[Review] Stephan Schulmeister - The Road to Prosperity - Policy change instead of system change

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Addendum 2026-06-09:

The Review has been updated.

Siehe auch:
[Rezension] Stephan Schulmeister - Der Weg zur Prosperität - Der Weg zur Prosperität - Politikwechsel statt Systemwechsel

Stephan Schulmeister is an economist and lawyer from Austria who has little in common with the economically liberal so-called Austrian school. The economist born on August 26, 1947 was a research assistant at the Austrian Economic Research Institute (Österreichisches Institut für Wirtschaftsforschung/WIFO) for forecasts, economic development, financial markets and international trade from 1972 to 2012. The focus of his work is on the conflicts of interest between employees, employers from the real economy and the financial markets or financial capital.
According to Schulmeister the orientation of the economic order fluctuates permanently between real capitalism and financial capitalism. Long upswings are caused by an alliance of interests between employees and real capital and long downswings are caused by an alliance of interests between real capital and the financial markets or financial capital.

In his 2018 book "The Road to Prosperity" Schulmeister describes the problems associated with the current state of affairs. At the same time however he praises the period from 1945 through the 1970s referring to it as the "golden age of capitalism". Rather than seeking to overcome the current malaise by replacing the system entirely Schulmeister advocates for realistic reforms.

  1. Policy Change instead of System Change
  2. The Golden Age of Capitalism
  3. The Role of the Finance Sector

Policy Change instead of System Change

Even at second glance the work of Schulmeister still appears as left. Schulmeister also assumes in several places that it is enough to have the supposedly right people in the crucial positions.
Keynesians according to the British economist John Maynard Keynes as Schulmeister is one argue however that a lack of purchasing power and demand weakens the economy and not necessarily that they are unfair. In addition Schulmeister emphasizes the destructive role of the financial markets and refers for this to Keynes as well. [1, p.355-357]

And Schulmeister also blames the rise in financial capitalism for the decline in purchasing power and demand. [1, p.124-156 , p.190-207 , p.405(119)]
With his criticism Schulmeister advocates for realistic reforms that have also already been applied in the past. With his well-founded criticism Schulmeister differs from everyone who wants to abolish or overcome capitalism. [1, p.325-329 , p.329-347]

Schulmeister identifies the prevailing predicament as the absence of a unifying economic theory capable of pointing the way to prosperity. However the book makes no mention of MMT (Modern Monetary Theory), Georg Friedrich Knapp’s "State Theory of Money" or chartalism. Yet at the time of the book’s publication in 2018, both concepts played a far less significant role in Europe. This comparison is relevant because both MMT and chartalism offer ways to implement Schulmeister’s major demands and most of Schulmeister’s demands.

Ein bedeutender Unterschied zu frühen Gesellschaftskrisen besteht darin, dass es derzeit keine von den meisten "Anti-Neoliberalen" akzeptierte Wirtschaftstheorie gibt, die den Weg Europas von Prosperität in die große Krise konkret erklären und damit auch den Weg zu ihrer Überwindung weisen konnte.
...
Den neoliberalen Ökonomen ist es trotz der hervorragenden Performance der keynesianisch-realkapitalistischen Spielanordnung in der Prosperitätsphase gelungen, ihre Weltanschauung durchzusetzen. Die "Keynesianer" hingegen schafften es trotz der miserablen Performance der neoliberal-finanzkapitalistischen Spielanordnung nicht, eine alternative Theorie zu entwickeln.

A significant difference to early social crises is that there is currently no economic theory accepted by most "anti-neoliberals" that can explain Europe’s path from prosperity to the great crisis in concrete terms and thus also shows the way to overcome it.
...
Despite the excellent performance of the Keynesian-real capitalist arrangement in the prosperity phase the neoliberal economists managed to dominate with their worldview. The "Keynesians" on the other hand were unable to develop an alternative theory despite the miserable performance of the neoliberal financial capitalist arrangement. [1, p.115]

The Golden Age of Capitalism

One of the recurring arguments in the book is that a different economic order is not only possible. Schulmeister describes that and how many of his demands have already been applied in the past. He locates this period to be at least between 1945 and the 1970s and calls it the "golden age of capitalism". Schulmeister thus differentiates himself from anti-capitalists from the left spectrum.

