La Strada on Wall Street

Apologists for neo-liberalism assume not only that states should be run like companies, but also that, as far as possible, they should not intervene in the economy. The financial crisis that began in the US – the heartland of neo-liberalism – has undermined this view, and it is crucial that the European Union now draws the appropriate conclusions and takes the logical next steps.

VIENNA – Apologists for neo-liberalism assume not only that states should be run like companies, but also that, as far as possible, they should not intervene in the economy. The market, they insist, regulates itself. But, more than 50 years ago, the Nobel laureate Paul Samuelson contradicted this idealization of markets in graphic terms: absolute freedom for the market will lead to Rockefeller’s dog getting the milk that a poor child needs for healthy development, not because of market failure, but because “goods are placed in the hands of those who pay the most for them.”

This distributional quandary lies at the heart of the capitalist system, which is one of never-ending competition fueled by the drive to maximize profits. In such a world, there is no room for a social conscience.

It is the state that, to a greater extent in some societies than in others, must fill the gap. The market economy is unsurpassed as a system for creating wealth, but only social compensation ensures that this wealth is distributed in a just manner. Europe’s social-market economies, far more than the Anglo-Saxon neo-liberal model, regard mitigating the inequalities created by markets as the state’s duty.

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