In this book, I will try to lay out the central precepts of the Sovereign Economic Model as a theory and as the foundation of a sovereign wealth-creating real economy. Further, I will explore in its political and economic perspectives the increased role of the state in the national economy, economic strategies and policies, and market sectors in different stages of economic development with ideas, examples, and action plans.
The sovereign economic model
A nation that cannot control its borders is not a nation.
Ronald ReaganA nation that cannot control its economy is not a nation.
Stefan DemetzWhat is the Sovereign Economic Model?
The Sovereign Economic Model is a variant of capitalism with better checks and balances than current liberal capitalism. It is more sustainable, better balanced, and fairer, and it should provide further benefits for people and the state. It tries to remove the instability caused by unproductive, toxic, and inefficient economic activities. Not only that, it is centered around a development model that favors creation of wealth, employment, and growth over an anarchic hunt for profits. Furthermore, it is not an entirely novel concept, as many countries have practiced or are currently practicing one or more of its tenets. It tries to aggregate all best practices that have contributed to the positive development of many countries in the last century. The author of this book merely attempts to baptize these concepts under the same nominal umbrella. This economic model is based on sovereignty, as a country shall itself contemplate which development path to choose without the hackles of status quo, ingrained liberal economic theories or external pressures.
The Sovereign Economic Model includes the following tenets to achieve the stated purposes:
State capitalism: to control the most strategic sectors of the economy
Wealth creation: to create shared wealth for its people and the state
Industrialization: to drive a countrys progress in technical and technological production, investments, and forward advancement
Import substitution: to replace most imported goods while driving industrialization in the country
Diversification: to produce as many goods and variants thereof as possible
Small and medium enterprises: to allow small businesses to fill as many niche industries as possible and drive large socioeconomic improvements of their specific business type
Trade/export: to improve trade balances by letting businesses expand into foreign markets
Taxation: to tax in a way that suits real economic development
Market regulations: to stifle de facto monopolies and cartels by limiting market share, lowering the cost of entry, and fostering competition
Education and research and development (R&D): to position the country for technical and technological breakthroughs by aligning the education and research sectors to the needs of the economy in a way that produces highly skilled human resources.
Why is the Sovereign Economic Model needed? Why sovereignty? Sovereignty is needed to let each country decide on the best economic development model for its citizens. This implies severe political consequences, as all anchors holding a country back from sailing along its most beneficial economic route must be cut loose. As big economics is invariably linked to big politics, immense struggles will take place. Why a new or different capitalist economic model is required is another question. The current commonly used economic system of neoliberal capitalism is not working. It is increasingly unstable and does not grow wealth. Nor does it produce good growth in gross domestic product (GDP) numbers. Significant changes in economic policies will require some adaptation by those who are now benefiting from the imbalanced economy by offering economically harmful products and services. The Sovereign Economic Model has many benefits over existing economic systems, such as these:
Improved economic development model
Less economic instability
Increased wealth creation
Distributed and shared wealth distribution
Long-term sustainability
The Sovereign Economic Model does not throw the baby out with the bathwater but tries to fine-tune several features of capitalism. Some economic experts fiercely criticize such a «paternalistic» economic model by citing moral and ethical considerations. Their criticism includes the following:
«Too communist/socialist»
«Too nationalistic»
«Too fascist»
«Too ideological»
«Too revolutionary»
«Too paternalistic»
The Sovereign Economic Model does not have ideological components per se. It simply strives to give the fruits of labor to the state and the people and prefers to avoid the unnecessary accumulation of capital. If a considerable accumulation of capital is possible, such as through de facto monopolies or rent-seeking economic activities, then the companies that pursue it should be state-owned corporations (SOE). The excess profits they earn should go to the state itself, which can grant higher-quality services, lower taxes, and a higher standard of living to citizens of the country. Excess profits of a state can be used in a variety of ways, including to provide a better education system, better health care, higher pensions, or other subsidized services like cheap transport.