The economic system outlined by Schulmeister is characterized by a constructive cooperation between real capital and the workforce. Schulmeister attests the economic regime that has now prevailed to be a destructive cooperation between real capital and financial capital. Schulmeister gives opponents of capitalism a bad testimony. According to Schulmeister opponents of capitalism see capitalism as coming to an end because of the current problems. He accuses the opponents of not knowing what should follow after capitalism. [1, p.306-314]

In Prosperitätsphasen zwischen 1950 und 1973 liegt der Zinssatz unter der Wachstumsrate, die Profitrate des Realkapitals - auch deshalb - weit unter. Diese Konstellation sowie stabile Wechselkurse und Rohstoffpreise lenken das Gewinnstreben auf Realinvestitionen. Bei anhaltend hoher Vollbeschäftigung sinkt die Ungleichheit.

...

During periods of prosperity between 1950 and 1973 the interest rate remained below the growth rate while the rate of return on real capital—partly for this reason—was far lower. This constellation combined with stable exchange rates and commodity prices channeled the pursuit of profit into real investments. Inequality declined amidst sustained high levels of full employment.

... [1, p.125]

Schulmeister's arguments have long been tried and tested but have partially been forgotten. Stable and steady economic growth was promoted by wage growth that does justice to the growth in labor productivity and possibly forwards government investment. Both are necessary because labor productivity is steadily increasing and the added value created must also be bought. However if purchasing power or demand is lacking for this the state may have to invest since individual actors are not willing to risk higher wages or invest if economic growth is insufficient. And labor productivity primarily means that the goods and services are more valuable not necessarily that they are more goods and services or that more ressources are required. [1, p.355-357 , p.306-314]

...
In Krisenphasen wie seit 1980 in Europa liegt Zinssatz über der Wachstumsrate, instabile Finanzmärkte lenken das Gewinnstreben auf Finanzinvestitionen, die Profitrate des Realkapitals sinkt und damit das Wachstum der Realinvestitionen. Arbeitslosigkeit, prekäre Beschäftigung und Sozialabbau erhöhen Ungleichheit.

...
During periods of crisis such as those experienced in Europe since 1980 interest rates exceed growth rates; unstable financial markets channel the pursuit of profit toward financial investments, causing the rate of profit on real capital to fall and, consequently slowing the growth of real investment. Unemployment, precarious employment, and the erosion of social welfare systems exacerbate inequality. [1, p.125]

But Schulmeister warns against the idea of an unconditional basic income as nothing more than a way of demobilizing the poor. The idea of an unconditional basic income originates from Milton Friedman. The intention is to keep people unemployed without the discontent of the unemployed becoming excessive. And unemployment is not a condition that needs to be combated through a policy of full employment. Rather unemployment serves to keep the inflation rate low by weakening the bargaining position of the workforce regarding wage increases. [1, p.306-310 , p.92-93]

Balanced foreign trade balances are achieved through exchange rates that do justice to foreign trade balances as in the former Bretton Woods system. That means that exchange rates rise when economies achieve foreign trade surpluses and that exchange rates fall when economies achieve foreign trade deficits. Foreign trade deficits are bad because they replace jobs in the local economy with imports and thus cause unemployment. Foreign trade surpluses are bad because the accounts receivable created thereby have yet to be made due. And if the currency of the target country loses value by then the value of the accounts receivable will decrease. [1, p.58-74 , p.75-103 , p.306-314]

Schulmeister has no interest in revolutions. According to Schulmeister revolutions are only for impatient people and tend to get out of control. Instead Schulmeister describes measures to put an end to the prevailing plight. [1, p.322-324]

Instead Schulmeister explicitly pleads for a European Monetary Fund as a way to refinance countries after the monetary unions have banned their own central banks from doing so, a limitation of the flowing auctions in the financial markets to auctions at intervals of several hours, an introduction of a general financial transaction tax, a world currency or at least one world currency system and an EU authority for comprehensive supervision of the entire financial sector. [1, p.325-329]

Schulmeister also advocates for promoting economic growth through investments in sustainable technologies and thermal renovation of buildings, determining the price development of fossil fuels in the EU in order to make their use increasingly unattractive, trans-European high-speed train networks, Investment in local public transport and promotion of electric mobility, the renewal of the welfare state in Europe, public housing and minimum security in the EU, the improvement of educational offers and de-economization of the educational system and Creation of jobs in nursing, care and in the social area. [1, p.329-347]

Schulmeister also lists a rough ten point plan.

