Maximes of Economic Order

How to Transform the Neoliberal Anarchy into a Sustainable Economic Order and Globalization

An Article in the Compendium of Market-Based Social-Ecological Economics

Key issues in view of the neoliberal crisis:
How can we guarantee employment and fair income?
How can we protect the environment effectively?
How should we shape the economic globalization?
What should the economic sciences contribute?
What must be the vital tasks of economic policy?
How can we legitimize economic policy democratically?

Click here for the list of all articles: Compendium
Click here for the German-language version: Maximen der Wirtschaftsordnung

Table of Contents

  1. Overview
  2. Human Rights as a Starting Point
  3. Human Rights, Democracy and Market Economy
  4. Plea for a Future-Proof Economic Order
  5. Social and Ecological Justice
  6. The Truthful Price as a Control Element
  7. The Production Structure as a Guarantor of Welfare
  8. Agreements on Foreign Trade and Competition
  9. The Separation into Regional and Global Order

1. Overview

In view of the conceptual confusion and the social and ecological devastation caused by the neoliberal system, a return to the human rights progress of European and North American history is urgently needed. This was and is a prerequisite for the development and interaction of democracy and market economy. What is at stake is nothing less than transforming neoliberal anarchy into a sustainable economic order and globalization. In essence, it is a question of restoring the autonomy of economic areas to enable them to lay a solid foundation for the prosperous coalescence of the world.

2. Human Rights as a Starting Point

The decisive step towards the recognition of individual fundamental rights given to man by nature – especially in the face of state arbitrariness – only succeeded as late as in the Middle Ages with the overcoming of feudal orders. Initially, the rights included only the fundamental freedoms, i.e. the right to equality, integrity, property, freedom of opinion and belief, and the right to resist oppression. In the 19th century the rights to work, education and social security were added, and in the 20th century the rights were extended to free political, economic and cultural activity. In 1948 the UN General Assembly issued a declaration and in 1966 two covenants to establish civil and political rights accordingly. The two covenants have now been ratified by almost 70 states. The contents correspond roughly to the European Convention for the Protection of Human Rights and Fundamental Freedoms of 1950 and the European Social Charter of 1961. The citizens of the European signatory states can sue for their rights before the European Court of Human Rights (ECHR).

For further details see the Court’s website: https://www.echr.coe.int/Pages/home.aspx?p=home

Applying human rights to the economic sphere means first and foremost that every citizen has the right to participate in economic life, taking into account individual abilities, and that every citizen has the right to a fair, performance-related share of the economic outturn. In enforcing these rights it must be ensured that individuals do not curtail the rights of others when exercising their rights. Because the optimal welfare, (the welfare optimum), is only given, if all citizens are involved in economic cycles in an optimal performance-oriented manner as producers (entrepreneurs or dependent employees) and consumers, and if at the same time they achieve optimal performance-related incomes. In other words, if full employment, equal distribution of income, wealth and production capital as well as substance preservation of natural resources are ensured, or in short: if social and ecological justice prevail. See also the article Sustainable Social Welfare.

Incidentally, fair performance-related remuneration – as part of social justice – is not a nebulous wishful thinking, but an economically quantifiable value. Franz Radermacher explained this with »mathematical accuracy« in his contribution to a conference transcript. He stresses that too much as well as too little compensation leads to social impoverishment, and sees the optimum achieved when the »richest (or better: the most efficient) 20 percent of the work force share less than 35 percent of the cake among themselves«. (Radermacher 2004, p.101)

At least since the Club of Rome’s 1972 report on the »Limits to Growth«, there can no longer be any doubt that the welfare optimum presupposes not only social but also ecological justice, also being referred to as ecological sustainability, which manifests itself, as already indicated, in the permanent substance preservation of renewable and non-renewable natural resources.

3. Human Rights, Democracy and Market Economy

The idea of the natural freedom of the individual, which was the driving force behind the enforcement of human rights, naturally went hand in hand with the development of modern political and economic systems. Thus, despite all setbacks, two future-oriented maxims of prosperous coexistence have emerged in the course of history which, as experience shows, do justice to the claim to human freedom in the best possible way – especially in their interaction: democracy and market economy. In contrast to dogmatic »drawing board products«, as for instance Marxism, democracy and market economy exhibit a singular advantage: They matured over the millennia and have emerged strengthened from the hard school of practical use. In the beginning there was the Stone Age exchange of independent traders in sporadically convened market places, followed by fights of Greek citizens against their tyrants, and finally the birth of democracy in 508 BC by a daring constitutional petition of the Athenian public servant Kleisthenes.

twocrisespng01

How slow the development was and how numerous and discouraging the setbacks have been since then is not the subject here, but rather that we are contemporary witnesses of a renewed, existentially threatening setback.

For the first time in industrial history, we are witnessing the simultaneous occurrence of two crises, one social and the other ecological, which are caused by political negligence and have become an existential threat. The illustration on the left lists the hazards that we now have to face politically, economically and ecologically.

