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New Policies - Sytemic Fiscal reforms for a future with future

Carnoules, the 31th May, 2004

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There are several reasons why a dramatic dematerialization of western economies is unavoidable:

At this time in history, a number of reasons call for serious re-orientation of the current economic framework in western countries. Among the reasons are:

It is evident that only profound and systemic policy changes will secure the future and open the road to sustainability. It is no longer possible to continue introducing partial solutions to individual problems when they arise. Sustainable solutions require the simultaneous and evenhanded consideration of economic, socual and ecological consequences of every impending decision.

A recent article illustrated the potential macro-economlc gains in Germany under condition that all currently profitable dematerialization measures would be undertaken and further, that financlal gains would not be negotiated away by increasing the income of labor in tune with tradltional practices [6]. Wage increases during the period of demateriallzation were assumed to be those expected without the deliberate increase of resouree productivity. Among the most interesting results of the study were these: some 760 000 new jobs would be created, the GNP would rise by close to the 10 % and the government income would increase by ca. 20 billion Euro.

What is urgently needed now is a similarly exhaustive modelling effort to clarify the consequenees of shifting the current overhead on labor to natural resources. Based on such results one could conceive a step-by-step plan for approaching ecologically and economically sustalnable conditions. First, those dematerialization efforts would be launched that are already profitable under existlng eeonomic boundary conditions. Governments could simultaneously begin to re-orient their procurement procedures, giving increaslngly preference to demateriallzed products and services. Subsidies deleterious to saving resources would begin to be withdrawn. After some 2-3 years, fiscal reforms would commence in a carefully planned manner, previously shared and discussed with the public. Features protecting the sick and the poor would demand special attention. 3 or 4 Years later, all measures leading to "Factor 10" would become fully operational, including the adjustment of norms, standards and practices and revoking special privIleges of all kinds that provoke un-necessary resouree and energy consumptlon. Among those to be eliminated eould be the right to levy-free lifting of resources from nature, Including minerals, sand, gravel, flsh, and plants.

Failure to drastlcally dematerlallze the economy In leading countrfes by a fiseal reform as indicated would yield dramatlc consequences:

Moreover, It is far from obvious how to incorporate the concept of dramatic dematerialization into the political and economic reality of today. The possibilities of unilateral national moves are somewhat limited because all national economies operate today in a complex network of international interests and contractual obligations. The necessary changes would obviously require courageous and farsighted political leaders.

Democratic process demands that voters, politicians and business people -most of them recipients of subsidies and enjoying special privileges of one sort or another within the present system - would agree to a new set of parameters, accept shiftlng focuses and priorities, be ready to consider all dimensions of sustainability before reaching decisions, and establish a new network of business partners. Perhaps the most serious barrier to change would be the ensuing initial uncertainty for aperiod of time about how to establish proper budgets, how to make profits and what to consume.

In earlier times natural catastrophes and wars lost and won left little choice but to take such risks. Fortunately, times have changed in some parts of the world. In the future we will have to learn how to adjust to paradigmatically new realities on the basis of reason and dialogue. Are we ready for that? Do we have the right leaders for that in Industry and politics? In 2001, Japan has already incorporated the concept of dematerlalization (Factor 8 to 10) into the framework of its strategie economlc planning.

1 Schmidt-Bleek and Cowokers: The unfolding of the Factor 10- and MIPS-story (in English) at the Wuppertal Institute, Special Isue of the Fresenius Environmantal Bulletin, Birkhaeuser, August 1993.
2 F. Schmidt-Bleek, "Wieviel Umwelt braucht der Mensch - MIPS", das Mass fuer oekologisches Wirtschaften", Birkhaeuser, 1993. A Chinese translation is on the market. The Finnish Version is in ist second and the japanese is in ist 4th edition. The English translation is available on these sites unter "The Fossil Makers"
3 See for instance Report (in German) by the Future Council of the state of Northrhine Westfalia, March 2004, Düsseldorf. To be published in English in 2004
4 Report of the Future Council of the German State of Northrhine Wetfalia, March 2004
5 F. Schmidt-Bleek, "Das MIPS-Konzept - Faktor 10" Droemer, Munich 1998 and Franz Lehner and F. Schmidt-Bleek,"Die Wachstumsmaschine - Der oekonomische Charme der Oekologie", Droemer, Munich 2000.
6 Hartmut Fischer, Karl Lichtblau, Bernd Meyer und Janina Scheelhaase, "Wachstum und Beschäftigungsimpulse rentabler Materialeinsparungen" Wirtschaftsdienst, Issue 4, April 2004. This study was financed by the Aachen Foundation Kathy Beys.