Joseph E. Stiglitz Macau March 27, 2014

1. A Future of Green Growth: Why sustainability and equity are crucial for saving the environment Joseph E. StiglitzMacau March 27, 2014

2. We live in a planet with finite resources • We cannot and should not take it for granted • There is limited fresh water—necessary for sustaining life, growing food • There is limited capacity of our atmosphere to absorb carbon • Beyond a certain level, there will be unacceptable levels of climate change, with increasing temperatures, increased weather volatility, changing sea levels

3. Precautionary principle • There is still some uncertainty about the consequences of different levels of atmospheric concentrations • And further uncertainties about the effects of different policies • And still further uncertainties about technologies which could address the problems of climate change • By reducing emissions • Or through carbon storage • But so far, most of the “surprises” have been on the negative side • New channels through which adverse effects are brought about • Consequences for weather variability • We have only one planet • Precaution means that we should do what we can to reduce carbon emissions • Especially because the costs of doing so are low • Especially in comparison to the potential costs of not doing so

4. Broadening perspectives on sustainable development • Broad global consensus on the imperative of sustainable development • And broad global consensus that it is imperative to broaden perspectives on sustainable development • Not just environmental sustainability • But economic, social, and political sustainability • These are all intertwined

5. Economic sustainability • Growth in the US before the 2008 crisis was not sustainable • Built on a mountain of debt • But one of the reasons for the mountain of debt was that it was compensating for what would otherwise have been an insufficiency of demand, leading to a weak economy • The economy was weak before the crisis • Weaknesses masked by the bubble • Which generated strong demand • But the breaking of the bubble left a legacy of debt, further weakening the economy

6. Explaining the weak economy • A key reason for the weak economy was the growing inequality • Those at the bottom spend more (as a percentage of their income) than those at the top • So a redistribution from the bottom to the top lowers overall demand • But in the aftermath of the crisis inequality has become even larger • 95% of the growth since the crisis has gone to the top 1%. • Part of the explanation for why the recovery of the advanced industrial economies has been so weak

7. New perspectives on inequality • There is not a trade-off • We could have more equality and a better economy • Main message of The Price of Inequality • View now espoused by the IMF • Many channels • Including impacts on public investments • Stability • Those at the bottom not being able to live up to their potential

8. U.S. GDP numbers didn’t reflect these realities • Before the crisis, it appeared as if the US economy was doing well, according to the GDP numbers • We were misled • Numbers didn’t reflect any of the dimensions of non-sustainability • The worsening of the environment • The growing inequality • Major message of the International Commission on the Measurement of Economic Performance and Social Progress

9. Intertwining of environmental and economic sustainability • The poor bear the brunt of the poor environment • Globally, in global warming • Nationally, in exposure to environmental hazards • But especially in developing countries, poverty leads to environmental degradation • Deforestation • A vicious circle

10. The intertwining of short-run macroeconomics and green growth • Weak economy has led focus to shift away from green growth • With the argument that we can’t afford it • Perspective precisely wrong • Retrofitting the global economy for global warming could provide the stimulus to aggregate demand that is needed to restore the global economy to robust growth • Strengthening the economy today • And protecting the planet for the future • Weak economy having strong adverse effect on inequality • Direct impact on unemployment • Indirect impact through lower wages • Ordinary citizens hit again through government cutbacks

11. What really matters? • Not GDP today • But living standards, today and in the future • For most citizens • But current policies aren’t accomplishing this • Protecting the environment is essential • Promoting equality is essential • There are policies that strengthen the economy today, and simultaneously protect the environment and reduce inequality • Promoting sustainability in all of its dimensions