Dematerialization, Employment and Competitiveness · Hinterberger/Luks: Dematerialisation,...

DEMATERIALIZATION, EMPLOYMENT ANDCOMPETITIVENESS IN A GLOBALIZED ECONOMY

Paper prepared for the plenary session Iof the Fifth Biennial Conference of theInternational Society for Ecological Economics (ISEE)"Beyond Growth: Policies and Institutions for Sustainabiliy"November 15 - 19, 1998, Diego Portales Convention Center, Santiago de Chile,

by

FriedrichÊHinterberger and FredÊLuksWuppertalÊInstitute HamburgÊSchoolÊofforÊClimate,ÊEnvironment,ÊEnergy EconomicsÊandÊPolitics

[email protected] [email protected]

http://members.aol.com/FritzHint

Contents1 Competitiveness, employment and the environment: a magic triangle2 Material flows: the Wuppertal approach to environmental sustainability3 Some empirical data: the recent history of (de)coupling jobs from matter/energy flows4 Employment, material flows and economic activity5 The "fourth corner": the institutional setting6 Sustainability in a globalized economy: an international perspective7 Toward an integrated policy: an ecological economic policy

Abstract

There is a level below the general dimensions of sustainable development (economic, social,

ecological) which has to be considered to reach effective and operationable policy goals. We present

an interpretation that includes competetiveness, employment and throughput (or scale) reduction or

dematerialization. All three goals are related to securing the development conditions of economic,

social and environmental systems. This paper discusses the three goals and stresses the interrelations.

Some empirical data (for Germany) will be presented. It is shown that the institutional setting behind

economic and social processes is decisive and can be formulated as a "fourth corner". In the context

of globalization, an international perspective is important in all three (four) aspects. Key elements for

an integrated (economic and environmental) policy for sustainable development will be presented. It is

emphasized that a policy aimed at sustainable development, understood as the simultaneous

achievement of competetiveness, employment and dematerialization, must address micro-, meso-,

macro-, as well as meta-level problems.

This paper can be downloaded from: www.wupperinst.org !

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Hinterberger/Luks: Dematerialisation, employment and competitiveness ISEE Plenary Paper

"In the past, economic development and environmental protectionwere considered mutually antagonistic goals. Promotion of onewould inevitably mean damage the other. In recent years theconcept of 'sustainable development' has attempted to overcomethis apparent conflict: it is now widely accepted that by integratingenvironmental concerns into economic policy, business andindustrial activities can be 'greened'." (Jacobs 1994, p. 1)

1 COMPETITIVENESS, EMPLOYMENT AND THE ENVIRONMENT:A MAGIC TRIANGLE

The title of our conference, "Beyond Growth: Policies and Institutions for Sustainabiliy", reflects not

only current priorities in ecological-economic research, but also the necessity of action to be taken on

different levels. Sustainable development will not be achieved without appropriate policies, and not

without social and economic institutions that "fit" a sustainable development pattern which is "beyond

growth". In this paper, we will deal with this problematique in an international context: How are

competetiveness, employment and the environment related to one another in a more and more

globalized, at least internationalized, world? And what does this imply for political and institutional

steps that have to be taken in order to achieve a development that serves today's as well as

tomorrow's needs?

There is a level below the general dimensions of sustainable development (economic, social,

ecological) which has to be considered to reach effective and operationable policy goals. This paper

will discuss such goals and stress the interrelations. In general and qualitative terms, these goals can

be described as securing the (economic, social and ecological) development conditions of economic,

social and ecological systems (see figure 1). Among the key features are:

¥ competitiveness for securing economic development,

¥ employment as a basic feature of social development and the

¥ reduction of throughput as a precondition for environmental sustainability.

It seems important to separate conceptually the level of goals from the level of policies that are

designed to achieve these goals. To emphasize the conceptual distinction we make: we do not claim

that competetiveness, high employment and througput reduction respresent the "fulfillment" of

sustainable development. What we have in mind is that there is a level below the general dimensions

of sustainable development (economic, social, ecological) which has to be considered to reach

effective and operationable policy goals. We present of course one interpretation. We think, however,

that the interpretation presented here includes rather significant goals: For competetiveness and

employment this becomes evident even from a superficial view of the political scenery, while the

goals of throughput (or scale) reduction is a core policy subscribtion to most ecological economists,

which is not yet on top of the political agenda.

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Quelle: F. Hinterberger, 1998 Wuppertal Institut UM – 203e-1/98

The social dimension:Intra- and intergenerational equity,

rough indicator: employment

The economic dimension:Efficiency, structural change,

and competetivenessrough indicator: GDP per capita

The ecological dimension:Preserving ecosystems

rough indicator: material flows

SustainableDevelopment

Figure 1: Sustainability as securing development conditions of ecological, economic and social systems

Wherever political organisations are concerned with visions for future developments, competetiveness

in a globalized world is key, as well as cures for mass unemployment and, increasingly, also the

problem of environmental pressures arising from all sorts of economic activity. But the

connectedness among these goals is ambivalent. There are positive and negative relations. A central

question in this context is therefore the compatibility of competetiveness and employment on one

hand, and ecological goals on the other.

The economic dimension of sustainable development relates to competition and

competitiveness, which today are mainly perceived as matters of (relative) costs and (unit)

productivity, a view which is too narrow and too static to fully understand differences between

countries and regions (see Hinterberger/Luukkanen/Messner et al. 1997). In the longer run and from a

dynamic/evolutionary perspective, it is rather the innovative capacity of a society which determines its

perfomance in relation to others. For this, relative costs and supply side conditions are only but one

determining factor. Others are the society's institutions (from informal networks to the education

system) as well as the values and beliefs of its members toward innovation and competitiveness, but

also mutual trust, the ethics of work etc. Faucheux et al. (1997, 101) define competetiveness as "a

dynamic process involving learning, adaptation, and innovation." Messner (1997) shows that

differences in the economic performance between, for example, Latin America and South-East Asia

cannot be explained by a neo-classical look at factor availability and relative prices nor by some kind

of dependency theory. It is rather a more complex picture of micro, meso, macro and meta conditions

that help to explain such differences. Indicators of economic development/competitiveness are (the

growth of) gross domestic product and (human-made) capital stocks, representing the genuinely

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economic factor of production. While the other two, labour and land/nature can be regarded as

primary inputs, representing nature and society, human-made capital can eventually be traced back to

the other two that were necessary to produce it.

