Transcript The Three Waves of Community Economic Development First Wave

Sustainable Community
Development and Ecosystem
Services: A Recovering
Economist’s View
U.S. EPA – Mid-Continent Ecology
Division
Duluth, MN
October 8, 2008
JERRY HEMBD
State Specialist
Community and Economic Development
University of Wisconsin-Extension
Associate Professor of Economics
Department of Business and Economics
University of Wisconsin-Superior
“ . . . the ideas of economists and political
philosophers, both when they are right and
when they are wrong, are more powerful than
is commonly understood. Indeed the world is
ruled by little else. Practical men, who believe
themselves to be exempt from any intellectual
influences, are usually the slaves of some
defunct economist. Madmen in authority, who
hear voices in the air, are distilling their frenzy
from some academic scribbler of a few years
back.”
John Maynard Keynes in The
General Theory of Employment,
Interest, and Money, 1936.
Some Economic World Scribbles
In the Microeconomic World
Q = f ( L, K )
In the Macroeconomic World
Y=C+I+G+X
Four Challenges Posed by the
Transition to Sustainability
•
•
•
•
We need more accurate models, metaphors, and
measures to describe the human enterprise
relative to the biosphere.
It will require a marked improvement and creativity
in the arts of citizenship and governance.
The public’s discretion will need to be informed
through greatly improved education.
It will require learning how to recognize and solve
divergent problems, which is to say a higher level
of spiritual awareness.
Source: David Orr. The Last Refuge: Patriotism, Politics, and the Environment in an Age of
Terror. Washington, DC: Island Press, 2004.
The Three Waves of
Community Economic
Development
Plus One
Three Waves Portion Derived from:
Blakely, Edward J., and Bradshaw, Ted K. Planning Local Economic Development: Theory and Practice. 3d
ed. Thousand Oaks, CA: Sage Publications, 2002.
Drabenstott, Mark. “Rethinking Federal Policy for Regional Economic Development.” Economic Review, Vol.
91, No. 1 (First Quarter 2006).
Eberts, Randall W. “Overview of State and Local Economic Development Policies and Practice in the United
States.” In Local Governance for Promoting Employment—Comparing the Performance of Japan and Seven
Countries, pp. 87-102. Edited by Sylvain Giguere, Yoshio Higuchi, and the Japan Institute for Labour Policy
and Training. Tokyo, Japan: The Japan Institute for Labour Policy and Training, 2005.
Shaffer, Ron; Deller, Steve; and Marcouiller, Dave. “Rethinking Community Economic Development.”
Economic Development Quarterly, February 2006.
First Wave
Industrial Recruiting
1950s to early 1980s
Driver
• Export base
Goal
• Attract outside firms
Strategies
• Financial incentives
• Industrial parks
Keys to success
• Government funds for
subsidies and tax
breaks
• Industrial
infrastructure
Second Wave
Cost Competition
Early 1980s to early 1990s
Driver
• Efficiency and scale
economies
Goal
• Retention and expansion
of existing firms
Strategies
• Reduce taxes
• Deregulation
• Industry consolidation
and cost cutting
Keys to success
• Health of existing firms
• Training programs
• Social and physical
resources
Third Wave
Regional Competitiveness
Early 1990s to present
Driver
• Innovation and
entrepreneurship
Goal
• Enhance regional
resources to promote
industrial clusters
Strategies
• Entrepreneurship
• Clusters
• Building regional
collaboration
Keys to success
• Distinct regional assets
such as
–
–
–
–
Human capital
Higher education
Amenities
Creative economy
• Leadership and
development of quality
environment
• Bridging economic and
community development
The Fork in the Path
 Current trajectory
 Technical tinkering
 Incremental adjustment
 Paradigm change
 Sustainability revolution
 Radical overhaul
Fourth or “New” Wave
Sustainability Revolution and
Paradigm Change
Early 1980s and still evolving
Drivers
• Sustainable development
and systems thinking
Goal
• Sustainability
Emerging Strategies
• Eco-municipality
movement (The Natural
Step)
• Localization
• Valuing ecosystem
services
• Precautionary principle
• Local food systems
• Sustainable (eco) tourism
• Triple bottom line business
• Industrial ecology
• Green jobs
• Alternative and renewable
energy sources
“Sustainable development is
development that meets the
needs of the present without
compromising the ability of
future generations to
meet their own needs.”
Intergenerational
equity
Source: World Commission on Environment and Development.
