The different categories of goods

The distinction between different types of goods offers a privileged field of application of the interpretative framework of governance in view of the evolution of today’s society. The binary pattern according to which there would be from one side the public goods, and to the other the private or traders’ goods, does not stand up to the analysis. By the yardstick of the trilogy put forward by the interpretive framework of the governance - «   objectives, ethical criteria and work devices  "-, are 4 categories of goods that emerge. Each requires specific management and allows us to reorganize our view of things by adapting to the challenges of our time. Thus, among other advantages, this typology sheds new light on the relations between public action and the market.

Market is one among others forms of the governance, subject to the same principles and objectives.

The world is not a commodity  ! It is the rallying cry of opponents of the neo-liberal globalization. Who would not adhere to this striking motto ? Can we consider as a human progress the transformation of all things, every being, every idea, every service delivered for profit making to eventually end up, echoing the famous saying, to a situation where we would know the price of each thing and the value of none  ? How can we ignore that a company can fall apart and become bankrupt, if what has not got market value right away is not managed properly and if social relations are transformed into economical connections ?

Market is one of the many forms of the «   trade governance   » of products and services. It is therefore necessary to study it, analyse it and judge it based on the same principles of the other forms.

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Let’s continue to analyse the market with our interpretative framework of the governance. It invites us to come back to history, to the conditions of the establishment of the norms and rules, in order to contextualize it and define its scope.

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The market as a form of governance can not be exempt from the necessity to move from a typology dominated by the skills, the rules and the institutions to a new one, dominated by the objectives, the ethical standards and working arrangements. The final purpose of overall economy is in fact to organise the framework and the mechanisms for regulating the production and the management of goods and services in view of the thrive of societies and peace, based on social justice and responsibility and in the context of sustainable development that takes into account the balance between humanity and the biosphere as rights of future generations. It is in view of these objectives and criteria that one must consider the market as a form of regulation.

The traditional gap between public and private has become irrelevant.

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Let us now move on to the second point : the definition of public asset or public service in the 21st century. To affirm that «   it is an asset which is managed under the authority of public power  ” is nothing but the result of society’s choice. (…) By virtue of what criteria society justifies this need  ? It seems to me that from the analysis, we are mixing three different criteria  : the nature of goods and services, their vocation and their distribution.

• The nature of products and services  : are they likely to be produced and distributed according to the market mechanisms  ?

• Their vocation  : are they considered as goods or services that a company deems necessary to offer to all its members  ? In terms of the nature of doing good, what difference there is between a medical consultation and a session at the hairdresser, if it is that health is considered to be of public interest and not the haircut  ?

• Their distribution  : one can consider that equality in education, access to housing, the right to live in a good environment are too important to be dependent on financial resources or on personal choices.

These three criteria are extremely substantial and the companies combine them on purpose. By firmly combining them to form the sphere of public action, they however decrease the range of possible solutions while the aim of the governance is to increase them. The criteria for vocation and distribution of goods can lead to various solutions from one society to another; some give priority to the direct provision of services by the community while others are focusing on the mechanisms of financial redistribution. It seemed to me that due to the evolution of our societies, the first criterion which is the nature of goods and services, gave a guiding principle of great potential in order to address the relationship between public action and the market from a new perspective.

The relationship between public action and the market is determined by the nature of goods and services.

The guiding principle that will help us to decide between the various goods and services, I would almost say the experimental criterion, is the one that takes up the challenge of sharing. (…) I have noticed that this challenge of sharing gave birth, very roughly, to four different categories of goods and services, leading to very different types of relations between public action and market given that, as we will see, the range of solutions and choices of society remains very high within each category.

The first category, to which we could reserve the expression of «   public goods » strictly speaking includes the goods which are destroyed while being shared or which, when they exist and are produced, is of benefit to everyone without the use of one being excluded by the use of the other. These ones require a collective management.

The second category that one could call «   natural resources« , in a broader sense, includes the goods which divide while being shared and are of finite quantity. These goods need proper economic management that will mobilize, maintain and reproduce them, but their availability partially depends on human ingenuity, their distribution is a matter of social justice as much and even more than the market economy.

The third category includes goods and services which divide while being shared but they are above all, the product of ingenuity and human labour. These are mainly industrial goods and social services. As mentioned earlier, they can be regarded as goods and services that are essential and they can come under public management by «   vocation   » or by «   distribution  ” but they are also well adapted to a regulation by the market, as a decentralized way of allocation and combination of resources.