Employment as a key element of social development and therefore of the social dimension of

sustainable development is certainly closely related to the economic performance. But here not only

economic growth and the relative price of labour are relevant. Zweim�ller (1998), for example, shows

how the interaction of innovation, costs and demand/supply conditions on labour markets co-

determine empoyment as a macro-economic result. As a quantitiative indicator we may here refer to

the rate of (un)employment (measured in the number of persons employed or unemployed) and the

volume of employment (measured in working hours). It is difficult to assess ex ante the employment

effects of environmentally positive developments (for an overview over German studies analysing the

relationship between environmental protection and job creation, see Klingert et al 1998). In the

following, we will dicuss some past developments in the relationship between environmental

indicators and employment. One important finding to be shown is that there is not at all a fixed

relationship between employment and these indicators. In his 1994 study for the WWF, Michael

Jacobs showed that "environmental policies do not, in general, destroy jobs. On the contrary, many

environmental measures are likely to be job-creating. Even more importantly, it shows that

environmental improvement is likely to become an essential part of economic development over the

next twenty years - to the extent that failure to enact environemtal protection measures may lead to

worse economic performance, and therefore ultimately fewer jobs." Today, such a view is widely

acknowledged and fostered by many studies. On the other hand, the extent of unempoyment today

has reached a magnitude that makes it impossible to solve the problem simply by 'greening jobs'.

Let us now turn to environmental sustainability. In economic (and still general) terms, the goal

can be interpreted as a reduction of global external effects of today's economic activities on other parts

of the world and on future generations (which shows how strongly the socio-ethical goals of

intergenerational and intragenerational justice are related to economic and ecological issues) The

problem is the difficulties (or rather impossibility) to determine externalities; climate change is just

one global environmental problem and most probably there are more to come (and understand) in the

near future. Even if an internalisation were possible, this would lead to a much too detailed

intervention of public policy into economic processes (see Hinterberger et al. 1996). "Unlike past

technological 'externalities', current environmental problems stem from the accumulation of small

effects, which at some point in time appear to exceed the critical boundaries of the ecosystem or at

least the public perception of those boundaries" (Kemp/Soete 1992, p. 438). In this paper,we are

concerned with this kind of global environmental threats. Environmental policy of the past has been

running behind the ever changing faces of the different environmental problems. Such an analysis has

lead to the claim that a more comprehensive view is needed on environmental problems and the policy

aimed at these problems.

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We will present such a comprehensive vision of environmental problem in the following

section. Before elaborating the vision, however, it seems appropriate to indicate how the approach we

are suggesting relates to our evolutionary vision. This seems also necessary because the indicator we

present is not (yet) as accepted as, for example, GNP and unemployment figures as socioeconomic

conditions. As already indicated, we understand sustainble development above all as the maintenance

of development conditions of different systems. In the case of ecological systems, this means that

anthropogenic interventions must be substantially reduced. There is one dimension that is of utmost

importance in this respect: the scale, i.e. the throughput of the economy. This one (albeit huge and

complex) dimension is key for the development conditions of natural environments. Hence, the

reduction of complexity we present in the following section is perfectly compatible with our

evolutionary vision Ð indeed, the former is a direct consequence of the latter.

2 MATERIAL INPUTS: THE WUPPERTAL APPROACH TO ENVIRONMENTALSUSTAINABILITY

The Wuppertal Institute developed a methodology of material flow accounting which can provide

comprehensive indicators of the anthropogenic interference into nature. This follows the idea that a

reduction of material flows is necessary to reduce environmental externalities. While the quality of

material flows plays a decisive role for the ecological stability of concrete eco-systems, their quanity

can be regarded as a very rough but comprehensive indicator of human/societal/economic

interventions into nature, which should be reduced: this is how we can define the term

dematerialization (Schmidt-Bleek 1994). It is widely acknowledged within ecological economics that

the scale of the economy is a central determining factor for ecological sustainability (see especially

Daly 1991), and the material flow approach is a method that can operationalize this scale in a

meaningful way (see Luks 1998a, 1998b, Ch. 8).

The Wuppertalian methodology for material input (MI) accounting (Schmidt-Bleek et al 1998)

can serve as an operationalization of Herman DalyÕs concept throughput/scale (see Luks 1998a). It is

obvioius that resource use does not only include the utilization of source functions but also the

pressure put on ecological sinks. To be meaningful from an ecological point of view, it must also

include the anthropogenic material movements that do not enter the economy. Measuring material

inputs is an operationalization of scale, since material input minus stock accumulation equals the

output of the industrial metabolism. Hence, with material input figures for, say, regions and

companies, at hand, we can determine the scale of the throughput of an economy. By including

Òecological rucksacksÓ or Òhidden flowsÓ, material input (MI) is the total material and energy flow (in

mass units like kg or tons) and includes not only the materials converted within the economy but also

those "left aside", for example at mining sites. As hidden flows may also be harmful, this broad

concept of scale is clearly beneficial.

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The input approach concentrates on the sources of matter-energy-flows, as opposed to the

emphasis on emissions of the environmental policies currently in practice. Since the quantity of

ressource movement and the intensity of use of material, energy and area represents a hazard to the

environment, the input oriented ecological economic policy advocates for ÓdematerializationÒ, that is

a reduction of the material flows set in motion by human intervention into the ecological system. This

can be achieved by a very far-reaching structural change of the economy. At the same time this

approach is based on the precautionary principle taking into account the interests of future

generations, global aspects and the long term stability of the ecosphere.

One of the ways to quantify material throughput is the MIPS (material intensity per unit of

service) concept. 1 Material inputs are related to a unit of service by calculating from the extraction

until the disposal of a product all the material movements activated for the provision of any kind of

service. These material flows are divided into movements of soils, water, air, abiotic and biotic raw

material. The total material input is then related to the units of service available from the product to

receive MIPS -the material input per unit of service. These are units of use, which help to make

different products (i.e. different kinds of satisfying needs) comparable. A growing number of

enterprises already commit themselves to reducing the material intensity per unit of service (or the

increase of units of service with the same MI) by rethinking and reorganizing their production process

(Liedtke et al. 1998).

The same methodology of material flow accounting has also been used to calculate the material

flows of entire economies (Bringezu 1997). The Direct Material Input (DMI) includes those flows that

enter the economy for further processing, e.g. grains and petroleum. The Total Material Requirement

(TMR) refers to the sum of MI and rucksacks and includes anthropogenic landscape alterations: "It is

the total material requirement for a national economy, including all domestic and imported natural

resources. TMR gives the best overall estimate for the potential environmental impact associated with

natural resource extraction and use" (Adriaanse et al. 1997, 8). In other words, TMR, is the sum of

DMI and ecologial rucksacks.

