Back to Table Of ContentsEthical potential of development
Willem Adrianus de Bruijn
Founder
DB, association of consumers maintaining their integrity with their income
80, avenue Emile Zola
B-1030 Brussels, Belgium
Tel. : 32 (2) 648 56 95
"Willem Adrianus de Bruijn" <WdeBruyn@yucom.be>
SUMMARY
Development could have an ethical sense if mankind would use the natural resources in such a manner that future generations can also enjoy income from the utilisation of these assets.
Consumers who pay income taxes will be attracted by commodities that assure this income, under the condition that they can deduct from their taxable income, the money they spend on such goods.
With this accounting ability, the consumer can assume his function in the free market economy, namely, to maintain a way of living that sustains development.
The goal of development is then to maintain the integrity of Nature.
Consumers will draw producers in a moral equilibrium by keeping this integrity with their income.
A need to test this competence would be ignited by the requirement that each product indicates a value of its ecological contents.
Part I
THEORY
Introduction
Most descriptions of a well functioning economy could not be used as goal for its development, because the view of the operation presented in the description lacks a moral basis that would give sense to the production of all the goods and services with which mankind maintains its way of living.
The sense of development
All these goods and services are made up from the natural resources of this planet. This merchandise is produced in the processes which' progression determines the development of the economy.
This development would have an ethical sense if mankind would use the natural resources in such a manner that future generations can also enjoy income from the utilisation of these assets. That future income is the continuous income from production processes that are endless. This income is essential for sustaining development.
The motivation of consumers to spend their income on goods and services that maintain a way of living that assures this income, gives this ethical sense to development.
The function of the consumer in the economy
Recent findings about shifting taxes in the European Union from the income of consumers to products that pollute 1 indicate that consumers are more interested to buy ecological products when they also get a reduction in their income taxes, than when they are only prodded by punitive taxes on articles that contaminate the environment.
It seems therefore almost certain that consumers who pay income taxes will be attracted by commodities that assure income from the utilisation of natural resources, under the condition that they can deduct from their taxable income, the money they spend on such goods.
The capacity to deduct costs of living from taxable income will drive income tax paying consumers with personal, financial and professional interests to live in harmony with Nature.
With this accounting ability, the consumer can assume his function in the free market economy, namely, to maintain a way of living that sustains development.
The goal of development
In exercising their function in the economy, consumers will naturally try to keep Nature sound, while conscientiously striving to maintain the integrity of humanity when they spend their income. This pursuit will become the goal of development of the free market economy, since this goal appears from our research to be the aim with which consumers spend their income.
The goal of development was indeed unknown, according to the introduction to the programme of a world congress of EADI (European Association of Development Institutes), held in Amsterdam in 1987.
The above stated hypothesis raises the question, what is the goal with which consumers can spend their income today : to consume forever more? This seems to be confirmed by the macro-economic policy on upholding growth in development.
The pursuit of this goal seems to be a logical reason why parts of the world population continue to live in increasing poverty, while people in developed countries improve their well-being. Their consumption pattern persists in absorbing a more than proportional amount of natural resources, since the industrial world is more efficient in increasing its utilisation of products.
Consuming always more of the limited natural resources, besides polluting them, is most likely also the cause of the worsening ecological crisis.
Continuing to consume more of the limited natural resources, leads to natural catastrophes and wars over drinkable water, arable land and healthy air.
The alternative
According to the legislation of most developed nations, costs that have a positive effect on income can be deducted from this income, before taxes have to be paid over the difference.
Costs of living could have a favourable effect on income, if income is considered by law on a time scale of generations, rather than of a human life. Costs of living that maintain a way of living in harmony with Nature would assure income from the utilisation of the limited natural resources. They should therefore be tax deductible and the law should make this possible. Interpretation of the time dimensions of a law is indeed a way to adapt law into sanctioning practises required by the reality of knowing more.
Present attempt to manage the costs of living to protect or conserve Nature
In the current version of the free market economy, only Central Government can try to motivate billions of consumers to sustain development, by levying eco-taxes, by setting pollution standards, by shifting taxes or by controlling their way of living. Current results are comparable to the effects of the central management of the costs of production, on well-being, in planned economies. Central management of the costs of living fails, because eco-taxes and other such measures cannot motivate consumers to change their way of living. The goal, while spending their income, remains to consume more. Whatever obstruction, consumption will therefore grow with increasing efficiency. As long as mankind continues to consume more, Central Government can neither use the produce from the eco-taxes to protect Nature nor can they assure future generations income from the utilisation of the natural resources, with incomes from these taxes.
Optimum place to manage costs
An efficient place to manage costs is at the source of the revenues which these costs sustain. This principle of efficiency of the free market economy is also a result of our research. The principle anticipates that the equilibrium between revenues and cost is maintained by the people who earn the revenues.
