Social market economy
It is sometimes classified as a coordinated market economy. The social market economy was originally promoted and implemented in West Germany by the Christian Democratic Union under Chancellor Konrad Adenauer in 1949 and its origins can be traced to the interwar Freiburg school of economic thought. The social market economy was designed to be a way between laissez-faire economic liberalism and socialist economics. It was strongly inspired by ordoliberalism and the tradition of Catholic social teaching or, more generally, some authors use the term social capitalism with roughly the same meaning as social market economy. It is called Rhine capitalism, typically when contrasting it with the Anglo-Saxon model of capitalism, rather than see it as an antithesis, some authors describe Rhine capitalism as successful synthesis of the Anglo-American model with social democracy. A2012 comparative politics textbook distinguishes however between the conservative-corporatist welfare state and the social democratic welfare state.
Social market economies aim to combine free initiative and social welfare on the basis of a competitive economy, the term social was established by Adenauer to prevent further reference to christian Socialism, which was used in the early party agenda Ahlener Programm in 1947. In putting social policy on par with economic policy, Müller-Armack’s concept was more emphatic regarding socio-political aims than the economic concept. This dual principle appeared in the name of the model, various Third Way conceptions prepared the ground for the socio-economic concept. This desirable order of freedom and equality was labelled by a publication entitled Weder so – noch so. In his opinion the term was tainted, reminding him too much about ideas of a mixed economy and he vehemently and consistently argued against the view that models were converging. Further, in contrast to Müller-Armack who emphasised the social aspect, by proclaiming the freer an economy is, the more social it is, Erhard once told Friedrich Hayek that the free market economy did not need to be made social but was social in its origin.
Ludwig Erhard was rather inclined to Walter Eucken’s ordoliberal competitive market order, although he even considered himself an ordoliberal, Erhard based his economic conception neither on Eucken nor on Müller-Armack. In fact, his doctoral supervisor Franz Oppenheimer and especially Wilhelm Röpke, like Erhard a student of Oppenheimer, was his source of inspiration, Erhard perceived Röpke’s books as works of revelation and considered the economist a brother in spirit. For instance, Müller-Armack stressed that by more socialism he meant the social engagement for, Ludwig Erhard pointed out that the principles of the social market economy could only be achieved if the public was determined to give them priority. They share an involvement in the Anti-Nazi Opposition, whose search for an order for Germany is an important background for the development of this concept. Michel Albert described a concept, Rhine capitalism. While the neo-American model builds largely on the ideas of Friedrich von Hayek and Milton Friedman, Rhine capitalism, Albert analyzes the Rhenish model as the more equitable and less violent one
Under the German model, unions are organized at the industry level and co-exist with works councils at both the plant and company levels. These unions negotiate wage determination with employers associations, the strength of this setup is the cooperation among unions and management councils. This is unique among Western countries, which have been marked by either substantial weakening of union powers over the last twenty years, considered an outgrowth of the non-confrontational culture of postwar Germany, finding a common denominator was often the main goal in such relationships. The system of education is perhaps the most important component of the German model. In Germany, there is a heavier emphasis on apprenticeships for skilled positions. As such, there is a percentage of university students in Germany when compared to other Western countries. Vocational training is required for a number of occupations. At the end of training, a highly regarded certification qualification is awarded that is valid for a range of over 400 occupations.
This is in stark difference to other European countries, where the number of controlled occupations is much smaller, critics cite inflexibility of the school system as the main disadvantage. Some 60% of graduates change their profession within 10 years of graduation, German banks have a much larger role in shaping the industrial sector than those in other Western countries. Rather than simply collecting savings and investments and issuing loans, most German banks have large interests in the commercial sector, as such, many corporate boards offer seats to high-ranking German banking officials, whose banks are often investors in the corporation. As a result, they seek to promote investment in the overall health of the companies they are working with. Much of the discourse regarding reforms in recent years revolved around the question of how to modify the German model to sustain it in a globalised economy. Ex-Chancellor Gerhard Schröders reforms, called Agenda 2010, made some steps towards such a goal, after years of painful reforms, the German economy seems to have got back on track.