Our Common Future. The Brundtland Report.
Oxford University Press, 1987, p. 43.
“It contains two key concepts: the
concept of “needs,” in particular the
essential needs of the world’s poor,
to which overriding priority should be
given; and the idea of limitations
imposed by the state of technology
and social organization on the
environment’s ability to meet
present and future needs.”
Intragenerational
equity
Environmental Limits
Evolving Views of the
Community
Environment
Economy
Economy
Environment
Society
Society
Unconnected or silos view
Interconnected or linkages view
Economy
Society
Environment
Interdependent, nested, or systems view
Community Capitals Framework
Financial
Capital
Built
Capital
Natural
Capital
Political
Capital
Healthy Ecosystem
Vital Economy
Social Well-Being
Cultural
Capital
Social
Capital
Human
Capital
Source: Cornelia Butler Flora, North Central Regional Development Center, 2004
The Five Capitals Framework
Natural Capital
Human Capital
Manufactured
Capital
Economy
Society
Financial Capital
Social Capital
Source: Forum for the
Future
Natural Capital
Notes on the Five Capitals
Framework
 Different representations are possible,
what matters most is the
interconnections and interdependencies
 Natural and human capital are the
primary forms of capital (and only
sources of wealth), with social and
manufactured capital derived from them
 Must take account of the
preconditionality of natural capital
 There are no hard lines
What is a
system?
Source material from TNS Canada
Conventional Thinking
Traditionally, we try to
understand complex
systems by reducing the
whole and studying the
individual parts.
This is called
reductionist thinking.
Source material from TNS Canada
Systems Thinking
But…
We know that the properties
of systems depend on the
relationships between the
parts as much as the parts
themselves.
When you dissect the
system, you destroy the
pattern of relationships.
Source material from TNS Canada
Systems Thinking
We must
look at
the whole ...
… and not
get stuck
on details
Source material from TNS Canada
Types of Systems – A Beginning
• Closed system
– Imports and exports energy only; matter
circulates within the system
 the Earth approximates such a system . . .
energy flows through, material cycles within
. . . finite, nongrowing
• Open system
– Takes in and gives out both matter and
energy
 the economy is such a system . . . it can
change in size
Finite Global Ecosystem
Solar
Energy
Energy
Energy
Source
Functions
Growing
Economic
Subsystem
Sink
Functions
Resources
Resources
Recycled
Matter
Ecosystem services
Human
Welfare
Natural Capital (Ecosystem)
Manmade Capital (Economy)
Waste Heat
Source: Daly, Herman. Ecological Economics. Island Press,
2004
Major Categories of Ecosystem Services
Provisioning
• Food
• Freshwater
• Wood and fibre
• Fuel
Supporting
• Nutrient cycling
Regulating
• Soil formation
• Flood regulation
• Primary production
• Climate regulation
• Disease regulation
• Water purification
Cultural
• Aesthetics
• Spiritual
• Educational
• Recreational
Source: Millennium Ecosystem Assessment. 2005. Washington, DC: Island Press.
Examples from Forests of Services
Provided by Ecosystems
• Gas regulation – Trees store CO2 and
growing trees create O2; forests can clean
SO2 from the atmosphere.
• Climate regulation – Greenhouse gas
regulation; evapotranspiration and
subsequent transport of stored heat energy to
other regions by wind; affects of shade and
insulation on local humidity and temperature
extremes.
Source: Daly, Herman E., and Farley, Joshua. Ecological Economics. Washington, DC: Island Press, 2004.
Examples from Forests of Services
Provided by Ecosystems
• Disturbance regulation – Storm protection,
flood control, drought recovery, and other
aspects of habitat response to environmental
variability mainly controlled by vegetation
structure.
• Water regulation – Tree roots aerate soil,
allowing it to absorb water during rains and
release it during dry times, reducing risk and
severity of both droughts and floods.
Source: Daly, Herman E., and Farley, Joshua. Ecological Economics. Washington, DC: Island Press, 2004.
Examples from Forests of Services
Provided by Ecosystems
• Water supply – Evapotranspiration can
increase local rainfall; forests can reduce
erosion and hold stream banks in place,
preventing siltation of in-stream springs and
increasing water flow.
• Waste absorption capacity – Forests can
absorb large amounts of organic waste, and
filter pollutants from runoff; some plants
absorb heavy metals.
Source: Daly, Herman E., and Farley, Joshua. Ecological Economics. Washington, DC: Island Press, 2004.