  1. " Strengthening the principle of cooperation "cooperation" and thus the system "politics" as a prerequisite for an efficient combination with the control principle "competition" or the system "market". "
  2. " The state is "our association" which is responsible for the provision of public goods (internal security, legal system, etc.) and the organization of the health and education system, social security and services of general interest. "
  3. " Strive for a balance between individual involvement, especially through market competition, and social cohesion, especially through the welfare state. "
  4. " Increased consideration of ecology when redesigning the economic framework on a global, european and national level. "
  5. " Steering the pursuit of profits from short-term transactions on financial markets to long-term activities on goods markets i.e. strengthening the interests of real capital and labor at the expense of financial capital. "
  6. " Development of a social model that corresponds to the basic European values "freedom, equality, fraternity" and (thus) the wishes and living habits of its citizens. "
  7. " Supplementing the globalization of companies and markets with a "globalization of politics" particularly in the problem areas of climate change, global monetary system and financial markets. "
  8. " Promotion of social innovations for the social integration of technical innovation dynamics in particular to deal with the conflict between increasing productivity and - in the long term subdued - economic growth. "
  9. " Every citizen should contribute to the financing of the common good according to his or her economic possibilities in contrast to an austerity policy in which only those who have received something from the state have to make contributions. "
  10. " Strengthening european cohesion as a "unity in diversity" particularly in the area of education, culture and the organization of social security as the basis for the growth of a "European identity". "
[1, p.323-324]

The Role of the Finance Sector

For Schulmeister the economic dynamic is shaped in the long term by the trading of real, financial capital and employees. Real capital plays a crucial role here since there are two possible allies available to real capital. The common interests of real capital and the workforce land into production, trade and investment and the profit comes from the creation of real assets. And the common interests of real capital and financial capital result in trading in financial assets and the profit comes from valuation differences and user fees. [1, p.124-156]

One of the key points in the book is the sharp distinction between the real economy and the financial markets as well as criticism of the financial markets. This clearly differentiates between the effects of the two and makes the problems and the described solutions easier to grasp. Schulmeister attests that the financial markets undermine and damage the real economy. For Schulmeister criticism of unregulated financial markets is a central and forgotten part of Keynesianism. [1, p.124-156]

All too often the financial markets are considered to be a perfect or complete market. This would be the case if there are a lot of participants on the side of the provider and the customer and there are no preferences or preferences. However Schulmeister attests the behavior of the financial markets to be like a herd and describes the occurrence of this as a spontaneous disorder. [1, p.124-156 , p.157-189 , p.424(53)]

As a reason for this Schulmeister mentions the emotions greed for profit, fear of loss, joy and malicious joy to be smarter than others, enjoyment of speculation itself, optimism and pessimism. [1, p.169-186]

These emotions cause the bull and bear markets to collectively grow or shrink the demand side. In addition this leads to a redistribution. Those who are in need to sell and suffer losses and those who are able to buy and make profits. [1, p.157-189 , p.424(53)]

According to Schulmeister unemployment and public debt are two separate problems for Mainstrem economists. Unemployment arises from excessive wage demands or inflexible labor markets. And national debt arises from excessive social spending, the state overstepping its bounds, or an inefficient bureaucracy. [1, p.124-156 , p.190-207 , p.405(119)]

According to Schulmeister however both will be dampened by the shift due to profitability towards financial investments. The shift in the pursuit of profit to financial investments dampens the formation of real capital and consequently of jobs. And if companies increasingly invest in financial products instead of real capital the state is forced to create real capital.
As a result the corporate sector in most countries has shifted from being a net borrower to a net lender. The consequent decline in demand for capital goods also reduces the demand for labor. Consequently unemployment rises, government debt increases, or a combination of both occurs. [1, p.124-156 , p.190-207 , p.405(119)]

Preview:

Src:
[1] Stephan Schulmeisters Buch - Der Weg zur Prosperität- ISBN 978-3711001481
[2] Welche Aufgaben kommen für die Sozialdemokratie? Schulmeister und Max Lercher 2018-05-07
https://youtu.be/iJzheZwCtV0
[3] Der Weg zur Prosperität Stephan Schulmeister Buchvorstellung WU in Wien 2018-06-08
https://youtu.be/_s2SJIKk204
[4] „Wir sind in gefährlicher Nähe zu den 1930er-Jahren.“ Stephan Schulmeister im Gespräch 2018-06-18
https://youtu.be/tL0kaHQTByA
[5] Stephan Schulmeister - Europas Weg in die Krise und zurück zur Prosperität 2018-06-22
https://youtu.be/cKy4Y5Zk8ig
[6] Märkte als Religionsersatz? | Stephan Schulmeister bei quer.denken. 2019-02-07
https://youtu.be/EUCGzOkfBtc

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