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Social Market Economy – Third Way or Compassionate Capitalism?

Social Market Economy – Third Way or Compassionate Capitalism? Marcus Marktanner , American University of Beirut, Lebanon Prepared for: Birzeit University, Institute of Law Ramallah, Palestine, December 4, 2008. Social Market Economy – Third Way or Compassionate Capitalism?. Table of Content

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Social Market Economy – Third Way or Compassionate Capitalism?

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  1. Social Market Economy – Third Way or Compassionate Capitalism?Marcus Marktanner, American University of Beirut, LebanonPrepared for:Birzeit University, Institute of LawRamallah, Palestine, December 4, 2008

  2. Social Market Economy – Third Way or Compassionate Capitalism? Table of Content • Liberalism: One Way • Socialism: Another Way • Social Market Economy (SME): Which Way? • SME: A Superior Way? • SME: How to Pave the Way? • Embarking on the SME: A Rocky Way • Conclusions

  3. Social Market Economy – Third Way or Compassionate Capitalism? • Liberalism: One Way • Was not the first political economy • Mercantislism Physiocracy  Liberalism • Classical Economics: Smith, Ricardo, Marx • Neoclassical Economics: A Natural Law? • A theory of allocation without distribution • Liberalism: A games without rules • The First Globalization Wave (1870-1929) • 1929: Great Depression and the End of Liberalism • From Liberalism to Keynes

  4. Social Market Economy – Third Way or Compassionate Capitalism? • Socialism: The Other Way • Physiocracy recycled • Why was Marx a Classical Economist? • Efficient Allocation vs. Just Redistribution • Justice of what? Efficiency, consumption, opportunity? • A theory of distribution without allocation • Socialism: No market game • The Marxian Legacy in Developing Countries • 1989: Fall of the Berlin Wall and the End of Socialism • From the End of Socialism back to Liberalism

  5. Social Market Economy – Third Way or Compassionate Capitalism? • Social Market Economy: Which Way? • What’s the difference? • Combining market efficiency with equal opportunity • The market is in the heart, yes • But, the market needs to be in order • SME: The market as a game with rules • Ordoliberalism: The state defines the rules of the game • How? Theory matters, but history, too! • Order policy requires principles of economic policy

  6. Social Market Economy – Third Way or Compassionate Capitalism? • Social Market Economy: A Superior Way?

  7. Social Market Economy – Third Way or Compassionate Capitalism? • Social Market Economy: How to Pave the Way? (1) • Build fiscal capacity to become more equal and productive

  8. Social Market Economy – Third Way or Compassionate Capitalism? • Social Market Economy: How to Pave the Way? (2) • Because investment in social opportunities creates economic ones

  9. Social Market Economy – Third Way or Compassionate Capitalism? • Social Market Economy: How to Pave the Way? (3) • And vice versa

  10. Social Market Economy – Third Way or Compassionate Capitalism? • Social Market Economy: How to Pave the Way? (4) • And Social and Economic Opportunities Create Higher Incomes

  11. Social Market Economy – Third Way or Compassionate Capitalism? • Social Market Economy: How to Pave the Way? (4) • The East Asian Tigers Example

  12. Social Market Economy – Third Way or Compassionate Capitalism? • Embarking on the SME: A Rocky Way • Different countries require different policy priorities • Social Market Economy starts with the state • Fiscal capacity building is not a goal in itself • The less market efficiency is aligned with equal opportunity, the more the state must invest (not consume) • The introduction of the Social Market Economy, however, is not easy. • Take the case of the Arab world

  13. Social Market Economy – Third Way or Compassionate Capitalism? • Embarking on the SME: A Rocky Way (2) • Challenges to SME introduction in the Arab world: • Legacy of import-substitution • Political constraints • Geopolitical constraints • Geoeconomic constraints

  14. Social Market Economy – Third Way or Compassionate Capitalism? • Conclusions • The SME needs more awareness • Awareness in developed and developed countries • SME works better, the more are committed to it • Developed countries must help paving the way towards the third way of the SME to prevent development to end in a dead end as socialism and liberalism did. • Developed countries best show their compassion for capitalism by opening their markets and committing themselves to ordoliberal capacity building.

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