Examples from Forests of Services
Provided by Ecosystems
• Erosion control and sediment retention –
Trees hold soil in place, forest canopies
diminish impact of torrential rainstorms on
soils, diminish wind erosion.
• Soil formation – Tree roots grind rocks;
decaying vegetation adds organic matter.
Source: Daly, Herman E., and Farley, Joshua. Ecological Economics. Washington, DC: Island Press, 2004.
Examples from Forests of Services
Provided by Ecosystems
• Nutrient cycling – Tropical forest are
characterized by rapid assimilation of
decayed material, allowing little time for
nutrients to run off into stream and be flushed
from the system.
• Pollination – Forests harbor insects
necessary for fertilizing wild and domestic
species.
Source: Daly, Herman E., and Farley, Joshua. Ecological Economics. Washington, DC: Island Press, 2004.
Examples from Forests of Services
Provided by Ecosystems
• Biological control – Insect species harbored
by forests prey on insect pests.
• Refugia or habitat – Forests provide habitat
for migratory and resident species, create
conditions essential for reproduction of many
of the species they contain.
Source: Daly, Herman E., and Farley, Joshua. Ecological Economics. Washington, DC: Island Press, 2004.
Examples from Forests of Services
Provided by Ecosystems
• Genetic resources – Forests are sources for
unique biological materials and products,
such as medicines, genes for resistance to
plant pathogens and crop pests.
• Recreation – Eco-tourism, hiking, biking, etc.
• Cultural – Aesthetic, artistic, educational,
spiritual and/or scientific values of forest
ecoysystems.
Source: Daly, Herman E., and Farley, Joshua. Ecological Economics. Washington, DC: Island Press, 2004.
Ehrlich-Holdren “IPAT” Equation
I=P*A*T
I = environmental impact of the economy
P = population
 growing
A = average material standard of living
 growing rapidly (consumption)
T = throughput (resource consumption,
pollution, and ecosystem impacts) per unit of
output
 technology term to compensate for P and A
Original Source: Ehrlich, P., and Holdren, J. 1971. “Impact of Population Growth.” Science 171: 1212-19.
World
Population
11
World
PopulationSince
SinceAD
A.D.
Billion People
People
Billion
8
6
4
2
0
0
400
800
1200
Source: Engelman, UN
1600
2000
World Product
GrossGross
World
Product, 1950-2004
1950 - 2004
60
2003 Dollars
Dollars
TrillionDollars)
(2003
50
40
30
20
10
0
1950
1960
1970
1980
Source: Maddison, IMF
1990
2000
Dollars (2003 Dollars)
Gross World Product Per Person,
1950-2004
10,000
8,000
6,000
4,000
2,000
0
1950
1960
1970
1980
Source: Maddison, IMF
1990
2000
Carbon Emissions from Fossil Fuel Burning,
1751-2004
8,000
6,000
5,000
4,000
3,000
2,000
1,000
0
17
51
17
76
18
01
18
26
18
51
18
76
19
01
19
26
19
51
19
76
20
01
Million Tons
7,000
Source: UN, BP, DOE, IEA
US Energy Consumption
U.S. Energy
Consumption, 1635-2000
1635 - 2000
Quadrillion
BTU
Quadrilion Btu
40
35
30
25
20
15
10
Coal
Natural Gas
Petroleum
Nuclear
Hydro Power
Fuelwood
5
0
1635 1685 1735 1785 1835 1885 1935 1985
Source: DOE
The Age of Oil
Billions of
barrels
35
30
25
20
15
10
5
0
0
500
1000
1500
Year
2000
2500
Growth Trends Summary:
1950 to 2000
• Population
 more than 2X
• Economy
 7X
• Food consumption
 3X
• Water use
 3X
• Energy use
 4X
Finite Global Ecosystem
Solar
Energy
Energy
Source
Functions
Energy
Growing
Economic
Subsystem
Resources
Sink
Functions
Resources
Recycled
Matter
Natural Capital (Ecosystem)
Ecosystem services
Human
Welfare
Manmade Capital (Economy)
Waste Heat
Source: Daly, Herman. Ecological Economics. Island Press,
2004
Finite Global Ecosystem
Natural Capital (Ecosystem)
Manmade Capital (Economy)
Source: Daly, Herman. Ecological Economics. Island Press,
2004
The Natural Step Framework
• A science- and systems-based
definition for sustainability
• A decision-making framework and
process to help organizations and
communities plan for sustainability
• A shared language provides a
compass to help us know if we’re
moving in the right direction
Source material from TNS Canada
The Natural Step Resource Funnel
Resource Availability and Ecosystem Ability to
Provide Vital Services
Raw materials, ecosystem services,
declining integrity and capacity of natural
systems
Margin for
Action
Sustainability
Societal Demand for Resources
Growth in population, resource requirements as affluence increases, increased
demands as technology spreads.