Of course this concept is criticized for not taking into account the quality (e.g. toxicity) of

substances. The use of the material input framework may involve consideration of all known eco-

toxicities of the material flows associated with a good or service. Other things equal, a reduction of

material input must lead to a considerable reduction of toxic chemical and waste flows through the

technosphere and into the environment. What is more, in most cases it is impossible to distinguish

between "good" and "bad" throughput. There are, however, cases in which it is obvious that such a

differentiation is feasible - plutonium, for example, has a toxic quality that is very different indeed

from, say, sand.2 In many (indeed most) cases, however, it is not possible to anticipate the impacts

1 See www.wupperinst.org for more details.2 Biotechnology is an obvious case: it may be a material-extensive technology with possibly dangerous effects.

These dangers have, of course, to be taken into account. A low material throughput cannot per se serve as anargument for the desirability of a technology (Hinterberger et al. 1996, pp. 89ff.).

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human activities have on the natural environment. Besides that, it is of course not only the quality but

also the quantity of throughput that disturbs natural systems. To make this clear one could think of an

industrialized economy that does not produce toxic substances at all - just "good" throughput at

today's level. Would this imply to environmental problems be solved? Clearly, the answer is no. The

waste problems, the greenhouse effect (CO2 is not a toxic substance in the traditional sense), soil

erosion, the threat to biodiversity - none of those problems would be solved if we just "clean up our

throughput" but let it continue to grow. Reducing scale means reducing the potential ecological

impacts of economic activities. The throughput of the industrial metabolism is a crucial factor for the

sustainability of economies. The scale metaphor, which refers to the volume of this throughput, has

provided important insights into this question and has contributed to the acknowledgement of the

importance of the quantity of matter and energy used in the economic process. Reducing scale is

necessary, certainly not sufficient to achive sustainable development.3

"In the end, whether you think economic growth will be beneficialor harmful to the environment in the long run remains a matter ofbelief. Science is not able to give one view preference over theother."Neumayer 1998, p. 172)

3 SOME EMPIRICAL EVIDENCE: THE RECENT HISTORY OF (DE)COUPLINGGROWTH FROM MATTER/ENERGY FLOWS

In macroeconomic terms, we must come to grips with the potential as well as the limits of delinking

(both of which have, of course, considerable political aspects). Taking into account the social aspects

of sustainability, we need to ask wether GDP growth does really increase the economic and social

sustainability or the quality of life. If one considers well-being, services, GDP, material flows and

environmental impact, i.e. a "chain" that relates the purpose of economic activities with the ecologial

impact of these activities, enourmous potentials for delinking become evident, at least from a

theoretical point of view (for a thorough analysis of this issue, see Femia et al. 1998, Malaska 1998).

Well-being can clearly be kept constant, while impact is substantially reduced if

¥ (A) the "well-being intensity of services",

¥ (B) the "service intensity of income/production",

¥ (C) the material productivity of income/production", would increase and/or

¥ (D) the environmental impact of a material throughput would shrink.4

3 Suggestions for a more detailed concept, which allows for qualititive differentiations of material flows are in

preparation (Hinterberger et al. 1999), but available empirical data concentrates mainly on the bulk materialflows for countries, companies, products and services

4 Should the factors just mentioned all decrease by the same proportion, a tenfold reduction of their product isreached by a 1.78fold change in each of them. Spreading this in a time span of, say, 50 years, a 1.6% annualchange of each factor would more than suffice. Changes of such a magnitude are not unusual within the realmof a "normal" technical and structural economic change.

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While such a view seemed quite radical some years ago, it is today accepted by large and growing

parts of industry, international and national organisations as well as by environmentalists. The

political problem is how to give to economic development a direction which is needed for sustainable

development. But what about the "real world" Ð what can we learn from empricial evidence?

There are theoretical and empirical aspects to the "delinking" of employment, material flows

and GDP; both structural and scale effects have to be considered. The empirical debate on the

economy-ecology-relationship is dominated by the so-called Environmental Kuznets Curve (EKC). A

general "Kuznets-relationship" has so far not been established, i.e. it is not at all certain that

environmental pressure increases with rising income and then, after a certain plateau, starts to declince

("inverted U"). As far as future developments are concerned, the EKC-thesis gives no reason to be

overly optimistic about an "automatic" delinking of economic activities and environmental pressures.

Up to now, problems related to the use of indicators, to the question of explanatory variables other

than incomes and the to the models applied all leave it an open question whether there is actually

something like a EKC. Caution should be the order of the day.5 The issue of the appropriate indicator

is of special interest: while some studies observe EKCs for some pollutants, highly aggregated

indicators so far do not reproduce EKC-results (Rothman/de Bruyn 1998, p. 145). From this follows

that "policy matters", i.e. that political action is needed to realize delinking potentialities. Since one

cannot manage what cannot be measured, appropriate indicators are necessary. Here, a

comprehensive indicator such as TMR is of special interest, because the magnitude of TMR would not

change over time if

¥ a shift of material intensive production occurs from domestic production to imported goods and/or

¥ different materials would be substituted for each other.

Ayres (1994, 17) has observed that "narrowly conceived environmental policies over the past 20

years and more have largely shifted waste emissions from one form (and medium) to another, without

significantly reducing the totals" (our emphasis). The "totals" are of course what we refer to as scale

or TMR. Hinterberger/Renn/Sch�tz (1998) present a time series of some of the quantitative indicators

presented in the preceeding section (figure 2):

¥ material flows (measured in Total Material Requirement and Direct Material Input6; see Adriaanse et

al. 1997) and

¥ GDP and capital stocks as a measure of economic activities.

5 See Rothman/de Bruyn 1998 and the other articles in the special issue of Ecologial Economics [May 1998] on

the EKC as well as de Bruyn/Opschoor 1997 and Neumayer 1998.6 While the first (abbr. TMR) is more compehensive, the latter (DMI) excludes material flows from abroad as

well as overburden in mining.

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1,00

1,20

1,40

1,60

1,80

2,00

2,20

2,40

2,60

2,80

3,00

time

GDP

DMI

TMR

Index: 1960=1

1960 19941970 1980 1990

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

capital stock

GDP

working hours

Index: 1960=1

time1960 19941970 1980 1990

Source : WI Wuppertal Institute UM-740/741e / 98

Figure 2: Relative delinking (weak dematerialization) from economic growth in Germany

The (West) German TMR has grown by 55% between 1960 and 1990, four fifth of which areattributable for the first 15 years of that period of massive (re)construction of the German economy.