Some consequences when consumers manage the costs of living as income enhancing costs
When consumers assume their function in the economy and maintain a way of living that bolsters development, their demand will cause a more proficient utilisation of natural resources throughout the life cycle of products, since the ability to manage costs of living is congruous with the principle of efficiency of the free market economy. Indeed, consumers can manage the costs of living effectively to live in harmony with Nature, because they earn the incomes which cover these costs, just as producers can manage the costs of production efficiently to achieve their goal, also because they earn the money that pays for these costs.
Due to the discovery of this principle of efficiency, a maximum number of demands can now be satisfied with the natural resources of this planet. When this summum in sharing resources has been attained, all people will enjoy compatible levels of well-being, because then such a maximum has been reached. The plight of parts of the world population who now live in increasing poverty will then have come to its end. Peace might endure when people cherish matching satisfaction.
Another consequence of managing costs of living will be the moral equilibrium in which consumers draw producers by keeping integrity with income. This equilibrium will reflect in a harmonious equilibrium between Costs and Revenues, the two operating accounts of the account : Capital 2. Harmonious profits or Morabaha 3 could then be a logical consequence.
Benefits for governments of making the consumer interested to account for the ecological quality of his way of living
There are three economic reasons that should induce governments to adapt or propose laws allowing and encouraging consumers to report the ecological quality of their way of living. The first and most obvious is that, as a result of this bookkeeping, mankind will eventually live in harmony with Nature. The billions of Euro's, Dollars and Yen spent in trying to protect Nature, could be employed for other purposes.
Moreover, when consumers have to keep the receipts of their purchases to prove their ecological composition, the black market will disappear. Within the mechanism of the black market, producers can compete by lowering their prices, the transaction being accomplished without a receipt or an official document. No taxes can therefore be perceived on income from such transactions.
The third reason is that development will bloom with a demand for a way of living leading to optimum efficiency in the utilisation of the natural resources. The energy of economic development which now stagnates at the natural limits of the environment, will then merge into a bundle of currents that meander within the borders of a lush Nature, in which well-being thrives.
The increase in income from taxes levied on the growing incomes of suppliers of the products that uphold such existence has the potential to offset the reduction in income caused by the deductibility of money spent by consumers on ecological products. This potential exists by virtue of a more efficient use of natural resources when consumers exercise their function in the economy. History has shown that, after the industrial revolution began with Watt's invention of the steam machine, the state lost income from taxes paid by suppliers of non industrial goods and services. However, this loss was eventually offset by the increase in income from taxes paid by suppliers of industrial products, because they made a more efficient use of natural resources.
Other arguments for enabling consumers to manage the costs of living
Recent events demonstrate that the system of controls in Europe made by the scientific world, the European Commission and the food industry does not assure safe food 4. The result is still trying to prevent the latest crisis, at an accelerating rate. Germany was recently able to stop pollution by dioxin in milk, just before it became a crisis. The German government was not able to prevent it. The aim was to create a system that would assure safe food for everyone by the year 2000. Something was missing to achieve this and the faith to find the missing link by then, was expressed. The need to inform, to educate, nay, to imply the consumer in a process of assuring safe food was felt at all levels. A latest effort of the food industry consists in establishing lists with positive specifications which food products should satisfy.
The inability of the European Union to assure safe food by means of its present control systems confirms that no assurance can be given about a quality or state by controlling respect for or adherence to minimum standards. The laws of competition oblige producers to manufacture within the limits of these minimum levels of pollution, beyond which crises occur.
Consumers' ability to deduct from their taxable income the money they spend on ecological products, generates the force that will pull producers away from the tolerated levels of contamination and drive them to compete in obtaining environmentally beneficial products.
The inability of the European Union to assure safe food makes the introduction of the management of the costs of living even more urgent. If the European Union cannot assure safe food, which country, state or nation could?
Should mankind maintain the integrity of humanity?
According to the director of research in life sciences of our association, there does not seem to be a clear demarcation line between industrial chemistry and the chemistry of Nature. Eventually, industrial chemistry could therefore pollute, integrate, substitute the chemistry of Nature with industrial chemical processes. The integrity of Nature might therefore be lost and thus the integrity of humanity.
The ability of the consumer to deduct costs from taxable income creates also the demand to define the parameters of chemical processes that determine the integrity of humanity and to establish the values of these parameters that enhance integrity.
PART II
IMPLICATIONS FOR BUSINESSES ENSUING FROM THE CONSUMER'S ABILITY TO MANAGE THE COSTS OF LIVING
Before the demand to define products that maintain the integrity of humanity is satisfied, producers would have had to compete in developing an ecological industry. All countries can participate in the development of this nascent sector of the economy, with equal resources. Such participation is moreover an efficient way to build up this industry from little.
To be able to participate in this competition, producers will have to show which percentage of the price of the commodities they sell corresponds with an ecological content of the products. Consumers who pay income taxes will need this information to justify deducting the matching amounts from their taxable income. Governments of countries with few income tax paying consumers will also demand this information to give local ecological industry equal chances to progress as those operating on a different scale.
