Impulses for Growth and Employment through Profitable Savings in ...

Besides the level of input-output computation
that is profoundly structured in 59 production
or economic sectors, the model for
the computation of the national economic
variables contains the account system of
the national economic accounts of the
Federal Republic of Germany. This system
contains all income redistribution including
social security and taxation between the
government, private households and business
and thus enables the computation of
available incomes which themselves are
important determinants of final demand.
Moreover, the financing balances of institutional
transactors are determined. This
means that governmental budget restrictions
are also included in the model. The
complete fiscal policy is therefore also
endogenously embedded in the system.
Monetary policy, in as much as it influences
interest levels, is also endogenous.
Scenarios Examined
The period 2004-2015 was chosen for the
appraisal as this is an appropriate time line
for a political programme that seeks to
change efficiency structures on a wide
scale in the economy at large. The effects
of profitable dematerialization are examined
by using the values achieved in 2015
on the basis of different scenarios and
comparing them to the zero variant (endogenous
extrapolation of the status quo
in the model):
• In Scenario I “Imperfect Markets” profitable
dematerialization takes place
within the environment of present-day
wage and price formation in Germany.
• In Scenario II “Wage Competition” it is
assumed – in variance to Scenario I –
that productivity gains through dematerialization
do not lead to higher wages
but instead correspond to those of the
base scenario.
• In Scenario III “Price Competition” we
assume – in variance to Scenario I –
that competitive pressure forces companies
to pass on nationally achieved
productivity gains to consumers in the
form of lower prices. Wage formation
corresponds to that in Scenario I.
Scenarios II and III do not confer with present-day
economic practice but point to
the numerous welfare gains that can be
achieved on the labour and product markets
on the basis of more complete competition.
Common Assumptions
Across all Scenarios
Simplified assumptions are necessary for
depicting the scenarios in INFORGE. In all
scenarios, profitable dematerialization is
depicted through a linear reduction of material
costs per unit of production in the
manufacturing sector and in public administration
by 20% across the study’s time
line. In several ways, this is a conservative
assumption:
• Company practice shows double as
much potential (20% of manufacturing
costs instead of 20% of material
costs).
• The scenarios limit the cost effects to
production in the manufacturing sector
and in public administration. This
means that the economic sectors with
the highest dematerialization potentials
are addressed but that a political programme
aimed at profitable
dematerialization will have effects on
other sectors too through respectively
optimised products and know-how
• transfer. The development of new products is
not explicitly taken into account in the
scenarios. In reality, however, a strong
surge toward the dematerialization of
production and product use will not
only reduce costs but also create new
products. Cellular phones are a case in
point which only became a mass market
after miniaturisation with concomitant
cost reductions and easier usability
occurred.
As such efficiency gains do not simply fall
from the heavens but require innovation
and investment by companies annual savings
need to be juxtaposed with one-time
expenditures 33% of which consist of demand
for services close to the company
and 66% of which consist of fixed investment.
With respect to material cost reduction
(50% of total industrial costs) this onetime
expenditure amounts to a simple annual
saving while with respect to energy
cost reduction (2% of industrial costs) it
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