On the possibilities of a wonderful social utopia

Titel von Marktwirtschaft reparieren
Publisher: oekom, 200 pages.
ISBN 978-3-96238-099-1. Price 17 Euro.

Growth policy is considered to have no alternative. Governments around the world want to use economic growth to create jobs, stabilize the economy and establish social justice. Nevertheless, there are still economic crises, the gap between rich and poor is widening, and ecology is falling by the wayside. „Growth critique“ opposes these policies, but remains essentially unheard, because one unanswered question has so far robbed growth critique of its political persuasiveness: is growth policy merely a political fad, a relic of the Cold War with its system competition, or does the current economic system possess an inner coercion to grow – and if so, where: is it competition, profit orientation, or the monetary system? This question divides the growth-critical minds, and accordingly colorful is the bouquet of (in)political proposals that are made for overcoming the „growth dogma“, such as changes in personal behavior, a cultural change or even a completely new economic system.

Oliver Richters and I are both physics graduates who have been involved in the degrowth movement for a long time. In 2014, we started a scientific project to address this question. We published the result in February 2019 as a comprehensible non-fiction book: Fixing the Market Economy – Blueprint for a Liberal, Just and Sustainable Utopia. In it, we went far beyond the original question and took a hard look at the market economy as such. Market economy is actually fantastic, but why has it not been able to develop its full potential so far?

One could consider market economy as a yet unrealized social utopia, in this respect similar to other social utopias. Its scientific formulation can be found in any economics textbook under the title „neoclassical theory“ or „neoclassics“ for short, which in this respect could be called a utopian theory. Quite a few critics accuse neoclassics of not being able to describe capitalist economics adequately, and many other schools of economic thought have set out to describe capitalist economics better. But what we really need is not a theory that better describes capitalism, but a policy that overcomes it. So the political mandate might be to view neoclassics not as a bad theory but as a good set of demands, and to work toward making its concepts becoming reality – in other words, to make reality fit the theory. In this view, perfect markets, perfect competition, meritocracy, and the neutrality of money are desirable goals that could be realized, perhaps not perfectly, but considerably better than is the case today.

The contribution we make to the social debate in our book is a radical reinterpretation of „market economy as a concept:“

These problems can be solved democratically and through a market economy: By caps on resource use, skimming of land rents, limiting corporate size and wealth, reforming money creation. Market economies can indeed be as simple, robust, efficient, and equitable as neoclassics claims. The prerequisite, however, is a proper „economic order,“ a term coined by the ordoliberal „Freiburg School“ and especially by its mastermind Walter Eucken.

In this way, another social utopia could be realized at the same time, namely that of the „lean state“ of classical liberalism. If undeserved incomes (called rents in economics), which turn the market economy into capitalism, were successfully prevented or skimmed off, then very many tasks of the state, which today seem necessary to mitigate the grossest „market failures,“ would fall away. However, there are no market failures, there are only policy failures. Markets properly constituted in the sense of ordoliberalism cannot fail because the so-called Pareto efficiency of economic theory is systemically realized. Many market interventions, such as minimum wages or restrictions on temporary employment, could be eliminated because the historical power asymmetry of labor and capital is removed. The measures we propose would actually make the decentralized organization of a large economy „via the market“ possible.