1. Social Market Economy – Third Way or Compassionate Capitalism
Social Market Economy – Third Way or Compassionate Capitalism? Marcus Marktanner, American University of Beirut, Lebanon Prepared for: Birzeit University, Institute of Law Ramallah, Palestine, December 4, 2008

2. Social Market Economy – Third Way or Compassionate Capitalism?
Table of Content
Liberalism: One Way
Socialism: Another Way
Social Market Economy (SME): Which Way?
SME: A Superior Way?
SME: How to Pave the Way?
Embarking on the SME: A Rocky Way
Conclusions

3. Social Market Economy – Third Way or Compassionate Capitalism?
Liberalism: One Way
Was not the first political economy
Mercantislism  Physiocracy  Liberalism
Classical Economics: Smith, Ricardo, Marx
Neoclassical Economics: A Natural Law?
A theory of allocation without distribution
Liberalism: A games without rules
The First Globalization Wave ( )
1929: Great Depression and the End of Liberalism
From Liberalism to Keynes

4. Social Market Economy – Third Way or Compassionate Capitalism?
Socialism: The Other Way
Physiocracy recycled
Why was Marx a Classical Economist?
Efficient Allocation vs. Just Redistribution
Justice of what? Efficiency, consumption, opportunity?
A theory of distribution without allocation
Socialism: No market game
The Marxian Legacy in Developing Countries
1989: Fall of the Berlin Wall and the End of Socialism
From the End of Socialism back to Liberalism

5. Social Market Economy – Third Way or Compassionate Capitalism?
Social Market Economy: Which Way?
What’s the difference?
Combining market efficiency with equal opportunity
The market is in the heart, yes
But, the market needs to be in order
SME: The market as a game with rules
Ordoliberalism: The state defines the rules of the game
How? Theory matters, but history, too!
Order policy requires principles of economic policy

6. Social Market Economy – Third Way or Compassionate Capitalism?
Social Market Economy: A Superior Way?

7. Social Market Economy – Third Way or Compassionate Capitalism?
Social Market Economy: How to Pave the Way? (1)
Build fiscal capacity to become more equal and productive

8. Social Market Economy – Third Way or Compassionate Capitalism?
Social Market Economy: How to Pave the Way? (2)
Because investment in social opportunities creates economic ones

9. Social Market Economy – Third Way or Compassionate Capitalism?
Social Market Economy: How to Pave the Way? (3)
And vice versa

10. Social Market Economy – Third Way or Compassionate Capitalism?
Social Market Economy: How to Pave the Way? (4)
And Social and Economic Opportunities Create Higher Incomes

11. Social Market Economy – Third Way or Compassionate Capitalism?
Social Market Economy: How to Pave the Way? (4)
The East Asian Tigers Example

12. Social Market Economy – Third Way or Compassionate Capitalism?
Embarking on the SME: A Rocky Way
Different countries require different policy priorities
Social Market Economy starts with the state
Fiscal capacity building is not a goal in itself
The less market efficiency is aligned with equal opportunity, the more the state must invest (not consume)
The introduction of the Social Market Economy, however, is not easy.
Take the case of the Arab world

13. Social Market Economy – Third Way or Compassionate Capitalism?
Embarking on the SME: A Rocky Way (2)
Challenges to SME introduction in the Arab world:
Legacy of import-substitution
Political constraints
Geopolitical constraints
Geoeconomic constraints

14. Social Market Economy – Third Way or Compassionate Capitalism?
Conclusions
The SME needs more awareness
Awareness in developed and developed countries
SME works better, the more are committed to it
Developed countries must help paving the way towards the third way of the SME to prevent development to end in a dead end as socialism and liberalism did.
Developed countries best show their compassion for capitalism by opening their markets and committing themselves to ordoliberal capacity building.