Chapter 2 Basis Theory of Conservation-Oriented Economy

Section A Definition and Connotation

“Conservation-Oriented Economy” is a new concept in the economic theory (there are not any authoritative definitions of it). We study the definition by extracting it from “Conservation-Oriented Society”.

The Party Central Committee and the State Council have just put forward “Constructing Conservation-Oriented Society”, setting a new goal for the social and economic development of China. The definition of conservation-oriented society is to raise resource utilization rate in such aspects as production, circulation and consumption through comprehensive measures including laws, economy and administration, and then to achieve the most economic and social benefits by paying the fewest resources to remain a sustainable development. Generally, the targets to which it aspires are less resource consumption, lower pollution, more benefits and sustainable development.

Although there is no formulation of conservation-oriented economy abroad, many economic growth theories have mentioned this concept.

Under the guidance of Marx's economic theory, this book establishes a research frame for the definition and content of conservation-oriented economy by using contents of market economy theory and industrial economics.Based on this, it emphatically analyzes the potential ways to realize Chinese conservation-oriented society. It is a groundbreaking piece of research.

1 Definition of Conservation and Nature of Conservation-Oriented Economy

1.1 Definition of Conservation

There are three explanations of “economy”. The first explanation is savings of money, energy, time and resources. While the second one focuses on financing; the third one covers management, economic system, wealth, resource of a community, as well as the financial condition epitomized by production and consumption of commodities and services. Definition of conservation is to decrease unnecessary consumption. Specifically, conservation means to efficiently utilize resource by stages in a plan. The essence of conservation is to achieve decrement and sustainable use of resources and energy in economical operation. To put it in another way, it is to make constant wealth at minimal cost of resource, and then maximize the reclamation of castoff. Conservation is the fundamental law of all community economies, especially commodity economy and market economy.

1.2 Nature of Conservation-Oriented Economy

Essentially, conservation-oriented economy is the economic pattern which economizes on material resources. Material resource is the foundation of economic and social development. From the angle of view pertinent to the level of artificial intervention, material resource could be divided into three classifications, namely, natural resource, artificial material resource and renewable resource (shown in Fig.2-1). This system obviously reflects the contrast between different utilization types and production. It's the theoretical precondition of scientific distribution of resources.

Conservation-oriented economy is set to avoid waste and over-use in economic development. In my opinion, the essence is a sustainable development of social formation which focuses on protection of natural resource, rational exploitation of resource and recycling of the waste to achieve maximum production by a minimum cost. To develop conservation-oriented economy is to chase resource conservation to fullest extent while the social economy grows ceaselessly. For those developing countries that are still using the traditional mode of economic development and facing a crisis of resources, the mode recommended here becomes a pressing matter of the moment, even further in the future.

2 Connotation of Conservation-oriented Economy

Recently, domestic researches about conservation-oriented economy can be classified into two groups. One viewpoint is that consuming conservation should be emphasized. For example, Xu Kuangdi, academician of China Engineering Academy, put forward two points regarding the contents of conservation-oriented economy. The first is that the resource conserving system of national economy must be established. Secondly, all social members should form a new consuming concept. He claims that although people do have the right of spending money, they also have the duty of not wasting resources. He proposes setting a standard of luxuries and collecting taxes of luxury purchasing in order to limit the trend of extravagant style by economical means.

Ma Kai, director of NDRC, also assumes that saving type of consuming mode is the key point of conservation-oriented economy. The whole society should admire thrifty and form the habit of spending extravagantly. Concept of resource saving in consuming will lead to transformation of the spending pattern and then construct the conservation-oriented spending mode corresponding with the national conditions. Yu Yuanpei, a professor of philosophy in Fudan University, suggests, in addition to the change of economic growth mode, the more important thing is to change spending concept so that the endless desire of human can be choked. Opinions mentioned above all focus on consuming conservation that argues against luxury and admires thrifty and rational consumption.

However, the other group of viewpoints stresses the importance of conservation in production. An economist named Liang Xiaomin posits that essence of conservation-oriented economy is not in consuming but in the manufacturing processes. In his thoughts, driving a car with high engine capacity or throwing half of the lobsters in dinners away cannot be regarded as a big waste. Instead, it is production that generates the biggest waste. Moreover, some scholars purport that the financing mode of “buying two things with one cent” is just a constrained life style under the historical circumstance of material deprivation. Therefore, that type of saving is due to the conservation of products or the limitation for consuming. As the material products are getting various nowadays, consuming ought to be encouraged instead of being restricted despite the fact that the concept of thrifty is a traditional virtue. Compared with encouraging people to live pinching and scraping, strongly supporting new industries such as catering, automobile and manufacturing is going to contribute much more to the conservation-oriented economy and to the people's daily life.

Among various viewpoints, I do agree with the viewpoint of Lei Xiaoyu, a Chinese scholar. While consuming conservation seems to be consistent with Chinese traditional culture, it would probably affect sustainable acceleration of the economy. Similarly, emphasizing production conservation may breed consumerism in spite of its rooted foundation of economics.

Keynes's theory of effective demand has defeated Say's Law, which claims that supplying may create demands. In normal cases, effective demand is usually inadequate due to such reasons as the decrease of the marginal propensity to consume or the decrease of the marginal efficiency of capital as well as liquidity preference. Since market mechanism is not able to solve the problem, Keynes suggests broadening effective demand by government intervention. Recent years, macro-control of the Chinese government has applied “demand management”. The expansion of government's investing expenditure, even the repeated reduction of interest for irritating consumption, does contribute to the Chinese economy. Therefore, public opinion of consuming irritation springs up. However, as the expansion of this consuming demand may probably lead to luxury consuming and conspicuous consumption, which has the nature of “commodity fetishism”, called consumerism, it must be strictly controlled and cautioned.

