Goh Zhi Qian in Spain

Living in a nation where externalities are successfully passed on to other countries, we need to constantly remind ourselves about the finiteness of our global environment and resources.

It would be an understatement to say that the recent financial crisis has dealt a staggering blow to “our little red dot’s” economy. Being the worst global economic decline in 60 years, Singapore’s economy is feeling the effects simply because our economy is heavily dependent on trade. This dependency makes us extremely sensitive to key export markets of the United States (US) and Europe in which there has been a sharp decline in global economic activities.

In response to economic contraction, the Singapore government has drawn up a commendable “Resilience Package” in an attempt to preserve jobs, stimulate bank lending, enhance business cash-flow and competitiveness while developing infrastructure at the same time. This highly expansionary budget is supposed to pave the way for our economy to emerge from this unprecedented economic crisis stronger than before.

The Resilience Package’s Hidden Nature

SM Goh has likened the “Resilience Package” to the bitter medication that would “cure” our economy from the illness (i.e. credit-fuelled financial crisis), whereby the return to our defunct “healthy state” would be one characterized by positive or continuous Gross Domestic Product (GDP) growth. The “Resilience Package” in essence mimics the “Keynes-Inspired New Deal” that former US President Franklin D. Roosevelt implemented in the 1930s in the form of expansionary fiscal policies, which lifted the US out of its economic depression. Since then, expansionary budgets to stimulate GDP growth became intuitive and accepted as a part of classical homo-economicus.

However, the expansionary nature of the “Resilience Package” may not be completely in line with efforts invested by the Singapore Ministry of Environment and Water Resources for environmental sustainability; efforts manifested in the form of our Environmental Policy or National Climate Change strategy put forth to turn our “little red dot” a little “greener” (i.e. more environmentally sustainable). The return to our defunct “healthy state of the economy” to be achieved by stimulating GDP growth will almost always be accompanied by increases in the material flow through the economy. However, are increases in material flow and the expansion of the economy in physical terms sustainable?

Ecological Economics, which studies the metabolic flow through the economy and views the economy as a sub-system embedded in our finite physical environment, would be quick to disagree. Unfortunately, the well-entrenched homo-economicus supports the unsustainable concept of continuous positive GDP growth for economies. It also insidiously promotes the taking of our finite resources, our incommensurable ecosystems and biodiversity, and the limited capacity of our fragile environment to absorb anthropogenic pollution for granted. If the imperative of GDP growth and the use of GDP as an indicator for environmental sustainability are concepts far from ideal, what alternative schools of thought and indicators should we turn to?

Sustainable Development vs Sustainable Growth

The impossibility of economic growth achieved in an environmentally sustainable fashion has been rationalized and well argued by ecological economists. If it is acknowledged that conventional conceptions of economic growth are unsustainable, we then need to map out an alternative trajectory of development for our economy. While conventional economic growth involves quantitative increases in the inputs and physical growth of the economy, development deals with qualitative improvements to processes and products that consume energy. Another option would be for Singapore to start replacing conventional energy sources with renewable energy sources, such as solar energy panels. Such developmental initiatives will allow us to harness energy and cost savings, while diversifying our energy sources away from oil and gas. This reduces our susceptibility to oil or gas prices, further strengthening the energy security profile of our “little red dot”.

While discussions have been successfully undertaken by many countries on the topic of sustainable development, the tempo for executing discussed plans could perhaps be faster. To this end, the Singapore government should make a concrete commitment by setting specific targets for the proportion of consumed energy to be generated by renewable sources within a time period. In the same light, just being well-placed with key competitive advantages arising from our existing electronics, precision engineering and chemicals capabilities are not sufficient attributes for Singapore to succeed as a Global Clean Energy Hub. Subsidies for clean energy, such as the solar sector, should be considered by Singapore government if local installation and usage is an objective. Otherwise renewable energies will only continue to remain price uncompetitive and unexploited as compared to current electricity tariff. Hopes of becoming a Global Clean Energy Hub can only then remain a distant dream.

To abandon the homo-economicus of continuous GDP growth would undoubtedly generate a host of doubts; doubts about the feasibility and economic uncertainty accompanying the alternatives that we should or could undertake. Perhaps what we need may be a “Green New Deal”. One that is akin to that spearheaded by the United Nations Environmental Programme in the UK launched on 3^rd December 2008, and funded by the German and Norwegian Governments and the European Commission. Hitherto, Singapore has always strived to keep up with world developments. In this long neglected race towards sustainable development, the need to be enduring in this rapidly changing global landscape is paramount. The “little red dot” could be the leader in South-East Asia (SEA) to examine ways to make ourselves more self-sufficient and independent of our environment in terms of resources, taking concrete steps towards being the “little green dot”. 

Environmental Indicators vs GDP

Once the pathway for sustainable development has been set, suitable indicators to measure the health of our environment relative to the economy have to be adopted. The abandonment of GDP is not the issue at hand here, rather, it should simply be rationalized that GDP is an economic indicator bearing no ties to the state of the environment. This misconception would take a long time to be corrected, because it is rarely discussed and because GDP has been conventionally acknowledged as the most important indicator for all countries. As a medium of exchange created by the economy for the economy, monetary value (i.e. GDP) is neither an accurate reflection of the environmental stress nor the irrevocable loss of biodiversity caused by economic activities. The fact that economic and environmental languages of valuation are simply incommensurable has to be accepted.

