Public Goods and Services

Public Goods and Public Services as One of 17 Principles of Regional Economic Order Under 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: Öffentliche Güter und Daseinsvorsorge

Table of Contents

  1. Overview
  2. Preliminary Remarks
  3. Public Goods at the Center of Services of General Interest


regionaleordnung01In 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.

All 6 global principles are summarized in the article Principles of Global Economic Order in the form of questions. The supplementary 17 regional principles are listed in the article Prinzipien regionaler Wirtschaftsordnung, also as questions.

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 (i.e. US dollar or euro). This is an unprecedented event in economic history, especially 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.

In what follows, is the plea for the public goods at the center of services of general interest as one of 17 principles of regional economic order:

3. Public Goods at the Center of Services of General Interest

ÖffentlicheDaseinsvorsorgeJPG01As described in the article Private and Public Goods, the complementary task sharing between market and state is indispensable for a functioning community. Nevertheless, private enterprises can and should be involved as far as possible in the provision of public goods – and thus in safeguarding public services of general interest. This means, however, that the provision of public goods and the safeguarding of public services of general interest are largely, but not completely, congruent governmental functions.

In addition to the provision of public goods, public services of general interest also include a number of other tasks. These include above all the subsidiary structuring of the private and public sectors (also dealt with in the article Private and Public Goods) as well as profitably regulated foreign trade, and on this basis the balancing of productivity, wages and working hours on the one hand and of prices and purchasing power on the other. For this I recommend the articles Subsidiary Specialization and Division of Labour, Socialecological Equilibrium and Future-Proof Foreign Trade.

Below is the list of the seven concrete selection criteria for public goods already published in the above linked article Private and Public Goods – also as an indispensable prerequisite for a safe provision of public services of general interest:

  1. Goods that are part of the essential basic supply and must always be available area-wide, even in times of crisis – such as clean drinking water, reliable communication and energy supply, public transport and a monetary economy accessible to all citizens.
  2. Goods whose provision is associated with damage to and scarcity of the free goods air, water and landscape – such as building construction and civil engineering (damage can be minimized by aiming at an appropiate balance between settlement, transport, agricultural and natural areas).
  3. Goods which serve general safety – such as road and air traffic regulations and flood protection.
  4. Goods that provide objective and reliable information – such as public broadcasting and public statistics.
  5. Goods that provide objective and reliable consultancy, mediation and administration – such as debt counselling and property administration.
  6. Goods that serve to permanently secure livelihoods (services of general interest) – such as research and development programs aimed at social and ecological sustainability.
  7. Goods that are described as meritorious because under market conditions they do not guarantee the socially desirable penetration rate – such as school education, health care and culture.

In this context, it should be emphasized that the provision of public goods contributes significantly to economic value creation and thus to general social welfare. It is therefore selfish and economically nonsensical for protagonists of the current neoliberal system to regularly demand the further reduction of the share of public value added in comparison to that of the private sector (government expenditure relative to GDP). The demand is also dangerous because it includes the uncontrolled provision of public goods by private enterprises and, as experience shows, results in an incomplete supply of the general public, because private enterprises concentrate on profitable market segments and neglect or abandon all other segments.

In addition, I recommend the article Sustainable Social Welfare.

Click here for the German-language version: Öffentliche Güter und Daseinsvorsorge.

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