Efficient Resource Use as One of 17 Principles of Regional Economic Order Under the Maxims Democracy and Market Economy.
An Article in the Compendium of Market-Based Social-Ecological Economics
Key issues in view of the neoliberal crisis:
How can we guarantee employment and fair income?
How can we protect the environment effectively?
How should we shape the economic globalization?
What should the economic sciences contribute?
What must be the vital tasks of economic policy?
How can we legitimize economic policy democratically?
Table of Contents
In view of the threatening extent of the devastations caused by the neoliberal economic doctrine, the turning towards compatible economic principles becomes almost existential. But only when these principles are combined to form a model of sustainable regional and global economic order, can the urgently needed economic policy measures be derived.
All 6 global principles are summarized in the article Principles of Global Economic Order in the form of questions. The supplementary 17 regional principles are listed in the article Prinzipien regionaler Wirtschaftsordnung, also as questions.
In the context given here, the term »regional« refers to largely homogeneous entities, currently primarily nation states and supranational political and economic areas (unions), that meet all the requirements for political sovereignty and economic autonomy and are therefore in a position to form a viable foundation for the prosperous coalescence of the world. Hereafter, these entities are mostly referred to as economic areas.
The European Union (EU) and, in particular, the euro zone existing within the EU, can serve as a cautionary example here. Both are supranational entities that have emerged from the political and economic self-interest of powerful players, and whose inhomogeneity and centralism have since unfolded great destructive potential (as a supplement see the article Demokratie und europäische Integration).
In the course of the historical economic development in Europe and the USA democracy and market economy have emerged as useful and reliable Maximes of Economic Order. Both maxims have, however, been distorted by the neoliberal indoctrination since the 1990s to such an extent that the »natural principles« inherent in them are hardly perceived by the citizens any more. It is therefore essential to return to these principles and to combine them into a model of a sustainable regional and global economic order. See also the article Market and Market Economy.
In contrast to the centralistic structures produced by modern Neoliberalism, the model presented here is based on decentralized structures, or, better still: on subsidiary structures. Only if the citizens in as many countries as possible are recognizing democracy and market economy in their interaction again as convincing maxims, can a culture of political co-determination and economic self-determination return to society, politics and the economy and work towards social and ecological justice. Embedded in subsidiary structures, the citizens bear full responsibility for their actions and well-being, so that they are always brought to shape the conditions in their immediate environment in exchange with each other and at the same time create the preconditions and the foundation for global exchange.
Social and ecological justice, by the way, arise from a multitude of economic mechanisms: For example, the terms Efficiency and Productivity as well as specialization, which are wrongly defined in the neoliberal context, are redefined in the sense of social justice and ecological sustainability and are no longer subject to the arbitrariness of »liberalized« (unregulated) markets, but to economic policy control. The market thus regains the freedom it deserves, which enables it under meaningful and uniform framework conditions, rules and standards to allocate economic resources efficiently and equitably like no other mechanism.
Thus, the price is able to perform its original function again as the central information medium and control element of market transactions of individual economic players, because under the conditions of social and ecological justice and productivity it reflects all internal and external costs. By allowing the players to be guided by truthful prices resulting from the interplay of supply and demand, economic resources move – as if steered by an »invisible hand« – to where they provide the greatest benefit to individuals and, at the same time, to society as a whole. As a supplement see the article Economic Pricing.
Subsidiary structures ensure that prosperity and welfare are no longer at the mercy of the imponderables of a worldwide production quantity achieved under oligarchic rule and high capital concentration, but result automatically from the domestic production structure. The production structure alone is decisive for local and regional economic diversity and consequently for the level of employment, the performance-related equal distribution in society and the preservation of natural resources.
Unlike domestic competition, international competition can not, by its very nature, be granted the freedoms of regulated domestic markets. It must rather be based on bilateral trade agreements given the completely different traditions, standards and resources in the world. In these agreements the exchange rate must be set as the crucial trading link, supplemented by autonomous tariffs and trade quotas to balance out the differences and to grant trade profits to both sides. The primary objective of these agreements must be to ensure that imported products with their characteristics and prices are integrated into domestic competition in the most stimulating but harmless way possible.
The separation into regional and global order thus results quite naturally from the principle difference between domestic and foreign trade. Besides, this explains why there can be no superordinate, all-dominant, self-regulating and self-stabilizing world economic order in a desirably diverse and democratic world. For more details see the article Future-Proof Foreign Trade.
Among politically sovereign and economically autonomous nation-states and economic areas, the global order is reduced to agreements of norms of conduct, especially regarding norms of international trade and cooperation. By applying these norms, economic subsidiarity can be extended beyond national borders and find its perfection at the global level in the form of projects of global interest and scale.
With domestic and cross-border subsidiarity the doctrinal practice of transferring economic powers from lower to higher levels (especially nonstate) is overcome, of which neoliberal protagonists claim it would bring about »more appropriate« and »more efficient« decisions. Along with overcoming this practice, the justification is removed for a World Trade Organization, which is entrusted by its current 164 member states as the guardian of the Grail of global cut-throat competition based on dumping prices in lead currency (i.e. US dollar or euro). This is an unprecedented event in economic history, especially because the condition for membership is the (voluntary) renunciation of national economic autonomy.
