AN OPERATIONAL MODEL OF SUSTAINABLE DEVELOPMENT COMMUNITIES

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AN OPERATIONAL MODEL OFSUSTAINABLE DEVELOPMENT
COMMUNITIES

• by Sixto K. Roxas

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Gross National Product

• National development strategy and policy are
  based on theories built around growth in Gross
  National Product.
• That growth is the declared objective of strategy
  and policy and the measure of success or failure

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GNP accounting has operational relevance because

• Its components are traceable to unit
  responsibility centers for whom GNP accounting
  components are a measure of performance
• There is an operating theory that guides actual
  management practice based on functional linkages
  between specific instrument variables (prices,
  costs, production functions, demand functions)
  and the performance variables (incomes,
  employment, consumption levels, savings,
  investments, exports, imports, foreign reserves,
  net worth)

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• The enterprise has been the unit of
  responsibility, organization, management and
  accounting in both neo-classical and
  Marxist-Leninist economic theory and strategy
• The polemic between them has polarized around the
  ownership of these units

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The problem and status quaestionis

• There is a theory and measurement of growth
  implicit in the UN statistical series of national
  income accounts
• Not a good measure of welfare
• Nor does the existing method measure the
  environmental cost

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UN statistical series of national income accounts

• The basic accounting unit is the enterprise
• GNP starts from the enterprise profit and loss
  statement
• Converts this into a net value added account by
  factor distribution
• And consolidates the accounts by industry and
  sector

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• The use of the enterprise as the primary unit of
  is
• Partly supported by neoclassical theory
• Partly an operational convenience, since
  enterprises are a sector that keeps formal
  accounts of their transactions

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Failures

• The method fails to capture productive,
  consumption and capital formation activities
  which do not go through the formal enterprise
  accounting network
• Unpaid work in the family (home cooking, sewing,
  personal services, and home improvements)
• Farming activities of peasant proprietors
• Subsistence food gathering, fishing and
  agriculture
• And services and transactions of non-profit
  institutions, churches, foundations, etc.

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• Country national income estimates attempt to
  compensate for some of these by imputations, but
  coverage will differ. These are divided into
  five main groups
• Foods and other goods produced on the farm for
  the farmer's own consumption.
• Unpaid personal services of housewives and other
  members of the family or of broader social
  groups.
• Unpaid services of owner-occupied dwellings.
• Unpaid services of other consumer durable goods
  owned by households.
• Unpaid services of tangible wealth owned by
  governments and by benevolent organizations.

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Operational significance of the measurement system

• The accounts are consistent with the way modern
  economies are organized. The entries into the
  aggregated accounts are traceable to
  responsibility units whose transactions determine
  the values the entries will assume.
• Strategy, investment, fiscal and monetary policy,
  programs, projects and budgets are formulated on
  the basis of expected impacts on the variables
  they monitor.
• At the micro level, individual corporations
  assess their own growth in relation to the
  performance of the over-all economy as measured
  by the national income accounts.
• At the macro level, national development strategy
  and policy are based on theories built around
  these measurements.
• The goals are narrowly defined to encompass sheer
  quantitative growth in GNP.
• Growth in GNP does not necessarily mean change,
  or development or progress.

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• In our contemporary society, the business
  enterprise is the dominant mode of organization.
• The decision-logic for enterprise is rigorously
  clear and widely standardized.
• The balance sheet and income statement
  imperatives are part of modern culture.
• At the level of the business organization, the
  variables of human development and ecological
  integrity are not mainstream values.
• Deliberate government programs to redistribute
  social services and incomes, provide safety nets
  for the poorest sectors.
• These will always be marginal for as long as the
  modes by which society organizes production,
  consumption and investment activity relies
  primarily on enterprises as the dominant units.
• This is the logic behind the concept of
  communities as unit of organization, of
  management, of accounting and are structures to
  become market-players.

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Shifting to a community paradigm

• The objective is to flesh-out an operational
  model of a self-reliant community
• Two reasons dictate that it should be
• Enterprise management excludes responsibility for
  the ecology
• An authentic sustainable development program must
  be designed as a consolidation of sustainable
  development programs at the level of these
  self-reliant local communities.

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Theory of the Community

• Develop a theory of the community that can serve
  for the community managers and all the ancillary
  technical and professional manpower supporting
  them, what the economic theory of the firm has
  done for enterprise management and
  enterprise-based development
• Orienting the processes of change and development
  towards making community culture emerge as the
  dominant leaven in societies. This force must be
  powerful enough to overcome the 19th century
  enterprise culture
• Its power of organic re-integration and of
  symbiotic linkage among peoples and between
  society and nature must prevail over the opposite
  effects of the enterprise-culture which is now
  the overarching agent in planetary change and
  development and is responsible for the
  stomization of society into sector-specialized,
  disintegrative micro-organizations, and the
  opposition of man to nature.

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Technical Protocol for Specifying the Systemic
Characteristics of a Community as an Operating
Organization
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The Planning Framework for the Local Community

• The Social Accounting Matrix depicts
• The wealth-structure
• The production and income-generation anatomy, and
• The consumption-investment patterns of the
  community.

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1. The uses of the framework To define more
precisely

• The structure and anatomy of the community's
  economy
• The productive value of its resources
• The pattern of their usage
• The production and income flows derived from them
• The distribution of costs and benefits between
  members of the community and outside individuals
  and institutions, and among social groups and
  institutions within the community
• The interventions of national and local
  government units in the system.

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2. The uses of the framework To define more
precisely

• The present structure and performance of the
  local economy structure
• The performance desired for the system at a
  future "terminal" period
• The vision of the future may then be translated
  into the variables and parameters of the
  framework which become specific and internally
  consistent targets and budgets
• Actual performance may be monitored using the
  same framework now as the accounting and
  management information system.

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The principle of subsidiarity

• The community will use its resources first to
  satisfy its own needs directly and resort to
  production for trade only where the advantage to
  it is evident, or to fill needs that cannot be
  satisfied from local production
• This contingency is then translatable into a
  schedule of exportable commodities and an import
  demand schedule.

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.

• These parameters fully specify the bioeconomic
  district
• The system condition can be described in a set of
  simultaneous equations
• The baseline situation is the actual one which is
  based on
• Present resource disposition
• The actual capital in place
• The current production, consumption, trade and
  capital formation levels and pattern.
• This should be depicted in an appropriate SAM
  for the base period.

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Highest and Best Use (HBU) condition for the
bioeconomic district

• We distinguish between
• The logic or the algorithm for determining the
  HBU valuation technical process that can be
  done by technocrats
• And the process by which the decision parameters
  are arrived at requires a planning process in
  which the community roust become the principal
  determinant.

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The SAM provides several "bottom line" figures
for the community

• The gross value added (GVA) total income
  accruing to the community from current production
  activity
• Distribution of GVA by factor or income classes
• The level and composition of household
  consumption by factor or income class.
• The level of community investments in capacity
  increasing capital
• The flow of export sales that measure the
  community's capacity to pay for its import needs,
  and the level and composition of imports of two
  categories
• Those that do not compete with any local
  production and
• Those which have locally produced counterparts.
• The community savings-investment level which
  equals GVA minus consumption plus exports minus
  imports.
• The export of savings or the leakage of capital
  represented by an excess of local savings plus
  exports over imports of the community.