Source: Nattrass, Brian, and Altomare, Mary. The Natural Step for Business. New Society Publishers, 1999.
Ways we are un-sustainable
we dig stuff (like heavy metals and fossil
fuels) out of the Earth’s crust and allow it
to build up faster than nature can cope
with it
we create man-made compounds and
chemicals (like pesticides and fire
retardants in carpets, etc.) and allow them
to build up faster than nature can cope
with them
3
4
2
1
we continuously damage natural systems
and the free services they provide
(including climate regulation and water
filtration) by physical means (for example,
overharvesting and paving wetlands)
And . . .
Source material from TNS Canada
we live in and create societies in which
many people cannot meet their basic
needs (for example, affordable housing)
Basic conditions for sustainability
In a sustainable society, nature is not subject to
systematically increasing:
concentrations of substances
extracted from the earth's crust
concentrations of substances
produced by society
degradation by physical means
3
and, in that society…
4
2
1
Source material from TNS Canada
people are not subject to conditions
that systematically undermine their
capacity to meet their needs.
Sustainability objectives
Reduce dependence on fossil
fuels, scarce metals, and minerals.
Reduce dependence on chemicals
and synthetic substances that can
accumulate in nature.
3
Reduce dependence on activities
that harm life-sustaining
ecosystems
4
2
1
Source material from TNS Canada
Meet present and future human
needs fairly and efficiently.
Planning and Action Framework
“D” Step
 Right direction?
 Flexible Platform?
 Return on
investment?
time
Source material from TNS Canada
A Growing Movement
Community
stories
Source material from TNS Canada
Swedish Eco-municipalities
An eco-municipality aspires to
develop an ecologically,
economically, and socially
healthy community for the
long term, using The Natural
Step Framework for
sustainability as a guide, and
a democratic, highly
participative development
process as the method.
Wisconsin Eco-municipalities
City of Washburn
City of Ashland
City of Madison
City of Bayfield
Town of Bayfield
Douglas County
Johnson Creek
City of Marshfield
City of Manitowoc
City of Neenah
City of Menasha
Town of Cottage Grove
La Crosse
La Crosse County
City Beloit
City of Baraboo
City of Sheboygan
Dunn County
Village of Spring Green
Duluth, MN
Closing Comments and
Topic for Another Time
Ecosystem Services in a
Market Economy
Total Economic Evaluation Framework
(A Utilitarian Approach)
ECOSYSTEM GOODS
AND SERVICE
VALUES
Nonuse values
Use values
Consumptive use
e.g., existence, species preservation,
biodiversity, cultural heritage
Nonconsumptive use
e.g., harvesting, water supply
(irrigation, drinking), genetic
and medicinal resource
Direct
Indirect
e.g., recreation (boat/swim),
transportation, aesthetics,
birdwatching
e.g., UVB production, habitat
support, flood control, pollution
control, erosion prevention
The figure shows the multiple types of values from ecosystem goods and services that
are considered within a total economic valuation (TEV) framework.
The Tragedy of Ecosystem
Services
• A competitive, market-based economy creates
obstacles to putting the economic value of
ecosystem services into operation
• Owners of natural capital resources from which
such services could flow have insufficient
incentives to employ resources for that purpose
• There are insufficient incentives for beneficiaries
of such services flowing from other people’s
resources to invest in their conservation or do
anything other than reap as much of the benefits
as possible as fast as possible
Ways of Correcting the Incentive
Structure
• Better-defined property rights

Addressing externalities, information costs,
transaction costs, and free riders
• Prescriptive state regulation

“Mutual coercion, mutually agreed upon by
the majority of the people affected”
• Social norms

Customs, tacit agreements, and ways of
getting along
Some things
have to be
believed to be
seen.
Northern Center
for Community and Economic Development
Jerry Hembd, Director
University of Wisconsin-Superior
Belknap & Catlin, PO Box 2000
Superior, Wisconsin 54880
Phone: 715-394-8208
Fax: 715-394-8592
E-mail: [email protected]
Website:
http://www.uwsuper.edu/ncced