Finally, the fourth category and the more appealing for the future, consists of goods and services that multiply while being shared. This paradoxical algebra where two divided by two equal four matches to knowledge, information, relationship, creativity, intelligence, love, experience, and human capital. What I give, I keep it, and I get rich from what others give me. Logically, such goods and services should come within the idea of mutuality and not from the market  : I receive because I give.

We understand why the evolution of society makes it necessary to move from one categorization in two classes, public and private assets, into the categorization in four classes as I have just outlined. The industrial production of «   mining   » type underestimates the importance of goods which are first-class category, operates as if natural resources were practically unlimited, and considers goods of fourth category as negligible. Therefore, the classical economy focuses on goods and services of third category. Significantly, and until very recently with the creation of human development indicators, the measure of the development was mainly associated to goods and services of third category  ! The gross domestic product only considers those and excludes even the large sub-category of goods and services which are home-produced. Neither the destruction of ecosystems, nor the degradation of natural resources, nor goods that multiply while being shared are considered or even envisaged.

The evolution of society no longer allows such rough and biased approximations. The goods of first-class category, particularly global public goods, are necessary for our survival and this questions both the supremacy of the markets as well as the sovereignty of States which are the two fundamentalisms of the governance. Good management and fair distribution of natural resources become vital as their scarcity increases in view of the growth of the population and the lavish lifestyle of rich countries. The goods of fourth category are expected to occupy a significant position both for the well-being of all and as a factor of production or management of other types of goods.

Hence, the premises of classical economy no longer correspond to the realities. The ideological contortions to bring in for whatever reason, and at any costs these three categories of goods and services in the logic of the market resemble very much to desperate efforts to adapt in astronomy the Ptolemy’s model into reality before the Copernican revolution, to which I have made reference in the introduction of the book, come to suggest a new cohesion taken as a whole.

It is therefore in each of the categories of goods that we now need to examine the possible relationships between public action and market.

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The common principles of governance gather in the management of the different categories of goods and services.

The distinction of the four categories of goods and services has helped to understand the mode of relationship between public action and market, specific to each of them. We cannot conclude now without emphasising the profound analogies that show the overall meaning of the principles of governance.

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Firstly, the definition of the governance by the objectives, the ethical criteria and the specific devices proves to be every time relevant to undermine some certainties well embedded and defended by very strong interests. The rules of the economical governance must continuously be evaluated and enriched in terms of their concrete impact. Similarly, the criteria of legitimacy of the governance provide a productive interpretative framework in order to say what is acceptable and what is not. As we have seen, the simply fact of considering market as a modality of governance among others, being evaluated with the same criteria as others, has allowed to move from the dogma of an economical science to an experimental approach and to widely expand the realm of the possible.

Then, in all cases, including the goods of the third-class category, the question of the articulation of levels of governance is raised and the principle of active subsidiarity is applicable as the way to get maximum unit and diversity at the same time. (…)

If it is found that the integration of a local economy in the global market is both destructive of social ties and the origin of a depletion of human capital, and one thing leading to another, if this undermines food safety or food quality because the safety measures provided by former local interdependencies have not been replaced by safety measures constructed at another level of the governance, this means that we lose more than we receive  : the economic optimum based on the only trade market was then met at the cost of a deterioration of the situation in more important part of the social life. The process of specialisation of productions between regions, countries and between economic actors leads in fact, to strengthen the vertical sectors of production. The link with the other categories of trade is lost, be it social or environmental trades. Therefore, everything happens as if the one-dimensional measurement tool used to measure the «   economical progress   » is proved outrageously simplistic and was hiding most of the phenomena.

To preserve fairness between actors and avoid the effects of rent, we could, for instance, state the following general principle  : within a common framework and common specifications which preserve equal opportunities between actors and allow particularly the constant arrival of new actors in order to prevent the effects of rent, any company at any level can develop systems of exchange that meet the requirements of its situation and its specific needs as far as it can prove superiority on the mere implementation of uniform rules of the market.

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We have finally found for the management of each category of goods, two principles of governance that will be explained in the following pages  : the essential partnership between the different types of actors  ; the key role of local territories in order to organize accurately the relations of all kinds.

 

Translation

Alliance Rio