Scientific counseling in economic policy uses a triangle of tools to reach selected goals from a given state: state analysis, economic goal definition and designation of tools. I want to utilize these parameters in my contribution. By Dr. Martin Büscher

Current State
The favored political direction of economic liberalization of the last two decades and the resulting mechanisms of global competition are destroying worldwide social balances. The neoliberal economic and social model overemphasizes individual effort as value orientation and competition as the social coordinate system.

The global pressure of costs, performance and competition does not only create new norms for businesses and economic policy. The structural changes caused by the economy also affect other dimensions of society: The political possibilities of governmental actions are put into question, a new balance of power is created in the supply of public goods (health, energy, water, etc.) and the advancement of the welfare state. There is a deficit in public funds on the national, state and municipal level. Structural problems in this setting should be solved through economic impulses: Economic growth is to be created through an economic, finance and tax policy which unburdens investment income and which should help to improve cost structures.     
 
My reasoning is not to emphasize that the market should be viewed critically in principle. It is more about the question which tools are to be used; how a market economy can or cannot achieve its serving function for society and how social balance of a market economy is formed in its political, social, ecological and cultural contexts.     

A global perspective shows that there are a lot of examples that market-oriented solutions and entrepreneurial actions of global players can better guarantee social, ecological and cultural standards than regional governmental authorities. On the other hand the right extent has to be found that market-oriented competition remains a tool and does not become an end in itself. Economic competition is positive when it is about a creative and innovative process. Even business leaders – members of the executive boards and managers of global players – express that they are at the mercy of the open market and do not have room to manoeuvre in their decisions. The market economy distinguishes itself as a place of practical constraint and cut-throat competition. Offshoring, layoffs or closings are undesirable, but the concern of return on investment enforces this or the stock market, with its relentless focus at stock prices makes this inevitable.  
   
On the other hand there is a growing number of globally operating companies which are trying to integrate issues of sustainability, Corporate Social Responsibility or Corporate Citizenship into their business policy. Especially in small to medium-sized enterprises this is often an implicit rule.      

Thus the different levels of economic responsibility must be distinguished. The actual deficit lies in the new economic forming of the framework of economic action, though it is different than conceptual simple neoliberal approaches suggest.     

Society and politics shape the framework of economic action. Regulatory policies (or even regulatory ethics – i.e. questions of the normative criteria in relation to the well-being of men, the responsible actions or welfare and justice) hardly have a place in economics as a science. 
      
Neoliberal economics means microeconomization of the macroeconomy, private sector individualization of economics. Neoliberal economics means the loss of the area of conflict between economy and society in the economic discipline.
Regulatory policy as a fundamental economic issue became redundant in the social sense. Conceptually a vacuum of regulatory policy exists.      

 
Goals
The European model aims to balance the area of conflict between the individual and society. There is a social culture of solidarity in the structure of a community. The European model characterizes itself through a ‘related diversity’ in contrast to ‘unrelated diversity.’ It is always about the connection of freedom and order, of the individual and of the social structure, of individual competition and public spirit.      
The goal is the introduction of economic tools of governance or regulation which help competition and performance serve in a social way, though which ends the liberalization in the sense of practical constraints and law of nature.       

This is the European model: the appropriate balance of freedom and order, individual and society, of political forming and subsidiarity of cultural and common integration.        
 

Tools
I will mention design approaches in two areas: the reorientation of economic science and economic policy.    
   
In research and education the dimensions which have been forgotten for different reasons, even though they are the actual base of this field, have to be reintegrated: methodology (What is economy? Approaches, the subject matter of economy), dogma stories, political economics, system comparisons, research of economic systems, economic thinking in comparison between cultures, business ethics and business philosophy.          

In economic policy the scope of economic tools should be redefined and more directly connected to social and economic contexts. It needs more social authority, which does not necessarily have to be the state. An example: The core problem of unemployment reduction and securing jobs is not reached. On the contrary: Even prosperous companies ‘have to’ cut jobs. In an economic growth of up to three per cent this is called ‘jobless growth. ’The philosophy of economic and financial policy is to unburden investment income and to lower non-wage labor costs. This has marginal effects in relation to the international cost structures in comparison of labor costs and costs of the welfare state with Slovakia, Portugal, Romania, the Philippines, Vietnam or China.      
  
The state has an economic duty to fulfill. Public revenue is to be gained, the necessary work in the areas of education, senior welfare and youth, social welfare which cannot be financed by the market must be made financially feasible. The principle of fiscal capacity needs to be revived. Instead of another reduction of the maximum tax rate the public spirit needs to be reactivated and the income tax progression (e.g. starting at a gross salary of 120,000 Euro) must be raised. On an international level there are more tools available: The taxation of foreign exchange transfer (Tobin tax), to lower the incentive of currency speculation and achieve a higher financial charge of capital in relation to the financial charge of labor; the taxation of capital yield; taxes for luxury items (e.g. automobiles) like in France or Denmark. Through new social balances develop.  
     
Win win situations would always arise when an increase of government funds allows non-wage labor costs to be lowered. This would have a cyclical effect and would at the same time heighten the competitive position. Such tools are economically in line with market conditions, if these are not individual interventions, but common rules.  
   
In the discussion about the Tobin tax as an economic tool, the argument has narrowed to neoliberal self-controlling on the one hand and politically controlled development of global markets on the other. The political pluralities in Europe are inconsistent. The idea of the Tobin tax is just one of the tools of a socially, ecologically, daily-culturally and politically guided market economy. It is unrealistic to expect a revolutionary change overnight. In all areas which are today affected by economics it is about context specific tools, to shape the right balance between economic and social dimensions.    
  
The European Model could prove that it could better solve economic problems, better do ‘political homeworks’ and try to be a role model for a harmonious new balance between social authorities and a serving function of the market economy.     

Source:
Dr. Martin Büscher 2008
Private lecturer Dr. Martin Büscher is Director of Studies at the “Institute for Church and Society” of the Academy of the Evangelic Church of Westphalia. Furthermore he is private lecturer for Business and Social Ethics at the University of St. Gallen.