Flexicurity Capitalism: Foundations, Problems, and Perspectives

An intense debate has played out in recent years regarding how to implement a so-called "flexicurity system"-a labor market reform that combines flexibility, particularly in the hiring and firing process of firms, with security in the employment and income of the workforce. In Flexicurity Capitalism, Flaschel and Greiner lay out the macroeconomic structure of this system, providing the detailed mathematical models necessary to ponder seriously how such a system can work. Their book rests on three pillars of thought: Marx, Kalecki-Keynes, and Schumpeter. The authors highlight the relevant contributions from the work of each and build upon it. They in turn provide a basic framework for flexicurity capitalism and then compare their economic system to pure capitalism to determine the best and most practical way forward. Their scope is ambitious: to address the shortcomings of a narrow focus on mass unemployment, selective-schooling systems, property rights based solely on ownership without qualified business decision-making expertise, financial markets that do not of channel savings properly into real investment, and innovations that ignore human rights or moral sentiments. Flaschel and Greiner's Flexicurity Capitalism provides serious discussion and feasible mathematical models necessary to consider moving in this direction.

Table of Contents:
Notation Introduction 1 Marx: Socially Acceptable Capitalism? 1.1 Introduction 1.2 Theminimum wage debate 1.3 Sustainable social evolution through an unrestricted reserve army mechanism? 1.4 Classical growth dynamics 1.5 Hiring and firing, social security and restricted reserve army fluctuations 1.5.1 Human rights: Basic income and minimum wages 1.5.2 Capital's and labor's responsibility: Minimum wages and basic income needs 1.5.3 Capital's and labor's responsibility: Upper bounds for real wage increases 1.5.4 Automatic stabilizers: Blanchard and Katz error correction terms 1.6 Conclusions Appendix: Wage dynamics. A specific theoretical foundation 2 Kalecki: Full Employment Welfare Capitalism? 2.1 Introduction 2.2 Economic and political aspects of full employment 2.3 Themodel 2.4 The implied laws ofmotion 2.4.1 The DADmodule: multiplier and employment dynamics 2.4.2 The DAS module: real wage dynamic and capital accumulation 2.5 Steady state configurations and reduced-form3D dynamics 2.5.1 Balanced growth in the 4D dynamics 2.5.2 Reduced-form3D dynamics 2.6 Feedback structures 2.6.1 Feedback channels in KMGS growth 2.6.2 The feedback structure of the KGR model of capital accumulation and employment dynamics 2.6.3 A feedback-suggested local stability scenario 2.6.4 Consensus-based economies: Attraction towards accepted steady state positions 2.7 Local instability and global boundedness 2.7.1 Conflict-driven economies: Repelling steady state configurations 2.7.2 Kalecki-type upper turning points 2.7.3 Goodwin-type upper turning points? 2.7.4 Rose-type lower turning points 2.7.5 Goodwin-type lower turning points? 2.8 Numerical examples 2.9 Political aspects of the Kaleckian investment and employment cycle 2.9.1 Monetary policy 2.9.2 Fiscal policy 2.10 Conclusions 3 Schumpeter: Capitalism, Flexicurity and Democracy? 3.1 Introduction 3.2 From Marxian reserve army to Schumpeter's competitive socialism and beyond 3.3 Flexicurity capitalism: budget equations, consumption and investment 3.3.1 Full-employment capitalism: Ideal, status-quo and compromises 3.3.2 Basic principles and problems 3.3.3 Sectoral accounts, consumption and investment 3.4 Dynamics: Stability and sustainability issues 3.4.1 Stability of balanced reproduction 3.4.2 Sustainability of balanced reproduction 3.5 Pension funds and credit 3.6 Education and schooling 3.6.1 The educational system: Basic structure and implications 3.6.2 Equal opportunities and life-long learning 3.7 Challenge I: Keynesian business fluctuations 3.8 Challenge II: Schumpeterian processes of 'creative destruction' 3.9 The future of capitalism: A brief appraisal 3.10 Elites in flexicurity societies 3.10.1 Basic aspects 3.10.2 Elite groups and areas of operation 3.10.3 Education: Foundation for administrative authority and social behavior 3.10.4 Career advancement and decent paths 3.10.5 Preferences, incentives and responsibilities 3.10.6 Elite failures 3.10.7 The remuneration of elites under flexicurity: A baseline proposal 3.10.8 A summing up 3.11 Price formation: Time dependent markup pricing around long-period prices of production 3.12 Conclusions and outlook Appendix 1: Stability of Balanced Reproduction Appendix 2: Sustainability of Balanced Reproduction 4 Unleashed Capitalism: The Starting Point for Societal Reform 4.1 Introduction 4.2 Real disequilibria, balanced portfolios and the real-financial markets interaction 4.3 A portfolio approach to KMG growth dynamics 4.3.1 Households 4.3.2 Firms 4.3.3 Fiscal and monetary authorities 4.3.4 The wage-price spiral 4.3.5 Capital markets: Gross substitutes and stability 4.3.6 Cumulative processes in capital gains expectations: Chartists' behavior251 4.4 A baseline stability scenario 4.5 Likely outcomes of unleashed capitalism: Local instability and regime-switch induced viability 4.6 A further risk-bearing asset: Long-termbonds 4.6.1 Intensive form 4.6.2 Steady state 4.6.3 Comparative statics 4.6.4 Stability 4.6.5 Summary 4.7 Interest rate policy in the KMG portfolio approach 4.8 Conclusion 5 Conclusions Mathematical Appendix: Stability Theorems Notes References Index

About the Author :
Peter Flaschel is Professor Emeritus in the Department of Business Administration and Economics at the University of Bielefeld, Germany. Alfred Greiner is Professor of Economics in the Department of Business Administration and Economics at the University of Bielefeld, Germany.