The wage share, measured as compensation of employees as percentage of national income, was declining in Germany since the 1980s. Unemployment has fallen below 10% for the first time in years, in June 2016, the unemployment rate was reported as 5. 9% by the German Federal Employment Agency. Whether this is a development is however a matter of continuing debate. From 2003 to 2008, Germany was the worlds strongest exporter, in 2009, China overtook Germany in exports
Mercantilism was an economic theory and practice that was dominant in Western Europe during the 15th to the mid-18th centuries. Mercantilism is a form of economic nationalism and its goal is to enrich and empower the nation and state to the maximum degree, by acquiring and retaining as much economic activity as possible within the nations borders. Manufacturing and industry, particularly of goods with military applications, were prioritized, Mercantilism sought to ensure the nation produced as much volume and variety of output as possible, so as to limit its dependence upon foreign suppliers. Economic autarky was an element of mercantilism. These aims were primarily accomplished by, Imposing high tariffs on the importation of finished goods, Imposing low, or no taxes on the export of finished goods, and imposing high taxes on the exportation of raw materials. Seeking new markets for manufactured products, so as to artificially increase the demand for domestic production. These policies generally resulted in a balance of trade, which led to the accumulation of precious metals.
Historically, such policies sometimes led to war and may have motivated colonial expansion, high tariffs, especially on manufactured goods, are an almost universal feature of mercantilist policy. Mercantilism has been linked to bullionism ever since Adam Smith made the accusation, due to the fact that no author self-consciously used the label to refer to their own thoughts mercantilist authors can only be identified retrospectively. It is the supply of things necessary for life and suitable for clothing, the core of mercantile policy was a coherent national industrial policy, which was aimed at generating as much material wealth within the nation as possible. Doing so, it was thought, was the best way to increase the states military, the term mercantile system was used by its foremost critic, Adam Smith, but mercantilism had been used earlier by Mirabeau. Many nations applied the theory, one example being France which was the most important state economically in Europe at the time. King Louis XIV followed the guidance of Jean Baptiste Colbert, his general of finances.
Mercantilism was the dominant school of thought in Europe throughout the late Renaissance. Evidence of mercantilistic practices appeared in early modern Venice, however, as a codified school of economic theories, mercantilisms real birth was marked by the empiricism of the Renaissance, which first began to quantify large-scale trade accurately. England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era, queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping. It was written in the 1620s and published in 1664, numerous French authors helped cement French policy around mercantilism in the 17th century. This French mercantilism was best articulated by Jean-Baptiste Colbert, though policy liberalised greatly under Napoleon, in Europe, academic belief in mercantilism began to fade in the late 18th century, especially in Britain, in light of the arguments of Adam Smith and the classical economists
Protectionist policies protect the producers and workers of the import-competing sector in a country from foreign competitors. According to proponents, these policies can counteract unfair trade practices, protectionists may favor the policy in order to decrease the trade deficit, maintain employment in certain sectors, or favor the growth of certain industries. In recent years, protectionism has become closely aligned with the anti-globalization movement, There is a broad consensus among economists that the impact of protectionism on economic growth is largely negative, although the impact on specific industries and groups of people may be positive. The doctrine of protectionism contrasts with the doctrine of free trade, a variety of policies have been used to achieve protectionist goals. Tariff rates usually vary according to the type of goods imported, import tariffs will increase the cost to importers, and increase the price of imported goods in the local markets, thus lowering the quantity of goods imported, to favour local producers.
