Economic and Social Systems

1. Economic and Social Systems Day 3 MIM 511/BA 548

2. Agenda • Discussion Questions • Economic Paradigms and Social Consequences • Global Social Issues, Policies and Economic Implications • Poverty • Connecting ‘Capitals’ • Electronic Industry Focus: Toxic Exposure in Recycling and Digital Divide • Spotlight: ZUMER Project – Nokia and Poverty Issues

3. Discussion Questions • What are indicators in the Millennium Development Goals that link economic and social development? • Describe the interdependencies between economic and social opportunity and development? • When you consider some of the key MDGs, what are the key challenges? What are the key opportunities? • Do you see interdependencies emerge in the video on ‘Santiago’s Story’?

4. Economic Paradigms and Social Consequences

5. Economic Paradigms and Social Consequences • Inputs: Capital (Physical Capital) and Labor (Human Capital) • Inputs are perfectly substitutable • Natural Capital and Social Capital are not considered Neo-Classical Economics/Worldview

6. Economic Paradigms and Social Consequences • Implications • No limits on resources, pollution and waste. • Labor is exclusively a cost. • Focus is on maximizing throughput; no focus on inflows or outflows. • Technological progress makes throughput more efficient. • There is no optimal scale at economy – “limitless growth” Neo-Classical Economics/Worldview

7. Economic Paradigms and Social Consequences • What can be the societal consequences of this economic paradigm/worldview? • Distortion of full cost of production – limited and, at times no, valuation of social and human capital. Example: Major price fluctuations of commodities, high grow dependence, no supply chain power, no consumer awareness in coffee and cocoa

8. What can be the societal consequences of this economic paradigm/worldview? Underestimate the economic value of social institutions, civic participation, trust and collaboration Example: High levels of social capital in a society are associated with greater extent of incremental and radical innovative capabilities in that society (Kaasa, 2007; Subramaniam and Youndt, 2005) Economic Paradigms and Social Consequences

9. Global Social Issues and Policies and Economic Implications • Poverty • First, some definitions…because this is a tricky…and political issue • Absolute Poverty: a set standard which is consistent over time and between countries. • World Bank: • Extreme Poverty: Living on less than $1 per day (PPP) • Moderate Poverty: Living on less than $2 per day (PPP) • Relative Poverty: an index of income inequality • Second, keep in mind that poverty is systemically related to other challenges, including health, access to education, gender equity, infant mortality, life expectancy, and so on.

10. Global Social Issues and Policies and Economic Implications • Poverty • Some important trend data • Extreme Poverty • Overall, fell from 28% in 1990 to 21% in 2001; Most of improvement in East and South Asia. • Increased from 41% in 1981 to 46% in 2001 in Sub-Saharan Africa • Moderate Poverty in East Asia • Fell to 27% in 2007, from 30% in 2006 and 69% in 1990.

11. Global Social Issues and Policies and Economic Implications • Population % in Extreme Poverty, 07-08

12. Global Social Issues and Policies and Economic Implications • Gini Coefficient (relative poverty), 2009 This index measures the degree of inequality in the distribution of family income in a country. The index is calculated from the Lorenz curve, in which cumulative family income is plotted against the number of families arranged from the poorest to the richest.

13. Global Social Issues and Policies and Economic Implications • Human Development Index, 2009 The HDI combines three dimensions: 1. Life expectancy at birth, as an index of population health and longevity. 2. Knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting). 3. Standard of living, as measured by the natural logarithm of gross domestic product per capita at purchasing power parity.

14. Global Social Issues and Policies and Economic Implications • Some questions… • What are the key differences between the measures of Extreme Poverty, Income Inequality (Gini Coefficient) and Human Development Index? • What is the usefulness of each measure? • Why is it important to understand the differences between each measure?

15. Global Social Issues and Policies and Economic Implications • Some Example Policies • Property Rights • Example: 30 year land tenure rights for Chinese farmers versus collectives/“readjustments” lead to major productive gains. • Drives improvements in Human and Social Capital • Health • Example: Distributed health services and access to sanitary water in Costa Rica lead to significant drop in infant mortality rates. • Drives improvement in Human and Social Capital • Gender Equity • Example: Guaranteed access to education has lead to equality in primary and secondary education in Sri Lanka. • Drives improvement in Human and Social Capital.

16. Connecting Capitals Click there

17. Connecting Capitals • INSEAD’s Global Innovation Index • Five input pillars: • Institutions and Policies • Human Capacity • General and ICT Infrastructure • Market Sophistication • Business Sophistication • Three output pillars: • Knowledge Creation • Competitiveness • Wealth Creation.

18. Connecting Capitals • BCG/NAM’s Global Innovation Index • Inputs • Fiscal policy: R&D tax credit, Taxation level, Government R&D funding • Other policies: Education policy, Trade policy, Regulation, IP policy, Immigration policy, Infrastructure policy • Innovation environment: State of education, Work force quality, Infrastructure quality, Business surroundings • Innovation Performance • R&D results: R&D investments, IP generation, Publication & knowledge transfer, Commercialization • Business performance: High-tech exports, Labor productivity, Market capitalization of listed companies • Public impact of innovation: Employment growth, Investment, Business migration, Economic growth

19. Connecting Capitals • Millennium Development Goals • 2000 UN Millennium Summit, • Commitment to a set of eight time-bound targets that, when achieved, will end extreme poverty worldwide by 2015. • Poverty • Primary Education • Gender Equity • Child Mortality • Maternal Health • Combat Disease • Environmental Sustainability • Global Partnerships

20. Connecting Capitals • What are the similarities and differences between the Global Innovation Indexes and the Millennium Development Goals? • What are the similarities and differences between the Gini Coefficients rankings and the Global Innovation Indexes? • How do these concept tie back to the idea of Distributive Justice from our textbook?

21. Electronics Industry Focus • Toxic Exposure • Electronic waste (or, E-waste) contains a number of toxic substances, including plastics and heavy metals such as lead, cadmium, and mercury, which can cause serious adverse health effects. • Lead: In circuit boards, CRTs. Causes brain and nervous system damage. • Cadmium: In chip resistors, infrared detectors, semiconductors. Causes renal damage. • Mercury: In circuit boards, switches, lamps, mobile phones, batteries. Inhibits enzymatic activity, causes cell damage.

22. Electronics Industry Focus • Toxic Exposure • Europe, Japan and US pass electronic product recycling laws. • But don’t have capacity to do the recycling. • Trade in E-waste sharply accelerates in late 1990s through today. • The Electronic E-Waste Trail (Greenpeace International) • E-Waste in India (Greenpeace International)

23. Electronics Industry Focus • Toxic Exposure • Responses • Regulatory • European Union’s WEEE and RoHS Directives • Voluntary • EPEAT (Electronic Product Environmental Assessment Tool) • Corporate • Toshiba’s Environmentally Conscious Products

24. Electronics Industry Focus • Toxic Exposure • How does this issue relate to the idea of Distributive Justice from our textbook? • What are key factors that can alter the Distributive Injustice in this issue?

25. Zumer Spotlight: Nokia and Poverty Issues • Zumer Categories: • Poverty most directly related to Community Impact and Human Rights • Poverty secondarily related to Materials and Recycled Content.

26. Zumer Spotlight: Nokia and Poverty Issues • Nokia – CSR Report 2008 – Society • Need to derive summary statements that ‘convert’ the stories and metrics provided by Nokia and other sources to the categories of Community Impact and Human Rights. • Some information to utilize: • Partnerships with NGOs and Government agencies; Support for youth development initiatives; Assistance to people affected by natural disasters; Researching impact of mobile technology in rural areas of developing countries.