Based on what has been discussed above, the author examines the connotation of conservation-oriented economy, the method of economic allocation of resources through a fundamental function of the market mechanism and through macro-control and micro regulation by the government. Its aims are to achieve maximum economic and social benefit by increasing resource utilization rate in production, circulation and consumption through comprehensive measures of economy, law and administration.

Summarization of what has been mentioned above breeds contents of COE (conservation-oriented economy) as follows.

① Keeping the order of the operation of social organizations and mechanisms. The social organizations and mechanisms of COE include CO-enterprises, CO-government, CO-social groups, CO-public institutions, CO-families and the like. These organizations and mechanisms are the main bodies of COS (conservation-oriented society).

② Accommodation among different domains of the national economy. CO national economic system is the cornerstone of COS. CO national economic system contains CO industrial production system based on conservation of energy and materials, CO agricultural production system based on conservation of water and land, CO service system promoting green consumption.

③ Adequate supply and balanced use of the main resources. To meet this end, we need to decrease social resource consumption, supply adequate main resource to meet the requirement of national economic development and maintain a balance between supply and demand.

④ Circular economic mode. Circular economic mode is based on cyclic utilization of material resource. It demands the economic operation to follow a circulation flow process as “resource - product - renewable resource” for reducing exploitation of natural resource and production of waste.

⑤ Full utilization of waste. In COE system, various kinds of waste are going to be comprehensively utilized for elongating industry chain. New energy and renewable resource will be exploited and applied. Unrecyclable waste will be treated with nuisanceless measures.

⑥ The improvement of the life quality and the mainstream of green consumption. By promoting consuming style of resource saving and by fulfilling social demands with conservation-oriented product, we can set up a public concept of scientific consuming, nature admiring, health chasing. While people seek comfort, environmental protection, resource saving and sustainable development should be taken into account.

⑦ Technological progress. In COE system, technology helps find substitutes, such as, renewable resource for natural resource and high-tech or applicative tech for traditional industry, which can enhance integral level of conservation.

⑧ Friendly environment and ecological protection. COE advocates being harmonious with nature and being friendly with the environment. People should be aware of the fact that saving resource is protecting the environment in which they live while they seek for comfortable life with high quality and high taste.

⑨ The development of a long-term sustainable harmonious social community. Developing COS is meant to be an eternal theme of the whole society. Every organization and individual has obligatory responsibility to enhance saving concept and to combine it to the social community.

⑩ The reflection of the progress of civilization. COE advocates ampleness without wasting, which means that people admire thrift and abominate wasting. When resource consumption has declined and national power has increased, the state can feature with both sustainable stability and endless vitality. It demonstrates the progress of a country and reflects the application of scientific development concept into the society.

That said, the context of ‘conservation' in the COE can be understood in the following ways. Firstly, conservation in COE is not just saving in any single specific pattern but in the whole process of reproduction. According to the theory of social reproduction in Marxism, the scope of conservation should be carried through in every area or phase, for example, production, exchange, distribution, particularly consumption, including producing consumption and living consumption. Therefore, conservation is not only about producing conservation but also consuming conservation. If it is biased towards either of them or ignores either of them, it will raise the labor cost to generate failure. However, the conservation is not equal to none-consumption but a healthy consuming mode suitable for the national situation. The areas of consuming that need spur is the unmet demand tendency such as rural market, not those luxury consuming.

The second, conservation also means savings on all production factors. The general opinion of economists contains labor, capital, land and the soul element, entrepreneur. If it is based on natural features, factors that function include human resources, natural resources and knowledge resources, capital resources and infrastructure, regarded as human, property and material.“The diamond system” by Potter entails the first key factor, production factor, separated into basic production factor, senior production factor and professional production factor. Basic factors contain natural resources, climate, location, non-technical labor, fund, infrastructure, fundamental education and the like. Senior factors include modern communication, information, transportation, educated human resource, research institution and so on. Professional factors are senior professional talents, professional research institutions, professional technology, professional hardware and software. At normal situation, acquisition of the senior factors and professional factors takes a long-term cycle, needs sustainable investment and hardly comes from outside. In other words, it can be realized only through internal functioning. With any understanding mentioned above regarding production factors, our ultimate goal is to actualize “optimal production, suitable consumption and minimum waste”. As the construction of COE system is a huge project, it is impossible be complete it recently. Current measurements that must be implemented are to encourage industries with low energy consumption and emission, to limit those with high consumption and high pollution, to formulate suitable price and policy for promoting recycling system, to modify tax policy and to establish a sound legal hierarchy about recycling economy. Conservation always means savings on all factors in a broader sense, including savings of natural resources, efficient utilization of human resources and the currency capital, savings of basic production factors, exploitation and protection of senior factors and professional factors. “Labor is the father of property while land is the mother.” Since production factor is the source of property, while it is in scarce, it attracts people to occupy it. Because of the strong desire, we truly need to save it.

The third, the target of the conservation is to achieve harmony between human and nature. The final target is to develop a human society being friendly with nature, containing such features as maximum efficiency,optimum ecological environment and happiest life of people.

Furthermore, the path to realize COE is establishing a recycling economy system. Recycling economy is a developing mode harmonious with the environment. It abides by principles, reduction, reclamation and harmlessness. Since optimal operation of eco-economy system is the objective, the concept of “resource utilization—clean production—resources recycling” should be adhered to simultaneously.