Globalization the Environment and Sustainable Economic Growth

Will globalization lead to a sustainable environment and a sustainable economy? Researchers have disagreed on the various and multiple impacts of globalization on the environment and on economic growth.

1.1.3.1 Globalization and Sustainable Economic Growth

According to Matteis [8], globalization will have both positive and negative consequences with respect to sustainable economic growth. The positive aspects of trade liberalization in a global marketplace include competition, increased productivity, economic growth, and increased access to foreign capital. By creating competitive global markets, trade liberalization maximizes resources with consequent reduction of production costs and helps increase productivity. Similarly, the United Nations' World Commission on Environment and Development [9] views the free market economy and trade liberalization as indicators of promoting sustainable economic growth. Free market access for products of developing countries, lower interest rates, technology transfer, and larger capital flows—the main ingredients of the global economy—have been identified by the United Nations as essential to sustainable development and poverty reduction. The World Bank [12] also focuses on the need for a free market economy and trade liberalization to reduce poverty and achieve sustainable growth. Globalization has provided the power of technology, especially information technology, to bolster the path of sustainable development for many nations; and has driven the world into a state of greater openness, interdependence, and integration that will bring about new development opportunities [14].

In addition, transnational corporations play a significant role in promoting sustainable economic growth within developing nations [15]. Halme, Park, and Chiu [16] explain the diverging impacts of globalization on sustainable economic growth. They argue that in spite of economic crisis in the late 1990s, countries in the Asia-Pacific region have attained the fastest rate of economic growth in the world over the past quarter century. Although the absolute number of poor remains high due to rapid population growth and other factors, the percentage of Asians who live in poverty has been reduced from 50 to 25% over the same period of time.

However, globalization imposes exogenous constraints on economic growth and contributes to strengthening economic dependence on international demand. It increases vulnerability to the fluctuations of international markets [8]. Indeed, according to Pronk [2], globalization will increase consumption and production, which will be coupled with unequal access to resources. Pronk emphasizes the need for creating new sustainable production and consumption patterns, as well as redirecting economic growth toward labor-incentive and bottom-up development which reduces poverty.

For example, the structural adjustment reforms in the 1980s and the influence of the North American Free Trade Agreement (NAFTA) in the 1990s manufacturing sector in the Caribbean island states failed to create a sustained path towards economic growth and have reduced the competitiveness of regional assembly-based manufacturers in the island states [17]. In addition to manufacturing, Caribbean service exports also continue to be affected by incompatibilities among global and local structures and institutions. Unfortunately, according to Mullings [17], individual island states have little power to challenge the trade or policy-based lending requirements of powerful global institutions like the World Trade Organization (WTO) or the International Monetary Fund (IMF).

Holliday, Schmidheiny, and Watts [18] emphasize the need for corporate social responsibility, that is, "commitment of the business to contribute to sustainable development, working with employees, their families and local community and society at large to improve their quality of life." Unfortunately, although globalization is purported to create "trickle-down" gains for all, it has all too often resulted in gains for just a few—most of whom are wealthy [19,20]. Concerns over equity issues are plentiful.

1.1.3.2 Globalization and a Sustainable Environment

Researchers also disagree on the impact of economic growth helped by globalization on the environment. The United Nations [11] argues that environmental degradation can be reduced through reduction of poverty. Holliday, Schmidheiny, and Watts [18] believe that producing more goods and services with fewer resources will reduce waste and pollution while promoting sustainable growth. In this respect, they argue that free and open markets are essential for sustainable economic growth. Jeppesen and Hansen [15] found that transnational corporations in collaboration with enterprises in developing nations play an important role in environmental affairs for at least two reasons. Transnational corporations have environmental standards, monitoring, and pollution control mechanisms in place. Moreover, transnational corporations provide technical assistance and training to businesses in developing countries, which in turn promotes environmentally friendly economic development.

However, Castro [10] rejects the idea that economic growth is achieved by free trade, that economic growth reduces poverty, and that if poverty is reduced environmental degradation will be reduced. Castro argues that despite the partial success in reducing poverty, rapid economic growth, coupled with increasing urban population, has surpassed antipollution investments and has resulted in deteriorating air and water quality as well as loss of biodiversity and natural resources.

Major pollution threats to the environment in the age of globalization come from economic activities, such as agriculture, mining, manufacturing, and transportation [21]. For instance, deforestation rates in East Asia were the highest of any region in the early 1990s. The World Bank [22] reports that Indonesia alone lost 20 million hectares of forest between 1985 and 1998, while almost 90% of productive old-growth forests have been destroyed in the Philippines since 1990. Halme, Park, and Chiu [16] further argue that globalization is a challenge to sustainable development in Asia because the wealthy northern countries consume 80% of the world's production while developing countries bear the burden of environmental and social impacts caused by that consumption. Moreover, threats to the environment in developing nations are more severe than in the developed world, due to cheap labor, access to inexpensive raw materials, poor environmental regulations, and other investment-friendly incentives offered by the governments of the host countries.

A positive trend has emerged recently: sustainability reporting and environmental information disclosure. For example, the sustainability reports published by the Fortune Global 250 indicate that the largest most visible multinational companies are very active in disclosing information on their environmental and social policies as well as their performance. Data show that European countries and Japan maintain a certain level of sustainability reporting, both in quantity and quality. Many multinational companies have also started disclosing economic aspects of sustainability [23], which indicate that global corporations are conducive to sustainable development.

Assessing the full impact of globalization on poverty reduction, economic development, and environmental quality is difficult to do. The phenomenon called globalization continues to transform as time goes on. Likewise, ecosystems respond to more than just globalization. Climate change, population growth, the use of new technologies, changes in patterns of consumption, alterations in production processes, civil conflict, and variations in the use of natural resources each play a role in environmental outcomes. Some are independent of globalization; others are intertwined with it. In this tightly coupled complex scenario, prediction of outcomes may be more art than science. Nevertheless, deepening our understanding of these phenomena is critical if we are to move to a more effective policy that seeks to end poverty and create economic growth, while at the same time protecting the environment. That is the purpose of this book.

1.2 Book Contents

The book is divided into four parts. Part One focuses on global environmental issues and policies. Part Two looks at global environmental organizations and institutions. Part Three addresses environmental management and accountability. Part Four discusses controversies in globalization and the environment. Further detail on the contents of each part is provided below.

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