Economic
systems have both inputs and outputs. When outputs exceed the total inputs, the
system is seen as unsustainable. A paper by Brestschger and Valente (2011)
delves into a method of measuring the sustainability of resource rich countries.
Even though their focus is on oil producing countries, they do have some
broader implications.
Most
studies seem to rule out the concept of technological progress and trade gains
to determine economic viability. Technology has the ability to lower the cost
of transactions and increase overall outputs. Thus, technological advancement
can lead directly to an export market and more sustainable system.
Net investment is a concept that
focuses on the net increases in all the productive assets of the local economy.
Such net investment are measured by adding all of the technology and labor
productivity increases and subtracting things like depletion of natural resources.
The more information available the more accurate such evaluations become.
The model proposed by the authors
includes an expression of net investment from:
1. International trade in different
types of inputs
2. productivity growth in final
sections
3. cost-reducing technology in
resource extraction
A large percentage of
resource-exporting countries are unsustainable because of negative net
investments. This means they are losing resources and not hedging the influx of
capital to ensure that sustainable growth beyond these resources occurs.
According to net investment, the economic capital flow is moving outward.
If w were to apply the findings of
this study to other areas using a similar schema we would conclude that
economies that can raise their value of products and export them on the market
have net inward flows of value. The wealth of an area increases while those
countries that export resources without raising the values significantly are
less sustainable. Technology and local
labor skill have the ability to convert lower value products to higher value
outputs that increase local wealth. When considering global economies hubs can
use local technology and skills to purchase lower value inputs from other
places in the world and develop them into higher value products that are sold on
the market to increase the wealth of an area.
Bretschger,
L. & Valente, S. (2011). International trade and net investment: theory and
evidence. International Economics and
Economic Policy, 8 (2).
