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Guiding Principles

The role of the state is to provide the adequate framework for economic activity and social justice. State intervention is reduced to cases when the market cannot provide the common good. In past decades, the South African model of the developmental state failed to deliver growth and equal opportunities due to overwhelming or inefficient state intervention. The answer to this failure is not “no regulation”, but to set up the right framework for the market to meet the needs of the common good.

The principle of subsidiarity states that matters should be handled by the smallest, lowest or least centralised competent authority in order to limit central government, provide freedom and empower communities. Subsidiarity also creates and guarantees the space for individual responsibility and initiative.

Solidarity refers to the need and the possibility in society to take care of each other’s wellbeing on the basis of a common agreement. It ensures that the free market economy is continually legitimised by its orientation to the common good.

An efficient economic structure geared to sustainability must be based on a system of private property ownership that places the power of disposal over goods in the hands of private enterprises and households. Private ownership provides the critical incentive for generating income through work and is the basis of innovative entrepreneurship. Only an economic system that is based on private property can safeguard employment on a sustainable basis. This is the basis upon which individual responsibility and initiative can develop, without which an effective use of one’s own potential and of education, innovation, growth and prosperity is unimaginable. Private ownership characterises a competitive system in which a multitude of owners of small and medium-sized enterprises are liable for their economic activity through their personal property. Ownership entails social obligations. Making use of it must serve the common good. This ensures careful and sustainable business activity and protects against a one-sided concentration on short-term profit-seeking.

A global competitive system based on the free determination of prices optimises the allocation of scarce resources. Fully functional competition is the engine that drives sustained economic activity. It fosters efficiency, innovation and progress, reinforces responsible behaviour and prevents the establishment of one-sided market power. A competitive system requires open markets, both nationally and internationally, and control of market power, as well as concentration by the state and the international community. Competition is rooted in performance and equality of opportunity.

Freedom of competition requires the application of the principle of liability, by which competitive performance is tied to the responsible conduct of each participating player. The prospects for profits stimulate competition, while personal liability in the event of losses curbs irresponsible and excessively risky behavior.

A market economy needs a long-term economic policy and the greatest possible macroeconomic stability. This applies particularly to national and international financial markets. Confidence in a stable economic framework is a prerequisite for investments and long-term consumption decisions. Such confidence also requires the rejection of protectionist measures and of a monetary policy geared only to short-term national economic and growth targets.

In a market economy, the state must ensure the provision of public goods if the market is unable to provide these goods or can only do so inadequately. An efficient infrastructure, fundamental educational opportunities, and access to comprehensive healthcare provision are all areas that the state must be involved in shaping. The need for state involvement is particularly great where there is social disadvantage. However, there should be a limit to state intervention.

Economic growth facilitates poverty reduction. The market economy cannot, however, prevent the development of income disparities and the disadvantaging of certain sections of the population. Therefore, a market economy needs effective, broad-based social security systems functioning in line with market conditions, mechanisms for regional redistribution and a performance-oriented system of taxation in order to safeguard social peace and to enable appropriate levels of participation by broad sections of the population in the development of the economy and society.

A market economy requires an incentive-oriented system of levies to finance state tasks. These taxes must be designed in such a way that they neither minimise performance incentives nor lead to allocative distortions.

Every economic system must be judged also by its long-term results. In ecological, social and fiscal terms, sustainability is one of the most important criteria for success and an expression of intergenerational justice. A legal system based on responsibility and liability facilitates sustainability. In particular, an active climate protection policy is an economic and moral obligation towards safeguarding the natural basis of existence for future generations.

Going it alone does not represent a cure for individual countries in the current crisis. On the contrary, it can exacerbate the global impacts of an economic crisis. What is crucial is a coordinated policy of open markets and respect for the rules of fair play. The relevant international institutions must be further strengthened to counter protectionism and economic nationalism.

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