The A.SK Social Science Award—The Donors Mission
Address by
Werner Abelshauser at the A.SK Award Ceremony October 19, 2013
What
is the A.SK Mission about?
In
2007, at the very beginning of awarding the A.SK Social Science Prize, the
leading daily in Germany, the Frankfurter Allgemeine, called the Award a “prize
for revolutionaries” and suggested that the donors wanted to reinvent capitalism. It summarized the
Foundation’s purpose as promoting
revolutionary thinking in order to prevent revolutions. In recent years
that assessment has been cast in a new light by experience with dangerously
smoldering crisis that is still on the verge of flaring up from the financial
markets and engulfing capitalism altogether. It positions the donors among the
select few to whom the condition of our economic system at that time was the
problem, not the solution.
There
is, however, a second global problem, which – according to the A.SK-Mission
needs promoting revolutionary thinking
in order to prevent revolutions. There are large parts of world society and
world economy, which cannot take part in global progress. They are suffering
from bad governance and incompetent economic leadership,
stemming from the old system of capitalism, which urgently needs economic and
government reforms. The large African continent is just one example, but a very
important one.
In
order to understand things about the donors, allow me to take some of their
biographical background and weave it together with Shu Kai Chans scientific
views. As a student of economics, the 16- to 20-year-old Shu Kai lived in a
surrounding of a still smoldering world economic crises in Europe while he
studied in Berlin, Leipzig, Vienna, Frankfurt, and Marburg. He was confronted
there with two schools of economic thought that at root were diametrically
opposed but that had one element in common: the idea of social capitalism.
On
the one hand there were the social conservatives of the Historical School of economics. They believed that public social
policy (not to be confused with the welfare state) was the correct answer to
the growing significance of human capital, and they saw the cultivation and
accumulation of this human capital as a state responsibility that was in
keeping with modern times. Another characteristic of the social conservatives
was their groundedness in economic
practice.
The
other direction of economics that Shu Kai Chan came to know while studying in
Germany was “ordoliberalism” - the roots of what we call Soziale
Marktwirtschaft today. Its proponents observed the market failure in the global
economic crisis and drew from it conclusions for a new role of the state.
Competition was expected to provide for the social components of the economy.
But it was to be competition bounded by government policies setting the overall
context in which business was conducted. If the markets failed in a crisis,
then one could resort to “liberal” state intervention to achieve the desired
results. In essence, then, the approach of the social conservative and that of
ordoliberalism both underscored a new role of the state and simultaneously
raised the standards of what could be expected from the state in terms of good governance.
Large parts of Shu Kais book “Social
Capitalism” published more than 60 years later – and in particular the Misson
Statement of the A.SK Foundation - still include this spirit. He closed his
book tersely by stating: “We need a
revolution.” Because - and I quote again - “New problems could be solved only by a new system.”
Against
this background it might well surprise you that I want to close my statement by
pointing out what is closest to the donors hearts. We shall start this ceremony
with music at its best. Musical highlights like these have accompanied the
A.SK Social Science Award ceremony since 2007. In fact, it was the donors
started this tradition. Shu Kai Chan in particular insisted from the outset
that music, that songs from the opera and operetta, should be granted at least
as much space in the award ceremony as academic speeches receive. He has
pursued this love of music ever since 1937, when he studied in Vienna and found
himself captivated by the exotic sound of the central European necropolises of
the Holy Roman Empire. I am sure you will enjoy this music, too.
After
the war forced the young student from Canton to return home, he wrote a long
manuscript about his encounter with these two schools of thought in the
gristmill of German economic science. He completed the manuscript as a young
lecturer at the University of Chungking, and in 2002, more than 60 years
later, he published it in New York under the title Social Capitalism. It
was a year when financial market capitalism was planting its flag throughout
the world. The call for social capitalism was not “in.” The book’s pivotal
sentences sounded surprisingly critical for an author who was a confirmed
capitalist: “Concentrated capitalization and intensive enterprise do not lead
to an economy which offers justice to all.” And:
“Although
we are now in the middle of a high technology industrial revolution , and our
economy is based on expanding international trade, we still retain obsolete
economic and political ideas. We still cling to outdated production notions. We
must find a new economic system, whereby everyone is provided a chance to fully
engage and participate in productive activities to generate more wealth. How
can we achieve the participation of all individuals in production? This is the
subject of our study and we shall call it ‘Social Capitalism’.”
He closed tersely by stating: “We
need a revolution.” Because and I quote again -
“New problems could be solved only by a new system.”