Tariffs may be imposed on exports, and in an economy with floating exchange rates, since export tariffs are often perceived as hurting local industries, while import tariffs are perceived as helping local industries, export tariffs are seldom implemented. Import quotas, To reduce the quantity and therefore increase the price of imported goods. The economic effects of a quota is similar to that of a tariff. Economists often suggest that import licenses be auctioned to the highest bidder, administrative barriers, Countries are sometimes accused of using their various administrative rules as a way to introduce barriers to imports. Anti-dumping legislation, Supporters of anti-dumping laws argue that they prevent dumping of cheaper foreign goods that would cause local firms to close down, however, in practice, anti-dumping laws are usually used to impose trade tariffs on foreign exporters. Direct subsidies, Government subsidies are given to local firms that cannot compete well against imports. These subsidies are purported to protect jobs, and to help local firms adjust to the world markets.
Export subsidies, Export subsidies are often used by governments to increase exports, Export subsidies have the opposite effect of export tariffs because exporters get payment, which is a percentage or proportion of the value of exported. Export subsidies increase the amount of trade, and in a country with floating exchange rates, have similar to import subsidies. Exchange rate control, A government may intervene in the exchange market to lower the value of its currency by selling its currency in the foreign exchange market. Doing so will raise the cost of imports and lower the cost of exports, international patent systems, There is an argument for viewing national patent systems as a cloak for protectionist trade policies at a national level. Peter Drahos explains that States realized that patent systems could be used to cloak protectionist strategies, There were reputational advantages for states to be seen to be sticking to intellectual property systems. In the modern trade arena many other initiatives besides tariffs have been called protectionist, for example, some commentators, such as Jagdish Bhagwati, see developed countries efforts in imposing their own labor or environmental standards as protectionism
Georgists argue that taxing economic rent is efficient and equitable. The main Georgist policy is a tax assessed on land value, Georgists argue that revenues from a land value tax can reduce or eliminate existing taxes on labor and investment that are unfair and inefficient. Some Georgists advocate for the return of public revenue back to the people by means of a basic income or citizens dividend. Economists since Adam Smith have observed that, unlike other taxes, a land value tax is often said to have progressive tax effects, in that it is paid primarily by the wealthy, and it cannot be passed on to tenants, workers, or users of land. Georgist ideas were popular and influential during the late 19th and early 20th century, political parties and communities were founded based on Georgist principles during that time. The term Georgism was invented later, and some prefer the term geoism to distinguish their beliefs from those of Henry George, Henry George is best known for popularizing the argument that government should be funded by a tax on land rent rather than taxes on labor.
According to George, people own what they create, but that natural opportunities. The tax upon land values is, the most just and it falls only upon those who receive from society a peculiar and valuable benefit, and upon them in proportion to the benefit they receive. It is the taking by the community, for the use of the community and it is the application of the common property to common uses. When all rent is taken by taxation for the needs of the community, no citizen will have an advantage over any other citizen save as is given by his industry and intelligence, and each will obtain what he fairly earns. Then, but not till then, will labor get its full reward, George believed there was an important distinction between common and collective property. Georgists have observed that privately created wealth is socialized via the tax system, while socially created wealth in land values are privatized in the price of land titles, assets consisting of commodified privilege can be considered as wealth since they have exchange value, similar to taxi medallions.
Standard economic theory suggests that a land value tax would be extremely efficient – unlike other taxes, as land value tax can improve the use of land and redirect investment toward productive, non-rentseeking activities, it could even have a negative deadweight loss that boosts productivity. A tax upon ground-rents would not raise the rents of houses and it would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it according as the competitors happen to be richer or poorer, in every country the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own.
Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry
The Nordic model refers to the economic and social policies common to the Nordic countries. This includes a combination of market capitalism with a comprehensive welfare state. The Nordic model began to earn attention after World War II, although there are significant differences among the Nordic countries, they all share some common traits. Each of the Nordic countries has its own economic and social models, the United Nations World Happiness Report 2013 shows that the happiest nations are concentrated in Northern Europe. The Nordics ranked highest on the metrics of real GDP per capita, healthy life expectancy, having someone to count on, perceived freedom to make choices, generosity. Strong property rights, contract enforcement, and overall ease of doing business and this is combined with collective risk sharing which has provided a form of protection against the risks associated with economic openness. Nordic countries rank very high in product market freedom according to OECD rankings, in Transparency Internationals 2015 Corruption Perceptions Index, Finland and Norway were ranked among the top 10 least corrupt of the 167 countries evaluated.