There is some sort of dematerialization, which, however, cannot be attributed to conscious

dematerialization policies. Many natural resources, which are part of the TMR, may be ecologically

scarce, but not economically scarce (see Hinterberger et al. 1998, 26; on the relationship between

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economic and ecological scarcity see also Luks 1998a). The German economy, like other

industrialized economies, shows a structural break around the two energy crises, which can be seen in

figure 2. While GDP and capital stock grew steadily, both indicators of material flows ceased to grow

after 1974.7 German unification (the merger with the less efficient economy of the former GDR) lead

to a sharp increase of material flows through the German economy (higher than the growth of GDP

and population through unification), hence we have two turning points with respect to the material

flows of the German economy, which were also of outstanding socioeconomic importance: The oil

crises of the 1970s and the unification of East and West Germany.

The preceeding remarks show what - in similar terms - many other studies have shown

before. But only very recently do we have a comprehensive picture of material flows instead of rather

singular invironmental indicators. What this data show is that despite of an increase in resource

productivity, there is no indication for dematerialization, i.e. a decrease in resource flows in absolute

terms.8 Investiating this in more detail, we can find counter-balancing effects. A recent study breaks

down the relation between economic and ecological indicators to 55 sectors of German input/output

tables. The relationship between productivity and growth in the ecological context resembles the same

relationship with respect to production and job creation. Here, productivity increases must be

countered by growth in production in order to aviod unemployment due to technical progress. Moll et

al. (1998) investigate the changes in level and structure of economic indicators and material

throughput of the German economy between 1980 and 1990. While material flows (in terms of TMR)

increased only by 0.8 % in that period, GDP grew by 25 %. A decomposition analysis shows that

ceteris paribus this would have increased TMR by 13% while structural changes forced TMR to

decrease (by 22 %). Additionally, resource extraction technologies became more inefficient (which,

again ceteris pariubus, would have increased TMR by 8 %). Together with some other (but minor)

effects that lead to keep TMR in fact almost constant (+0.8%)(p. 28).

A similar story can be derived from a look at the changes in final demand (consumption, investmentsand exports). Especially an increase in the demand for non ferrous metals and non ferrous metalproducts was responsibe for increasing material demands of the economy: The TMR of this sectorincreased by 70.9%. The production of road vehicles used 24% more TMR in 1990 than in 1980.Other sectors that contributed to an increase of TMR are electric power, steam, hot water (49.7%),musical instruments, toys, sports equipment, decoration (47.1%), electrical machinery and equipment(28.7%) and chemical products (19.9%). On the other hand, the TMR of coal and products of coalmining went down by 69.4%, iron and steel by 20.2%, building and civil engeneering work andinstallation and building completion works (14.4. and 18.9%, respectively), products of mining 7 Hinterberger/Renn/Schütz (1998) show that looking at growth rates rather than absolute figures, a delinking of

material flows from GDP cannot be proven.8 With de Bruyn/Opschoor (1997, 258) we can differentiate between strong and weak dematerilization A falling

material intensity would in this sense represent weak dematerialization, while strong dematerialization means areduction of the absolute amount of TMR:9 Something similar happened some time later with ãcapitalÒ,which was theoretically attacked in the course of the Cambridge-Cambridge controversy in capital theory, whichquestioned the possibility to measure capital without determining income distribution, which is in turndepending on how we measure capital.

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(excluding coal, petroleum, and gas) (46.6%) and foundry products (33.3%). What is of interest isthat the accountability of different sectors has important political implications, since knowing thecomposition of the overall material use means knowing where ecological economic policy canintervene with possibly best results (see Moll et al. 1998, pp. 31f.).

Wuppertal Institute UM-739e/98

Sectors with increasing TMR

non ferrous metals and non ferrous metal products plus 70.9%

production of road vehicles 24.0%

electric power, steam, hot water 49.7%

musical instruments, toys, sports equipment, decoration 47.1%

electrical machinery and equipment 28.7%

chemical products 19.9%

Sectors with decreasing TMR

coal and products of coal mining minus 69.4%

iron and steel 20.2%

building and civil engeneering work 14.4%

installation and building completion works 18.9%

products of mining (excluding coal, petroleum, and gas) 46.6%

foundry products 33.3%

Table 1: Industries with increasing/decreasing material flows, West-Germany 1980 Ð 1990

While the figures presented give important information, there are problems that are on a deeper layer

of social reality. From an evolutionary point of view, the question is rather about the feasibility of

different development paths than about the mathematical magnitude of certain relations. The question

is, whether a decrease in material throughput would harm the development conditions of socio-

economic systems. Many economists believe that market economies have an inherent ÒdriveÓ toward

growth (in monetary terms of GDP/capita), which is closely related to the innovative capacity and

other features that ensure socio-economic well being. The fear is that a non-growing economy would

sooner or later fall into a downward spiral of economic crises, and that the decline in material

production and/or monetary income could in the long run not be compensated by gains in well-being

per unit of income. Hence, even if the link between material wealth and individual well-being were

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quite loose, a decline in material production and/or monetary income creation would trigger serious

losses in well-being. This, however, cannot be "proven" in a way that would be regarded as

scientifically satisfying. In particular, no empirical study about past development can give us secure

information about future developments. Social reality cannot be captured in a few formulas, no matter

how elaborate. The evolutionary perspective reminds us that while path dependency is definitely an

important feature of changes, "surprises" (for example technological innovations) will always play a

role and can lead to developments that cannot be predicted. The exploding importance of

international/global issues since the early seventies is but one example.

