Connection between the Market and Social State

Due to the negative effects of the neoliberal economic concept in many countries of the world an alternative is sought for, which would enable a well-functioning market together with efficient social measures which would protect the interests of the citizens.

Connection

Connection between the Market and Social State

Due to the negative effects of the neoliberal economic concept in many countries of the world an alternative is sought for, which would enable a well-functioning market together with efficient social measures which would protect the interests of the citizens.

autor teksta
Gojko Vlaović | Demostat | Beograd 3. Aug 2017 | Analyses

The neoliberal path, started in 2001, has led to especially bad results in Serbia, in which the citizens were in a very bad economic position previously as well. Every responsible economic analyst knows that debt policy, orientation at small and medium enterprises with no big systems that they would work for, subsidies for new jobs without clearly defined obligations of employers, high interest rates of foreign banks and the lack of a national development bank for stimulation of the domestic economy, has destroyed the economy of Serbia. Therefore, it is essential for Serbia to look for new models which would help the recovery of the Serbian economy. Experts claim that it is necessary for the state to not only be an observer of the situation at the market but to work on such laws which would equally protect employees, unemployed persons and retired persons from all the negative effects of the competition and free pricing. We can conclude that most of the economic experts in the country would, not only, have nothing against the concept of social market economy, which has been present in Germany and Austria for decades, but that they would accept it with great support.

That is a concept, that some call “capitalism with a human face”, others call it the “path between capitalism and socialism” and some even the “new form of socialism”. Be it as it may, they all agree that this concept is taking care of the protection of socially endangered, which neoliberalism doesn’t care about at all. The creator of the social market economy is the German politician Ludwig Erhard and it is still today the basis of economic programs of most of the German political parties. It all began on June 20th 1948, when the currency reform became effective. The currency reform cancelled the Reichsmark and introduced the new German Mark in the occupied zones of West Germany. Every citizen was given 40 Marks in cash and another 20 Marks the month after, which led to the disappearance of the black market. That was the beginning of the development of the social market economy concept, which received its name by Alfred Müller-Armack, German economist and politician. The essence of that economic model is a connection between the market economy and social state. The state encourages competition and the development of market economy while it creates laws, which enable significant social benefits with a special focus on the protection of the most endangered population.

The citizens of Serbia are mostly interested in how social market economy could be applied in our country. We will give you one example. The state is the owner of the company “Electric Power Industry (EPS)”. That company does not have a market price for the electricity which it is selling to consumers in Serbia, because the citizens have very low incomes and many of them would not be able to pay the market price. That is why the electricity price in Serbia is among the lowest in the region. That creates business problems to EPS, because it cannot earn enough for investments in new production facilities (which are necessary, as experts say) and in the maintenance of existing facilities. Due to the lack of new facilities EPS is not able to produce enough electricity at every moment so sometimes it has to import very expensive electricity from abroad. If social market economy would be applied in Serbia, the state would be able to allow EPS to have a realistic electricity price. EPS would earn more and it would be able to build new production facilities, to maintain existing facilities, it would not have to buy expensive electricity from abroad and it would allocate more money into the budget of Serbia. The state would fulfil the needs of the health care system, the education and social protection with that money. On the other side, the state would take care of the poor citizens which would not be able to pay their bills and it would give them subsidies or it would pay those bills for them. Thus the main purpose of social market economy would be fulfilled, which is to be good for both companies and citizens. In order to achieve that it is necessary to have enough money in the state budget. According to economic experts that can be achieved in Serbia only with reindustrialization and bigger investments into the production sector of economy.

 

Whether the social market economy is the optimal and most successful economic concept of all is a matter of debate and analysis of experts and other relevant stakeholders. But without doubt, that concept would be a lot better and more just for Serbia and its citizens than the neoliberal model which has created huge unemployment and which has brought many people to the brink of poverty.

MOST POPULAR
NATO three years away from Serbia
NATO three years away from Serbia

  In all societies there are issues that are rather being skipped. Certain...

Which empire to lean on… Serbia between the East and the West
Which empire to lean on… Serbia between the East and the West

Four key findings: 1)      More than half of responden...

Serbia between NATO and Russia - Reality against emotions
Serbia between NATO and Russia - Reality against emotions

In reality, Serbia is closer than ever to NATO. In the course of the last five y...

Bridge to the new Serbian-American alliance
Bridge to the new Serbian-American alliance

In the internal, and thus in the foreign policy too, the interests and alliances...

Reality and prejudice in Serbian-British relations
Reality and prejudice in Serbian-British relations

In some way, Serbs and Britons entered the history of the modern-era Balkans in ...