das lebendige Bewusstsein über die Verbindung zwischen der ... · Athen, 2011 You Can’t Run on...

Die Verheissung der Soziologie:

“(...) das lebendige Bewusstsein über die Verbindung zwischen der persönlichen Erfahrung und der Gesellschaft als Ganzem.”

-- Charles Wright Mills, 1959

Athen, 2011

You Can’t Run on One Leg

–

Negative Integration in the EU as a Dysfunctional

Mixed Economy

Ak PolÖk / WEC FFM, 17.10.2014

Max Held BIGSSS/Uni Bremen

Allokation & Effizienz Verteilung Stabilisierung

MarktMarktgleichgewicht ist pareto-optimal

(über eine gegebene (ex-ante) Verteilung)(unter heroischen Annahmen)

Marktversagen Allmendegüter, Risikopools, …

Winner-take-all, monopsistische Arbeitgeber …

KonjunkturzyklenHandelsbilanz-

ungleichgewichte

Intakte Mischwirtschaft

Regulierung Steuern

Regulierung Steuern

Geldpolitik Steuern

Figure 1: Means and Ends of the Mixed Economy

Dimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human NeedDimensions of Material Human Need

ProductionaProductionaProductionaProductiona Riskb Distribution (vertically)cDistribution (vertically)cDistribution (vertically)cDistribution (vertically)cDistribution (vertically)cDistribution (vertically)cDistribution (vertically)cDistribution (vertically)c TimedTimed Space (horizontal)eSpace (horizontal)eSpace (horizontal)eSpace (horizontal)eSpace (horizontal)e

Humanf

FrailtyHumanf

CrisisHumanf

Modern Fit

Exchangeg

Success

Exchangeg

Success

Exchangeg Failure

Exchangeg Failure

Exchangeg Failure

Exchangeg Failure

Exchangeg Failure

Command h

Regu-latory

iCommand h

Regu-latory

iCommand h

Fiscalj

Command h

Fiscalj

Command h

Mone-tary

k

DisorganizationlDisorganizationlDisorganizationlDisorganizationl Ignorancev Dominance strategieszDominance strategieszDominance strategieszDominance strategieszDominance strategieszDominance strategieszDominance strategieszDominance strategiesz Myopia , herdingMyopia , herding ParochialismParochialismParochialismParochialismParochialism Conditionf

SubsistencelSubsistencelSubsistencelSubsistencel Black swansv Dominance hierarchieszDominance hierarchieszDominance hierarchieszDominance hierarchieszDominance hierarchieszDominance hierarchieszDominance hierarchieszDominance hierarchiesz Time inconsistencyTime inconsistency AutarkyAutarkyAutarkyAutarkyAutarkyConditionf

Maximum output for minimal inputslMaximum output for minimal inputslMaximum output for minimal inputslMaximum output for minimal inputsl Downside risk aversionv Affiliative strategiesz / Reciprocal altruismzAffiliative strategiesz / Reciprocal altruismzAffiliative strategiesz / Reciprocal altruismzAffiliative strategiesz / Reciprocal altruismzAffiliative strategiesz / Reciprocal altruismzAffiliative strategiesz / Reciprocal altruismzAffiliative strategiesz / Reciprocal altruismzAffiliative strategiesz / Reciprocal altruismz Golden rule savings rateGolden rule savings rate CosmopolitanismCosmopolitanismCosmopolitanismCosmopolitanismCosmopolitanism

Conditionf

Competitive equilibriummCompetitive equilibriummCompetitive equilibriummCompetitive equilibriumm Insurancew Pareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityA InterestInterest

TradeTradeTradeTradeTrade

Marketg

Competitive equilibriummCompetitive equilibriummCompetitive equilibriummCompetitive equilibriumm Insurancew Pareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityAPareto optimalityA InterestInterest Absolute advantage

Comparative advantage

Factor price

equalization

Factor price

equalization

Economies of

scale

Marketg

ExternalitiesExternalitiesExternalities Information asymmetryInformation asymmetryInformation asymmetry Winner-take-allB

