Impact of Sustainable Development Indicators on Economic Growth: Baltic Countries in the Context of Developed Europe/Darnaus Vystymosi Rodikliu Poveikis Ekonominiam Augimui: Baltijos Salys Issivysciusios Europos Kontekste

Article excerpt

1. Introduction. A theoretical review

Sustainable development is a leading concept of nowadays. It started to be considered as urgent issue since 1972 Stockholm Conference on the Human Environment, where the conflicts between environment and development had been acknowledged the first time (Kates et al. 2005). A lot of studies have been devoted to the new philosophy. However, there are various definitions of this phenomenon. The widely known definition states that it is the "ability of humanity to ensure that it meets the needs of the present generation without compromising the ability of future generation to meet their own needs" (Brundtland 1987). Germination of the concept of sustainable development at institutional level has been analysed by Grybaite and Tvaronaviciene (2008). The concept of sustainable development contains three dimensions of welfare, comprising economic, environmental, social aspects and their interrelations.

The aim of the paper is to analyse the relationship between the economic growth and sustainable development in different countries, juxtaposing the Baltic states with developed European countries. The assumption is made that economic processes of a particular country differ depending on the stage of its development. It might be the case that, at the lower level of economic development, there is a stronger relationship between the economic growth of the country and social-economic variables, while at the higher level, the environmental indicators are very important.

The modern study of economic growth was started by Adam Smith and David Ricardo. Since then, many theories have been defining the major factors of economic growth, but three basic factors, such as capital formation, population growth, technological changes and their interactions were mainly emphasized. The role of capital formation, reflected in saving and investment has been a crucial factor in many works of economics thinkers for centuries, and it remains important even today (Tvaronaviciene 2006; Tvaronaviciene, Tvaronavicius 2008). During the past fifty years the term "economic growth" was being transformed to a new notion--economic development, emphasizing not only the growth of the quantity of material goods and services, but also a higher level of welfare of the country. It was suggested (Theobald 1961) to divide the process of economic development into five stages, which every nation can pass regardless of its social and political structure. Notably, this approach is often presented as one of the leading theories of economic development (Parr 2001). In the middle of the 20th century social capital was made a focus in the analysis of factors, influencing the economic growth. T. W. Schultz was one of the first researchers who began to treat entrepreneurship as human capital, i.e. skills obtained by investing in a particular type of human resources (Huffman 2006). The social positions of development became even more prominent with the adoption of Human Development Index (Ghosh 2008). Social factor has been widely explored and now social development is considered to be a prerequisite for economic growth, while economic and social systems are often presented as one.

Since the 1970s, when the Club of Rome put forth the theory of "limits to growth", environment has been considered as a new prerequisite for economic growth. The world has recognized new challenges and responsibilities for changing climate and diminishing natural resources. The most effective theory based on the relationship between pollution and income level was developed (Bradford et al. 2005). Since then the economists have been analysing the question: "Do poor people care less about their health than rich people? If not, what makes the populations in poor countries, generally speaking, less healthy?" (Torras 2006). The later notion emphasizes that economic development and ecological services cannot be observed as one system, where the causality flows from both directions. …