Sustainable Development and Globalization in a World with Unequal Starting Points

We develop a simulation model, borrowing from and integrating aspects of economics, demography, and environmental and political science, to simultaneously consider environment, economic development, and population/politics by focusing specifically on the impact of important flows (i.e., pollution, capital, technology, production goods, natural resources, and people). The model can assess sustainable development on three levels: economic (by determining production, consumption, investment, direct foreign investment, foreign aid, technology transfer, and international trade), social (by calculating population growth/change, migration flows, and political stress levels), and environmental (by calculating natural resource use and the difference between environmental pollution and upgrading expenditures). We use the model to explore the challenges of development for countries with different initial conditions (i.e., natural resource endowment, physical and human capital, technology, and population) in a world with movement of goods, people, and capital, free substitution in production, flexible economic structures, and the ability to upgrade input factors via investment. We find that, rather than the total physical capacity of the earth being responsible for unsustainable paths, the initial disparities in circumstances among countries and the complex of internal and international human interrelationships can lead to a “social non sustainability”. The greatest challenge for rich countries (given their aging populations) is maintaining sufficient investment, and the greatest poverty trap for poor countries (given their subsistence consumption) is attaining high investment. The impact of globalization (i.e., the international flow of goods, people, and capital) on various countries differs depending on their to starting points, and this relationship can change over time. The modal behavior of the model can be either convergence or divergence among countries depending on the extent of these global flows and the degree to which individual countries can manage them. In general, capital flows (when accompanied by technology transfer) tend to benefit all countries, migration tends to benefit the destination countries (particularly the aging, rich) and the migrants themselves, and the benefits of trade can be either positive or negative depending on country endowments.