STU 04-05 : Special Topic - Transdisciplinarity and the governance of sustainable development [ Short Term Update 04-05 - 23/12/2005]

HEADLINES BELGIAN ECONOMY - DECEMBER 2005

The latest update of the FPB medium-term outlook for Belgium shows an average GDP growth reaching 2.1% during the 2005-2010 period. This development can be largely accounted for by both domestic demand and exports, although the contribution of net exports to economic growth is expected to be limited; the current account should continue to decrease until 2006 due to terms of trade losses. Private consumption should grow at a moderate pace during the projection period (1.7% on average), in line with growth of households’ disposable income in real terms. At the same time, gross fixed capital formation (and particularly business investment) should grow at a sustained pace with annual growth reaching 2.9% on average. The structural loss of export market share should be important, with exports increasing by 5% a year on average, compared with a 6.5% growth of our potential export markets.

Inflation should reach 2.2% on average during the projection period, due to figures close to 3% in 2005 and 2006. The current acceleration is explained by high energy prices and the recent depreciation of the euro against the dollar. However, inflation should be around 2% in 2007 and fall below 2% at the end of the projection period, mainly because of limited wage increases and moderate rises in imported costs. Employment is expected to increase by about 33,000 jobs a year during the 2005-2010 period. This performance can be explained by several factors: a relatively favourable macroeconomic context, limited wage increases, a - although very slow - reduction in working time and various measures taken to promote employment. Nevertheless, the fall in the unemployment rate should be very limited due to a considerable increase in the working population.

The FPB October update of the medium term outlook for Belgium does not yet take into account the measures taken within the framework of the 2006 budget.

Transdisciplinarity and the governance of sustainable development

Many questions about the directions in which our societies develop require answers from the authorities. Guiding this development requires an overall vision of the situation, which can be obtained by systematically organising the available social, environmental, economic and political information. The third Belgian Federal Report on Sustainable Development proposes such a comprehensive systemic model for describing and analysing how a given society develops.

The name of this model is TransGovern, short for Tra ns -formation of living conditions through Governing. It refers to the interactions (shown by the grey arrows between the two main boxes in the Figure below) between the transformation of living conditions in a society (the left-hand box) and the political decisions (the right-hand box) aimed at promoting a sustainable de-velopment. This model also represents the relationships between the main components that determine our living conditions as well as between the various components of the political decision-making process. This article fur-ther describes the main features of TransGovern, as well as its first application as a framework to structure the analysis of the development of our society.

TransGovern is a combination of several existing models. It combines the concepts central to the DPSIR framework (Driving forces, Pressures, States, Impacts, Responses), developed at the OECD, and the triangular model of interactions between the three basic development capitals (human, environmental and economical). The TransGovern model adds the institutional capital to these and places it at the core of an original public policy module, thereby following an approach to the political decision- making process that was developed earlier by the authors of the model. This political component is compatible with the theory on human, environmental and social risks put forward by the Dutch Scientific Council for Government Policy (Duurzame risico’s: een blijvend gegeven, Wetenschapelijke Raad voor het Regeringsbeleid, 1994) which already served as a basis for the scenario analysis in the first two Federal reports.

Moreover, six types of alternative financing measures were selected, which can be classified into three categories: increased indirect taxes, increased direct taxes, and new taxes. Indirect taxation was examined in terms of an increase in Value Added Tax (VAT) and an increase in excise duties on motor fuels and tobacco. Direct taxation was examined in terms of an increase in income tax and an increase in corporate tax. Finally, two new taxes calculated on very wide bases were examined:

Basic capitals of development

The evolution of well-being within a society depends on the human, environmental and economic resources that it can access. These resources constitute capitals, the accumulation and interactions of which determine how development evolves in that society.

Human capital is subdivided in three sub-capitals: the standard of living (material well-being), health (both mental and physical) and knowledge/capacities (what individuals know and are able to do).

Environmental capital includes, on the one hand, natural resources (water, air, land and mineral resources) and, on the other hand, the biosphere with all its biological diversity.

Economic capital is subdivided in two sub-capitals: physical and technological capital (equipments, buildings, infrastructure, and intangible assets including software and technology patents) and net financial assets.

Finally, institutional capital is the set of organisational, legal and social structures that characterise a country’s governance and that determine how far people can engage in civil society and to what extent conflicts can be peacefully resolved. [More in the publication ...]

STU 4-05 was finalised on 22 December 2005