High percentage of workers belonging to a labour union, in 2013, labour union density was 85. 5% in Iceland, 69% in Finland,67. 7% in Sweden,66. 8% in Denmark, and 52. 1% in Norway. In comparison, labour union density was 13. 6% in Mexico and 10. 8% in the United States, the lower union density in Norway is mainly explained by the absence of a Ghent system since 1938. In contrast, Denmark and Sweden all have union-run unemployment funds, Sweden has decentralised wage co-ordination, while Finland is ranked the least flexible. The changing economic conditions have given rise to fear among workers as well as resistance by trade unions in regards to reforms, at the same time and favourable economic development seem to have reduced unemployment, which has traditionally been higher. Denmarks Social Democrats managed to push reforms in 1994 and 1996. Sweden at 56. 6% of GDP, Denmark at 51. 7%, one key reason for public spending is the large number of public employees. These employees work in fields including education, healthcare.
They often have lifelong job security and make up around a third of the workforce, public spending in social transfers such as unemployment benefits and early-retirement programmes is high. In 2001, the unemployment benefits were around 90% of wage in Denmark and 80% in Sweden, compared to 75% in the Netherlands. The unemployed were able to receive several years before reductions. Public expenditure for health and education is higher in Denmark, Sweden
Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property, which is owned by an entity, and from collective property. Private property is distinguished from personal property, which refers to property for personal use. Private property is a concept defined and enforced by a countrys political system. Prior to the 18th century, English-speakers generally used the property in reference to land ownership. In England, property did not have a legal definition until the 17th century, private property as commercial property was invented with the great European trading companies of the 17th century. John Locke, in arguing against supporters of monarchy, conceptualized property as a natural right that God had not bestowed exclusively on the monarchy. Influenced by the rise of mercantilism, Locke argued that property was antecedent to. Locke distinguished between common property, by which he meant open-access property, and property in goods and producer-goods.
His chief argument for property in land was improved land management, smith confined natural rights to liberty and life. Smith further argued that government could not exist without property. Economic liberals consider private property to be essential for the construction of a prosperous society and they believe private ownership of land ensures the land will be put to productive use and its value protected by the landowner. If the owners must pay property taxes, this forces the owners to maintain a productive output from the land to keep taxes current, private property attaches a monetary value to land, which can be used to trade or as collateral. Private property thus is an important part of capitalization within the economy, socialist economists are critical of private property as socialism aims to substitute private property in the means of production for social ownership or public property. Socialists generally favor social ownership either to eliminate the distinctions between owners and workers, and as a component of the development of a post-capitalist economic system.
According to Mises, this problem would make rational socialist calculation impossible, in Marxian economics and socialist politics, there is distinction between private property and personal property. Prior to the 18th century, private property usually referred to land ownership, private property in the means of production is criticized by socialists, who use the term in a different meaning. The socialist critique of private ownership is heavily influenced by the Marxian analysis of capitalist property forms as part of its critique of alienation and exploitation in capitalism
A gift economy, gift culture, or gift exchange is a mode of exchange where valuables are not traded or sold, but rather given without an explicit agreement for immediate or future rewards. This contrasts with an economy or a market economy, where goods. Social norms and custom govern gift exchange, Gifts are not given in an explicit exchange of goods or services for money or some other commodity. The nature of gift economies forms the subject of a debate in anthropology. Anthropological research into gift economies began with Bronisław Malinowskis description of the Kula ring in the Trobriand Islands during World War I. The Kula trade appeared to be gift-like since Trobrianders would travel great distances over dangerous seas to give what were considered valuable objects without any guarantee of a return. According to anthropologists Maurice Bloch and Jonathan Parry, it is the relationship between market and non-market exchange that attracts the most attention. Gift economies are said, by some, to communities.
