The Ethical Market Economy (EME)
©copyright 2021- The Ethical Market Economy- All rights reserved.
In today's economy, children have no chance to live as long as their parents or grandparents because the economy is kept going with the macroeconomic practice of sustaining growth in its development. The continuous increase in merchandise for sale implies that more is produced. What is produced is offered on the market, sold, bought and consumed.
As a result of this practice, more than seven billion persons are inadvertently depleting more of this planet's limited resources, whilst the productive enterprises worldwide continue, just as inadvertently, to absorb more of what Earth has to offer.
Just as one's own funds run out because they are bounded, so do the planet's supplies. They are being depleted and used up every year earlier in the year, as evidenced by the continued occurrence of Earth Overshoot Day earlier in the year. Earth Overshoot Day marks the date when humanity’s demand for ecological resources in a given year exceeds what Earth can regenerate in that year. In 2020, the Overshoot Day was August 22 and in 2021, it was July 29.
Maintaining growth in the development of the economy implies therefore that mankind keeps on living itself into annihilation.
The methods and techniques used to get companies to produce more, have disturbed balances in the dynamic processes of Nature.
The World Weather Attribution summed up their study about the floods in Germany and Belgium on July 13 and 14, 2021 as follows: « All available evidence taken together, including physical understanding, observations over a larger region and different regional climate models give high confidence that human-induced climate change has increased the likelihood and intensity of such an event to occur and these changes will continue in a rapidly warming climate ».
Nature continues to react in this way until humanity lives in harmony with its needs.
It is no longer possible to ensure mankind’s survival with the macroeconomic practice of maintaining growth in the development of the economy.
That practice can be replaced with the one of preserving the integrity of Nature in the development of the economy. It is one way to ensure a sustainable development defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own need”.
Only the consumer can effectively and efficiently keep the Earth in good condition, because he can spend his money on products that do not harm the environment.
Give the consumer a financial interest in maintaining ways of living that safeguard the integrity of Nature and he will do this consciously, with pleasure and out of self interest. Realizing that living in harmony with Nature is a good way of living, he will want to continue living in this way.
The macroeconomic practice of preserving the integrity of Nature is then bound to appeal to the consumer because he is interested to guide the advancement of the streams of commodities towards progressing within the green borders of Nature.
Part I. EmE in practice
I.1 What is EmE?
EmE consists of the interlinked flows of merchandise and money that leave the environment with all its flora and fauna intact. This co-existence happens when all consumers spend all their money exclusively on living in ways that keep their surroundings unimpaired. There is then no ecological problem. Mankind lives in harmony with “The physical world and everything in it (such as plants, animals, mountains, oceans, stars, etc.) that is not made by people”.
This harmony between man and the environment can be imagined under two conditions:
i) Producers prove scientifically which percentage of their costs of production has kept the environment unblemished, i.e., the ecological content of each item they produce;
ii) The state grants the consumer a Pilot wage, which drives him to guide the streams of money, goods and services into staying within the limits of Nature. The amount of this reward corresponds to the value of the ecological content of what he bought.
Producers give this money to the consumer by deducting it from the price of each purchase.
Producers do not have to identify the recipient of the pilot wage in their accounting, because the amount they give as pilot wages can be justified with the ecological contents of the merchandise sold.
The pilot wage is a net wage defined as free from all charges or deduction.
Taking back a part of this wage, e.g., as income taxes, could increase environmental costs, because the consumer might be less motivated to pay attention to buying only ecological ware. Taxing pilot wages is counterproductive. It would be like wanting money back from the baker because his croissants are delicious.
The state reimburses the producer with the disbursed amounts of pilot wages. The state has then information about the ecological contents of market ware and is well informed to assume responsibility.
I.2 Reactions of the consumer and the producer
It is in the personal and particularly in the financial interest of the consumer - two powerful drives in human behaviour - to buy only products with the highest ecological contents when he earns his Pilot wage.
To satisfy the demand for continuously higher ecological content of merchandise, producers compete by increasing this value until they offer on the market only what has left the earth unimpaired.
