Ordoliberalism
The present chapter takes an Ordoliberal approach to Public-Private Partnerships. Ordoliberalism looks to set up an ordered capitalist system that preserves the competition mechanism to safeguard political and economic liberty and ensure properly functioning markets work to the public good. In the Ordoliberal perspective, economic liberty leads to greater efficiency and productivity, but care should be taken so as market forces are not left to operate outside the reasonable norms and legal and regulatory framework of the state (Reyes, 2010).
Given its integral approach to political and economic stability and growth, Ordoliberalism should be considered as an important developmental alternative in the Third World, especially for countries such as Guatemala, where the full benefits of market institutions and forces do not reach in real time the majority of the population which is poor and marginalized. In Guatemala, state action is rationally suspect on account of poor performance due to public sector corruption, cronyism and clientelism (Virzi & Belteton, 2009 A). This situation leaves the country without the sufficient means to overcome collective action problems and suboptimal levels of public goods and infrastructure, which many argue is the proper purview of state action (Hardin, 1989). A more realistic approach to development would take into account the collective action problems that development actors face in the Third World (Booth, 2012).
An Ordoliberal approach takes attempts to balance the desire for liberty and market forces with the need for reasonable state action deemed necessary for the proper functioning of market forces. The founding principles of an Ordoliberal Social Market Economy (SME) are the primacy of the human person, general liberty, and the general welfare, for which it is deemed that a strong state is needed (Hoegen, 1999). The term SME was invented to refer to this new order that aspired to integrate and lead the main actors in society towards cooperation in benefit of the common good. In this regard, economic freedoms are to be fomented when they serve to promote competition (Somma, 2013). An Ordoliberal model posits as much market economics as possible, but as much state as necessary, to achieve a harmonious model of economic and social progress, marked by political stability (Christian Democratic Union [CDU], 2010).
Ordoliberalism was made famous by Ludwig Erhard, the Minister of Economics during the phase of Germany’s economic miracle following World War II, when Germany was under American military occupation. To rebuild the destroyed German economy, Erhard oversaw the transition from a totalitarian demand economy to a more liberal, market economy oriented toward national development. Social inclusion safeguards and safety nets were included to blunt the appeal of communist, populist political and economic appeal. The main thrust was for the state to take an active role in benefit of market forces. In the Ordoliberal framework of a social market economy the state and the market work together toward a common goal (Hoegen, 1999). An important principle for the Ordoliberal SME is subsidiarity, whereby the government should not do what the private sector can well do, such as the production of goods and services (Hoegen).
Today, Germany stands as a bulwark and a standard bearer of a successful market economy, built upon the principles of free markets, republican democracy, and vigorous state action oriented towards national economic development, ever congruent with market oriented principles. Given its success for Germany in Europe, the German model of SME is put forth here as a viable developmental alternative for Third World developing economies such as Guatemala. The Social Market Economy is considered a potentially attractive option for developing countries because it has the end goal of satisfying human development needs within a framework of liberty and social compensation, accomplished via the mechanisms of constant cooperation between the public and private sectors.