4 LABOUR AND MATERIAL FLOWS AS FACTORS OF PRODUCTION

The issue of employment is of course of particlar interest in this respect. It is often assumed that an

ecologically bounded economy will suffer from serious employment problems. But is this necessarily

so? In this sections, we present some theoretical and empirical considerations. Bleischwitz (1998)

discusses why in the traditional economic discourse, labour productivity is considered as a key issue

while ressource productivity (indicating the efficient or inefficient use of natural ressources) is

neglected by most economists. Obviously this has changed since the time of Classical economics

(Smith, Ricardo, Malthus and many others) whoconsidered land as an (somethimes the) important

factor of production. One reason seems to be rooted in the rise of empirical economics, where it was

not at all clear, how to measure ãlandÒ or the use of nature in a similarly comprehsnive manner as

ãlabourÒ and ãcapitalÒ9. The publication of data for the material throughput of national economies

(such as TMR) enables us to bring back ecological economics into the debates of macroeconomics,

which uses differnt factors of production and explains what happens if their relation changes by some

exogenous or endogenous developments. To develop a better understanding for these relationships,

the knowledge about (the importance of) material flows can be combined with conventional

macroeconomic reasoning. We still need a "macroeconomics of dematerialization", which would be

part of an environmental macroeconomics as envisioned by Daly (1991; 1996).

Material input (MI) can be viewed from two sides. On the one hand - as expressed earlier -

they represent a rough estimate for environmetnal externalities. On the other hand, they are a

fundamental basis of any economic activity (you cannot produce something from nothing). In this

view, MI can interpreted as a factor of production, the use of which should be reduced for ecological

reasons. This makes material inputs a bit different from other factors of production (labour and

capital). One attempt in this direction was made by Schuhmacher et al (1997), who include material

flows in an econometric KL(E)M production function, in which KL(E)M stands for capital, labour

(,energy) and materials; while other studies used refined mateials to operationalize ãmaterialsÒ, TMR

and especially DMI figures are more comparable with labour and capital in terms of a primary factor

of production. Since DMI excludes (imported and domestic) rucksacks, it can be interpreted as a very

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general material input factor. The problem is that (relative) prices of resource extraction do not reflect

the ecological rucksacks, wich distorts the results of standard econometric modelling.10

As for employment, the number of jobs in Germany has increased (between 1960 and 1990)

by 8.53%. There is, as in all developed economies, a clear tendency for increasing labour

productivity. For example: the productivity of labour in Germany has increased by 3.78 per cent per

year between 1960 and 1990. As is well known, technical progress with a bias towards labour

productivity has so far lead to massive unemployment with parallel detrimental environmental effects.

What is obvious from the figures just presented that there appears to be no fixed relationship between

growth, use of environmental resources, and employment. What is more, there have so far be no

deliberate policies to induce dematerialization processes, but even so, there seems to be at least some

form of delinking. While this does by no means indicate a "Kuznets-relationship", it shows some

potential for delinking that has been utilized in the past. Technical progress, however, has so far been

biased towards labour saving and growth effects (induced by this increase in labour productivity)

have eaten up the modest increases in labour productivity. Hence, giving technical progress a new

direction, i.e. influencing innovations in a way that resources and not labour is saved, will be key for

sustainable development.

From the empirical data presented in the previous section, we can now derive the development

of factor productivities. Figure 3 shows that both DMI and TMR rise (although much less than labour

productivity), while material flows in absolute terms (figure 2) are not reduced.

0,5

1

1,5

2

2,5

3

time

TMR productivity

labour productivity

DMI productivity

capital productivity

1960 1994

index: 1960=1

1970 1980 1990

Source : WI Wuppertal Institute UM-742e / 98

Figure 3:Factor productivities in Germany (indices)

10 If we include energy, materials should exclude those material flows related to the use of energy (see Manstein

1996).

- 14 -


Another attempt was made by Wenke/Hinterberger (1998). This study shows that (over the period

from 1960 to 1990 in Germany, material flows (in terms of DMI) correlate stronger with GDP than

labour. It also reveals a clear contribution of (changes in) material inputs to economic growth, which

is considerably smaller than that of labour and capital, but nevertheless significant. Interestingly,

elasticities of production for material inpus are considerably higher in periods of recession than in

phasees of economic boom, while this relation is opposite for the other factors of production

(including energy).11

A first simulation of scenarios including data for material input and employment was made by

Meyer/Lutz (1998). One of the questions was, what would have happened if over the period from

1980 to 1990 no increase in the relative share of the service industry had occured. The study is based

on a dynamic input/output model and shows that the actual trend of economic development (with an

ongoing trend toward more services) has led to an increase of domestic production as well as imports,

it has reduced employment and increased material flows. 12

5 THE "FOURTH CORNER": THE INSTITUTIONAL SETTING

In the first chapter of this paper, we discussed competitiveness, employment and dematerialisation as

three "corners" of a magic triangle that are crucial both to understand the underlying processes as well

as their interrelations and to re-formulate sustainability as a normative imperative. Competetiveness,

employment and a healthy environment are highly interrelated issues in that achieving one goal always

has implications for the others. What is necessary, is therefore a policy that makes these goals

mutually compatible. Of crucial importance in this respect is the institutional environment in which

economic and political decisions are madeIn all three fields of consideration, external effects are

crucial. Faucheux et al. (1997, 131) emphasize that "a key factor for economic co-ordination

becomes the development of alliances of government (national andinternational institutions), the

private sector (trade and industryassociations), and people (consumer associations, NGOs of all

types) to promote a common vision of the world, along with new standards of conductgiving

legitimacy to certain orientations."

Kemp and Soete (1992) refer to both positive and negative externalities, which are related to

technical progress. But they "work" in different directions. While the benefits of technological

innovation widely diffuse, the economic risks are mostly borne by the limited group of innovators.

Negative environmental externalities, on the other hand, are mostly more diffuse than the direct

economic benefits to income earners from certain activities (see also Rennings/Hemmelskamp 1998,

p. 3). This fits to considerations by Meyer-Stamer (1998), who shows that while on the micro level,

innovations seem to appear at random, on the macro level, innovation is highly path dependent. This

11 Similar results can be obtained from looking at total factor productivities (Wenke/Hinterberger, 1998).12 Scharnagl, Spangenberg et al. (1998) have used similar data for a European simulation study by utilizing a

system dynamics modell (called ãSuEÒ).

- 15 -


means that macro-conditions, but also institutions, are the crucial variables for innovative capacity,

not only in a regional or national, but also in an international context. A German research project on

innovative effects of environmental policies defines environmental innovation as "measures by all

relevant agents (companies, politicians, lobbyists, churches, private households) that develop, use or

introduce new ideas and activities, products and production processes leading to reduce environmental

pressures or contributing to ecological sustainability (FIU 1997). This includes technical, social and

institutional innovations (Rennings/Hemmelskamp 1998). From this follows that innovations

contribute to all three aspects of sustainable development.

The effects of individual decisions on the labour market can be regarded as another externality,

which is again diffuse in relation to the individual decisions. In turn, it is not only the individual

decison on participation in the labour market (but the whole framework from social security to the

general approach to employment, work and private activities).