I.3 The funds needed to pay the consumer
The pilot wages are funded by the state’s expenses that are now being made for repairing the damage to the Earth caused by mankind's current lifestyles.
All this money is available once the consumer leaves the surroundings scatheless.
Governments can progressively transfer this capital to consumers in order to motivate them to make this money available, by not harming the environment.
The pilot wages will not be a burden for the state, because the sum of paid pilot wages will turn out to be less than the one used to pay for the environmental repair costs.
Money will even be saved by the state, because it is less costly to maintain anything in good condition than having to constantly resolve to reparations.
I.4 The necessity to reward the consumer with a Pilot wage
The consumer should have a financial interest in maintaining the integrity of Nature, because his participation in doing so implies that he spends his funds to live in pursuit of a common goal. Trying to accomplish a result together with many other persons, with one's costs of living implies a business relationship in which one cooperates in reaching the goal. An appropriate return for one's efforts is required to guarantee a successful enterprise.
I.5 The importance of the financial interest of the consumer in EmE
In this study, consumers receive a third of the ecological value of every purchase as pilot wage. The average percentage of income taxes was assumed to be about that part of revenues. When products with hundred percent ecological contents are readily available, consumers could earn one third of their annual costs of living by having spent all their money on produce that has the maximum ecological content.
I.6 Services rendered by the consumer in EmE
Every time the consumer spends money, he participates in steering the productive enterprises in their decision-making about what to offer on the market.
In the EmE, the steering is done collectively by pursuing the goal to keep the Earth in excellent condition. How producers achieve this result, becomes clear from the information about what the consumer buys every time he earns a part of his Pilot wage. The producers who offer the highest ecological values are thus known. Information about the tools and techniques they use to achieve this result is accessible.
The proofs about the ecological quality of what has been bought could in principle be used to develop a cahier des charges for an industry that must sustain ways of living with goods and services which keep the natural resources in a sound state.
When earning his Pilot wage, the consumer turns funds for costs that could have been prevented into revenues for preventing these expenses.
The consumer keeps environmental costs negligible.
Part II. Theoretical basis EmE
II.1 Three new concepts
Throughout the research three ideas became clear.
II.1.1 The sense of development
The money spent on maintaining ways of living is a considerable part of the flows of funds in the economy. The goal with which the consumer spends this money gives a sense to these streams of funds.
In the present economy, the consumer spends his money with the aim to consume more because he must sustain growth in development.
In the EmE, consumers buy everything with the highest ecological contents. To satisfy their demand producers strive to increase the ecological percentage of products. When consumers and producers pursue the same goal, then their efforts to achieve the result, give a sense to development.
II.1.2 The principle of using resources efficiently
In order to achieve optimum efficiency in the utilization of resources, costs should be managed at the source of the income that covers them. This principle implies that the person who earns an income should manage the costs covered by the earnings, so as to make the most efficient utiliz ation of materials.
Producers have proven this concept to be correct. They deduct their costs of production from their revenues of the sales of the goods and services they produced.
Producers maximize the difference between these revenues and costs, their profits, by maintaining an optimum efficiency in the utilization of the resources in their production processes. The money they spend on them is a part of their costs of production.
The consumer earns an income of which he spends a part to maintain his ways of living. This money represents his costs of living. To achieve an optimum efficiency in the utilization of resources in the ways of living of consumers, the costs of living must be managed with the intention of maintaining the surroundings unimpaired.
In the EmE, the consumer spends all his money only on produce with the highest ecological quality, thus with the highest efficiency in utilizing resources.
II.1.3 The responsibility of the consumer in the operation of a market economy
The consumer has to sustain the development of the economy with the goal of safeguarding the integrity of Nature for this and following generations.
This responsibility flows forth from the function of the consumer in the operation of a market economy.
Consumers absorb the merchandise that is offered on the market with the purchases they make.
Consumers sustain the productive activities in the economy when they do their shopping. They can steer these activities in a desired direction when they choose what they buy. The consumer is the pilot who guides the economy to advance in ways that stay within Nature’s borders.
