Addressing The Marketing Problem of the Social Prepared for: KAS-Conference on 60 Years of Social Market Economy Sankt Augustin, November 30, 2009 Marcus Marktanner, American University of Beirut
Outline Social Social, Not Socialist! Ordoliberalism Law and Order for Economic Freedom and Equitable Social Development Social Market Economics Microeconomic Foundations and Limits Social Market Economics Macroeconomic Sympathies and Limits Social Market Economics Is there Empirical Evidence? Conclusions
Social Social, Not Socialist! A third way Difference between socialism and unfettered capitalism Normative foundations Efficiency Hi Neoliberalism Washington Consensus Social Market Economy Low Failed states Totalitarianism Socialism Low Hi Equality
Ordoliberalism Law and Order for Economic Freedom and Equitable Social Development Five questions: 1. What is the normative value system of the Social? 2. What are the state-constituting principles? 3. What are market fundamental principles that are untouchable by the state? 4. When is the state supposed to interfere? 5. If the state is supposed to interfere, how is it supposed to so?
The Order of Social Market Economics in a Nutshell State constituting principles: Subsidiarity Constitutive principles: Free prices Regulatory principles: Prevention of inequality Supplementary principles: Limit stabilization Anti-trust policy No public bail outs interest groups Political insulation from No sectoral interventions policy Free contracts Market process Internalization of externalities Rules-based interference Predicatbility of econmic policy Market conform social policy Opportunity justice Free trade Prevention of non normal labor supply Price stability Secure property rights Efficiency justice Value system:
Social Market Economics - Microeconomic Foundations and Limits Microeconomic theoretical support: Diminishing marginal products: y i =f(k i ) with y'>0 and y''<0 Utility function with preferences for equality Welfare of two person economy: Equilibrium condition: ( ) U C i 1 e C i 1 = 1 e Welfare = U + U = k e 1 2 ( 1 k) = e ( ) 1 α 2 α 1 e ( k ) ( k) + 1 2 1 e
Social Market Economics Macroeconomic Sympathies and Limits Social Market Economics and current crisis Great Depression vs. current crisis The decoupling of the financial from the real sector
Social Market Economics Is there Empirical Evidence? A proposal for an index Manufacturing Export Share (% GDP ) Market Efficiency = Gross Capital Formation (% GDP ) Social Index Social Index Market Efficiency = Inequality