If effects are diffuse, they cannot be reduced or increased by simple mechanisms. It is rather

the instituional setting which is important for (changes in) these processes. Therefore the institutional

setting behind economic and social processes is decisive and can be formulated as a "fourth corner" to

our triangle. Since it makes up another dimension, we should rather speak of pyramid than a flat

figure with four corners (see figure 4).

Quelle: F. Hinterberger,1998 Wuppertal Institut UM – 203e-2/98

The institutional settingnetworks and guiding principles

Figure 4: The institutional setting: a pyramid of sustainable development

"Insitutions" should be understood in a broad sense, i.e. not only as formal institutions, such as

political organisations or legal frameworks, but also comprising "informal" facts such as preferences,

behavioural patterns and habits. Socio-economic changes require changes in insititutions. Any market

- 16 -


activity is embedded in an insitutional frame, which co-determines its outcome. Therefore it is not

only the price-relations that need to change in order to achieve more ecologically (and socially)

oriented market decisions. Societies have and need guiding principles so that individual agents can

relate their behavior to each other. These, in turn, are rooted in a society's system of (permanent)

education, its culture (is it innovative and attracted by fashions, for example) and the organisation of

its communication (existence of networks, the role of non-profit organisations etc.).

In other words, the meso and meta levels of a structured society are equally important as the

the micro and macro conditions. This is an interesting parallel to Esser et al (1996), who show that

similar processes and mechanisms are relevant for determinig the an economyÕs competitiveness (and

terhefore also the potential for job creation): education, culture, the functioning of networks and the

existence of shared beliefs (for or against world market orientation) are as crucial for a societyÕs

success on the world markets as (relative) costs and innovation capacities (see next section).

On the other hand, while the institutional setting is important, price relations do affect market

decisions and therefore ecological "guard-rails" are necessary to avoid external effects and to keep

socio-economic developments away from degrading the bio-physical basis of our existence. We will

come back later to the concrete measures that can be taken in order to implement such guard rails in

form of eco-taxes or tradable permits. From an institutional perspective, it is important to stress,

however, that these measures are difficult to employ if formal and informal insititutions - the legal

framework as well as the societal beliefs - contradict such a policy. In other words, guard-rails

("Leitplanken") and guiding principles ("Leitbilder") re-inforce each other, and any policy to change

the development must take this interrelation into account in order to be effective.

A similar view is expressed, for example, by the UN Comission on Sustainable Development

when it proposes four levels of indicators: economic, social, ecological and institutional. But the

concrete formulation of indicators for a country's institutional setting is very difficult. In the context

of this paper, dematerialization is more than a technical effort and a quantitative measure of ecological

progress: if a substantial reduction of material flows is to be achieved, it must be translated into

ecological guard-rails and guiding principles.We will show in the last chapter of this paper that it is

possible and advantagous (compared to more traditional environmental policies) to link these with

policies for social integration and competitiveness. In any event, the path dependency of

socioeconomic development has to be taken into account. One important issue of the current paths of

most economies is the stong influence they experience form the world-wide trend toward

globalisation, which brings us to our next topic.

6 SUSTAINABILITY IN A GLOBALIZED ECONOMY:AN INTERNATIONAL PERSPECTIVE

Just as "sustainable development" has dominated the political and scientific discourse of the 1980s

and early 1990s, "globalization" has become the buzzword of the late 1990s. While the first,

- 17 -


however, is a normative concept expressing a desired development, the latter is mainly expressed as a

fact that influences many other developments and especially the scope for national economic, social

and environmental policies. This is not the place to assess the globalization thesis or to investigate the

definitions, causes or implications of globalizing processes. What is beyond doubt is that the

international scenery has changed since the 1970s and especially during the last decade. Economic,

social, cultural as well as ecological problems all have a "global dimension", in that developments at

one place tend to have implications for other places.13 This is also emphasized in one of the most-

quoted definitions of globalization which has been formulated by the British sociologist Anthony

Giddens (1990, 64), who defines globalization as "the intensification of worldwide social relations

which link distant localities in such a way that local happenings are shaped by events occuring many

miles away and vice versa."

To what extent competetiveness is affected by globalizing processes, is one of the hotly

debated issues in this arena. Some authors (such as Altvater/Mahnkopf 1996) suggest that the nation

state becomes powerless and that political decisions in general can have only little impact in a world

that is dominated by an ever expanding global capitalism. On the other hand, books like Globalization

in Question (Hirst/Thompson 1996) ask whether the "strong globalization thesis" is valid in the first

place and whether globalization is just a "necessary myth" (Hirst/Thompson 1996, Ch. 1). They

suggest that while we are clearly moving towards an inter-national economy, a globalized economy,

in which single nations have no power and where truly trans-national corporations are the most

important global player, is not in sight. Several authors point to the fact that in pure quantitative terms,

the world was at least as "globalized" in the period from 1870 to 1914 as it is today. Few, however,

would argue that there are no qualitative differences between that period and the late twentieth

century. While scope and intensity of globalizing/internationalizing processes are still contested, we

can be sure that there are changes on a global scale that affect economic, social and ecological

developments.

Also on this level, we can oberserve structural and scale effects. Obviously, what is termed

globalization can be seen as a gigantic structural change with many effects, among them scale effects

with respect to economic activities as well as ecologically relevant flows. Indeed, many authors (in

particular those in the tradition of the French regulation school) see the change from fordism to

postfordism as a central cause for the change in the international scenery (see, for example, Hein

1994, 1995, 1997; Lipietz 1997). That this structural change has many Ð and very different Ð effects

on the labour market situation in both industrialized and developing countries is well known.

What should be emphasized is that "cutthroat competion" between nation states in order to

attract investment flows cannot be sustainable in a socio-economic sense, just as the current "models"

13 Faucheux et al. (1997) differentiate economic and ecological globalization: They define economic globalization

as "the manifestation on a worldwide scale of the social values and requirements of business competition. (...)Ecological globalization, by contrast, manifests itself in environmental matters such as free-market issues inthe context of the WTO (...); international agreements on the ozone layer, acid precipitation, greenhouse gases,etc; ownership claims to the products of bioengineering; and the transport and disposal of hazardous wastes"(their emphasis).