The consumer can exercise his responsibility in EmE in a formal way, because he leaves an accounting of his purchases by means of the available proof of the ecological quality of the goods and services he bought.
Part III. Interest of the producer in EmE
III.1 Immediate interests
III.1.1 A large demand
In the EmE, a demand exists for goods and services with which people want to live while keeping flora and fauna around them healthy and in balance with Nature’s requirements.
All consumers will eventually be driven to spend all their money, all the time, only on items that leave the physical world around them unspoiled.
III.1.2 A permanent demand
When hundred percent ecological ware becomes normal, the consumer will be content and generations of consumers will buy it for the rest of their lives.
III.2 Medium term interest
Ecological goods and services are still relatively scarce. Research has to be done to create them. The amount of research money will be considerable but needed in order to get the economy going in the right direction.
III.3 Long term interest
By keeping the natural resources intact in order to satisfy the demand of the consumer, producers sustain the sound conditions of their working capital, because it is composed of natural resources.
III.4 Ethical base of the economy
When they offer wares in EmE, producers give an ethical base to the economy. Economy is then no longer defined as the science of sharing limited resources to satisfy unlimited demands but as the science of sharing limited resources to satisfy a maximum of demands.
Part IV. Consequences of EmE
IV.1.1 Splitting of the socio-economic power
When a consumer goes shopping in the EmE, he dissembles the socio-economic power. He does so by dissociating the social power of income of the producer and the economic power of expense of the consumer.
The producer gives shape to society. All the forms and volumes one can see around are there because producers earned an income by creating them. Their power of income is a social one.
With the economic power of expense, the consumer can live naturally in flourishing surroundings, by accounting with scientific proofs made available by the producers, for the ecological quality of his acquisitions.
With the economic power of their combined expenses, consumers can safeguard the sound condition of the planet.
IV.1.2 Ethical currents in the economy
In the Merriam-Webster dictionary, integrity is defined
1: firm adherence to a code of especially moral or artistic values : INCORRUPTIBILITY
2: an unimpaired condition : SOUNDNESS
3: the quality or state of being complete or undivided : COMPLETENESS
Since integrity is defined not only as something which is sound and complete but also as having sound moral principles, the integrity of anything can be kept only with integrity.
With their economic power of expense, consumers will maintain ethical currents in the economy out of personal and financial interest to safeguard the integrity of Nature.
The social power of income of producers, who give economy an ethical base and the economic power of expense of consumers, who are the source of ethical currents in the economy, will be interpenetrated in an equilibrium in which the integrity of Nature can be kept.
IV. 2 More consequences
IV. 2.1 No poverty & peace
The demand for products with the highest ecological value, and thus with the highest efficiency in utilizing resources, could rather quickly trigger less resources to be necessary for satisfying demands.
Any increase in efficiency in utilizing resources in the lives of billions of consumers has as a result that so much more is made available with the same input that there will be enough for everybody on Earth to live decently.
There will be no more poverty. People will be sharing compatible levels of well being. They will be sharing satisfaction. People who are content live in peace.
This will be true particularly when an optimum efficiency in the use of resources in the lives of consumers has been secured.
Peace might then be permanent.
The findings about the cause and consequences of the current situation in which the planet finds itself, make it clear that it is no longer possible to ensure mankind’s survival with the macroeconomic practice of maintaining growth in the development of the economy.
That practice can be replaced with the one of preserving the integrity of Nature in the development of the economy.
Only the consumer can effectively and efficiently ensure that the Earth stays in excellent condition.
The state can afford to reward the consumer with a pilot wage in order to drive him to guide the flows of money and merchandise in the economy into staying within the limits of Nature.
Which percentage of the ecological value of a purchase should make up the pilot wage?
The answer to this question should ensure that the integrity of Nature is indeed safeguarded by consumers continuously adapting their ways of living, in an effort to share an existence in a state of balance with the physical world around them.
The choice left is to agree about the part of the ecological value of a purchase that makes up the pilot wage and to reward the consumer with it.
Hoeilaart, Belgium, 22nd of October 2021
Willem Adrianus de Bruijn