Gift ideology in highly commercialized societies differs from the typical of non-market societies. Gift economies must be differentiated from several closely related phenomena, such as common property regimes, however, he claims that anthropologists, through analysis of a variety of cultural and historical forms of exchange, have established that no universal practice exists. Gift exchange is frequently embedded in political, kin, or religious institutions, gift-giving is a form of transfer of property rights over particular objects. The nature of property rights varies from society to society, from culture to culture. The nature of gift-giving is thus altered by the type of property regime in place, property is not a thing, but a relationship amongst people about things. According to Chris Hann, property is a relationship that governs the conduct of people with respect to the use. Anthropologists analyze these relationships in terms of a variety of actors bundle of rights over objects, an example is the current debates around intellectual property rights.
Hann and Strangelove both give the example of a book, over which the author retains a copyright. The gifts given in Kula exchange still remain, in some respects, in the example used above, copyright is one of those bundled rights that regulate the use and disposition of a book. Gift-giving in many societies is complicated because private property owned by an individual may be limited in scope
Parties engaging in the production or distribution of prohibited goods and services are members of the illegal economy. Examples include the trade, illegal currency transactions. Violations of the tax code involving income tax evasion constitutes membership in the unreported economy, because tax evasion or participation in a black market activity is illegal, participants will attempt to hide their behavior from the government or regulatory authority. Cash usage is the medium of exchange in illegal transactions since cash usage does not leave a footprint. Common motives for operating in markets are to trade contraband, avoid taxes and regulations. Typically the totality of such activity is referred to with the article as a complement to the official economies, by market for such goods and services. Black money is the proceeds of a transaction, on which income and other taxes have not been paid. Because of the nature of the black economy it is not possible to determine its size. There is no single underground economy, there are many and these underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing.
Different types of activities are distinguished according to the particular institutional rules that they violate. Illegal economy participants engage in the production and distribution of prohibited goods and services, such as trafficking, arms trafficking. The unreported economy consists of economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the economy is the tax gap. In the U. S. unreported income is estimated to be $2 trillion resulting in a tax gap of $450–$500 billion, the unrecorded economy consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies. A summary measure of the economy is the amount of unrecorded income. Unrecorded income is a problem in transition countries that switched from a socialist accounting system to UN standard national accounting.
New methods have been proposed for estimating the size of the unrecorded economy, but there is still little consensus concerning the size of the unreported economies of transition countries
Anarchist economics is the set of theories and practices of economic activity within the political philosophy of anarchism. It is evident that, despite his speculations on the future of machinery, Godwins ideal society is based on the economics of handcrafts and cultivation. For the influential German individualist anarchist philosopher Max Stirner private property is a spook which lives by the grace of law, in other words, private property exists purely through the protection of the State, through the States grace. And what is their principle, whose protector they always love, not that of labour, rather it is interest-bearing possession. Labour certainly, yet little or none at all of ones own, Pierre Joseph Proudhon was involved with the Lyons mutualists and adopted the name to describe his own teachings. Clarence Lee Swartz gives his own account of the origin of the term, claiming that he word mutualism seems to have been first used by John Gray, an English writer, in 1832. Thus, he saw private property as essential to liberty and a road to tyranny, the former when it resulted from labour and was required for labour.
He generally called the possession and the latter property. For large-scale industry, he supported workers associations to replace wage labour, Josiah Warren is widely regarded as the first US anarchist, and the four-page weekly paper he edited during 1833, The Peaceful Revolutionist, was the first anarchist periodical published. Josiah Warren termed the phrase Cost the limit of price, with cost here referring not to monetary price paid, therefore, e proposed a system to pay people with certificates indicating how many hours of work they did. They could exchange the notes at local stores for goods that took the same amount of time to produce. Warren put his theories to the test by establishing an experimental labor for labor store called the Cincinnati Time Store where trade was facilitated by notes backed by a promise to perform labor. The store proved successful and operated for three years after which it was closed so that Warren could pursue establishing colonies based on mutualism and these included Utopia and Modern Times.