It should be noted that the demarcation of the specific functions of the various economic levels, i.e. the subsidiary structure of autonomous nation-states and economic areas both domestically and beyond their borders, is absolutely crucial for the future viability of economically autonomous entities and for the global economy as a whole:
Functioning regionality is a prerequisite for sustainable globality. Globality is the complement of functional regionality.
In what follows, is the plea for the efficient use of natural resources as one of 17 principles of regional economic order:
3. The Efficient Use of Natural Resources
The basic natural resources are characterized by their finiteness – by their scarcity, as economists say. Non-renewable or exhaustible resources in the true sense of the word include mineral and other minable raw materials and land areas. The latter fulfil a double function: on the one hand they serve as settlement and traffic areas and on the other as renewable resources (as humus, plant and animal reservoirs), as which they are integrated into the continuous cycle of the biosphere. And because biological cycles will only function permanently if untouched land areas are sufficiently large and networked and the species diversity is adequate, land areas may only be used and cultivated by humans to a limited extent.
In order to preserve resources for future generations under market-economy conditions – namely resources like minable raw materials, settlement and traffic areas, agricultural and forestry areas and, in particular, uncultivated areas required for the ecological equilibrium – the resources must have a price that is high enough to motivate economic players to avoid external costs arising from their use and, in addition, motivated by economic policy incentives, to even generate external revenues by removing previously inflicted environmental pollution. In more precise terms, prices and supplementary incentives must be appropriate to ensure the long-term preservation and reusability of non-renewable raw materials, and to protect and even improve the quality of uncultivated land areas, all this in order to increase the standard of living and the quality of life.
The neoliberal reality is the best proof that scarce resources are used imprudently and wastefully, i.e. inefficiently. To counteract this, appropriate prices and economical use can be enforced through a combination of taxation on a volume basis and tax incentives for technological developments that serve to secure the future. This combination motivates economic players to use resources economically and purposefully develop technologies that are tailor-made for decentralized (subsidiary) application and are thus both suitable to undo existing damage and to prevent external costs and ensure efficient resource use from the outset. Meaning in particular that price taxation and supplementary incentives obviate harmful costs at the beginning of the economic value chain and therefore minimize the risk of costly subsequent damage limitation and irreparable damage to resources.
An economically efficient and future-proof allocation of scarce resources can only be achieved by means of an absolutely binding economic policy governance that must feature three significant degrees of freedom:
Economic policy control must first be empowered to directly adapt the overall volumes of raw materials and the overall extent of economically used land areas in accordance with the latest ecological level of knowledge, secondly, on the same basis, to additionally limit resource use indirectly by adjusting prices through volume-based taxation, and thirdly, to additionally limit resource use indirectly through incentives for technological developments that are conducive to subsidiary economic structures.
The three degrees of freedom presuppose that commercially used land areas, including the extraction sites for raw materials, must in principle retain or regain the status of public property, and that the rights of use and exploitation are granted to interested private parties on a temporary basis only and at a site-dependent up-to-date ground rent.
With the ground rent calculated in terms of efficiency and sustainability – and also through the additional taxation of raw materials – there is a shift in public taxation from the production factors labour and capital to the scarce production factor natural resources.
By making scarce natural resources more expensive through taxation and at the same time relieving the tax burden on labour and capital, the already mentioned external costs of unemployment and environmental damage are reduced, while external revenues in the form of employment, wealth-enhancing capital gains, environmental protection and possible environmental damage repair are increased.
To avoid misunderstandings, I stress that wealth-enhancing capital gains can only be achieved if capital – as a production factor derived from the original factors human labour and natural resources – is being put at the service of the original factors with no ifs and buts. Or in economic terms: if the efficiency of the factor capital is derived exclusively from the efficiency of the factors labour and natural resources.
The only way to achieve sustainable capital efficiency is through the implementation of subsidiary economic structures enforced by an absolutely binding economic policy governance, as already mentioned above for the allocation of scarce resources. As described in the articles below, subsidiary economic structures are shaped according to the greatest possible extent of decentralization of real production capital – dependent on the underlying technologies – to the effect that inefficient concentration of capital including its geographical detachment from the factors labour and natural resources – as is the case under the current neoliberal economic doctrine – is prevented. Instead, capital efficiency is decentrally and directly derived from the efficiency of labour and natural resources. For more details see the articles Economic Subsidiarity and Building Subsidiary Economic Structures.
Back to the natural resources: The economic policy enforcement of limited use, constant reuse and taxation of natural resources (resource efficiency) described above is therefore only possible if the capital efficiency (wealth-enhancing capital gains) and the labour efficiency (full employment) are achieved a priori on the basis of subsidiary economic structures. Only then is overall efficiency of the three factors of production and thus overall productivity of economic value creation sustainably positive. As a supplement see the articles Excesses of Capitalism, Efficiency and Productivity and Factors of Production.
The revenues from ground rents for commercially used land areas and from taxation of raw materials flow into public coffers, so that, on the one hand, private speculation in real estate and raw materials is overcome and, on the other, both a fairer primary distribution of income from work is achieved and more funds become available for secondary income distribution in the form of public transfers. See also the articles Economy and Biosphere and Economy and Entropy.
Click here for the German-language version: Effizienz der natürlichen Ressourcen.