Baumol’s Cost

DiseaseB

Differential budget

constraintsC

Differential budget

constraintsC

Differential budget

constraintsC

Diminishing marginal utilityD

(Employer) market powerF

Positional externality

E

Short-term Long-termNo trade for some

Different terms of

tradeBrain drainBrain drain Agglo-

meration

Marketg


Baumol’s Cost

DiseaseB

Differential budget

constraintsC

Differential budget

constraintsC

Differential budget

constraintsC




E

business cycle,

bubbles & panics,de- &

inflation

under-saving (CPR)

No trade for some

Different terms of

tradeBrain drainBrain drain Agglo-

meration

Marketg


Baumol’s Cost

DiseaseB

Differential budget

constraintsC

Differential budget

constraintsC

Differential budget

constraintsC




E

business cycle,


inflation

under-saving (CPR)

Or: balance of payments crises (in the long run)Or: balance of payments crises (in the long run)Or: balance of payments crises (in the long run)Or: balance of payments crises (in the long run)Or: balance of payments crises (in the long run)

Marketg

Public goodo

Common goodp

(Natural) market powerq

Principal-Agent

problem

Adverse selectionx,

Moral hazardx

Efficiency wages

Winner-take-allB

Baumol’s Cost

DiseaseB

Differential budget

constraintsC

Differential budget

constraintsC

Differential budget

constraintsC




E

business cycle,


inflation

under-saving (CPR)

Or: balance of payments crises (in the long run)Or: balance of payments crises (in the long run)Or: balance of payments crises (in the long run)Or: balance of payments crises (in the long run)Or: balance of payments crises (in the long run)

Marketg

Public goodo

Common goodp

(Natural) market powerq

Principal-Agent

problem

Adverse selectionx,

Moral hazardx

Efficiency wages

Winner-take-allB

Baumol’s Cost

DiseaseB

Differential budget

constraintsC

Differential budget

constraintsC

Differential budget

constraintsC




E

business cycle,


inflation

under-saving (CPR)

+ adjustment costs+ within-party distributive effects

- factor mobility


- factor mobility


- factor mobility


- factor mobility


- factor mobility

Marketg

- Property rightss

Regulated private

provision, antitrustt

- Mandatory insurancey -

Price controlsGPrice controlsGPrice controlsGPrice controlsGPrice controlsG Antitrust, right 2

strike, EPL,codeter-

minationG

-EPL

(employment protection legislation)

mandatory pensions

factor price

flexibility-- - -- -

State

h

- Property rightss

Regulated private

provision, antitrustt

- Mandatory insurancey - Quotas

(e.g. affirmative

action)H

Quotas (e.g.

affirmative action)H

- --

Antitrust, right 2

strike, EPL,codeter-

minationG

-EPL

(employment protection legislation)

mandatory pensions

factor price

flexibility-- - -- -

State

h

Public pro-

visionr

Pigou-vian taxs

Public provision

for feet

Redistri-bution

Public benefitsy

Progressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfers

Fiscal stimulus

public investment, encourage

saving

transferstransferstransferstransferstransfers

State

h

Public pro-

visionr

Pigou-vian taxs

Public provision

for feet

Redistri-bution

Public benefitsy

Progressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfersProgressive taxationspending & transfers

Fiscal stimulus

public investment, encourage

saving industrial policy

industrial policy

structural policy

State

h

[Price stabilityu][Price stabilityu][Price stabilityu][Price stabilityu] [Price stabilityu] [Price stabilityu][Price stabilityu][Price stabilityu][Price stabilityu][Price stabilityu][Price stabilityu][Price stabilityu][Price stabilityu] Monetary

stimulus[Price

stabilityu] - - -- -

State

h

EfficiencyᵇEfficiencyᵇEfficiencyᵇ Risk Poolᴶ Equity cEquity cEquity cEquity cEquity cEquity cEquity cEquity c ConsistencydConsistencyd Convergence eConvergence eConvergence eConvergence eConvergence e

Ends of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human InstitutionsEnds of Enlightened Human Institutions

Figure 2: Means and Ends of the Mixed Economy (Director’s Cut)







ungleichgewichte


Regulierung Steuern

Regulierung Steuern

Geldpolitik Steuern


Why does the mixed economy matter to the welfare state? (p. 86ff)

