Principles of Global Economic Order

How the Principles of Global Economic Order Fit into the Maxims Democracy and Market Economy

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: Prinzipien globaler Wirtschaftsordnung

Table of Contents

  • Overview
  • Preliminary Remarks
  1. Foreign Trade and Competition in Goods and Services
  2. The Multi-Bilateral Exchange Rate System
  3. Global Free Trade in Intellectual Property
  4. Factor Mobility and Its Limitations
  5. International Cooperation
  6. Structure-Forming Development Aid


In view of the threatening extent of the devastations caused by the neoliberal economic doctrine, the turning towards compatible economic principles becomes almost existential. But only when these principles are combined to form a model of sustainable regional and global economic order, can the urgently needed economic policy measures be derived.

This article lists the key questions for each of the 6 principles of global economic order. The individual principles are dealt with in detail in separate articles, which can be accessed via the attached links. The supplementary 17 principles of regional economic order are listed in the article Principles of Regional Economic Order, also as key questions. These principles are also dealt with in detail in separate articles, there as well to be accessed via links.

In the context given here, the term »regional« refers to largely homogeneous entities, currently primarily nation states and supranational political and economic areas (unions), that meet all the requirements for political sovereignty and economic autonomy and are therefore in a position to form a viable foundation for the prosperous coalescence of the world. Hereafter, these entities are mostly referred to as economic areas.

The European Union (EU) and, in particular, the euro zone existing within the EU, can serve as a cautionary example here. Both are supranational entities that have emerged from the political and economic self-interest of powerful players, and whose inhomogeneity and centralism have since unfolded great destructive potential (as a supplement see the article Demokratie und europäische Integration).

Preliminary Remarks

In the course of the historical economic development in Europe and the USA democracy and market economy have emerged as useful and reliable Maximes of Economic Order. Both maxims have, however, been distorted by the neoliberal indoctrination since the 1990s to such an extent that the »natural principles« inherent in them are hardly perceived by the citizens any more. It is therefore essential to return to these principles and to combine them into a model of a sustainable regional and global economic order. See also the article Market and Market Economy.

In contrast to the centralistic structures produced by modern Neoliberalism, the model presented here is based on decentralized structures, or, better still: on subsidiary structures. Only if the citizens in as many countries as possible are recognizing democracy and market economy in their interaction again as convincing maxims, can a culture of political co-determination and economic self-determination return to society, politics and the economy and work towards social and ecological justice. Embedded in subsidiary structures, the citizens bear full responsibility for their actions and well-being, so that they are always brought to shape the conditions in their immediate environment in exchange with each other and at the same time create the preconditions and the foundation for global exchange.

Social and ecological justice, by the way, arise from a multitude of economic mechanisms: For example, the terms Efficiency and Productivity as well as 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 »liberalized« (unregulated) markets, but to economic policy control. The market thus regains the freedom it deserves, which enables it under meaningful and uniform framework conditions, rules and standards to allocate economic resources efficiently and equitably like no other mechanism.

Thus, the price is able to perform its original function again as the central information medium and control element of market transactions of individual economic players, 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 truthful prices resulting from the interplay of 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. As a supplement see the article Economic Pricing.

Subsidiary structures ensure that prosperity and welfare are no longer at the mercy of the imponderables of a worldwide production quantity achieved under oligarchic rule and high capital concentration, but result automatically from the domestic production structure. The production structure alone is decisive for local and regional economic diversity and consequently for the level of employment, the performance-related equal distribution in society and the preservation of natural resources.

Unlike domestic competition, international competition can not, by its very nature, be granted the freedoms of regulated domestic markets. It must rather be based on bilateral trade agreements given the completely different traditions, standards and resources in the world. In these agreements the exchange rate must be set as the crucial trading link, supplemented by autonomous tariffs and trade quotas to balance out the differences and to grant trade profits to both sides. The primary objective of these agreements must be to ensure that imported products with their characteristics and prices are integrated into domestic competition in the most stimulating but harmless way possible.

The separation into regional and global order thus results quite naturally from the principle difference between domestic and foreign trade. Besides, this explains why there can be no superordinate, all-dominant, self-regulating and self-stabilizing world economic order in a desirably diverse and democratic world. For more details see the article Future-Proof Foreign Trade.

Among politically sovereign and economically autonomous nation-states and economic areas, the global order is reduced to agreements of norms of conduct, especially regarding norms of international trade and cooperation. By applying these norms, economic subsidiarity can be extended beyond national borders and find its perfection at the global level in the form of projects of global interest and scale.

