ABSTRACT
This chapter starts from the observation that Goodwin’s (1967) Classical growth cycle does not represent a process of social reproduction that can be considered as adequate for a social and democratic society in the long-run. This chapter therefore derives on this background a basic macrodynamic framework where this form of cyclical growth and social reproduction is overcome by an employer of ‘first’ resort, added to an economic reproduction process that is highly competitive and flexible and thus not of the type of the past Eastern socialism. Instead, there is high capital and labor mobility (concerning ‘hiring’ and ‘firing’ in particular) where fluctuations of employment in the first labor market of the economy (in the private sector) are made socially acceptable through a second labor market where all remaining workers (and even pensioners) find meaningful occupation. The resulting economic system with its detailed transfer payment schemes is in its essence comparable to the flexicurity model developed for the Nordic welfare states and Denmark in particular. We show that this economy exhibits a balanced growth path that is globally attracting. Moreover, credit financed investment can be easily added without disturbing the prevailing situation of full capacity growth. We thus do not get demand-, but only supply-driven business fluctuations in such an environment with both factors of production always full employed. This combines flexible factor adjustment in the private sector of the economy with high employment security for the labor force and thus shows that the flexicurity variety of capitalist reproduction can work in a balanced or at least fairly stable manner.