- ... because it engages the complexity of a modern economy: markets react to interventions (e.g. deadweight-losses)

- ... because it denaturalizes market allocations: whatever allocative results welfare states redress, are already contingent on social institutions and ex-ante distributions (e.g. “poor relief” vs. winner-take-all, efficiency wages, monopsony employers)

- ... because it guides us to social consequences: (welfare) states are better, and in specific ways, at some things than others (e.g. public utilities, free family health care; efficiency and equity)

How does this differ from other formulations? (p. 89ff)

- ... there are better (and worse) tradeoffs between efficiency, equity and sustainability in designing mixed economies. Marginal costs differ! (e.g. NIT vs. minimum wage)

- ... it’s not full employment (Keynesian, “demand-side”) vs. growth (neoliberalism, “supply-side”) (e.g. Offe 2003). ‣ Keynesians: there is not always underconsumption ‣Neoliberals: not all deregulation stimulates growth. ‣Growth: in GDP (cash flow) measures activity, not income (earnings and losses), let alone assets (balance sheet) ‣Full employment: is necessary but not sufficient condition for welfare (e.g. depleted commons, winner-take-all)

Ordnungspolitik (Regulatory Policy)

... braucht:

- Gewaltmonopol (sonst Korruption)

- Rechtsstaatlichkeit (sonst Willkür)

- Kongruenz, nicht Subsidiarität (sonst Arbitrage) (Sinn 2011)

Fiskalpolitik

Geldpolitik (Monetary Policy)

... braucht:

- Kongruenz (sonst Steuerwettbewerb)

- Minimale Marktverzerrung (sonst Wachstumsversluste)

- Beliebige Lastenverteilung zwischen natürlichen Personen

- u.v.a.m. (Held 201x)

... braucht:

- Synchrone Konjunkturzyklen

- Totale Mobilität von Arbeit, Kapital

- Flexible Preise, Löhne

- oder Fiskaltransfers! (Mundell 1961)







ungleichgewichte


Regulierung Steuern

Regulierung Steuern

Geldpolitik Steuern

EU Regulierung Steuern

Regulierung Steuern

Geldpolitik?Steuern


Table 9: Tax Competition in the EU, Stylized as a Prisoner’s Dilemma

Home

Low Tax High Tax

Rest of World

Low Tax3 0

3 10

High Tax10 7

0 7

Home and Rest of World are the only two countries in the union. They set their tax rates eitherhigh, or low. Capital and other mobile factors flow to whichever country has the lower tax rate.Payo↵s are state revenues.

up a lot of new escape routes, especially for newly mobile capital, and, toa lesser extent, high-skilled labor: they can relocate their economic activityto wherever the tax burden will be lowest. This causes welfare-depressingdistortions in the high-tax economy: rather than face a now voluntary tax,these pareto-optimizing exchanges will not be made at all, and instead hap-pen elsewhere. For example, a rich entrepreneur otherwise willing to opena new factory in high income-tax Germany, may, faced with the new alter-native of building the same facility in a low-tax location, forego his originalplan. Germany unambiguously looses welfare, both because the investmentis not made, and also because it does not even generate any fiscal revenue.

Faced with these dynamics, governments will, again rightly so, shift theirtaxation to bases that are less prone to DWLs, or equivalently, bases thatare relatively less mobile. Relatively less mobile bases in the EU will beconsumption and labor incomes, because consumers and workers cannoteasily do their shopping and working in another country.

Other — partly dysfunctional — taxes traditionally used to raise revenuefor mixed economies will be rolled back or falter altogether. This appliesespecially to — anyway defunct — national CITs that large corporationscan often evade easily, in part because nailing down the locale of any partic-ular increment of income of a multinational firm will always be conceptuallydi�cult. For example, the German holding of Deutsche Bank AG can eas-ily reassign a particular income stream to a Luxembourg-based subsidiary,arguing that a crucial business process occurred there. Tax administrationswill always, and necessarily, be unable to argue where any particular valuewas created (Ganghof 2006, Ganghof and Genschel N.d., Ganghof and Gen-schel 2007: 5). Similarly, higher brackets of progressive PIT will also causelarge DWLs or, more likely and wisely, disappear, as high-income individu-als change residence or citizenship, o↵shore their income-generation to othercountries, or at least shelter it in foreign corporations no longer a↵ected by