With domestic and cross-border subsidiarity the doctrinal practice of transferring economic powers from lower to higher levels (especially nonstate) is overcome, of which neoliberal protagonists claim it would bring about »more appropriate« and »more efficient« decisions. Along with overcoming this practice, the justification is removed for a World Trade Organization, which is entrusted by its current 164 member states as the guardian of the Grail of global cut-throat competition based on dumping prices in lead currency (dollar and euro). This is a unique procedure in economic history, because the condition for membership is the (voluntary) renunciation of national economic autonomy.

It should be noted that the demarcation of the specific functions of the various economic levels, i.e. the subsidiary structure of autonomous nation-states and economic areas both domestically and beyond their borders, is absolutely crucial for the future viability of economically autonomous entities and for the global economy as a whole:

Functioning regionality is a prerequisite for sustainable globality. Globality is the complement of functional regionality.

Below, the essential questions are listed that pertain to the 6 individual principles of global economic order. The principles are discussed in detail in separate articles, which can be accessed via the attached links.

1. Foreign Trade and Competition in Goods and Services

How can differently developed economies trade with each other to enjoy mutual trade gains? How can countries engaged in foreign trade control the important balance between the levels of productivity and wage/purchasing power autonomously and at the same time participate constructively in international quality and productivity competition? How can price distortions, crowding-out of competitors and hostile market captures be prevented in foreign trade? Which solutions are available in the tension between production volume and production structure and how can exaggerated territorial specialization be prevented? How can domestic competition be constructively stimulated by foreign trade competition? How must the trading interfaces between economic areas be designed, or how can the specific advantages and applications of bilateral, multi-bilateral and multilateral trade structures be exploited, and what role can tariffs and trade quotas play? How can social and environmental standards be improved internationally through regulations on foreign trade competition? How can equitable trade and current account balances be achieved? How can the cross-border movement of capital, natural resources and the labor force be regulated?

For details see the article Foreign Trade in Goods and Services.

2. The Multi-Bilateral Exchange Rate System

What role do exchange rates play in international trade and competition? How can and must exchange rates be calculated in order to achieve maximum welfare gains, or asked differently, what are the advantages of a multi-bilateral exchange rate system over a multilateral one? How can a conducive interplay of exchange rates, tariffs and trade quotas be achieved and how can this interplay ensure a domestic balance between productivity, wages and purchasing power as well as a balance of payments and trade? What influence do exchange rates have on interest rate and money supply policy and ultimately on government borrowing and debt? See also the article Strafzölle und Handelskrieg.

For details see the article Multi-Bilateral Exchange Rate System.

3. Global Free Trade in Intellectual Property

What conditions must be met for intellectual property to be traded worldwide independently of material goods and services and thus contribute to global progress? How must intellectual property rights be handled nationally and globally? What influence does free trade in intellectual property have on exchange rates and trade balances? How does such free trade affect the implementation of international research and development projects? What influence does the TRIPS Agreement of the World Trade Organization (WTO) have on intellectual property rights and trade in intellectual property?

For details see the article Free Trade in Intellectual Property.

4. Factor Mobility and Its Limitations

What obligations and restrictions must be imposed upon national and international mobility of production factors? Should there be a basic right to international mobility for workers, and under what conditions can workers take employment in foreign economic areas for the benefit of their own economy? Which obligations and restrictions are indispensable for the factor natural resources, or how must the mobility of this factor be regulated in order to achieve social and ecological yields? What restrictions must apply within the factor natural resources particularly to land and property? What obligations and restrictions must be imposed upon the factor production capital?

For details see the article Mobility of Production Factors.

5. International Cooperation

How can fruitful international cooperation be shaped and coordinated? Under which conditions can which powers be safely transferred to supranational organizations? Which areas of responsibility are suitable for international cooperation? How should the coordination of international cooperation be organized and how should international programs and projects be funded? Where must the boundary be drawn between public-sector and private-sector programs and projects, or which private-sector tasks are not suitable for international cooperation?

For details see the article International Cooperation.

6. Structure-Forming Development Aid

What must be the focal points of structure-forming development aid that aims at prosperity and welfare? How must development aid be designed that aims at economic independence of recipient countries? What is the mandatory sequence in reconstructing underdeveloped economic sectors to ensure the future-oriented development and autonomy of recipient countries? Against which interests in the donor and recipient countries must development aid be enforced?

For details see the article Structure-Forming Development Aid.

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


Click here for the German-language version: Prinzipien globaler Wirtschaftsordnung.

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