One important indicator in the realm of ecological economics is harnessed from the Material Flow Accounting (MFA) method. MFA is developed and practiced at the Wuppertal Institute, Germany and also at the Sustainable Europe Research Institute in Vienna, Austria to analyze the material and energy flow of economies at the regional, national or European Union (EU) level. MFA is a growing research field particularly in EU because it is recognized to be of increasing relevance to planning and policy making. It indicates the quantity of materials (measured in tonnes) flowing through an economy, and provides a year on year profile of any increase or decrease in material demands.  Figures generated by MFA manage to dissociate itself from the prime flaw of GDP; GDP is classical economics’ embodiment of “commodity fetishism” which strives to assign a dollar value to almost anything that brings about utility. MFA is instead a diagnostic procedure that relates to environmental problems, and allows early warning or supports precautionary environmental measures to be taken.

However, MFA alone does not suffice as a comprehensive indicator for sustainable development. While MFA captures the amount of materials flowing through the economy, the total quantity of material actually extracted from the environment (i.e. the ecological rucksack) to produce goods and services is eluded even when MFA is used as an indicator. The consideration of other indicators from Ecological Economics such as exergy or emergy is then necessary. This basically means that only a multi-criteria approach would be adequate in supporting decision making processes in the realm of environmental sustainability. No single environmental indicator is sufficient by itself. Nevertheless, Singapore could lend MFA greater attention and importance, as it is a good accounting methodology with multiple applications for environmental sustainability issues in Singapore. 

Environmental Indicators and Southeast Asia

Besides China and India, SEA has been traditionally an important manufacturing facility for the world. Environmental stress resulting from economic activities is the greatest at the source of production. Developed nations that have been taking advantage of the cheaper environmental compensation costs by situating production facilities in lower-cost SEA countries are playing upon what Ecological Economics would term as “the Environmentalism of the Poor” and “Ecological Unequal Exchange”. Lending significance to environmental indicators does not necessarily mean the jeopardisation of economic activities in SEA. On the contrary, these environmental indicators are critical sources of information for SEA countries to justify the need for higher payments to preserve or avoid damage to vital ecosystems and also for the greater transfer of clean development mechanisms from developed nations. This would set the development trajectory of SEA apart from the development history of developed nations marked by pollution. Adopting these novel environmental indicators would also demonstrate the foresight that SEA has in balancing development with environmental sustainability by prolonging the lifespan of natural resources and the longevity of the economic attractiveness of the SEA region.  

Externalities go around and come around

Successfully woven into the fabric of the world economy, Singapore is lucky as we do not have to bear the externalities arising from our consumption patterns. This is due to the success of our economy, which is dependent on external trade; trade that defines our survival, competitiveness and attractiveness in the world economy. Nevertheless, this does not justify adopting an attitude of indifference towards the cost-shifting successes that trading permits. The sobering impacts of the sub-prime mortgage induced financial crisis in the USA managed to arrive at our doorsteps. Likewise, it is only a matter of time that the environmental externalities we have “sub-contracted” to other parts of the world come around with repercussions on our economy. International tensions with Indonesia over the issue of sand for construction and unprecedented soars in oil prices in 2008 in Singapore are sore reminders of how vulnerable we are without natural resources, further subjected to fast depleting global resources. Ahead on our path still lays the uncertain impacts of global warming on our island. The commissioning of a 2-year study by the Singapore government on this issue is already a clear reflection of how global warming fuelled by economic activities elsewhere results in repercussions even on our home ground.

Short Term vs Long Term Solutions

In the search of an exit from the current financial crisis, should we limit our options only to economic expansionary policies which were successful solutions in the PAST? Is diversifying trade to other countries besides the USA and Europe the long term solution? Who can then assure us that these alternative markets will not meet with a similar financial crisis (perhaps on an even larger scale than the ongoing one) in the future? It has to be rationalized that the REAL long term solution has to be disassociated with the very values and beliefs that led to the onset of this sobering economic crisis.  The long and arduous path towards sustainable development requires a monumental shift not only in the mindset of people but also complementary structural changes to the economy so as to swiftly execute planned green initiatives.

An attitudinal change from the imperative of economic growth to the imperative of sustainable development would be the foremost challenge. Global warming, climate change, the volatility and vulnerability of the global market have led us to the era of post-normal science; facts are uncertain, values in dispute, stakes are high and decisions are urgent. Truly sustainable developments and attitudes is our only insurance in such an era. Even amidst the gloomy economic backdrop brought about by the financial crisis, discussions have been underway between world economic leaders such as the USA and China about models of sustainable economic development. The question remains on whether our “little red dot” would even consider prescribing the “bitter medication” to really go green.

What could these mean to individuals like us? Besides the knowledge that a zero or negative GDP growth is cause for worry, should we be concerned about the amount of or repercussions from increased material flows through our economy? Or should the extent of externalities that these materials have caused to the origins of their extraction matter to us? Living in a nation where externalities are successfully passed on to other countries, we need to constantly remind ourselves about the finiteness of our global environment and resources. For a start, just keep in mind that every consumption decision we make may just be contributing to global warming and to the externality debt we owe to some of our trading partners in this shared and finite environment.

Addendum:

Singapore looks set on becoming the regional hub for the solar industry with investors such as Renewable Energy Corp (REC) establishing the world’s largest solar manufacturing complex on our home ground. However, invisibilities abound with regards to the unsustainable nature of solar cells. The energy intensive processes to extract component minerals and to forge them into solar cells are still being powered by polluting fossil fuels. Coupled with the low efficiency of solar cells to convert sunlight into electricity, the “sustainability” of our upcoming solar industry comes under question.

Edited by Elaine Toh & Shaun Goh.

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About the Author:

Zhi Qian is currently a student under the Joint European Masters in Environmental Studies (JEMES). He has just completed a semester of studies at the Autonomous University of Barcelona (Spain) and is slated to start his next semester at the Technical University of Hamburg-Harburg (Germany).  ZhiQian received his Bachelor of Engineering in 2008 from the Department of Environmental Science & Engineering at the National University of Singapore.

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