Maximising individual rights, freedom and economic output based on Rule of Law and making the Euro realise its value - in defence of Democratic Capitalism

Calibrated Capitalism is a concept that encapsulates the core ideals and ideas behind the €. stems from a drive to solve existing problems within Europe's economic system. Existing research indicates that the post-2008 economic framework is largely a remnant of the 'neoliberal' model that dates back to the Cold War. Within this framework, economic progress and human prosperity has been achieved ... to some extent. Yet there are unaddressed issues too, which include human rights issues, systemic risk accumulation in banking and increasing levels of populism. 

In conclusion, aspects of the system are non-ergodic as its assumptions regarding rationality do insufficiently add up to the physical reality of its participants. Somewhere there is a 'blockage' within the system vis-a-vis natural law and the individual that will have to be addressed, i.e calibrated to support long-term peace and prosperity. That is the main objective of Calibrated Capitalism. This will contribute to a functioning economy under EU law versus a dysfunctional one subject to illiberal forces.

So do we not have a working market economy under democracy yet? Yes we do to an extent, but issues such as State capture have to be taken into account more than currently is the case. 

Such distortions are problematic on several counts: i) Fueling corruption ii) Potentially causing human rights issues iii) Destabilizing the level playing field iv) Creating biases in the flow of information. In this context, a free market is understood as one with an optimal flow of information within the constraints of objective reality based on law.

A more accurate description is social market economy. This concept has been adopted by the EU already. Yet the 'Calibrated' part consists in protecting this infrastructure and strengthening it, while containing rough edges in the existing economic framework. The French Revolution and the Enlightenment provide an important input , in this context it is important to liberalise those aspects of the market and society that have not been captured well by these two historical themes. 
Core to calibrated capitalism is the protection and improvement of Modernity based on liberalism, which includes the metrical, scientific and statistical systems of the French Revolution as well as liberal aspects of the pre-Revolution era, delineating objective reality in a way that could be defined as 'Euroliberalism'.

Within this framework, information is optimised through the pricing mechanism of the market. Furthermore, cooperation between firms and authorities can be improved in domains such as AML while adhering to the constitutional underpinnings of the EU. This is not always the case.

Three dossiers in particular form the basis for this concept and attempt to identify failures in the existing model: The Panama Papers, Egrant Inquiry (still pending) and Parex scandal. Investigations into these dossiers are by no means an attack on 'the system', instead it reveals those aspects of the system that are illiberal and at odds with objective reality. Central to Calibrated Capitalism is the idea that the Euro should radically account for objective reality and 'bounded rationality' to be a success, so that each Member State and each individual citizen can be the best version of itself. 

One may ask, why not call it calibrated democracy? In its essence, calibrated capitalism is highly supportive of democracy. The reason for resorting to capitalism in this context is that responsibility rests more with the individual than with the State. 

The concept social market economy was coined by German 'ordoliberals' and also Chilean economist Rolf Lüders. Ordoliberals have referred to this concept as a stable response to the tyranny of Nazism, Fascism and Communism. The Chilean economist's reference point  is Chile's economic model following a severe crash in 1983. He attributed this to the attempt of creating a 'free market' with practically no state beforehand, a radical variant which was introduced under highly repressive circumstances in approximately 1975, and has shown to be more problematic in its functioning as evident from the crash. This was the variant in which rough edges are not removed and instead given unconstrained reign over society. As such it contains a more illiberal edge in which power structures reside that can have an adverse impact on the visible, liberal part of the system, whereas that later variant has resulted in a healthy economy under stable democracy. Problems related to illiberalism will have to be addressed at some point. Other illiberal economic actors have found a way in this gap too, such as 'socialist kleptocrats'. 

The Chilean Constitution of 1980, centred around the concept of homo economicus and adopted by the Pinochet government has sometimes been described as 'neoliberal' . Its setup provides a building for the social market economy, an economic concept that has been adopted on a global scale (in different forms). The circumstances under which this constitution was adopted has been debated for understandable reasons, for approximately 3,000 Chileans lost their lives during the military takeover, and thousands have fled into exile to escape the civil unrest and the violent fight between various civil and political fractions. 

The German Constitution of 1949, centred around liberalism and adopted by the German Parliament was established to prevent the excesses of tyranny experienced under Nazism, Fascism and Communism. Since the EU was established, this constitution has formed an important legal basis for the EU and also for its social market economy. One of the objectives of Calibrated Capitalism is to address similarities as well as potential gaps between these two constitutions and in the process shape an improved market economy that suits liberal democracy best and provides high economic performance and minimised levels of corruption. Calibrated Capitalism thus in many ways encapsulates the Eurosystem's mission, and assumes that the Euro was formed to have a capitalist economy in a democratic system, based on liberalism and objectivity. In this pursuit, the German Constitution of 1949 prevails over Chile's 1980 constitution, yet overlap matters: Those aspects of the Chilean Constitution, particularly regarding to market logic, are interesting to the extent that they are compatible with the German Constitution. 

The exact legal specifications of this economic construct can be found at the section 'Legal Foundations'. The logic of Calibrated Capitalism as a system that radically encapsulates the social market economy, can obviously be applied to other regions or non-EU countries too, both at national and international level. The Social Market Economy under Calibrated Capitalism does not assume a priori a given safety net. Rather, it is a free market based on reciprocal reality with a common set of rules of engagement, Rule of Law, in which the existence of a (social) State is recognised. In this context, there is room for social safety nets, environmental concerns etc. The pricing mechanism plays an important role in answering these concerns. 

DISCLAIMER: Although the economic construct of this page reasons from the perspective of the individual under rule of law as sovereign being and an investor in the economy, research and information on this page does not constitute official investment advice. Investors are recommended to carefully read attached documents for any security or consult an officially registered investment advisor (such as a Chartered Financial Analyst).