Despite the fact that hardly any sustainable development program occurs without governance reforms, changes in legal mechanisms, and other institutional adjustments, the institutional setting has not been systematically integrated into sustainability planning. In the North, the dominant perception of sustainable development considers reconciling the environmental and the economic dimension as the key sustainability challenge (Figure 7.1). Humans and their actions, and the rules regulating them (i.e., the social and the institutional dimensions), are understood as secondary elements of sustain-ability, moderating the interaction of economic and environmental processes. Sometimes they are even reduced to means of managing the side effects of environmental policies (OECD 2001), which in turn are defined economically, as the internalization of external costs. However, without a change in orientations, central elements of
sustainable development such as the shift toward sustainable patterns of production and consumption will not materialize. Similarly, without appropriate mechanisms, neither the greening of the economy nor gender mainstreaming, community empowerment, and civil society participation will be implemented, although they are key demands of Agenda 21.
This biased perception reflects the situation of countries where social and institutional problems are considered less pressing than environmental ones, whereas in countries with prevailing poverty different priorities apply. Here the main emphasis in development planning, national and by donor organizations, often is on the interaction of the social and economic dimensions (e.g., poverty eradication, literacy promotion, public health improvements), with the environment often playing a secondary role and institutions again as a moderator. However, as the Arab Human Development Report illustrates (without reference to the sustainable development concept), it is societal orientations and political decision-making mechanisms that hinder successful development, not the lack of investment capital or organizational matters (DGVN 2005).
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