SUSTAINABLE

ECONOMIC
SYSTEMS
Prepared by:
Justine J. Estrada
Aubrey B. Illurimo
Introduction
The global economy of the first decade of the twenty-first
century had became a sphere of extreme uncertainty and risk.

Collapsing financial markets

Rising unemployment
Deeper inequalities
Shrinking middle class
Extreme indebtedness
Inability of Government to force through reforms
In addition, there were the increasing challenges of climate change
and availability of resources.

Sociologist Ulrich Beck predicted this many years ago and coined
the term ‘risk society’ (Beck, 1986)

The two main reasons for this problem has been the inability
of modern societies to produce enough Stability and
Sustainability.
Stability
Firmness in position, permanence and resistance to change,
especially in a disruptive way – these are general
associations connected with the term ‘stability’.

The International Monetary Fund (IMF) describes it as

‘avoiding large swings in economic activity, high inflation,
and excessive volatility in exchange rates and financial
markets’ (International Monetary Fund, 2012)
 Economy is stable means actually that the system is in
one of the calm phases of the business cycle, neither towards
heading boom nor towards depression.

Economy moves through periods of rapid growth with

rising demand, higher inflation and dropping
unemployment, followed by depression with reversal
phenomena (Knoop, 2009)
 “The challenge is that excessive highs and lows should be
avoided.”

The fluctuations are themselves are unavoidable – like the business

cycle – but a clever stabilization policy could flatten and shorten
them.

The global crisis in the 1970s, the time of surprising stagflation

(rise in inflation and unemployment), opened the gates for new
economic ideas.

* Monetarism could produce stabilization, control amount of money

in circulation.
From a wider, global perspective this optimism was exaggerated.
The 1990s still saw many collapses in the world economy.

*Asian financial crisis in 1997

*Russian crisis
*Disaster in Argentina 1999

Imbalances in the world economy and complex interdependencies

made it difficult to target precisely.

The try-and-try-again desperate attempts to revive the economic

growth contributed to the persistence of extreme public debt in
many countries and the zero-bound trap by the monetary policy.
Sustainability
Sustainability should be seen different from stability, although at
the first sight the overlap seems obvious.

Sustainability considers the long term capacities of a system to

exist, not its short-term resistance to change. (environmental,
economic, social)

“Development that meets the needs of the present without

compromising the ability of future generations to meet their own
needs” – the Bruntland Report (WCED, 1987) prepared for the
United nations in 1987.
Economics had a certain problem with sustainability,
analyzing mainly the questions of long-term growth.

At a certain stage of development of economic theories

technology became a fantastic escape from the sustainability
dilemma. The message was both simple and convincing:
new techniques of production help to expand size of output
without raising necessary input.
The endogenous factors, like human capital and education, were
recognized as crucial for growth and their application was free
from the steady state problem of classical resources.

Sustainability played a marginal role, because it was better to

think primarily about new technologies making a better use of
resources instead of literally saving resources.

Two significant factors that are affecting sustainability is the

climate change and human population.