This
conclusion was more apt than ever when Mr. and Mrs. Chan created the
A.SK Foundation in 2006. At the peak of the boom in financial market
capitalism, the donors of the A.SK Social Science Award summarized the
problem and the possible solution to as follows, and I quote:
“The
rapid progress of economic and technological development is rendering economic
systems like capitalism, socialism, and communism obsolete. Worse yet, this
progress has not benefited most people. They continue to live in poverty. If we
were to find a new political philosophy and a new economic system, we could
enhance the well-being of people and resolve many problems in the world at the
same time. The A.SK prize is intended to help achieve that goal.”
Today,
in the fifth year of the Foundation’s work and with the experience of the persistent
predicament in the capital markets, such phrases sound much more obvious and
therefore far less dramatic than they did before the onset of the crisis. The
donors were already pretty much aware of what they were talking about. They
both knew the capitalist system very well, Angela Chan through her long years
of experience directing a top-of-the line retail chain in Hong Kong with
subsidiaries in Australia and the United States, and Shu Kai through his
speculative dealings in real estate, stocks, and currencies. He knows the stock
market inside out and is a successful entrepreneur in cities as far flung as
Hong Kong and São Paolo. His farsighted appraisal of the situation hit the mark
as early as 2007.
Today,
the capitalist system is creating more incentives for speculation than for
investment. Whoever has the capital to buy expensive properties and houses is
making big profits. The consequence is rising prices. The rest of the people
cannot afford their own homes; they live impoverished. Ought we really want a
system like that?
He deplores a system of increasing financialization that in his opinion has stood on the shaky ground of soaring debt rates as well as financially and mathematically specious leveraging: “A big part of private spending is financed not from income, but on credit asset.” It was from that insight that
as
an entrepreneur, Shu Kai Chan also knows that improvement in the system does
not come solely from having individuals change their behavior: “As a businessman,
I have never thought in societal categories. It is always about one thing: you
look for something reasonably priced that promises profit, and you buy it.” The
foundation’s first mission statement reads in part: “New problems could be
solved only by a new system.” To Shu Kai Chang the problem of capitalism is not
with freedom of enterprise or the free market. “Rather it is with capital and
profits concentrated in small groups.” The government should solve the
distributional problem by establishing the appropriate framework for the
economy.
“Since
the economy is based on capital, government should use its financial resources
to provide loans to help qualified citizens to directly engage in production.
There should be a law that all enterprises must be divided into different
categories of work and profit sharing and profit bonuses given to workers.”
Combined
with land reforms, says Shu Kai Chan, this approach can raise productivity,
create more jobs, and distribute prosperity fairly: “Income must come by work.
Not by charity.”
The
foundation has just as tirelessly championed reforms of govern that are
intended to strengthen the participation of “groups” in the Hegelian sense,
that is, of the civil society linking the individual and the state. The model
of the business-coordinated market economy would thereby be able to acquire a
counterpart in the field of governance. This context especially brings to mind
the idea of strengthening the role of nongovernmental organizations in order to
keep the government apparatus from becoming bloated and remote from sovereign
control. New forms of organization such as multigovernment and self-ruling
democraties ought not be tabooed. In short, the idea behind the foundation is
to promote scientific research on the basic preconditions of good governance.
Many of the proposals that the donors make for this very area are reminiscent
of the institutional economics of the Historical School with which Shu Kai Chan
became so familiar on his journey through German universities. It would be
stimulating today to seek possible solutions in the New Institutional
Economics. Incidentally, whoever believes that reform of government is a
problem faced only in developing countries should consider the issue raised
right here in Germany by Article 21 of the Federal Republic’s written
constitution, the Basic Law. Sentence 1 of the article reads “Political
parties shall participate in the formation of the political will of the
people.”)
Understood
in this way, the Frankfurter Allgemeine Zeitung is not so wrong in
asserting that the foundation has the paradoxical mission of facilitating
revolutionary rethinking in order to prevent revolutions—especially if one
means the practical scientific thinking that the prize is intended to
stimulate. As we have heard, the semantics of revolution are by no means
something unfamiliar to the founders. Nevertheless, they are not concerned with
revolution in the actual sense. The Bastille of industrial society was stormed
long ago. What is needed instead are new ideas for achieving more justice in
business and politics and for ensuring their humane application in the postindustrial
age. That is the purpose of the A.SK Social Science Award, one worth striving
to live up to again tomorrow and every day.