- 18 -


of development in the rich countries cannot be sustainable on a global scale. If competitiveness is just

seen in the reduction of (relative) costs, this could lead to a beggar-my-neighbour policy, not taking

into account the economic and social needs and necessities of many people in all countries. High

unemployment poses not only social problems, but also reduces effective demand and therefore the

potential for further development in all parts of the world. Also for these reasons, the broader view of

(systemic) competitiveness as presented in the ealier sections, is more appropriate especially from a

globalization point of view.

Last but not least, the material consequences of these developments must be taken into acount.

This brings us back to our approach to ecological problems: Today, the material consumption in the

industrialized parts of the world has reached a level (50 - 80 tons of TMR per capita per year), which

can be buffered by global eco-systems only because the majoritiy of the global population still far

below these figures.14 In other words, even if we cannot determine, where the ecological limits to

global economic growth are: the environmental space (Opschoor 1995) is limited. While the

environmental space concept is an operationalization of the general call for sustainable development

as formulated in the Brundtland-Report, our material input approach is developed to make this

concept more concrete: to make sustainability accountable.

We have emphasized above that the goals of competetiveness, employment and scale reduction

can be derived from the more general goals of economic, social and ecologial sustainability. We have

also argued that the compatibility of these goals is the central problem. This implies that on a scientific

level, these goals have to be taken into account simultanuously. As an empirical evidence for the

current situation, Dahme et al. (1998) present one possible suggestion to link TMR data as an

environmental component with indicators of socio-economic developments. Their example is the

Human Development Index (HDI) as published by the United Nations Development Programme (see

table 2. Empirical data for such an ãSustainable Human Development IndexÒ (SHDI) for four

Country HDI Rank1 HDI TMI TMI Index SHDI SHDI Rank

USA 1 (4) 0,942 84 0,06 0,721 4

Netherlands 2 (6) 0,940 67 0,25 0,768 2

Japan 3 (7) 0,940 45,2 0,50 0,831 1

Germany 4 (19) 0,924 76 0,15 0,730 3

Table 2: Example for a Sustainable Human Development Index (SHDI) 1 In brackets are the actual HDI rankings,

countries (USA, Japan, Germany and the Netherlands) show a re-ranking of SHDI as compare with

HDI for 1994. As a result, the SHDI values of all countries investigated would fall compared to the 14 Just to give an example. Helmut Sch�tz from the Wuppertal Institute estimates, for example, a TMR per capita

of 2 - 5 tons per year for Viet Nam.

- 19 -


original HDI values, and the US would drop considerably behind other countries because of its higher

ecological impact as measured in material flows). For Viet Nam, with an estimated TMR per capita of

2 (HDI value: .557, rank: 121) the SHDI would increase to .667, that is, much closer to industrialized

countries.

What must be taken into account, of course, is the fact that countries like Viet Nam (just to give an

example) strive to become industrialized. As a consequence, the TMR of the less industrialized

countries will definitely increase in the future, which will most likely lead to an unsustainable

development on a global scale. This is exactly the rationale for the call for a dramatic reduction of

material throughput (dematerialization) in the rich (OECD) countries, in order to allow for more

environmental space for catching up (in material input terms) in other parts of the world: In the end, a

substantial reduction of global material flows can only be achieved in the course of technological,

structural and institutional changes in all parts of the world

From this follows that the world-wide matter-energy-throughput, must be a maintarget of an

ecologial economic policy in a world that is characterized by global financial and trade flows. Just as

the economic transactions link different regions and nations closer together, so the material flows

around the globe link these enteties in an ecological sense. The figures presented here show that there

are means to conceptualize and influence the material inputs of economies. They further indicate that

there is very likely a huge potential for a scale reduction that does not automatically lead to both

economic disasters and mass unemployment. It must become a primary target of regional, national

and last but not at all least "global" policies to use this potential. Even though some aspects of

globalization were accelerated by political decisions, the different globalization processes cannot

simply be stopped or even turned back. In a sense, the policy-relevant question then might be not

whether certain processes are "good" or "bad" but what kind of globalization is sustainable (see

Sachs et al 1998)? How a global governance of material flows would look like is not at all certain

today. What is certain, however, that we need political action and not just the hope that the economy

will take care of itself Ð this is, as mentioned above, also evident from the debate over the EKC.

From this, some further research questions can be formulated:

· When a global economic structural change is taking place anyway, what are the ways in which this

change can be influenced in a sustainable direction? In other words: How can global governance be

put into place and how can it be made work effectively (see, for example, Messner/Nuscheler

1996). Especially, what kind of ecological regulations that reduce the scale are needed in a world

that has so far been dominated by (successful) attempts to deregulate trade flows, thereby

increasing competition?

· In what manner would it be helpful for the ecological economic analysis of globalization to reach

out to other social scientific paradigms (such as the regulation school) in order to combine

ecological insights with elaborated research efforts in the context of globalization (see Luks 1999)?

- 20 -


· When material flows are of such central importance, how can this dimension be incorporated into

attempts to model global economic and environmental scenarios? One requirement for this would

be a more detailed empirical picture of global material flowsThese could be fed into economtric

world models (see, for example, Meyer/Uno 1998) in order to achive results similar to those of the

IPCC process and to discuss the material implications of different national and international

policies on a better informed basis.

On the other hand, national (or regional, such as European) policy-making cannot wait until

these questions (or rather fields of reseach) have found scientifically sufficient answers. In the

following, we claim (again) that there is some scope for a national (and European) ãecological

economic policyÒ that aims at the targets of competitiveness, employment and dematerialization in an

integrated manner.

7 TOWARD AN INTEGRATED POLICY:AN ECOLOGICAL ECONOMIC POLICY

The preceeding sections have shown that in a globalized world, competetiveness, job creation and

dematerialization policies are all mutually dependent and interrelated. This poses not only analytical

difficulties but creates a need for an integrated policy, i.e. a political approach that does not separate

economic, social and environmental policy but sees these realms as a whole area of interdependent

sections.15 Economic policy must be environmental policy just as environmental policy must be

economic policy. What is needed is an ãecological economic policyÒ (Hinterberger et al. 1996). Such

an integrated policy must try to formulate the goals of competetiveness, employment and

dematerialization in a way that they arelargely compatible with each other. It also follows from the

analysis above that such a policy needs to aim at four levels: enterprises and consumers (micro level),

institutions and networks (meso), the socio-economic conditions at the macro level such as fiscal,

monetary and distributional conditions. To achieve this, society need at least some minimal consensus

with respect to the objective of sustainable development, interpreted as the combination of

competiveness, social and ecologial goals Ð what we can describe as the meta-level (see also

Hinterberger/Luukkanen/Messner 1997). The learning ability of societies is of crucial importance in

this respect: The achievement of sustainable development will be the result of complex and dynamic

interactions between businesses, the state and intermediary institutions on the different levels.