114

Figure 3: Tax Competition as a PD

Sfb 597 „Staatlichkeit im Wandel“ - „Transformations of the State“ (WP 80)

- 11 -

tions. From the 1980s onwards payroll taxes became the dominant form of public reve-nues, but indirect taxes in the form of VAT (value-added tax) have caught up in recent years. For comparative reasons I have plotted the tax mix of the UK on the right hand side of the figure. In the UK the income tax ratio hit its all-time high already in the mid 1970s, became briefly more important in the early Thatcher years, and then went back on decline until the mid 1990s. Only from then on income tax revenues have recovered slightly. Indirect tax revenues have increased over the whole period. Only during the labour governments of the late 60s and 70s payroll taxation was of some importance.

Figure 2 Tax Mix of Germany and the UK after World War II

810

1214

16

1960 1970 1980 1990 2000

GER

Income Tax to GDP Payroll Tax to GDPIndirect Tax to GDP

year

Graphs by country_n

510

15

1970 1980 1990 2000

UKD

Income Tax to GDP Payroll Tax to GDPIndirect Tax to GDP

year

Graphs by country_n

In both countries one sees influences of business cycles (inflation and growth) in the growth of income tax. One can also see long term changes that are due to political rea-sons that shifted the tax mix away from progression. Of course, a higher proportion of income taxes does not automatically lead to higher levels of progressivity. Yet different measures of tax-based redistribution move broadly in line with ratios in both countries. Using both statutory marginal rates and coefficients of ’residual progression’ Corneo (2005) shows for Germany that from 1958 till the mid 1980s tax progression was on the rise for middle and high incomes, whereas it has decreased from then on. Very low in-comes of half the average GDP per capita income have seen a remarkable increase in marginal rates so that the overall progressivity of highest and lowest income brackets has been reduced since the mid 1970s. It is therefore safe to argue that across time the

Kemmerling 1999Figure 4: Tax Base as Share of GDP

Structural Unemployment

Structural Underfunding

real dissavings

underprovision of public goodsconstrained

redistribution high effective labor

price floors

The Twin Crisis of the Late Welfare State

poor growth

low

productivities

great needs for transfers

Figure 5: The Twin Crisis of the Late Welfare State

Public Consumption

State Market

Public Investment

Private Consumption

Private Investment

Taxes (on consumption, labor)

Command Exchange

Saving

Consumption

Taxes (on assets)

In-kind Transfers, P

ublic Goods,

Natural Monopolies

Cash Transfers & Stimulus

Public Goods, Natural Monopolies,

Sovereign Wealth

Stimulus & Industrial Policy

Demand

Supply

InterestRate

Taxes (on income)

Figure 6: Tradeoffs of the Mixed Economy

Equity

Efficiency

Positive Integration

Negative Integration

Autarky

Mode of Integration

Figure 7: Negative Integration as a PPF

“The Congress shall have Power [...] to regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes;”

- US Constitution, Article I, Section 8, Clause 3 (Commerce Clause)

“(...) das die Übernahme der Schulden eines Staates durch den Bund, und umgekehrt, eine Maßnahme von guter Politik und substantieller Gerechtigkeit sei.”

-- Alexander Hamilton, 1790

Frankreich Bulgarien

Pro-Kopf Einkommen (2010 PPP, IWF) $44,747 $6334

Arbeits-produktivität (2010, indiziert auf

EU-25 Schnitt)116 41.3

Figure 8: Prosperity and Productivity across the EU

Finanzkrisen als Latente (Dys?)funktionen (Merton 1936)

(Süchtig machende) (Placebo) Schmerzmittel:

1. Reale Einsparungen

2. Kreditblasen (Stiglitz 2010) 3. Asset-Blasen

4. “Eingebaute” Inflation (Gordon 1988 / Philips Curve)

∆ Wealth∆ Wealth∆ Wealth = IncomeIncome − ConsumptionConsumption↑ - ↑ ↑ ↓ (+)↑ (-)↓

Ownership

House-holds

Build house Take out mortgageEarn more

(wages, profits)

or

Earn less(wages, profits)

or Consume more(private goods)

