Why is capitalism becoming less popular

Capitalism and alternatives

Lars P. Field

To person

Dr. oec. habil., born in 1966; Professor of Economic Policy and Regulatory Economics at the Albert Ludwig University of Freiburg; Member of the Advisory Council for the assessment of macroeconomic development; Director of the Walter Eucken Institute, Goethestrasse 10, 79100 Freiburg i. Br. [email protected]

It starts with the terminology: while in Anglo-Saxon the word capitalism is used neutrally, there is already a valuation in the German language in the designation "capitalism". The critique of capitalism further diminishes capitalism, which is already pejoratively referred to as such. It is therefore not just a matter of objectivity in German debates to speak of "market economy" instead. In addition, its expansion into a "social market economy" facilitates the addition of an ordoliberal perspective.

But even the market economy has gotten into the talk. The financial and economic crisis of 2007 to 2009 is to blame for this. In view of the collapse of the financial markets at that time, the functionality of the markets is fundamentally questioned. Following on from the Frankfurt School's criticism of capitalism, Wolfgang Streeck, for example, sketches in his Adorno lectures [1] how the capitalist economy shuffled from crisis to crisis and postponed the solution of the distribution problems between rich and poor in society. His narrative spans several decades, but includes as a constant constant the conflict between labor and capital, the construction of which is so dear to socialism. In the 1970s, inflation concealed these distribution problems. In the 1980s, these were mitigated by an anti-inflation policy with increasing national debt. Since the 1990s, so Streeck, the excessive private indebtedness of the banking and financial system replaced the national indebtedness as moderator of distribution conflicts. This policy of procrastination and concealment has now come to an end. The open outbreak of distribution conflicts can only be avoided through a democratic socialism with a high level of redistribution. Streeck gives socialist historicism a new narrative.

Economists shouldn't be surprised that it has come to this point. Since the famous essay by the economist Eugene Fama [2], the majority of economists carried the mantra of efficient financial markets, which always and in real time efficiently processed all available information relevant to the valuation of financial products. From this point of view, efficient financial markets do not make mistakes. When problems arise, they have to come from elsewhere. Some authors say that Anglo-Saxon economists only identify government intervention as the cause of such errors. If something goes wrong, the state is to blame. [3] That is not entirely fair to the Anglo-Saxons, because it is more likely a specific research direction in economics that argues in this way, and this approach is also echoed in Germany and other continental European countries among those who rely exclusively on the self-healing powers of the market. In view of the inflation of the financial markets and market forces, it is not surprising that the countermovement is also extreme and that the market economy as a whole is seen in a bad light. The financial crisis has shown that the financial markets do not correspond to such an inflated ideal.

Moreover, criticism of capitalism is not just criticism of the system that is linked to large macroeconomic contexts. Rather, it goes hand in hand with fundamental doubts about the economic approach per se, the economic behavior model, the homo oeconomicus. This criticism starts at the foundations of economics, because the economic behavior model is the starting point for deriving market efficiency. Another example is Frank Schirrmacher as a critic. In his book "Ego. The Game of Life" he attacks the economic behavior model head-on. Economics, in particular game theory, had led people to use their own opportunities for appropriate behavior in anticipation of the opportunistic behavior of their fellow human beings. [4] The economists indoctrinated people and made them selfish, suspicious, underhanded, in short: thoroughly depraved beings: "(...) how can one remain in a society that assumes that everyone is sensitive in the long run without emotional damage if he acts out of self-interest? "[5]

This criticism also responds to a kind of exaggeration. Because the economic behavior model penetrated into other areas of the social sciences over time. In sociology and political science, this approach is about as Rational choice-Model known. Its representatives advertised it as superior, understandably given their goal of being scientifically successful with it. But last but not least, the economists themselves took on this, if one thinks, for example, of the research work of Gary Becker, who did pioneering work in the field of economic analysis of law or the economics of the family, or of James Buchanan, who founded the economic analysis of politics. This did not always meet with approval in the other sciences and was denounced as economic imperialism. [6]

The economic behavior model offers so much friction surface to this day that with the behavioral economics an independent approach has emerged, which the basic assumptions of the homo oeconomicus questions in order to derive new knowledge about individual action based on this. Originally developed in conjunction with experimental economic research, behavioral economics today draws on neuroeconomic research and field experiments. With an essentially microeconomic orientation, conclusions can be drawn from this for economic policy. [7] However, the step from behavioral economics to the system question mentioned at the beginning, but also to macroeconomics, is a big one. So far, behavioral economics has hardly made its way into macroeconomic research. [8th]

Ordoliberalism, or, in German, less laden with values, the economics of order essentially held back when market forces were too high. The Kronberger Kreis, an association of like-minded economists and legal scholars, as a decidedly regulatory-oriented institution, has demanded more market in many publications since its foundation. [9] However, he did not deal with the deregulation of the financial markets. One can accuse him of this when discussing the need for re-regulation after the financial crisis. [10] However, the analyzes of this group cannot be interpreted as an exaggeration of the efficiency paradigm of the financial markets.

Such an idealization would contradict the basic economic concerns. The German order economists of the founding generation, especially Walter Eucken, developed their approach and the principles of economic policy derived from it, in contrast to the laissez-faire approach of classical liberalism. They recognized possible market failure and wanted to ensure through state economic policy that this would be remedied or that it would not occur in the first place. Economic policy should be oriented towards regulatory policy, i.e. define the framework for the economic actors, but not intervene in the daily economic events on the markets in the sense of state interventionism. [11] Even Friedrich A. von Hayek, who was clearly more market-friendly, recognized the limitations of individual decision-making processes. [12] Some proponents of behavioral economics and the theory of limited rationality could find themselves in his conception of the human psyche. Hayek's conclusion, however, is different from that of the critics of capitalism. He advocates less state and provides further arguments for regulatory economics in the sense of regulatory-oriented interventions.

In order to better understand the arc drawn here at the beginning, it is necessary to start with the economic behavior model and then to ask what this means for economic policy. [13]