Al-Ahram Weekly Online   31 December 2009 - 6 January 2010
Issue No. 979
New Decade's special edition
 
Published in Cairo by AL-AHRAM established in 1875

Towards a functioning social order

Ismail Serageldin * argues that we do not necessarily have to leave for posterity what we had

We live in a world of plenty, of dazzling scientific advances and technological breakthroughs. Adventures in cyberspace are at hand. Yet, our times are marred by conflict, violence, debilitating economic uncertainties and tragic poverty.

Globalisation grows, fuelled by the integration of the world economies, a revolution in computers, IT, and the non-stop activities of capital markets. Equally global are the increasing inequities between societies and within societies. Our environment and ecosystems are under threat.

Here comes the importance of sustainable development.

There have been many definitions of sustainable development, but the generally accepted definition of sustainability is that given by the Brundtland Commission:

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

This definition is philosophically attractive but raises difficult operational questions. The meaning of "needs" is fairly clear for the poor and the starving, but what does it mean for a family that lives in luxury?

A much more attractive concept is sustainability as opportunity. From this concept sustainability would be defined in the following way:

Sustainability is to leave future generations as many opportunities as we ourselves have had, if not more.

How does one measure opportunity? In economic terms one could use the concept of capital. In economics and finance one does not deplete one's capital and consider it an income stream. In fact, it goes to the heart of the definition of income given by Nobel Laureate Sir John Hicks (1946) when he defined income as "the maximum value a person can consume during a week, and still expect to be as well off at the end of the week as at the beginning."

Income based on depletion of capital is not sustainable and should not be accepted as income. But capital and the growth of capital are the means to provide future generations with as many opportunities as, if not more than, we have had, provided that we define it as per capita capital.

This takes into account the need to meet the needs of a growing population.

To get to the heart of the concept of sustainability, we must include more than man-made capital as conventionally defined and accepted in economic literature, to include other forms of capital that are every bit as important to our individual and collective well-being.

We recognise that there are at least four kinds of capital: man-made (the only one usually considered in financial and economic accounts); natural capital (as discussed in many works of environmental economics); human capital (investments in education, health, and nutrition of individuals); and social capital (the institutional and cultural basis for a society to function).

Man-made capital has received a vast amount of study but what do we mean by the others?

Natural capital is basically our natural endowment and is defined as the stock of environmentally provided assets (such as soil, atmosphere, forests, water, wetlands) that provide a flow of useful goods or services.

The flow of useful goods and services from natural capital can be renewable and non-renewable or marketed and non-marketed. Sustainability means maintaining environmental assets, or at least not depleting them beyond limits. Any consumption based on the depletion of natural capital should not be counted as income. It must be accounted for as a reduction of natural capital.

Regarding human capital, there has been considerable progress made in the past four decades in recognising the importance of human capital formation, meaning that investment in people is now seen as a very high-return investment, especially in developing countries.

The mainstream paradigm of development has been expanded to include investment in human resources as an essential ingredient of a development strategy.

Investments in health, education, and nutrition are increasingly recommended parts of a national investment strategy.

Recognising the importance of social cohesion leads directly to social capital, the fourth form of capital to be considered in sustainability. Without a degree of common identification with the forms of governance and of cultural expression and social behaviour that make a society more than the sum of a collection of individuals, it is impossible to imagine a functioning social order.

The myriad institutions that we take for granted as the essential premise of a functioning society must be grounded in a common sense of belonging by the members of that society. The institutions must reflect a sense of legitimacy in their mediation of conflicts and competing claims.

In short, if that social capital is not there, the resulting failures make it impossible to talk of economic growth, environmental sustainability, or human well-being.

But what constitutes this social capital? It is a difficult question and a very different one from investment in individual human capital. It is based on inclusion, participation, and the promotion of an enabling environment. Yet it is more.

Sustainability then is the combination of the above mentioned four kinds of capital per capita that we leave for future generations. We are able to set aside a foolish yet still prevalent view among some groups that sustainability requires leaving to the next generation exactly the same amount and composition of natural capital as we found ourselves, by substituting a more promising concept of giving them the same, if not more, opportunities than we found ourselves.

This means that the stock of capital that we leave them, defined to include all four forms of capital, should be the same if not larger than what we ourselves found.

* Director of the Bibliotheca Alexandrina.

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