SOCI AL MARKET ECONOMY

A KEY ELEMENT OF A

CENTRI ST POLI CY PROGRAM

I N THE PHI LI PPI NES

West-Germany under occupation by American, British and French authorities

All major production sites destroyed and infrastructure heavily damaged

Millions of refugees from regions in the east, occupied by the Russian Army

No functioning political, legal and economic order in place.

I. Social Market Economy in Germany

Designed and implemented after the Second World War (1946)

Fundamentals:

no liberal model no socialist model carefully orchestrated set

of principles and guidelines built on fundamental

values pragmatic and realistic

view of human nature taking into account

dynamics of a modern society

A new socio-economic model – the Social Market Economy (SMEc)

Alfred Mueller-Armack (1961), German economist, introduced the idea of a “Social Market Economy”

With a few years, SMEc brought:

an economic miracle social peace and stability a fundament for a stable democracy a fundament for the most powerful economy in Europe

► A success story second to none in Europe

Outcome and Adaptation

suitable to be adapted in Asian countries?

could SMEc help to solve the problems of low productivity, lack of competitiveness, poverty and social injustice in the Philippines?

The dignity of each human as in the Christian philosophy:

its right of self-determination and of taking care for itself

its freedom of personal development, initiative and decision making

BUT also: the right of each person to receive assistance in case that he/she can not provide enough means by own efforts for a decent life

and the other side of the coin: the obligation to help others who need such assistance

► The individual and the social side of human nature

II. Centrist Values and Socio-Economic Orders

Capitalist economic order:

people are in general free to take their own decisions

some actors obtain economic power

the market as an invisible hand may become distorted into an instrument of exploitation

the needs of many people are not satisfied any more

disadvantaged and unlucky human beings are hurt in their dignity

Capitalism and the Socialist Model of Centralised Administrative Economy

Centralised Administrative Economy: people lose their right of self-

determination no more private ownership of their

means of production following centrally drafted plans talents, abilities and commitment

unimportant, central bureaucracies in charge of distribution

► very low productivity ► people standing far below their

abilities► suppression of freedom rights in

economic activities and by lack of availability of necessary goods

open contradiction to the key value of human dignity

III. The Three Pillars of a Social Market Economy

Capitalist order

Free market

Centralized economy

Strong state

Social MarketEconomy (SMEc)

I.Free market

II.Participation of

People and Society

III.Strong state

Everybody can offer goods and services following her/his capacities andinterests. This provides maximal benefits for the people living in a society only if some conditions are in place:

people must have had the possibility to develop their natural capacities (education) in order to offer valuable things at the market

people need information in order to provide goods and services which are requested by others and to find the products and services which are useful or even necessary for their own lives

the competition between different producers has to be a competition through prices and quality–not through misinformation, pressure, tricks, intimidation - in order to contribute to a optimal benefit of the consumers

the competitors have to be independent from each others and numerous enough in order to avoid cartels or monopolist structures which do not provide pressure for high quality and low prices any more

the markets have to be open for the access of newcomers

A. Free Market

a free market is not just the absence of state regulations and interventions

Free markets do not provide benefits to all human beings in a society

numerous people with natural deficiencies or weaknesses

people with serious diseases or with disabilities

old people without close relatives

children not being taken care of by their parents

B. Participation of People and Society

► The question how to provide goods and assistance to them will not be solved by a functioning market

It can be solved by a democratic state organisation in case that

► the majority of the sufficiently healthy, strong and active citizens agree on the following principles

part of their money will be redistributed to the weaker ones

security by health-, unemployment- and pension-insurances

payment of sufficient taxes to enable the state to

provide educationprotect law and orderbuild infrastructurepromote science and research

People have to understand and agree:

trade unions and employers associations have to deal and compromise in a civilized and moderate way with each other

the protection of natural environment as precondition for human life in the future needs restrictions

B. Participation of People and Society (1)

► the state can play its necessary role in all these fields only if the citizens are ready to respect the regulations set in place through democratic procedures

Logo of the German Conferderation of Trade Unions (founded 1949)

Second SMEc pillar in conclusion:

Social Market Economy is only viable with …

a certain level of active citizen-responsibility for their community and

a sense of the citizens that it needs their active participation and their respect for the common rules and regulations

… to preserve freedom and human dignity and to govern a modern society without authoritarian measures

B. Participation of People and Society (2)

Philippine flag (officially adapted on 12th June 1898)

SMEc needs a strong state with high responsibility

for the dignity and well being of all people for the functioning of the essential instruments of this

socio-economic order: the market mechanism the mechanisms of social security social justice social dialogue and partnership and protection of environment

But the state is not economic actor and implementer:

it should not plan the activities of the citizens and enterprises

it should not intervene normally into these activities its role is a subsidiary role

C. Strong State (1)

Functions of the State in SMEc:

1. to provide the private and societal actors with a supportive legal and political framework:

stability of the currency, political predictability, clear legal regulations, promotion of the dialogue between

the social partners;