As a consequence of this exigency, producers will have to mark in their accounting the costs of production that are incurred for ecological products, processes, tools or techniques.
They will thereby do research to define which products and processes assure income from the utilisation of the natural resources in their quest to maintain the integrity of humanity.
Part III
FEASIBLE WAY AHEAD TO FACE THE CHALLENGES OF DEVELOPMENT
A development that could contribute to progress, would be initiated by the requirement that each product indicates a value of its ecological contents.
A drive to improve the ecological composition of merchandise would then have been inaugurated by the moral consequences of having to show implicitly also the devastating value of current production processes.
Most producers from the industrialised world could probably calculate only one digit percentages of the cost price of their products that correspond with an ecological value. This would mean that over 90 % of all the costs of production in industrial processes are incurred in ways that are harmful to Nature.
The demand for an ecological content of products will awaken a consciousness among people that the environmental quality of goods has to be improved. This awareness will bring forth a momentum to introduce the management of the costs of living in countries with income tax paying consumers, they being the most effective in creating a demand for such a quality when they manage these costs. With such attention this introduction could be realised with a trial process.
The requirement to show an ecological composition of products, could spark off the development of an ecological industry.
Producers of developing countries would have to participate in satisfying the instantaneous demand of income tax paying consumers for ecological products, since there are not enough.
Part IV
PRACTISE
The demand for an ecological content of products would subsequently oblige governments of countries in which there is no administration to account for incomes, to enable their consumers to manage their costs of living as well.
People who do not live in harmony with Nature, cannot compete in the development of an ecological industry.
The management of the costs of living can be introduced gradually in the economy of a special economic zone, under the rigorous conditions of scientific research.
If this study would be institutionalised within the legal structures that govern the area, then income tax paying consumers could be enticed to visit the region and to participate in the investigations. Indeed, the money they spend could then legally be interpreted as research costs. Trial processes to prove that these expenses could assure continuous incomes and should therefore be tax deductible according to law, might be necessary in countries where the right to deduct these research costs from taxable income would not be recognised and the proper laws exist.
The operations in the zone will result in an administrative system in which consumers account for their costs of living. The incomes of local producers who derive the majority of their revenues from sales to the participants in the project, will be known fairly well by the cost declarations of these consumers. These incomes can hence be taxed. Local producers would therefore be interested to participate in the project and would thus share the same incentive to spend their money on ecological products as the other participants in the zone.
Local manufacturers would be so induced to adopt a way of living that sustains development, while their incomes increase through their participation in the project and, in general, by their participation in the development of an ecological industry. These producers will want to sustain this development with their incomes in order to remain competitive. They will therefore voluntarily account for their incomes in an administration that can be developed simultaneously with a system to account for costs of living.
The market for ecological products in the zone would thus flow over into a market for local income earners who account for their costs of living.
If the initial zone would be large enough the demand of local consumers could suffice in igniting the start of an ecological industry.
A proposal to operate a zone is described in an addendum to this paper.
Part IV
CONCLUSION :
While the information about the results of managing the costs of living becomes available, the zone and thus the region could sprout into the cradle of a human and ethical development that would be upheld by the suppliers to the area.
Peace radiating from the zone would enhance the wisdom of policy makers to provide the means for this research, continuously.
The participants in the discussions could bring this all about.
Brussels, 26 December 2002 Willem Adrianus de Bruijn
1 Bernie Fischlowitz-Roberts, 2002, "Restructuring Taxes To Protect The Environment" , "http://www.earth-policy.org/Updates/Update14.htm"
2. Figure 1 : Relationship between the operating accounts : Costs and Revenues and the Balance sheet accounts,
Figure 2a : Current accounting of the daily costs of living in the macro-economy of developed states ; daily costs of living treated as "private expenses" and therefore not tax deductible,
Figure 2b : An accounting in which the private consumer is treated in the macro-economy as a professional, responsible for the maintenance of the quality or state of nature when he or she spends his or her costs of living
"http://www.oocities.org/zero_association/
3. Morabaha is a term of Islamic Fiqh (Jurisprudence) and refers to a particular kind of sale. If a Seller agrees with his purchaser to provide him a specific commodity on a certain profit added to his costs, it is called a Morabaha transaction. The basic ingredient of a Morabaha is that the Seller discloses the actual cost he has incurred in acquiring the commodity and then adds up some profits thereon. This profit may be lump sum or may be based on a percentage. (http://www.alfaysal.net/public/murabaha.htm)
4. Willem Adrianus de Bruijn , 1999, "European Union control system does not assure safe food", Analysis and comments about the conference : "La securité alimentaire", held on Thursday, 21 October 1999, by the Cercle de pharmacie, ULB, Brussels, presented at the DB web site : http://www.oocities.org/zero_association/
Nota Bene, parts of this article have been presented in a paper for the congress : Euro Environment 2002, held in Aalborg from October 21 to 23, 2002