Running head: ECONOMIC GROWTH & THE ENVIRONMENT 1

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Sidra M. Mahmood

The Lahore School of Economics

Author Note

Sidra Mansoor Mahmood

BSc (Hons) Economics & Finance

sidra.mansoor24601@gmail.com
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Achieving Economic Growth without Damaging the Environment

Economic growth has become the single most important indicator of assessing a

population’s standard of living. It does not come as a surprise that increasing economic growth

has become an essential part of any government’s economic policy. Measured primarily by

looking at the real per capita income over time and across countries, it is a narrow yet telling sign

of a country’s progress over time. Growth has generally been quite lethargic, with countries

achieving higher living standards over large spans of time. Recently, however there has been a

drastic change in this trend. The Newly Industrialized Economies (NIEs), specifically the four

Asian Tigers have been able to attain and sustain high levels of growth as observed by Dowling

(March, 1997). South Korea, Taiwan, Hong Kong, and Singapore have all risen through the ranks

by liberalizing their economies and following an export based growth model.

The race to maximize growth has not been free. Like any economic decision the pursuit

of higher living standards has come at the cost of increased environmental degradation. The

trade-off, which had been initially been ignored, can no longer be undermined. With countries all

over the World feeling the brunt of a progressively polluted ecosystem a crisis looms constantly.

China which has rose to become the World’s second largest economy in a matter of years is

threatened by ever expanding deserts and an air filled with yellow dust. The air is full of

pollutants while the water is a convenient way of getting rid of industrial waste. The miracle

seems to have come at a terrible cost.

This does not means that we need to choose one or the other. There may be a trade-off on

the surface but the answer lies in managing the growth. Things start to look much better when a

balancing act is performed. The economy depends on the environment. The resources needed to
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start and the process for production and turn the cogs of the economy come from nature. This is

the reason why sustainable growth is dependent heavily upon the environment. If resources are

exhausted, and even renewable resources can get depleted (Shafik & Bandyopadhyay, June

1992), then the means of production will also disappear. It is essential to ensure that economic

activity is not exceeded to an extent which in turn threatens future economic activity.

Conservation has thus become an additional part of national policies. Over the years an

increased awareness regarding the hazards of environmental degradation have given rise to

international pressure groups and bodies which further the cause of the environment. Countries

have adopted caps on emissions, cleaner sources of energy, proper waste management systems,

and so forth all in a bid to preserve future growth. Current studies have proven that economic

growth and the environment in fact have an inverted U-shaped relationship (Lim, September

1997). This means that as the growth accelerates the environment is initially negatively affected.

However, once living standards rise a country is able to invest more into improving the

environment and by conserving it.

The belief that economic growth must come at a sacrifice is then rendered groundless.

While it may be true at the beginning when countries start to develop that the environment is

disregarded in pursuit of higher income levels. Once a certain standard of living is reached the

pressure to protect the environment starts to take over. This makes complete sense because

sustained future growth is dependent heavily on the availability of resources. Depletion of

natural resources (renewable and non-renewable) and poor human capital (due to ill health) will

mean a decreased level of growth if not a complete stagnation. It is safe to conclude that

economic growth and a clean environment complement each other in the long-term.
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References:

Dowling, M. (1997), “Asia’s Economic Miracle: An Historical Perspective”, The

Australian Economic Review, vol. 30, no. 1, pp. 113-23

Lim, J. (September, 1997), “Economic Growth and Environment: Some Empirical

Evidences from South Korea”, Seoul Journal of Economics, vol. 10, pp. 273-92

Shafik, N., & Bandyopadhyay, S (June, 1992), “Economic Growth and Environmental

Quality: Time Series and Cross-Country Evidence”, Background Paper for World Development

Report 1992, pp. 1-50

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References

Last Name, F. M. (Year). Article Title. Journal Title, Pages From - To.

Last Name, F. M. (Year). Book Title. City Name: Publisher Name.

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