Development in market economies is the outcome of innovations, and in the context of sustainable

development, understood as the achievement of competetiveness, employment and a sound use of

environmental resources, excellerating innovations and at the same giving them a new Ð a sustainable

Ð direction becomes a central task for policy makers (see also Weizs�cker et al. 1995). Playing off

certain goals against other goals Ð e.g. employment against ecological sustainability Ð is not only not

helpful: it is wrong, considering the mutual dependence of the goals analyzed in this paper. 15 This is also one of the major goals of the European Union as stated in the Amsterdam treaty of 1997.

- 21 -


This requires, that all three policies be not too detailed in order to keep possible interference

small. Rather is it important that political (governmental and non-governmental) agents set

appropriate (and strong) boundary conditions. A solution can be seen in the formulation and

implementation of rough but bold physical limits in terms of material flows (including energy flows)

and land use.16 If these limits are implemented, allocation could be left with the price mechanisms in a

market economy.17 There is a broad range of instruments possible in order to implement the physical

limits of economic activities (see Hinterberger/Luks/Stewen 1996, ch 10 and

Hintgerberger/Welfens/Rave 1998). They range from voluntary agreements over public provision of

information to the use of taxes as well as substances and the introduction of tradable permits on

material flows.18

Even if there would be a common sense about the guideline "dematerialization", every

entrepreneur and every consumer needs information as to how he /she can act according to the guiding

principles. Governments can give this information directly or can indirectly support environmental

education and the further education of children and adults. A way to give minimal information and

induce consumers to buy products with low material intensity, could be the MI figures printed on a

product, which focus on the total material and energy -consumption in the product-life-cycle rather

than ecological details. From this follows the need for a uniform and controllable standard of

calculation to secure comparability of products. This would also allow for ecologically and

economically efficient systems of resource-management within companies. In combination with the

traditional cost-accounting, such an accounting scheme would reflect both inerternal and external

(ecological) costsby considering the induced ecological rucksacks. In this context it is decisive that the

information systems in the company as well as the national level will connect economic as well as

ecological data concerning material intensity (Liedtke 1998). It can show what companies could do

and how these actions could be brought together on the level of the national statistics (the linking of

GDP and MI data).

In the institutional view developed above, it is important, that economic agents relate their

activities to each other. Providing information is a necessary but certainly not sufficient condition for

this. Companies and/or their associations could commit themselves to achieve binding environmental

goals, which contribute to the higher goal of dematerialization. The advantage to rules or prohibitions

by the state is the preservation of a relatively large entrepreneurial freedom, while the danger is that

without further state activities, incentives to reduce throghput are too small. Here it is also useful to to

increase the degree of integration of the citizens in the process of an ecological and competitive

16 Additionally, some more detailed measures have to be taken to control hazardous substances, but the more

material flows are reduced the more hazardous substances should be avoided also.17 It is certainly a good claim to "get the prices right" but the question remains what are the right prices. This

depends crucially on the definition of limits below which certain material flows (inputs and/or outputs) shouldbe reduced

18 For the reduction of hazardous flows some regulation will still be necessary but to reduce the overall sum ofbulk material flows economic instruments are much more suitable

- 22 -


technological development. This way social interests are connected with those of the individual

companies.

Beside these soft measures and instruments, which donÕt always turn out to be efficient,

financial incentives are necessary supporting companies on their way to achieve sustainability and

dematerialization. Subsidies often have a harmful effect on the environment and create social costs.

Nevertheless fixed term subsidies can play an important role in setting an ecological structural change

and redirect resources in an ecologically productive manner. The affore mentioned methodology of

material flow accounting could be used as a general criterion for an ecological reduction and

reorganisation of subsidies. Energy and material taxation is not tied to emissions or waste but

concentrates on the materials entering the economic process. Both tax bases (energy and material

input) provide an estimate for the environmental stress potential. A fundamental difference between

material and energy taxes is the fact that the amount of substances, which have to be taken into

account as material input in case of material input taxation, is much larger than the number of energy

sources. So an energy tax could be administrated in an easier way. When introducing a energy taxes it

is necessary to think about the reduction of those material flows which will not be affected by an

energy tax in a sufficient extent. The introduction of tradable permits of material flows would allow

firms to displace a certain quantity of primary material in exchange of a monetary payment. A national

or international authority could determine the permissible extraction quantity as an ecological guard

rail and issue certificates accordingly, while setting prices for resource use would be left up to the

markets.

There is no Óone and onlyÓ instrument to achieve the goal of dematerialization. A policy of

dematerialization cannot ignore the instruments put in place so far, but should be combined with the

instruments mentioned above. It is important to coordinate the different instruments in order to create

incentives to reduce all material flows by keeping at the same time the intensity of intervention in

economical decisions on a low level. There is the chance that dematerialization - in comparison to the

current environmental laws - provides a useful tool for deregulation of economic as well as

environmental policy. A dematerialization through deregulation (compared with today's environmental

policy) could therefore trigger innovation and create employment. In environmental terms this would

lead to an avoidance of detrimental effects to global eco-systems and so lead to an internalisation of

external effects through the backdoor. Such a policy can certainly not be prescribed. If ecological

economists want to shape policy in a certain direction economists should become part of this process.

This involves of course also the question of which economic approach is employed. The above

considerations rely on the assumption that both ecological and economic systems are complex

dynamic systems and that the goal of sustainability means that the conditions of development of these

systems should be secured rather than trying to achieve a prespecified equilibrium. Empirical research

can be helpful in guiding such decisions, in particular with respect to the interaction between meso-

and macro-level. Structural changes (meso level) and growth effects (macro level) are crucial for the

ecological effects of economic activities Ð and, of course, both levels are also crucial for the

- 23 -


employment effects of dematerialization policies. Further empirical as well as theoretical research to

analyze dematerialization potentials and job effects can therefore help determining where policy might

be most effective.

AcknowledgementsThis paper presents results of reseach efforts at the Wuppertal Institute as well as those of a Europeanreseach network ("CompETE"; For more information, please refer to our web-site"http://www.wupperinst.org/Projekte/compete/compete.html"). We thank Kai Dahme, Christian Kopfand Maria J. Welfens for helpful comments. All usual disclaimers apply.

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