Green economics, as part of Smart Cities, replace the traditional one. Sometimes, the current model of the economy is called the “brown” economy because it primarily uses fossil fuels. The phases of the traditional principles explain also Kondratiev’s production modes. On the contrary, green economics is an economic aimed at sustainable development. A model encompasses the intersection of three spheres − economic, ecological, and social. The fundamental difference between the “green” and the traditional economy is the concern for the renewal of natural resources at the level of an individual enterprise.
Economic values ensure environment protection
In a traditional economy, the entrepreneur believes that such factors of production as natural resources restore themselves over time. Modern experience has shown a different picture. The enterprises should bear social responsibility for the borrowed natural resources, and not shift care for their renewal to the state. An increasing number of institutions, including the World Bank, support the introduction of natural capital estimation into economic calculations. They argue that nature needs a reasonable justification for its economic value to ensure environmental protection. If the assessment of natural capital adopts governments on an international level, it can become a crucial element of the developing green economy.
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So far, only traditional tools such as business interdictions that damage the environment and care for environmentally friendly working conditions have been used to protect natural resources.
Evaluation of Kondratiev’s production cycles
Outstanding Russian economist N.D. Kondratiev in the 1920-s discovered long cycles of economic conjuncture. Subsequently called Kondratiev’s cycles. According to the innovation theory, these cycles arise from radical innovations. Changes that launch the transition from lower production mode to higher, progressive ones. To date, economists have singled out six existing production modes and talk about the offensive of the 7th.
The first production order (1785-1835)
The order arose based on technology development in the textile industry and the extensive use of water energy.
The second production mode (1830-1890)
This mode refers to the era of accelerated development of transport like for example construction of railways, or steam navigation. And the emergence of mechanical production in all industries based on the steam engine.
The third production mode (1880-1940)
A production model based on the use of electric power in industrial production. The development of heavy engineering and the electrical industry based on the use of rolled steel and discoveries in the field of chemistry.
The fourth mode (1930-1990)
The model appeared as a result of the further development of power engineering with the use of oil, gas, communications, and new synthetic materials. That time was the era of mass production of cars, tractors, aircraft, various types of weapons, consumer goods.
The fifth-order (1985-2035)
This solution includes achievements in the field of microelectronics, informatics, biotechnology, and genetic engineering. It also covers new types of energy, materials, and satellite communication. There is a transition from isolated companies to a single network of large and small companies. Moreover, these are connected by an electronic network based on the Internet, carrying out close cooperation in the field of technology.
The sixth technological order
The order characterizes the development of robotics, biotechnologies based on genetic engineering, nanotechnology, and artificial intelligence systems. These also incorporate global information networks, integrated high-speed transport systems.
The seventh order
The sprouts of the seventh production mode are only just beginning to manifest. Therefore they are visible only to those who are closely involved in innovative technologies of the new order.
Smooth transition to the green economic
In our opinion, the transition to a green economy began only with the advent of the sixth technological order. The fundamental difference between the sixth order and all the previous ones is the increase in the share of intangible assets (knowledge) in the finished product. Intangible assets already predominate in the structure of the total world capital. In its turn, the development of a new non-material economy (knowledge economy) stimulates an increasing shortage of natural resources. In particular, green economy dematerialization is the achievement of better results due to the lower consumption of materials. For example, the rationalization of environmentally friendly production processes, structural transformations, and changes in the needs of consumers. These are the basics transition principles of economics of Smart Cities.
However, traditional economics are still too bound up with concerns of price, profit, economic growth, and the perspective of the owners of production. The green economy focuses on the ability of production systems to self-renew and adapt to a variety of changes. In this new context, the Green Economy methodology also opens up new perspectives on the use of its tools for the traditional economy to unleash a conflict of interests in the global marketplace.
The advocation of the traditional economic principles
Unfortunately, many well-known economists continue to advocate a more intensified business as usual approach. They promote growth, more profit, and the increased traditional economic hegemony of global corporations. Green economists argue that these solutions do not solve the problems of today.
In this context, we are talking about the mechanisms of intangible value transactions. All knowledge and information as the leading production resource of the post-industrial era. Intangible values do not obey the laws of competition. In such an economy, the primary function assumes the convergence, which becomes an attribute of the partner’s relations in the production of information and knowledge. By all means, the enhancement of intellectual wealth.
In summary, if competition separates, then convergence unites, acts as a mechanism for expanding possible options for economic development. In this case, interacting subjects do not absorb each other, do not lose their originality, but, mutually enrich, retain their uniqueness. Also, the growing popularity of these principles determines the logic of the transition to a green economy. Green economy advises that since the earth’s environments are complex and diverse. Then diversity and complexity should become a dominant feature of future economic systems.