Social Market Economics Is there Empirical Evidence? Top 10? Rank Country MANU GCF EOM INEQ SMEX ycapgr 1 Macao, China 70.03 0.26 264.92 24.29 10.91 3.79 2 Hong Kong, China 63.45 0.26 240.4 25.97 9.26 6.35 3 Belgium 35.26 0.24 148.7 34.91 4.26 3.09 4 Singapore 53.65 0.34 156.11 40.26 3.88 6.52 5 Malta 28.6 0.27 106.11 35.2 3.01 6.17 6 Netherlands 22.1 0.22 98.87 32.85 3.01 2.51 7 Germany 20.61 0.24 87.27 31.62 2.76 2.44 8 Sweden 16.9 0.23 73.55 27.92 2.63 2.48 9 Mauritius 27.82 0.25 109.29 43.9 2.49 4.91 10 United Kingdom 13.44 0.2 68.41 31.38 2.18 2.17
Social Market Economics Is there Empirical Evidence? -6.0-1.3 3.3 8.0-2.0-0.7 0.7 2.0 DZA AGO ARG AUS AUT BHS BGD BRB BEL BEN BOL BRA BFA BDI CMR CAN CAF CHL CHN COL COG CRI CIV CYP DNK DOM ECU EGY SLV FJI FIN FRA GAB GMB DEU GHA GRC GTM HTI HND HKG HUN ISL IND IDN IRN IRL ISR ITA JAM JPN JOR KEN KOR KWT LBY MAC MDG MWI MYS MLT MRT MUS MEXMAR NPL NLD NZL NIC NGA NOR PAK PAN PNG PER PHL PRT ROM SAU SEN SYC SLE SGP ZAF ESP LKA SDN SUR SWE SYR THA TGO TON TTO TUN TUR UGA ARE GBR USA URY VEN ZMB ZWE ycapgr vs LOG10(Manu) LOG10(Manu) ycapgr -6.0-1.3 3.3 8.0 0.8 1.1 1.3 1.6 DZA AGO ARG AUS AUT BHS BGD BRB BEL BEN BOL BRA BFA BDI CMR CAN CAF CHL CHN COL COG CRI CIV CYP DNK DOM ECU EGY SLV FJI FIN FRA GAB GMB DEU GHA GRC GTM HTI HND HKG HUN ISL IND IDN IRN IRLISR ITA JAM JPN JOR KEN KOR KWT LBY MAC MDG MWI MYS MLT MRT MUS MEX MAR NPL NLD NZL NIC NGA NOR PAK PAN PNG PER PHL PRT ROM SAU SEN SYC SLE SGP ZAF ESP LKA SDN SUR SYR SWE THA TGO TON TTO TUN TUR UGA ARE GBR USA URY VEN ZMB ZWE ycapgr vs LOG10(GCF) LOG10(GCF) ycapgr -6.0-1.3 3.3 8.0-1.0 0.2 1.3 2.5 DZA AGO ARG AUS AUT BHS BGD BRB BEL BEN BOL BRA BFA BDI CMR CAN CAF CHL CHN COL COG CRI CIV CYP DNK DOM ECU EGY SLV FJI FIN FRA GAB GMB DEU GHA GRC GTM HTI HND HKG HUN ISL IND IDN IRN ISRIRL ITA JAM JPN JOR KEN KOR KWT LBY MAC MDG MWI MYS MLT MRT MUS MEXMAR NPL NLD NZL NIC NGA NOR PAK PAN PNG PER PHL PRT ROM SAU SEN SYC SLE SGP ZAF ESP LKA SDN SUR SWE SYR THA TGO TON TTO TUN TUR UGA ARE GBR USA URY VEN ZMB ZWE ycapgr vs LOG10(EOM) LOG10(EOM) ycapgr -6.0-1.3 3.3 8.0 1.4 1.5 1.6 1.8 DZA AGO ARG AUS AUT BHS BGD BRB BEL BEN BOL BRA BFA BDI CMR CAN CAF CHL CHN COL COG CRI CIV CYP DNK DOM ECU EGY SLV FJI FIN FRA GAB GMB DEU GHA GRC GTM HTI HND HKG HUN ISL IND IDN IRN IRLISR ITA JAM JPN JOR KEN KOR KWT LBY MAC MDG MWI MYS MLT MRT MUS MEX MAR NPL NLD NZL NIC NGA NOR PAK PAN PNG PER PHL PRT ROM SAU SEN SYC SLE SGP ZAF ESP LKA SDN SUR SWE SYR THA TGO TON TTO TUN TUR UGA ARE GBR USA URY VEN ZMB ZWE ycapgr vs LOG10(INEQ) LOG10(INEQ) ycapgr
Social Market Economics Is there Empirical Evidence? ycapgr vs LOG10(SMEX) 8.0 ycapgr 3.3-1.3 UGA LBY NGA SDN CYP SGP KOR MLT JPN THA CHN MUS PRT GAB IDN GRC ESP MYS HUN ISL EGY ITA SYC BRB AUT BRA TUN FIN FRA ISRIRL JOR PAKNOR BEL SYR LKA COL DOM AUS COG BHS CAN DNKDEU DZA BDI CHL KEN IND MEXMAR SWE NLD PAN TON TUR USA CRI GBR ECU IRN SAU MRT CMR FJI GTM BFA PNG TGO PHL GMB MWIHNDNPL NZL TTOZAF ZWE CIV URY ARG BGD JAM BOL BEN PER SLV ROM SLE VEN GHA SEN HTI SUR CAF ZMB MDG NIC HKG MAC ARE KWT -6.0-2.0-0.8 0.3 1.5 LOG10(SMEX)