The economic and financial crisis has laid bare the weaknesses of the dominant growth model in no uncertain terms. Manifestly, this growth, which was largely abandoned to market forces, was not sustainable. This is shown as well by the crisis in the European Monetary Union. Now, a taskforce of the Friedrich-Ebert-Stiftung presents a roadmap for »Social Growth«.
The global financial crisis ushered in a decisive turnaround in the economic debate, dominated for over thirty years by the market liberal model. The promise of prosperity for all, brought about by the free play of market forces – via the triad of deregulation, privatisation and liberalisation – seems no longer tenable. The so-called »trickle-down effect« of the Washington Consensus has benefited only a few. Instead, the gap between rich and poor in almost all countries has widened and a privileged economic elite confronts a multitude of losers from globalisation. The manifest failure of the »invisible hand« has opened up an opportunity to strike out on an alternative path, replacing the economic liberal faith in market mechanisms, touted as the only alternative, by enhanced policy action and governance capabilities.
In fact, politics regained its primacy over the market in the first phase of the crisis. The state intervened in the time of need, forged economic stimulus packages, bailed out tottering banking institutions and supported the labour market. However, the public debt that accompanied this effort gave rise to fresh crisis phenomena. This enabled the representatives of the liberal economy to emphatically implement their old agenda in the second phase of the crisis, alluding to practical constraints and declaring that there was no alternative. Pro-cyclical fiscal policies, budget consolidation, austerity and cutting back the welfare state are enjoying stronger approval in the political debate as we exit the crisis than before it began. At the same time, stricter regulation of financial markets has largely remained a declaration of intent, as has enhanced international economic policy cooperation and coordination.
The window of opportunity for replacing the market fundamentalist model is already closing fast. However, there is still a chance to transform the debate by means of a new, progressive economic policy model. The concept of »Social Growth« is the Friedrich-Ebert-Stiftung’s (FES) proposal for this progressive economic policy model. The aim is to develop a growth model that combines prosperity for all with sustainability and justice. Its primary target is Germany, but it is also intended to apply to Europe and globally. »Social Growth« should be based on the following ten-point programme:
- Guarantee a stable supply of credit with effective financial market regulation.
- Use education policy to boost the forces of growth and expand opportunities for all.
- Open up new areas of growth with industrial policy.
- Strengthen the position of employees by means of minimum wages and co-determination.
- Fund public tasks properly and fairly by reforming tax policy.
- Stabilise the economy and the debt situation by means of an anti-cyclical fiscal policy.
- Strengthen forces for growth in Europe by means of a robust public financial architecture.
- Provide more stability in the Eurozone by means of economic policy coordination.
- Ensure Decent Work for all by means of European and global standards.
- Manage Globalisation by means of a new economic and monetary Order.
The recommendations can be found in detail in the study:
Friedrich-Ebert-Stiftung 2012: Social Growth – Model of a Progressive Economic Policy http://www.fes.de/cgi-bin/gbv.cgi?id=08836&ty=pdf