New Welfare Economy

Introduction

Figure 1.

Illustration by H. Schinzel

Mainstream concepts are challenged in more ways by the globalization of markets. Classical income distribution is directly disrupted, and monopolist behaviors are no longer an exception but the standard case. Further, the expansion of collective services makes effectiveness of public services a key challenge, too. Chapter 3 `New Welfare Economy` is based on the latest research.

The rapid rising global threat from global heating related to economic growth gives today economic top priority to environmental protection. Chapter 4 on Economic Ecology focuses on this challenge based on surveys of the state of the Ecosystem as well as the state of energy alternatives to fossil energy sources.

3.1 Stabilization Policy

The cybernetic client-server-integrator model structures macroeconomics in Households (Client), Business (Server) and Government (Integrator). The circular cash-flow between consumers, enterprises and public institutions constitutes the national economic system where consumer expenses are identical to the factor income of someone. However, the national economy is today more or less an open system strongly affected by export to and import from other countries, too. Table 1 defines major components of an open macroeconomy (Keynes, 1936). Keynes showed that classical self-stabilization of employment is blocked due to inherent inertia. National fiscal policy must support a high level of aggregate employment increasing public expenses to assure a high level of employment in periods of business recession. The masterpiece of Keynes was the “New Deal” of Roosevelt 1932 which became pathbreaking to recover from “The Great Depression 1929”. Keynes fiscal strategy applies not to recession due to poor international competitiveness. This explains why Germany was reluctant to support expansive fiscal policies in some countries in Southern Europe after the breakdown of the international financial crisis 2009.

Recovery from recurrent demand-based business recessions is the short-term target for Doughnut Economics. Major components of modern fiscal and monetary policies are explained in Table 1.

Note 1: W is wages. C is Consumer expenses at the level of “Goods and Services”.

The aggregated level of “Savings (S) and Investments (I)” depends on the level of interest (i).

“Public Transfers” or cash payments (T) are specified to Firms (T_B) respective Households (T_H).

“Foreign Trade” (Exports and Imports) reflects the international level of competitiveness.

Note 2: Beyond components specified in Y_(Emp), macroeconomics include non-priced voluntary community work (Commons) e.g. Sports clubs, Cultural associations, Housing associations, social care and healthcare and environmental protection. Every third adult participates in voluntary community work at least once a year contributing with about 10% of normal work hours. Voluntary community work, although not accounted for in national production statistics, is an important social factor for the well-being of the population. Further, non-governmental organizations (NGO) based on extensive use of voluntary work play an important role in long-term macroeconomic development policy, for instance welfare and healthcare as well as modern Environmental protection.