4. Plea for a Future-Proof Economic Order

In the course of neoliberal indoctrination, the above-mentioned maxims of democracy and market economy have been distorted to such an extent that their »natural principles« are hardly perceived anymore by citizens all over the world. The two articles published in this compendium Principles of Global Economic Order and Prinzipien regionaler Wirtschaftsordnung serve to bring these principles to the fore again and assemble them into a model of sustainable regional and global economic order. The impetus to reconsider and redefine takes place in the firm conviction that the interaction of democracy and market economy does justice to the double human demand for individual freedom and social welfare better than any other known order.

In contrast to the centralist structures produced by modern Neoliberalism, the model presented in the abovementioned articles is based on decentralized structures, or even better: on subsidiary structures. Only if democracy and market economy are spread over as many countries as possible (again) can a culture of political co-determination and economic self-determination be established in society, politics and economy and work towards social and ecological justice. Embedded in subsidiary structures, people have to bear full responsibility for their actions and well-being, so that they are always motivated to exchange ideas, above all to shape the conditions in their immediate environment but also to create and negotiate the conditions for global exchange.

5. Social and Ecological Justice

Social and ecological justice arise from a multitude of economic mechanisms: For example, the terms efficiency, productivity and specialization, which are wrongly defined in the neoliberal context, are redefined in the sense of social justice and ecological sustainability, and are no longer subject to the arbitrariness of unregulated markets, but to economic policy control and regulation. Markets thus regain the freedom they deserve, which enables them like no other mechanism to allocate economic resources efficiently and equitably under meaningful and uniform conditions, rules and standards. See also the article Efficiency and Productivity.

6. The Truthful Price as a Control Element

Under the conditions described the truthful price can function again as the central information medium and control element of individual market transactions of economic players. The price can perform its original function again because, under the conditions of social and ecological justice and productivity, it reflects all internal and external costs. By allowing the players to be guided by thruthful prices arising from the interplay between supply and demand, economic resources move – as if steered by an »invisible hand« – to where they provide the greatest benefit to individuals and at the same time to society as a whole (see also Economic Pricing).

7. The Production Structure as a Guarantor of Welfare

Subsidiary structures ensure that prosperity and welfare are no longer at the mercy of the imponderables of production quantities achieved worldwide under oligarchic rule and concentration of economic capital and economic power, but result as if by themselves from the domestic production structure. The production structure alone is decisive for regional economic diversity and consequently for the employment level and the performance-related equal distribution in society as well as for the preservation of natural resources. See also Sustainable Social Welfare.

8. Agreements on Foreign Trade and Competition

The basis for meaningful, conducive and self-determined foreign trade and cross-border competition is regional diversity, which enables the greatest mutual trading gains in the exchange of unique regional products. However, cross-border competition cannot, by its very nature, be granted the freedoms of a regulated domestic market. Rather, foreign trade and beneficial cross-border competition must be based on bilateral trade agreements, given the widely differing traditions, factors of production, productive standards and production costs across the globe. Above all, provisions must be laid down in these trade agreements concerning exchange rates, tariffs and trade quotas to ensure that imported products are integrated with their specific characteristics and prices into domestic competition in the most stimulating but harmless way possible. For a deeper insight I recommend the articles Future-Proof Foreign Trade and Comparative Advantage – Upgraded.

9. The Separation into Regional and Global Order

The separation into regional and global order, which constitutes the core of the abovementioned articles, emerges quite naturally from the principle difference between domestic and foreign trade. This also explains why there can be no superordinate, self-regulating and self stabilizing, all-dominant world economic order in a desirably multifarious world.

In the context given here, the term »regional« refers to sovereign and largely homogeneous entities such as nation states or economic unions,

  1. who meet all the prerequisites for political and economic autonomy,
  2. who are independent enough to negotiate at eye level with each other,
  3. who can resist foreign trade blackmail attempts,
  4. who jointly develop normative guidelines for international exchange,
  5. who do not delegate their powers to undemocratic, centralist institutions such as the present European Union and the World Trade Organization, and
  6. who form a solid foundation for a prosperous growing together of the world and for a sustainable economic globalization.

As a supplement I recommend the articles World Trade Organization (WTO), Undemocratic EU Institutions and EU: Federal Superstate or Confederation.

Note on the COVID-19 Pandemic

The pandemic has noticeably revealed the significant weaknesses of the neoliberal economic system for everyone, above all the shortage of medical, but also other products, caused by disruptions in the absurdly networked value and supply chains across the globe.

The analyses of the neoliberal system as well as the principles and practical procedures based on them for building a sustainable system, which are presented in this compendium, thereby obtain an unexpected topicality. Now is the time to seize the opportunity and build up economic policy pressure to enforce the development of an economic order that is sustainably oriented towards social and ecological welfare.

The following article refers to the targeted arguments contained in the Compendium: COVID-19 and Globalization

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Click here for the German-language version: Maximen der Wirtschaftsordnung.

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