Consume less(private goods)

Ownership

House-holds Pay back debt Sell house

Earn more(wages, profits)

or

Earn less(wages, profits)

or Consume more(private goods)


Ownership

House-holds

Going to college Student loanLess taxes

(lower or more regressive schedule)

More taxes(higher or more

progressive schedule)

Consume more(private goods)


Ownership

Firms Retained earnings Dividend

Less taxes(lower or more

regressive schedule)

More taxes(higher or more

progressive schedule)

Consume more(private goods)


Ownership

Govern-ment

Build levee Burn carbonᴮ

Collect more(taxes, revenues)

Collect less(taxes, revenues)

Consume more(public, common

goods, etc.)

Consume less(public, common

goods, etc.)

Ownership

Govern-ment

Do basic research Sell government enterprise




goods, etc.)


goods, etc.)

Ownership

Govern-ment

Build SWFᴬ Issue bonds




goods, etc.)


goods, etc.)

Ownership

Govern-ment

Pension reserves Neglect roads




goods, etc.)


goods, etc.)

Savings - Dissavings Growth Decline Affluence Austerity

Figure 9: Aggregate Haig-Simons Identity of Income

Resources / Factors of Production(Land, Labor, Capital)

Output (O)(Goods, Services)

Income (Y) / Factor Earnings(Rents, Wages, Dividends)

Expenditure (E)

Government Sector

Financial Sector

Overseas Sector

Leakages

Injections

Net Taxation (T)(Transfers - Taxes)

Imports (M)

Net Investment (I)(Divestment - Investment)

Exports (X)

Net Saving (S)(Saving - Dissaving)

Households Firms

Government Spending (G)

Budget Surplus

BudgetDeficit

Trade Deficit

TradeDeficit

CreditBoom

CreditBust

Figure 10: Circular Flow in the Economy

Capital Account = Current Account

Central Bank Foreign

Reserves+ Net Ownership of Foreign Assets = Factor Incomes + Balance of Trade

Investments Abroad - Loans from

Abroad = (Foreign Earnings - Foreign

Payments) + (Exports - Imports)

O w n e r s h i p

House- holds -

Buying shares in French

agribusiness

Taking out mortgage from Icelandic bank

Dividends on French

agribusiness shares

Interest payment to Icelandic

mortgage bank

Cuckoo clocks to USA

Olive oil from Greece

Firms -

Foreign Direct Investment (FDI)

in Romanian plant

US-owned corporate paper in

German firm

Returns from foreign

subsidiaries

Dividends to foreign owners

Capacitative touchscreens

to USA

Diesel engine particle filters from France

Govern-ment - Buy Zimbabwian

bondSell German bond to British holders

Interest payments on

German-owned Zimbabwian

bonds

Interest payments to

British holders of German

bonds

Used tanks to Turkey

Commuter trains from

Italy

Capital Outflow Capital Inflow Recipient Trade Surplus Trade Deficit

Figure 11: Capital and Current Account

saving always means to build more things that last longer and/or thatwe will consume later, instead of things that last a short while andthat we consume now.

Of course, any one investment will ultimately be consumed or depre-ciate away. And we can save too much, when capital goods depreciatefaster and have such decreased marginal returns that they outstripour current utility from the same resources (This follows from Solow(1956) theory of growth, p. 48).

But while that means we should not save endless amounts at any pointin time, it does not mean that at some point in time, we should saveno more. There is no economic reason why we could not roll over(limited) savings to our children in perpetuity.

2. Dissaving 6= Debt = Deposits 6= Saving. Dissavings are not the sameas debt. Dissaving is a decrease in net worth of households, firms andeconomies: we diminish some durable thing in its value. Conversely,saving is an increase in net worth: we add value to some durable thing.

In contrast, going into debt does not a↵ect net worth of households,firms or government: we temporarily gain access to an already existingvaluable thing (construction man-hours), potentially transform it intosomething else (a house) and return the valuable thing later (withinterest). Conversely, putting in a deposit (or other credit) also doesnot a↵ect net worth: we temporarily grant access to an already existingvaluable thing to others, for an interest.

