Roads to Social Capitalism

Roads to Social Capitalism

Theory, Evidence, and Policy

Peter Flaschel and Sigrid Luchtenberg

The current crises in the financialization of capitalism, and their repercussions on the financial viability of entire countries, severely question the achievements of mainstream economics and its disregard of Keynes’s theory of effective demand and finance. In view of this, Peter Flaschel and Sigrid Luchtenberg consider roads to a type of capitalism that could eventually be considered as ‘social’ in nature. The authors underpin their study with theory, empirical evidence, and policy from a positive as well as a normative perspective. As points of departure for their concept of social capitalism, the theoretical framework provides a synthesis of the work of Marx, Keynes, and Schumpeter on ruthless capitalism, regulated capitalism, and competitive socialism.

Chapter 9: Social Capitalism: A New Social Structure for Capital Accumulation

Peter Flaschel and Sigrid Luchtenberg

Subjects: economics and finance, history of economic thought, radical and feminist economics

Extract

9.1 Introduction In this chapter1 we start from a Keynesian macroeconomic model of advanced capitalist societies, Section 9.2, and briefly summarise on this basis the functional chains and their stability properties that characterise the working of such economies from the Keynesian perspective. We do so in order to provide a theoretical description of the status quo of such societies, which will then be contrasted with an ideal model of a flexicurity economy, in Section 9.5, as one central result of the European debate on the welfare state. This type of economy we then extend towards our conceptualisation of a society which is built on the principles of what we shall call ‘social capitalism’ and its three pillars, flexible and socially oriented labour market institutions, a coherent educational system and on this basis the formation of democratic elites and the change in property rights this implies, see Section 9.6. The current crisis and its impact in particular on the Eurozone indeed provides an important opportunity in this regard, where central institutions are in question and where therefore openness for new ideas can be expected. An ideal construction of ‘social capitalism’ as in Section 9.6 is indeed needed before compromises with the actual status quo of given capitalist economies should be sought and investigated, as it is suggested by the word ‘compromise’. Without an ideal, against which potential and actual reforms in countries like Denmark can be investigated, there is a lack of a coherent theoretical structure against which one can...

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