Introduction
Economic growth typically refers to an increase in the level of goods and services produced by an economy, as estimated by measures including gross domestic product (GDP). It involves the combination of different types of capital to produce goods and services including produced capital, such as machinery; human capital, such as knowledge and skills; natural capital, such as raw materials; and social capital, including institutions. While economic growth has produced many benefits including raising living standards and improving quality of life around the world, it has also resulted in the depletion of natural resources and degradation of ecosystems. As such, there has been much debate on whether or not it is possible to achieve economic growth without unsustainably degrading the environment. 1
1.1 Challenges to the Global Economy
The key challenges to the global economy include a variety of issues including population and economic growth, rapid urbanisation, environmental degradation, and climate change. 2
Population Growth
The worldâs population is projected to increase by more than one billion people within the next 15 years, reaching 8.5 billion in 2030 and to increase up to 9.7 billion in 2050 and 11.2 billion by 2100. More than half of that population growth is expected to occur in Africa, while Asia will add 0.9 billion people between 2015 and 2050. At the country level, half of the worldâs population growth is expected to occur in just nine countries: India, Nigeria, Pakistan, Democratic Republic of Congo, Ethiopia, Tanzania, the United States, Indonesia, and Uganda. 3
Rapid Urbanisation
In 2014, 54 percent of the worldâs population resided in urban areas, compared to 30 percent in 1950. This is projected to rise to 66 percent by 2050. Currently, the most urbanised regions of the world are North America (82 percent), Latin America and Caribbean (80 percent), and Europe (73 percent). In comparison, Africa and Asia are mainly rural with 40 and 48 percent of their populations urban respectively; however, these two regions are urbanising faster than any other region: by 2050, 56 percent of Africaâs population will be urban while in Asia 64 percent will be living in urban areas. In terms of population size, increasing population growth and urbanisation are combined expected to add 2.5 billion people to the worldâs urban population by 2050, with nearly 90 percent of this increase expected to be in Africa and Asia. The number of mega-citiesâcities with more than 10 million inhabitantsâis also projected to increase: in 1990, there were ten of these cities. This has risen to 28 today, and by 2030, the number of mega-cities will reach 41. 4
Rapid Economic Growth
Over the period of 2014â2050, it is projected that the worldâs economy will grow at an average of over 3 percent per annum, doubling in size by 2037 and nearly tripling by 2050. At the same time, global economic power will shift away from the established advanced economies in North America, Western Europe, and Japan, with India projected to become the second-largest economy by 2050 in purchasing power parity (PPP). Meanwhile, emerging economies such as Mexico and Indonesia are likely to be larger than the United Kingdom and France by 2030 (in PPP terms). In terms of the rate of growth, Nigeria and Vietnam could be the fastest-growing large economies between now and 2050 at 5 percent per annum, in comparison to Chinaâs 3â4 percent growth rate and advanced economiesâ rate of 1.5â2.5 percent. 5 This will increase demand for water, energy, food, and natural resources, resulting in global material resource consumption projected to double by 2050. 6
Air Pollution and Climate Change
The World Health Organization (WHO) estimates that 92 percent of the worldâs population lives in places where air quality exceeds WHO limits. Around 3 million deaths a year are linked to exposure to outdoor air pollution. Indoor air pollution can be just as deadly with 6.5 million deaths in 2012 associated with indoor and outdoor air pollution together. Nearly 90 percent of air pollutionârelated deaths occur in low- and middle-income countries, of which 94 percent are due to non-communicable diseases, particularly cardiovascular diseases, stroke, chronic obstructive pulmonary disease, and lung cancer. 7 In Japan, prenatal exposure to outdoor air pollution has been associated with behavioural problems relating to attention and delinquent or aggressive behaviour at age eight in a nationally representative sample across the country. 8
Deforestation
Forests provide food, wood energy, shelter, fodder, and fibre while harbouring biodiversity. However, the worldâs forests continue to diminish as populations increase and forest land is converted to agriculture and other uses. In fact, 80 percent of all deforestation is a result of commercial agriculture particularly in developing countries. 9 Since 1990, nearly 130 million hectares of forestâaround the same size as South Africaâhave been lost, with Africa and South America having the highest net annual loss of forests over the period 2010â2015, with 2.8 and 2 million hectares respectively. 10 , 11 , 12
Ecosystem Degradation
The Millennium Ecosystem Assessment found that around 60 percent of the ecosystems evaluated in the assessment, including 70 percent of regulating and cultural services, were found to be degraded or used unsustainably. Ecosystem services that have been degraded over the past 50 years include capture fisheries, water supply, waste treatment and detoxification, water purification, natural hazard protection, regulation of air quality, regulation of regional and local climate, regulation of erosion, spiritual fulfilment, and aesthetic enjoyment. The use of two ecosystem servicesâcapture fisheries and freshwaterâis beyond levels that can sustain even current demands: around a quarter of all commercial fish stocks are overharvested, and from 5 to even 25 percent of global freshwater use exceeds long-term accessible supplies and is now met through either engineered water transfers or over-abstraction of groundwater supplies. 13 In New Zealand, Lake Rotoruaâs ecosystem services value is calculated to be NZD 94â138 million per annum with potential damage costs of eutrophication calculated at $14â49 million. 14
Soil Degradation
Between 10 and 20 percent of land globally is already degraded, 15 leading to soil degradation, which is the decline in soil quality caused by improper use, usually for agricultural, pastural, industrial, or urban purposes. It encompasses physical, chemical, and biological deterioration. Examples of soil degradation include loss of organic matter; decline in soil fertility; erosion; adverse changes in salinity; and the effects of toxic chemicals, pollutants, or excessive flooding. 16 In Europe, the estimated number of contaminated sites adds up to 1.5 million, of which more than 300,000 have been identified. 17 Meanwhile, in sub-Saharan Africa, a combination of poor land management, a growing population, and a changing climate is leading to soil degradation, with economic losses estimated to be $68 billion per year. 18