Ensuring national economic policies support sustainable development

Encouraging economic policies conducive to sustainable development.

Economic policy dominates human activity and impact on the environment. In the past, national policies have been driven by "wealth creation" without taking into account finite environmental capacities. In recent years, such unsustainable economic policy has been reconsidered. Sustainable economic policy can provide positive feedback by stimulating development of sustainable technology and practice, which in turn can increase profits, this in turn encouraging further sustainable economic policy making.

National commitment to sustainable development should involve specifying the policy and action to be taken or initiated at the government level. This includes a policy statement on sustainable development, explicitly clarifying the commitment of the government and of the ministers involved, and a government policy document specifying national objectives, the underlying principles, the necessary legislative and non-legislative tools, and the principles of monitoring and evaluation. It also includes a national strategic action plan, intended to identify the actions necessary to achieve objectives specified in the national policy. The strategic action plan should also specify the role and action to be taken by each stakeholder, including government institutions and local authorities. Finally, the entire national system should be audited and evaluated periodically, so that adjustments can be made as necessary, and to ensure continuous feedback from society.

Several issues should be addressed while developing a national policy. One issue would be which general principles to apply, such as the precautionary principle, legal compliance, democratic control, extended producer responsibility and the preventive principle. In establishing the policy, defined and measurable goals should be set, a time frame determined and a scheme for monitoring, evaluation and auditing agreed. All relevant stakeholders should formulate, implement and periodically review an integrated national policy.

In the process of policy development, accountability, transparency and the use of self-control and self-regulation should be observed. A national policy should create economic and social incentives for enterprises to develop sustainable practices. It should also encourage the development of economic appraisal of environmental performance in enterprises. It should reduce the opportunities for enterprises to externalize the costs of poor practice.

This strategy features in the framework of Agenda 21 as formulated at UNCED (Rio de Janeiro, 1992), now coordinated by the United Nations Commission on Sustainable Development and implemented through national and local authorities.

Sustainable economic policies include the establishment of a pollution-based tax system based on the "polluter pays" principle and its variant, the "user pays" principle. Both principles imply the removal of subsidies and other economic distortions that encourage unsustainable activities. Charges, resource taxes, tradable permits, subsidies and performance bonds can be incentives to industry to meet environmental standards in the most cost-effective way.

Pending more fundamental reforms, the national economic policies of the major industrialized countries should be reformed to support sustainable development. Whether or not they choose to recognize it, these countries have policies with profound implications for the economic performance of the rest of the world. De facto, they bear responsibility for global macro-economic management. The major industrialized countries of Western Europe and North America have for a number of years given priority to restraining inflation. While price increases have indeed been less rapid than in the late 1970s, the restrictive monetary and expenditure policies that have been adopted to combat inflation have resulted in universally high open and disguised unemployment, low investment, sluggish growth and a generally low level of aggregate demand. One of the most important conditions for accelerating world growth in the 1990s is wider recognition in the industrialized countries that, while resistance to inflation is one objective of the international community, it is not the only objective. The solution of many economic problems, domestic as well as international, could be facilitated if expansion were given a higher priority by the OECD countries in general, following the example of Japan. In many countries, there is a strong case for a change in the composition of governmental expenditure away from military spending in favour of investment. In many countries there is also a need for improved fiscal policies and changes in the monetary fiscal policy mix in favour of one that would permit lower interest rates and thus encourage more private investment.