The Social Market Economy Calibrated: Maximising individual rights, democratic freedom and economic output under Rule of Law with clean markets - in defence of a Constitution of Liberty based on Spontaneous Order which incorporates Equity/Social Justice.
Calibrated Capitalism is a concept that encapsulates liberal capitalism and also liberal democracy based on the core ideals and ideas behind the €. Firstly, we think a distinctive feature of the € is the desire to incorporate Equity/Social Justice into the Spontaneous order so that Skin in the Game is preserved to the best extent possible. This page thus proposes a distinct form of libertarianism/individualism that improves on the economic and social status quo while seeking to preserve a monetarist approach to markets.
Existing research indicates that the post-2008 economic framework is largely a remnant of the 'unipolar' model that dates back to the Cold War. Within this framework, economic progress and human prosperity have 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. We think a kind of fragmentation has taken place in this model. The reference to Navalny on the front-page is very simple to explain: His value system and attitude relate directly to the values and ideas of the Euro if it is to succeed as a long-term currency and is in direct opposition to totalitarian dictatorships and other illiberal regimes.
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. To that extent, it is not a free market. Somewhere there are 'blockages' 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. Illiberalism implies coercion by definition. Bounded rationality holds that illiberalism cannot be fully eradicated, but it can be contained.
So do we not have a working market economy under democracy yet? To an extent, but issues such as State capture have to be taken into account more than currently is the case. Under the assumption that liberal capitalism involves the individual under rule of law, attacks on the individual are in its essence a form of State capture and are as such an attack on democracy under Rule of Law too. Countering State capture thus helps synchronise markets with democracy and includes research on issues like breach of sanctions, illicit funds and illegal asset allocation. In a best-case scenario, these issues can then be reflected in the pricing mechanism of the market as much as possible. Above problems require a degree of Social Justice to be solved, in fact State capture is the polar opposite of Equity/Social Justice.
State Capture is therefore also opposed to productive economic activity necessary to create and preserve valuable rights and assets. We hold that protection against it safeguards individual freedom and his/her assets, such as pensions, investments and savings.
Distortions as mentioned 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.
An accurate description is social market economy, in which the sacred is protected so that individuals can operate freely. This concept has been adopted by the EU already and other parts of the world. Yet the 'Calibrated' part consists in protecting this infrastructure and strengthening it, while containing rough/illiberal 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 across Europe.
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 now 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 and markets should radically account for objective reality and recognise 'bounded rationality' to be a success. We honour those who relentlessly pursue information and truth through courage. And we think these findings and the concept of Social Justice does have a place in a genuine Spontaneous Order as a requirement for its long-term functioning.
The concept social market economy was coined in multiple contexts 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, Nazi tyranny in particular. These ideologies serve as a reminder on the importance of truth and the prevention of perversion of language. 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. Given the violence that has taken place over there and the humanitarian crisis as a result, it contains an illiberal edge in which power structures reside that may 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 and highlights the importance of Social Justice. 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 has sometimes been described as 'neoliberal' . Its setup provides a building block 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 remains controversial: It was implemented under severe repression. Precisely because of that the logical elements are relevant in relation to the EU and German Law in particular for the sake of legal limits and the protection of human dignity.
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 definitely prevails over Chile's 1980 constitution, yet overlap matters: Aspects of the Chilean Constitution, particularly regarding to market logic, are relevant to the extent that they are compatible with the German Constitution and the concept of Social Market Economy and the extent to which it is not, may help in devising strategies against illiberalism/state capture.
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 definitely room for social safety nets, environmental concerns etc. The pricing mechanism plays an important role in answering these questions too. The concept is thus opposed to central planning due to society's complexity, yet assumes that optimised information provision improves individual decision-making. Ultimately, the value of this construct can only be determined by its professional application. The power rests with the individual and its autonomy in a decentralized setting so long as Rule of Law is respected.
Reports on this site will be written in adherence to and respect for Rule of Law
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).