2. to create and protect a socio-economic order which guarantees:

open and undistorted competition in the markets,

access to markets, private ownership of business and

production factors, social security and support for the disadvantaged

members of society;

C. Strong State (2)

3. to create and enforce laws which protect a humane treatment of all people in

the economic processes and the protection of the natural

environment

4. to decrease the inequalities of income distribution, taking into account the number of children of families, physical ability of generating

sufficient income and other factors

5. to ensure a minimum income for everybody above the poverty line without destroying incentives for hard and good work

The good news in principle:

The political order of the Philippines is built on the same key value as the concept of a Social Market Economy: the dignity of each human being

The socio-economic order of the country consists both of the idea of a free market and of social policies and instruments based partly on private, religious or humanitarian initiatives and partly on state regulations and projects.

IV. Social Market Economy in the Philippines

The bad news in reality:

Huge contradictions and gaps with regard to the three pillars of SMEc

Numerous political, social and legal deficiencies and obstacles which make it impossible to achieve the aim of a Social Market Economy

No fundamental

contradiction

Competition at the Philippine markets: by quality and prices, or through power, misinformation, tricks, intimidation, even violence?

Access to the markets for new foreign or national actors? Discrimination of some actors in order to protect others by law or attitude of state authorities?

Sound legal framework with consequent implementation by state authorities and courts protecting free markets against monopolies and cartels?

A. Some Questions with regard to a free market in the Philippines

Poverty in big parts of the rural population; most of them might not survive as independent economic actors, will end up as urban dwellers or workers without rights and protection, so:

Any relevant state programs to help poor farmers and handicraft people to develop their entrepreneurial capacities and to become competitive actors in the respective markets?

Any systematic support for building sustainable joint private or social enterprises?

Do Philippine people in general agree to pay taxes to the state in order to enable him to support the establishment and functioning of social security and social protection systems and mechanisms?

Do people respect laws and legal regulations put in place by their democratically elected representatives in Congress, Senate and Administration or on regional and local level – starting from traffic laws and labour laws to laws and regulations on the protection of the natural environment?

Do the rich and powerful leading families of the country accept that they do not have the right to influence by corruption or pressure state decisions on project development or distribution of public funds in their own interest?

B. Some questions on peoples participation and society

Do the state authorities have any measures to protect the openness of markets against cartels and monopolies and to protect the fairness of competition processes, and do they use these measures?

Does the state restrict itself to build and guarantee the framework of the socio-economic order, or are state bodies on different levels active participants in competitive processes or intervening into the markets?

Does the state effectively protect property rights against product piracy or against pressure from powerful private actors?

Does the state take effective measures to implement the valid laws and legal regulations in the daily social and economic reality of the country, creating by that legal security for the life and the economic actions of its citizens?

C. Some questions with regard to a strong, but subsidiary state (1)

Does the state promote the opportunities for development of personality and for successful economic activities of all its citizens by ensuring quality education all over the country?

Does the state guarantee – in cooperation with social actors like churches, religious communities and civil society organizations – a minimum of material means necessary for a decent life also for all the citizens who are not able to achieve these means by themselves or are not in the situation to be taken care by relatives?

C. Questions with regard to a strong, but subsidiary state (2)

„We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a just and humane society and establish a Government that shall embody our ideals and aspirations, promote the common good, conserve and develop our patrimony and secure to ourselves and our posterity the blessings of independence and democracy under the rule of law and a regime of truth, justice, freedom, love, equality, and peace, do ordain and promulgate this Constitution“ (Preamble of the 1987 Constitution of the Republic of the Philippines)

The actual problems in the socio-economic order of the Philippines cannot be solved within a very short time.

Other democratic movements might have similar understanding of the problems and reform needs like centrist/ christian-democratic groups.

But: centrist/ christian-democratic philosophy has strongest linkage to the key value of human dignity.

And centrist/ christian-democratic movement with a much more realistic understanding of human nature and society than liberal/capitalist groups or left-wing socialist groups can follow the orientation and guidelines from the Social Market Economy concept for addressing these problems.

V. How to go on with socio-economic policies in a centrist democratic policy agenda?

The establishment of a Philippine version of Social Market Economy in the centre of a political program as one of two, three real essential elements will be a cornerstone for the success of a Centrist Democratic Movement in the Philippines

The Movement should develop a long-term concept of building up a Social Market Economy in the Philippines, under Philippine conditions, with a specific Philippine format. And, of course, not only to develop a long-term concept, but to design an action plan of step by step implementing this long-term concept

Conclusion

► But you should never forget: Thesolution must be a Philippinesolution, you have to take over theresponsibility and ownership for thisproject, we can only assist andsupport.

The Konrad-Adenauer-Stiftung, after forty years of partnering with Philippine Christian Democrats and Centrist Muslim Democrats, is ready to join and to support this important political project for the Philippines.

Thank you for your attention