20.3.2 Factors that support sustainable development

A brief excursion into some of the recent literature on economic development is sufficient to support the fundamental observation that the factors that determine a country’s ability to promote (sustainable) development coincide with the factors that influence adaptive capacity relative to climate change, climate variability and climatic extremes. The underlying prerequisites for sustainability in specific contexts are highlighted in italics in the discussion which follows. The point about coincidence in underlying factors is made by matching the terms in italics with the list of determinants of adaptive capacity identified above (Chapter 17, Section 17.3.3): access to resources, entitlements (property rights), institutions and governance, human resources (human capital in the economics literature) and technology. They are all reflected in one or more citations from the development literature cited here, and they conform well to the “5 capital” model articulated by Porritt (2005) in terms of human, manufactured, social, natural and financial capital.

Lucas (1988) concluded early on that differences in human capital are large enough to explain differences between the long-run growth rates of poor and rich countries. Moretti (2004), for example, showed that businesses located in cities where the fraction of college graduates (highly educated work force) grew faster and experienced larger increases in productivity. Guiso et al. (2004) explored the role of social capital in peoples’ abilities to successfully take advantage of financial structures; they found that social capital matters most when education levels are low and law enforcement is weak. Rozelle and Swinnen (2004) looked at transition countries in central Europe and the former Soviet Union; they observed that countries growing steadily a decade or more after economic reform had accomplished a common set of intermediate goals: achieving macroeconomic stability, reforming property rights, and creating institutions to facilitate exchange. Order and timing did not matter, but meeting all of these underlying objectives was critical. Winters et al. (2004) reviewed a wide literature on the links between trade liberalisation and poverty reduction. They concluded that a favourable relationship depends on the existence and stability of markets, the ability of economic actors to handle changes in risk, access to technology, resources, competent and honest government, policies that promote conflict resolution and human capital accumulation. Shortfalls in any of these underpinnings make it extremely difficult for the most disadvantaged citizens to see any advantage from trade. Finally, Sala-i-Martin et al. (2004) explained economic growth by variation in national participation in primary school education (human capital), other measures of human capital (e.g., health measures), access to affordable investment goods and the initial level of per capita income (access to resources).