Decent Capitalism Prof. Dr. Hansjörg Herr Berlin School of Economics and Law Global Labour University Germany

Structure The invisible hand Principles of decent capitalism Discussion of selected topic Consequences for Thailand

The dream of an “invisible hand” All economic agents should act in an egoistic way The market is a wonderful mechanism to harmonise the economic interest of all Free markets lead to the welfare of nations Adam Smith, The Wealth of Nations 1776

Especially -Money / financial markets -Labour -Nature cannot left to markets (Karl Polanyi, The Great Transformation,1944 )

Dynamic, ecologic, social and sustainable development Decent Capitalism Financial systems have to serve the real economy/ financial systems must be regulated become stable External protection of domestic development /regulation of international capital flows, more or less balanced current account Regulated labour markets: minimum wages, coordinated wage bargaining, Relatively equal income distribution Social protection: health insurance, pension system, unemployment insurance Public goods: education, research, infrastructure, etc.. Strong public sector, functioning tax system, state-owned enterprises in key sectors Industrial policy, Green New Deal, internalisation of external effects Macroeconomic stability: monetary policy, fiscal policy, wage development, external equilibrium

Consumption demand, income distribution and growth Aggregate demand Domestic based sustainable growth model Income distribution -Functional income distribution (wage quota) - Wage dispersion (minimum wages, wage bargaining) - Tax system, transfer payments Distribution of wealth - Social security systems (health, unemployment, old age) -Public goods (education, etc.) - Welfare state (cash payments to the poor) Consumption demand based on income and not credit Social coherence, increase productivity

Integration into the world market Aggregated demand Sustainable growth Current account current account deficits reduce aggregate demand, low foreign debt to prevent currency crises, more or less balanced current account Support of key industries also in the export sector, industrial policy in the tradition of Friedrich List Capital controls - no portfolio investment - low level of foreign credit - selective foreign direct investment Stable nominal exchange rate (managed floating) - capital controls - Foreign exchange interventions - interest rate mainly for domestic purposes

Industrial policy and Green New Deal Aggregate demand Sustainable growth Investment demand, important is level and structure Industrial policy a) increase productivity b) ecological requirements c) development requirements (Friedrich List) d) Prevention of real estate bubbles Public investment (big public sector, for example in areas of natural monopolies like water supply, energy, public transport Private Investment (internalisation of external effects) Foreign direct investment in selected areas Sufficient, long-term and cheap financing for private and state investment, Bank based financial system, Strong development banks

Consequences for Thailand Change in income distribution is of key importance –Minimum wages – Wage bargaining system/ industry level bargaining –Tax policy Protection from a medium- and even long-term unstable world market –Control capital flows –No current account deficit, no dependence on high surpluses Immediate beginning with ecological policies -Increasing productivity in general -Ecological policies

Literature S. Dullien, H. Herr Chistian Kellermann, Decent Capitalism. A Blueprint for Reforming our Economies, London: Pluto Press H.Herr, M. Kazandziska, Macroeconomic Policy Regimes in Western Industrial Countries, London: Routledge, H. Herr, Credit Expansion and Development: A Schumpeterian and Keynesian View of the Chinese Miracle, in: Intervention. European Journal of Economics and Economic Policy, 2010, Vol. 7, p H. Herr, Finanical Systems in Developing Countries and Economic Development, in: E. Hein, T. Niechoj, P. Spahn, A. Truger (eds.), Finance-led Capitalism? Macroeconomic Effects of Changes in the Financial Sector, Marburg 2008, H. Herr, Capital Controls and Economic Development in China, in: Arestis, P., De Paula, L.F., Financial Liberalisation and Economic Performance in Emerging Countries, Basingstoke and New York H. Herr, Making an Unstable Financial System Work: Reform Options, in: International Journal of Labour Research, Vol. 3, 2011, H. Herr, M. Kazandziska, M., S. Mahnkopf-Praprotnik, The Theoretical Debate About Minimum Wages. Global Labour University Working Papers, no. 6, February 2009.