E3G

Keynote Address to European Environmental Bureau

By Chris Littlecott

Interdependence not Competition

Europe is not alone in facing these long term challenges, and is better placed than most to manage them successfully. To hear many commentators the biggest threat facing the EU is the stabilisation of its population over the next 50 years. However, Japan and Russia are already managing the economics of a falling population. China and the US face also shrinking proportions of workers in the next 15 years.

The environment movement should be the first to point out that this is a global transition that should be welcomed not feared. It will be a challenge to deliver stability and prosperity to 8-10 billion people, many of whom are extremely
poor, when we have already exceeded the planet’s environmental and resource limits. But this is a lot better than having to manage a world with 15-20 billion people, as was often predicted 20 years ago.

An immediate consequence of this welcome population stabilisation is that all industrialised countries will have to deal with a relative increase in older people. The EU is changing faster and sooner than some regions, but is not fundamentally different. Indeed, the EU is fortunate to be one of the first to undertake the demographic transition to a stabilised population, because we will have the opportunity to invest and trade with fast growing, younger economies.
China in particular is vital in helping soften the impact of Europe’s demographic transition. Estimates are that continued Chinese growth will raise real wages in the EU by between 15 to 40% by 2050 compared to a “slow growth” China scenario. This increased growth will allow lower taxes on workers to finance pensions and healthcare, improve employment rates and make economic space for increased public investment in areas like climate change. However, this positive outcome will require China to find solutions to its own sustainable development problems.

All Europe’s prime “competitors” face their own critical economic problems. The US has runaway deficits and crippling inefficient health care policies, which have destroyed the competitiveness of much of its automotive and manufacturing industries. Even as the rest of the world is focused on their increasing external power, internal debates in all the emerging economic powers focus on the growing challenges to their internal stability. China and India in particular face instability from endemic corruption, rising social inequality and unrest, and water shortages.

Even the largest economies are vulnerable unless they learn to collectively manage a world of climatic change, resource constraints and interlinked vulnerabilities; and the cost to poorer countries of richer countries failing to manage these challenges will be felt globally through humanitarian, security and political crisis and conflict.

This future environment makes redundant many economic assumptions held by policymakers. The rise of China and India is making global economic interdependence a hard reality. Aging populations will force a redefinition of what counts as economic success, and require a new social bargain between generations. The need to keep within natural limits is already fundamentally changing the role of the state in the economy, and is exposing previously hidden assumptions about ever falling costs of transport, materials and energy. 

The EU must back its hard-won insight that embedding economic interdependence inside a fair, rules-based system does benefit all. This insight underpinned the creation of the EU, and should continue to guide Europe’s approach to wider globalisation.

The alternative leads to a situation where a number of “great powers” attempt to compete strategically for global market share and access to natural resources.
Experience shows this type of world results in neither stability nor prosperity. The EU is poorly placed to compete as a great power, and surveys of European publics have repeatedly shown a lack of support for Europe taking such a military-driven role.

Managing these multiple transitions will require all countries to achieve cooperative “sustainable development”; preserving their social and environmental foundations of prosperity in an interdependent world. The consequences of not making the necessary choices will be expressed in growing political instability, economic crises and conflict.

Europe will be one of the first to face these transitions, and has the most to lose if they are not managed well. As the world’s largest economy Europe should be the pathfinder towards sustainable development for others.