Decent Capitalism Prof. Dr. Hansjörg Herr

1. Decent Capitalism Prof. Dr. Hansjörg Herr Berlin School of Economics and Law Global Labour University Germany

2. Structure • The invisible hand • Principles of decent capitalism • Discussion of selected topic • Consequences for Thailand

3. The dream of an “invisible hand” All economic agents should act in an egoistic way The market is a wonderful mechanism to harmonise the economic interest of all Free markets lead to the welfare of nations Adam Smith, The Wealth of Nations 1776

4. Especially • Money / financial markets • Labour • Nature cannot left to markets (Karl Polanyi, The Great Transformation,1944)

5. Consumption demand, income distribution and growth Distribution of wealth Consumption demand based on income and not credit • Income distribution • Functional income distribution (wage quota) • Wage dispersion (minimum wages, wage bargaining) • - Tax system, transfer payments Aggregate demand • - Social security systems (health, unemployment, old age) • Public goods (education, etc.) • - Welfare state (cash payments to the poor) Social coherence, increase productivity Domestic based sustainable growth model

6. Integration into the world market Current account current account deficits reduce aggregate demand, low foreign debt to prevent currency crises, more or less balanced current account Support of key industries also in the export sector, industrial policy in the tradition of Friedrich List • Capital controls • no portfolio investment • low level of foreign credit • selective foreign direct investment • Stable nominal exchange rate (managed floating) • capital controls • Foreign exchange interventions • interest rate mainly for domestic purposes Aggregated demand Sustainable growth

7. Industrial policy and Green New Deal • Investment demand, • important is level and structure • Industrial policy • a) increase productivity • b) ecological requirements • c) development requirements • (Friedrich List) • d) Prevention of real estate bubbles Sufficient, long-term and cheap financing for private and state investment, Bank based financial system, Strong development banks Public investment (big public sector, for example in areas of natural monopolies like water supply, energy, public transport Aggregate demand Private Investment (internalisation of external effects) Foreign direct investment in selected areas Sustainable growth

8. Consequences for Thailand • Change in income distribution is of key importance • Minimum wages • Wage bargaining system/ industry level bargaining • Tax policy • Protection from a medium- and even long-term unstable world market • Control capital flows • No current account deficit, no dependence on high surpluses • Immediate beginning with ecological policies • Increasing productivity in general • Ecological policies

10. Literature • S. Dullien, H. Herr Chistian Kellermann, Decent Capitalism. A Blueprint for Reforming our Economies, London: Pluto Press 2011. • H.Herr, M. Kazandziska, Macroeconomic Policy Regimes in Western Industrial Countries, London: Routledge, 2011. • H. Herr, Credit Expansion and Development: A Schumpeterian and Keynesian View of the Chinese Miracle, in: Intervention. European Journal of Economics and Economic Policy, 2010, Vol. 7, p. 71-90. • H. Herr, Finanical Systems in Developing Countries and Economic Development, in: E. Hein, T. Niechoj, P. Spahn, A. Truger (eds.), Finance-led Capitalism? Macroeconomic Effects of Changes in the Financial Sector, Marburg 2008, 123 -150. • H. Herr, Capital Controls and Economic Development in China, in: Arestis, P., De Paula, L.F., Financial Liberalisation and Economic Performance in Emerging Countries, Basingstoke and New York 2008. H. Herr, Making an Unstable Financial System Work: Reform Options, in: International Journal of Labour Research, Vol. 3, 2011, 133-156. H. Herr, M. Kazandziska, M., S. Mahnkopf-Praprotnik, The Theoretical Debate About Minimum Wages. Global Labour University Working Papers, no. 6, February 2009.