Table 8: Debt and Credit in the Closed Economy

Households Government

Income� Spending < 0 Revenue� Spending < 0P

private debt public debt =

(e.g. credit card, mortgage) (e.g. government bonds) All Debt

Income� Spending > 0 Revenue� Spending > 0P

=

private credit public credit =

(e.g. deposits, bonds) (e.g. reserves, sovereign wealth) All Credit

P= 0

Trivially, public and private debt will always equal public and private

83

Figure 12: Debt and Credit in the Closed Economy

Ökonomische Schlussfolgerungen

1. Effiziente und faire wirtschaftliche Integration braucht immer eine intakte Mischökonomie mit unionsweiten Steuern: sonst steigende Arbeitslosigkeit, Ungleichheit,

2. Das Wohlstands- und Produktivitätsniveau in der EU machen einheitliche Steuersätze einstweilen unmöglich; wir brauchen eine Transferunion.

3. Reales Entsparen, Kredit oder Asset-Blasen und Inflation können Krisen verstecken, verschieben und verschlimmern. Nichts ist gut, weil nominelle Variablen wie BSP oder Beschäftigung gut aussehen.

4. Kapitalmärkte mögen bessere Regulierung (und kleinere Firmen!) brauchen; Finanzkrisen sind aber auch Epiphänomene.

Politische Schlussfolgerungen

1. Die Nutzen, Kosten und Bedingungen der wirtschaftlichen Integration müssen umfassend erklärt werden. Zur wirtschaftlichen Integration und dem Abschied von imaginierten Gemeinschaften wie dem Nationalstaat gibt es keine attraktive Alternative.

2. Vollbeschäftigung und BSP taugen beide nicht als hinreichende Politikziele.

3. Vielleicht geht wirtschaftlicher Integration Tiefe vor Breite.

4. Banken- und Finanzkrise waren (sind) auch Symptome.

5. Nachfragesteuerung depolitisieren (Inflation trifft Mittelschicht!).

“Aber wer kann schon sagen, wieviel zu ertragen ist, oder wohin sich die Menschen wenden werden, als letzte Flucht aus ihrem Unglück?

-- John Maynard Keynes, 1919

Athen, 2012

Universität Bremen

www.maxheld.de

Abstract

Welfare states are best understood as mixed economies, where free market exchange is supplemented by planned state command in the service of equity, efficiency, or both. In well-designed mixed economies, market and plan co-exist with minimal mutual distortions, and democratic sovereigns can trade off efficiency and equity at relatively small marginal cost. Intact mixed economies rely on a set of regulatory, monetary and fiscal tools that operate on the same scale as markets. In negative integration, markets expand to larger scale, but states remain organized at lower levels, crippling the command tools of the mixed economy. As a result, democratic sovereigns can no longer take primacy over the economy and any remaining welfare states will be inefficient, inequitable, unsustainable or all. European integration is negative integration, and much of the 2010ff Euro-crises and the demise of European welfare states can be fruitfully analyzed as defunct mixed economies. CEEC, in particular, followed a bad route to liberalization and built largely dysfunctional welfare states, because they did not, and could not, engage the trade-offs and contradictions of mixed economies in the context of negative integration. Some of the existing literature on CEEC welfare and retrenchment fails to acknowledge the true constraints and alternatives of a mixed economy, and thereby fails to criticize and explain the societal and political choice of negative integration. The current acquis threatens welfare, and, ultimately democracy and regional integration. If the EU is to succeed, more economic integration must again always beget more political integration.

Mehr auf: https://github.com/maxheld83/hamilton

https://github.com/maxheld83/hamilton

TINA (p. 137 ff)

“There is (...) no alternative.”

-- Margaret Thatcher (London 1980)

Without the mixed economy, fall for TINA: we assume alternatives that aren’t, and forget alternatives that are.

- Kovacs (2003: 12) “Eastern Europe may be unlucky (...)e if it is confined to imitation” because these (Western) welfare regimes “will probably not produce the same performance levels as they do today”.

- Scharpf (1997: 26) “the economically less developed MS simply could not afford (...) the same level of welfare (...) (as) the highly developed MS”. Harmonization is “probably impossible”.

