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silk road?”,
at Herat University, in collaboration with the Ruhr-University Bochum
and the University of Herat. On August 10th, 2006 the KAF partner, the
National Center for Policy Research, organized a Roundtable intended
as a follow-up to the Herat Conference.
In the initial conference many differing views were
presented about the economic direction Afghanistan should take. The
aim of the follow-up session was to check whether the economic system
of a social market economy would be the right path for Afghanistan.
Speakers at the follow-up roundtable in Kabul were Professor Löwenstein
of the Ruhr-University Bochum, who had been unable to take part in the
Herat conference, and Dr. Sami Noor.
The follow-up roundtable was held at the NCPR. Dr. Khalatbari, Resident
Representative of the KAS, welcomed participants and gave a short introduction
to social market economy as an economic system, originating in West
Germany after the Second World War, that seeks a middle path between
socialism and capitalism. It was devised by the Christian Democrat Ludwig
Erhard, minister of Economics under Konrad Adenauer´s chancellorship
and German chancellor in his own right from 1963 to 1966.
Professor Löwenstein of the RUB then reviewed the history, the concept
and the implementation of social market economy in Germany in detail.
First, he explained the general role of the state in an economy. He
emphasized that economic activities and transactions were bound to laws,
customs, and social conventions. These rules were important preconditions
for the stability of an economy. For the whole society it was always
rational to follow those rules, whereas for individuals it was often
rational to break those rules. This created a social dilemma, necessitated
the enforcement of the law by the state, through sanctions if necessary.
Otherwise any economic system, a free market economy or a centrally
planned economy, would face chaos and poverty. Professor Löwenstein
explained to the audience how states had to choose between two poles.
The two poles were the free market economy and the centrally planned
economy. In a free market economy everything was left to the market.
A centrally planned economy was characterized by an increasing role
of state bureaucracy. None of those ideal types had ever existed. The
economic systems in the real world were mixtures of both types and were
located between the two poles. Professor Löwenstein named a special
group of countries, which had not yet decided where to go and which
path to take – towards a free market economy or towards a central planned
economy. Those countries included China, Russia, Pakistan, - and Afghanistan.
Afghanistan has a big state bureaucracy, but one which has little real
interference in the market. He called Afghanistan a “chaos economy”.
After defining the two ideal types of economic systems and briefly characterizing
Afghanistan, Professor Löwenstein told the audience about the historical
background of the social-market economy in Germany and compared the
former German situation with the situation Afghanistan is facing today.
The problems shared by both countries, former Western Germany and today’s
Afghanistan, were, for example, the problem of returning refugees, the
removal of the industrial base and the destruction of the infrastructure.
But Professor Löwenstein also stressed important differences between
former Western Germany and today’s Afghanistan: the main difference
was that in Germany the biggest part of the human capital had remained
in the country after the war. The second major difference was that the
Germans were used to abiding by rules. These two facts had enabled Germany
to catch up after World War II.
Under these conditions it had been the social market economy concept
of Ludwig Erhard which had led to Germany’s post-war economic recovery
. When Ludwig Erhard, then economic director in occupied Germany, had
opted for free prices, this had resulted in a huge economic growth and
was the first step towards the later system of the social market economy.
The whole concept of the social market economy was then illustrated
to the audience by Professor Löwenstein. Professor Löwenstein identified
the two main pillars of the social market economy: “private property”
and “competition”. “Private property” had the aim of increasing efficiency,
while “competition” enabled decartelization, deregulation and an improvement
to market access. The pillar that incorporated the social element within
the social market economy was free prices. According to this model of
the social market economy, free prices maximize social welfare. That
was the core idea of Erhard´s concept, as Löwenstein explained. This
meant that the economy was complemented by a social security system
which protected people against unemployment and provided health as well
as accident insurances and pension schemes. Today, however, the social
security system had become the main challenge of the German economic
system, as it had to be adjusted in an economy without full employment
and in a society with a large and growing percentage of old people.
Two further challenges to the German system of social market economy
have been the reunification of Germany, which included enormous costs,
and the challenge to maintain Germany’s advantage in international trade.
Professor Löwenstein´s speech was followed by a discussion. The audience
asked him what he thinks to be the main reasons for the chaotic state
of the Afghan economy. Professor Löwenstein stressed the missing consensus
in Afghanistan that rules must be followed. This was a cultural problem
he emphasized. A connected problem was the weak Afghan government, which
was not able to enforce the laws. These two problems, coupled with the
lack of human capital, made the Afghan economic situation very difficult.
What Afghanistan would need to solve these problems was time. Mr. Hassanzadah,
GM SIEMENS, stated that he perceived the education of the people as
the focal point for improving the Afghan economy. After the discussion
Dr. Noor summarized the outcome of the first conference in Herat, before
there was a little break of fifteen minutes.
The break was followed by an open question unit about social
justice. Professor Löwenstein emphasized that the term social justice
needed to be defined. Laila Jazayery, new head of the Department of
Social Science in the NCPR, stated that there would be two concepts
of social justice, first a distribution of goods and services according
to performance, and secondly a distribution according to the people’s
needs.
Mr. Ranjbar, Member of Parliament, stressed that it was impossible
to define social justice but that there would be three crucial points
in Afghanistan. First, social justice should include equal opportunities,
second the equal implementation of rules without discrimination and
privileges, and third that those members of the society who earn more
have to redistribute a part of their income, meaning for example progressive
taxation. Mr. Banwal hinted that in Afghanistan tax revenues were distributed
unequally between the provinces and that the gap between the developed
and non-developed parts of the country needed to be solved. Professor
Löwenstein summarized the statements of Mr. Ranjbar and Mr. Banwal as
closer to the American position than to the German one. Their positions
reduced social justice to equal opportunities. And he added why according
to him this way of just preserving equal opportunities would not lead
to real social justice. He gave the example of education in Germany.
There was free education in Germany, but in the end mainly children
of well educated parents with a good financial background would be successful
in the education system. Mr. Banwal mentioned the population increase
as a further Afghan problem, but Professor Löwenstein replied that this
demographic factor would seldom reduce the national income.
In the end of the conference Mr. Lowenstein concluded that before the
implementation of social justice, Afghanistan would need to develop
an economic system.
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