Warren said that Stephen Pearl Andrews The Science of Society, published in 1852, was the most lucid, in Europe an early anarchist communist was Joseph Déjacque, the first person to describe himself as libertarian. Unlike and against Proudhon, he argued that, it is not the product of his or her labor that the worker has a right to, returning to New York he was able to serialise his book in his periodical Le Libertaire, Journal du Mouvement social. Published in 27 issues from June 9,1858 to February 4,1861, the anti-authoritarian sections of the First International proclaimed at the St. This revolutionary transformation could only be the outcome of the action of the proletariat itself, its trades bodies. Due to its links to active workers movements, the International became a significant organization, Karl Marx became a leading figure in the International and a member of its General Council
Socialism of the 21st century
Socialism of the 21st century has democratic socialist elements, but primarily resembles Marxist revisionism. Between 1990 and 1999, the Gini coefficient rose in almost every Latin American country, volatile prices and inflation led to dissatisfaction. In 2000 only 37% of Latin Americans were satisfied with their democracies. According to Dieterich “the program of the Socialism of the 21st Century is necessarily a revolutionary one” in that the society is replaced by a “qualitatively different system. ”The model of socialism of the 21st century encourages economic and political integration among nations in Latin America. This often accompanied with opposition to North American influence, regional organizations like CELAC, Mercosur, UNASUR, and ALBA promote cooperation with Latin America and exclude North American countries. ALBA is most explicitly related to socialism of the 21st century, while other organizations focus on economic integration, ALBA promotes social and economic integration among countries that subscribe to democratic socialism.
Its creation was announced in direct opposition to George W. Bushs attempts to establish a Free Trade Area of the Americas that included the United States, in 2008 ALBA introduced a monetary union using the SUCRE as its regional currency. Former Venezuelan president Hugo Chávez has called the process of socialist reforms in Venezuela the Bolivarian process and it is more heavily influenced by the theories of Mészáros and Harnecker than by those of Dieterich. The process draws its name from Latin American liberator Simón Bolívar and is an example of Bolivarianism. Often translated to good living or living well, the concept of buen vivir is related to the movement for indigenous rights and rights of nature and it focuses on the living sustainably as the member of a community that includes both human beings and Nature. Buen vivir is enshrined in Ecuadors new constitution as an alternative to neoliberal development, the constitution outlines a set of rights, one of which is the rights of nature.
This approach has been applied to the Yasuní-ITT Initiative, critics claim that democratic socialism in Latin America acts as a façade for authoritarianism. The charisma of figures like Hugo Chávez and mottoes like Country, Socialism, or Death. have drawn comparisons to the Latin American dictators, according to Steven Levitsky of Harvard University, Only under the dictatorships of the past. Were presidents reelected for life, with Levitsky further stating that while Latin America experienced democracy, citizens opposed indefinite reelection, Levitsky noted that In Nicaragua and Ecuador, reelection is associated with the same problems of 100 years ago. The Washington Post stated in 2014 Bolivia’s Evo Morales, Daniel Ortega of Nicaragua, used the ballot box to weaken or eliminate term limits. Western media coverage of Chávez and other Latin American leaders from the 21st century socialist movement has criticized as unfair by their supporters. The sustainability and stability of economic reforms associated with socialism of the 21st century have been questioned, for the Bolivarian government of Venezuela, their economic policies led to shortages in Venezuela, a high inflation rate and a dysfunctional economy.
In 2015, Venezuela had the worlds worst performing economy, the currency is collapsed, it had the worlds highest inflation rate, on the other hand, economic growth increased in Bolivia under Evo Morales