health. This can be achieved through cleaner production technologies and renewable energy sources.
- Economic Stability: Sustainable economic growth aims for a balanced economy with low inflation and stable financial systems. This helps prevent economic crises and ensures steady progress. Investing in innovation and improving efficiency can drive sustainable growth. Technological advancements can lead to more efficient use of resources and reduced environmental impact.
- Social Inclusivity: Ensuring that economic growth benefits all segments of society, including marginalized and vulnerable groups, is essential. This includes creating decent jobs, reducing income inequality, and providing access to education and healthcare. Involving local communities in decision-making processes and ensuring that they benefit from economic activities can promote social cohesion and sustainable development.
How economic growth can affect social equity
Creating sustainable growth can improve outcomes across the board, but it can also have complex impacts on social equity. While the goal of sustainable growth is to balance economic development with environmental protection and social inclusion, the process can sometimes lead to unintended consequences that may adversely affect social equity. For instance, it can lead to:
- Economic Displacement:Transitioning to a green economy often involves phasing out industries that are heavily reliant on fossil fuels and other non-renewable resources. Workers in these industries may face job losses and economic displacement. For example, coal miners and workers in oil refineries may find it challenging to transition to new roles in the renewable energy sector. The shift towards sustainable industries requires new skills and training. Workers who lack access to education and training programs may struggle to find employment in the new green economy, exacerbating existing inequalities.
- Cost of Transition: Implementing sustainable practices can sometimes lead to higher costs for goods and services. For instance, organic farming and renewable energy technologies can be more expensive than their conventional counterparts. These higher costs can disproportionately affect low-income households, who spend a larger share of their income on basic necessities. Achieving sustainable growth often requires significant investment in infrastructure, technology, and education. Developing countries and marginalized communities may lack the financial resources to make these investments, leading to unequal benefits from sustainable growth initiatives.
- Access to Resources: Access to green technologies and sustainable practices can be unevenly distributed. Wealthier individuals and communities are more likely to afford electric vehicles, solar panels, and energy-efficient appliances, while low-income households may be left behind. The expansion of renewable energy projects, such as wind farms and solar parks, can lead to land use conflicts. Indigenous communities and small-scale farmers may be displaced or lose access to their traditional lands, leading to social and economic marginalization.
Conclusion
While it’s clear that economic growth can be sustainably achieved, leading to better development and human satisfaction, it sometimes involves an all too real human cost. People can be left by the wayside as the juggernaut of economic development rolls on. We know that there are important questions to be asked in order to avoid such a future. But it’s also true that no one has all the answers.
How would you ensure that economic growth does not unduly impair social equity?
