Developing economically

2. Although some neo-liberals and neo-conservative and most libertarians continue to believe that healthy economies create vibrant communities, in fact the reverse is more often the case. A strong community is a prerequisite for creating a healthy economy because it alone produces social trust. Where the third sector is weak, capitalist markets are more precarious and less successful. This was discovered by foreign businesses after the fall of the Soviet empire. The communists had eliminated the third sector, the many cultural institutions that create social trust and allow markets to function. The result was that foreign companies wishing to establish trade found that business agreements were difficult, even impossible, to arrange and that commercial contracts were often unenforceable.

3. Failing a reorientation of the development strategy, the question arises whether growth in the third world can be sustained in the face of a deteriorating environment. The answer is that aggregate rates of growth probably can be sustained. Environmental deterioration has not in general reached such a point that it will bring growth to a halt or even reduce the rate of growth markedly, but it definitely is costly and represents a misallocation of scarce resources. In some countries, however - for instance, those which run the risk of exhausting usable supplies of water environmental constraints may affect the rate of growth. But that is not likely to occur in many countries. The more immediate danger is that, if environmental deterioration continues, it may be impossible to sustain the income of the poor. While development on average proceeds, the poorest sections of the community might be faced with falling incomes, and consequently, greater pressure upon those parts of the physical environment to which they have access and, finally, still lower incomes in subsequent periods. A vicious spiral of environmental degradation and falling income for the poor is certainly possible.