Ordoliberalism and Market Socialism

I am kind of sympathetic to ordoliberalism in general, but I also recognize the danger it poses. Free-market systems work well under conditions of pure competition. However, pure competition has a tendency to lead to two things: (1) the breakdown of pure competition and (2) the emergence of substantial inequality and poverty. Competitors will compete ruthlessly until an oligopoly or monopoly emerges. Each competitor will try to outcompete the other until most of the competition is put out of business. The successful competitors will accumulate vast amounts of wealth while the losers are resigned to poverty. Free markets also tend towards aggregation, small firms merge into larger ones, until a couple large companies are able to absorb or eliminate their competitors. The ordoliberals realized this and argued that the government should focus on putting rules in place that help maintain pure competition. Thus, there should be anti-trust laws. The ordoliberals also advocated welfare programs to alleviate poverty and create a safety net. This would make the market safer for people to take risks and try their hand at going into business for themselves or becoming entrepreneurs. But ordoliberalism focuses heavily on rules. Rules should be standard and rigid, so that people can make rational decisions. It's hard to make rational economic decisions if there is a high probability of the government arbitrarily altering the rules of the game tomorrow. Thus, ordoliberalism proposes a social market economy similar to social democracy of the mixed-economy variety. However, ordoliberalism is far more rigid and conservative because of its emphasis on unchanging rules.

Ordoliberalism has been quite successful in Germany, but it is also ruining the rest of Europe with its rigidity. Thus, ordoliberal influence has led to austerity measures. This is how Greece got fucked over by the rest of Europe. Ordoliberal influence led to the demand (from its creditors) for Greece to simultaneously cut spending and increase taxes, a policy that necessarily results in slowing or halting of economic growth. The result is that the higher taxes actually result in less revenue since they starve the economy. Both income tax and VAT will bring in less revenue in a depressed economy where incomes and spending are stunted than they would in a prosperous economy. The end result is that austerity measures imposed by the creditors have not helped the creditors in any way and have also ruined the debtor. Greece, and Europe in general, would be better off under Keynesian and social democratic economic arrangements.

Ideally, Greece should have adopted Keynesian policies and increased government spending. Failing industries and banks in Greece should have been nationalized. All other “too-big-to-fail” enterprises should also have been nationalized. The revenue from such nationalized industry should have been used to fund government and make payments on the national debt, and the excess ought to have been given out as a social dividend to the people of Greece. Putting the excess profits of large industry into the hands of the people would have stimulated the economy as people spent their social dividend checks. The end result would have been a more prosperous economy that would be fully capable of ensuring that the government could keep up on its loan repayment. Greece ought to have become the first market socialist system.

The tragedy is that the rest of Europe is making the same mistake. Instead of becoming more social democratic and exploring the option of market socialism with socialized industry, they are exploring austerity. You don't even need to tax the rich; just tell them to "fuck off" and seize their land and industries. Corporate profit and land rent would then fund the government, greatly reducing or even eliminating taxes, and profits would be able to fund a national dividend. Inequality and poverty can be eliminated and economic crises can be permanently averted. Capitalism is collapsing. Market socialism is the only viable option.