- Scharpf (1997: 29) “Normative (sic!) political theory as well as political practice must come to grips with the conditions (sic!) of ‘democracy without omnipotence’.”

Who Should Manage it?Who Should Manage it?Public (State) Private (Market, Family)

When to

Save?

Pre-fundedPre-funded Sovereign Wealth Private pensionLife insurance (etc.) Current workersCurrent workersCurrent workersCurrent workers

IncidenceWhen

to Save?

Post-fundedPost-funded PAYGO Family, Corporate Pension Plans Future workersFuture workersFuture workersFuture workers

Incidence

What to Invest

in?

Productivity

Human Capital Education Quality Children

ProductivismProductivismProductivismProductivism

PolicyWhat to Invest

in?

ProductivityPhysical Capital Sovereign Wealth Private Investment

ProductivismProductivismProductivismProductivism

PolicyWhat to Invest

in?

WorkforceWorkforce Family Policy Having Children NativismNativismNativismNativism

Policy

Where to

Invest?

Abroad and at Home(under open economy)Abroad and at Home

(under open economy) Sovereign Wealth Fund International Financial Markets

Now: Trad

Now:Trade

Surplus

Now:Trade

Surplus

Future:Trade Deficit

Macro-Economy

Where to

Invest? At Home(under autarky)

At Home(under autarky) Capital Deepening Domestic Financial Markets

Now: Positive Savings

Rate

Now: Positive Savings

Rate

Future:Negative Savings

Rate

Future:Negative Savings

Rate

Macro-Economy

Without the mixed economy, fall for TINA: we assume alternatives that aren’t, and forget alternatives that are.

- Cerami (2009) sees non-alternatives in pensions: ‣ It’s PAYGO vs. funded. ‣ PAYGO is stable, but has vicious cycle. ‣ Funded is risky, but solves demographic problem, but double-charges the young. explain, not what we want to explain things with.

- Cerami (2009) ignores alternatives: ‣ Who pays, rich or poor? ‣ How much do we save for our children?

Pangloss (p. 148 ff)

“And they who assert that everything is right, do not express themselves correctly; they should say that everything is best.”

-- Voltaire: Candide (1759)

Without the mixed economy, fall for Pangloss: we assume that the defunct mixed economy is collateral damage.

- Theory of Second Best (Lancaster 1956) (mis-)applied to government and democracy. ‣ by definition, if the means to change the market outcomes are corrupted, and therefore unacceptable, whichever results occur must be the best of all worlds. ‣ Government failure -- it it exists -- is what we want to explain, not what we explain things with.

- Moravcsik (2002: 618): “No responsible analyst believes that current individual welfare entitlements can be maintained (...). In this context, the neoliberal bias of the EU, if it exists, is justified by the social welfarist bias of current national policies (...).”

Without the mixed economy, fall for Pangloss when we ill-measure welfare state en- or retrenchment. We ask weak questions.

- Swank (2005) ‣ Asks: has income replacement shrunk? (it has not) ‣ Asks not: are there bubbles, unemployment, dissaving.

- Pierson (1996: 174): Nondecisions “generally favor the welfare state”. ‣Asks not: can welfare states still react? (e.g. inequality, tax base) (Genschel 2005: 53)

Newspeak (p. 158 ff)

“But if thought corrupts language, language can also corrupt thought. A bad usage can spread by tradition and imitation even among people who should and do know better.”

-- George Orwell: 1984 (1946)

OMC, Governance

“OMC”, “Governance”

Bystanders (p. 162 ff)

“If there is a hard, high wall and an egg that breaks against it, no matter how right the wall and how wrong the egg, I will stand on the side of the egg.”

-- Haruki Murakami (Jerusalem, 2009)

How does this differ from decommodification? (p. 92ff)

- ... there is always interaction. You can’t take people off markets (e.g. moral hazard in disability)

- ... is description, not prescription (Esping-Andersen 1990) ‣Partaking in the market is more than just for money. ‣Decommodification is a last-resort tool (cf. NIT) ‣Decommodification does not have a market-failure justification.

- ... is radical, but limited (inequality, failure) ‣ ... is the explanandum, not the explanans; what we want to explain, not what we want to explain things with.

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