Social market economy

The social market economy (SOME; German: soziale Marktwirtschaft), also called Rhine capitalism, is a socioeconomic model combining a free market capitalist economic system alongside social policies that establish both fair competition within the market and a welfare state.[1] It is sometimes classified as a coordinated market economy.[2] The social market economy was originally promoted and implemented in West Germany by the Christian Democratic Union (CDU) under Chancellor Konrad Adenauer in 1949.[3] Its origins can be traced to the interwar Freiburg school of economic thought.[4]

The social market economy was designed to be a third way between laissez-faire economic liberalism and socialist economics.[5] It was strongly inspired by ordoliberalism,[6] social democratic ideas and the political ideology of Christian democracy, or more generally the tradition of Christian ethics.[7][5] The social market economy refrains from attempts to plan and guide production, the workforce, or sales, but it does support planned efforts to influence the economy through the organic means of a comprehensive economic policy coupled with flexible adaptation to market studies. Combining monetary, credit, trade, tax, customs, investment and social policies as well as other measures, this type of economic policy aims to create an economy that serves the welfare and needs of the entire population, thereby fulfilling its ultimate goal.[8]

The "social" segment is often wrongly confused with socialism and democratic socialism and although aspects were inspired by the latter the social market approach rejects the socialist ideas of replacing private property and markets with social ownership and economic planning. The "social" element to the model instead refers to support for the provision of equal opportunity and protection of those unable to enter the free market labor force because of old-age, disability, or unemployment.[9]

Some authors use the term "social capitalism" with roughly the same meaning as social market economy.[10][11][12] It is also called "Rhine capitalism", typically when contrasting it with the Anglo-Saxon model of capitalism.[13][14][15][16] Rather than see it as an antithesis, some authors describe Rhine capitalism as a successful synthesis of the Anglo-American model with social democracy.[17] The German model is also contrasted and compared with other economic models, some of which are also described as "third ways" or regional forms of capitalism, including Tony Blair's Third Way, French dirigisme, the Dutch polder model, the Nordic model, Japanese corporate capitalism and the contemporary Chinese model.[18] A 2012 comparative politics textbook distinguishes between the "conservative-corporatist welfare state" (arising from the German social market economy) and the "labor-led social democratic welfare state".[19] The concept of the model has since been expanded upon into the idea of an eco-social market economy as not only taking into account the social responsibility of humanity, but also the sustainable use and protection of natural resources.


Social market economies aims to combine free initiative and social welfare on the basis of a competitive economy.[20] The social market economy is opposed to laissez-faire policies and to socialist economic systems[21] and combines private enterprise with regulation and state intervention to establish fair competition, maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, social welfare and public services.[22] The term "social" was established by Adenauer to prevent further reference to Christian socialism[23] which was used in the early party agenda Ahlener Programm in 1947.[24]

Although the social market economy model evolved from ordoliberalism, this concept was not identical with the conception of the Freiburg School as it emphasized the state's responsibility actively to improve the market condition and simultaneously to pursue a social balance. In contrast to Walter Eucken, who sought an answer to the social question by establishing a functioning competitive order within a constitutional framework, Alfred Müller-Armack conceived the social market economy as a regulatory policy idea aiming to combine free enterprise with a social programme that is underpinned by market economic performance.[25] In putting social policy on par with economic policy, Müller-Armack's concept was more emphatic regarding socio-political aims than the ordoliberal economic concept. This dual principle also appeared in the name of the model. Although the adjective "social" often attracted criticism as a decorative fig leaf or conversely as a gateway for antiliberal interventionism,[26] it meant more than simply distinguishing the concept from that of laissez-faire capitalism on the one side and of ordoliberal conceptions on the other.[27] In drawing on Wilhelm Röpke's anthropo-sociological approach of an economic humanism leading to a Civitas Humana,[28] Müller-Armack pursued a "Social Humanism" or "Social Irenics"—the notion "irenics" derives from the Greek word εἰρήνη (eirēnē), which means being conducive to or working toward peace, moderation or conciliation—to overcome existing differences in society. Therefore, the social market economy as an extension of neoliberal thought was not a defined economic order, but a holistic conception pursuing a complete humanistic societal order as a synthesis of seemingly conflicting objectives, namely economic freedom and social security.[29] This socio-economic imperative actively managed by a strong state—in contrast to the ordoliberal minimal state solely safeguarding the economic order[30]—is often labelled by the ambiguous but historical term Der Dritte Weg ("The Third Way").

The concept of the social market economy received fundamental impulses from reflection and critique of historical economic and social orders, namely Smithian laissez-faire liberalism on the one hand and Marxian socialism on the other. Furthermore, various Third Way conceptions prepared the ground for the socio-economic concept. Already in the late 19th century, the Kathedersozialisten ("Catheder Socialists") engaged in social reforms in the Verein für Socialpolitik, turning away from pure liberalism to demand a purposive state policy designed to regulate economic life and advocating a middle course between anarchic individualism, traditionalistic corporatism and bureaucratic etatism.[31] In the early 20th century, the Frankfurt sociologist and economist Franz Oppenheimer postulated a so-called liberal socialism (i.e. socialism achieved via liberalism) as the pursuit of a societal order in which economic self-interest preserves its power and persists in free competition.[32] This desirable order of freedom and equality was labelled by a later programmatic publication entitled Weder so – noch so. Der dritte Weg (Neither thus, nor thus. The third way).[33]

This position was widely shared by Oppenheimer's doctoral student and friend Ludwig Erhard,[34] though the latter displaced adjective and subject by promoting a social liberalism[35] and never liked the expression Third Way.[36] In his opinion, the term was tainted, reminding him too much about ideas of a mixed economy, somewhere between a market economy and central planning. He vehemently and consistently argued against the view that models were converging.[37]

Further in contrast to Müller-Armack who emphasised the social aspect, for Erhard the social market economy was always first and foremost a market economic system.[38] By proclaiming "the freer an economy is, the more social it is",[39] Erhard once told Friedrich Hayek that the free market economy did not need to be made social, but that it was social in its origin.[40] Erhard was rather inclined to Walter Eucken's ordoliberal competitive market order. Although he even considered himself an ordoliberal,[41] Erhard based his economic conception neither on Eucken nor on Müller-Armack. In fact, his doctoral supervisor Oppenheimer and especially Röpke, like Erhard a student of Oppenheimer, was his source of inspiration.[42] Erhard perceived Röpke's books as works of revelation and considered the economist a brother in spirit.[43] On 17 August 1948, Erhard referred to Müller-Armack by whom he was strongly impressed most of all not as a theorist, but instead as one who wanted to transfer theory into practice[44] and his concept of the social market economy. Soon after, at the second party congress of the Christian Democratic Union in the British zone in Recklinghausen on 28 August 1948, Erhard circumscribed the concept as a "socially committed market economy".[45] Whereas most neoliberal economists viewed the concept not only as an economic path between the Scylla of an untamed pure laissez-faire capitalism and the Charybdis of a collectivist planned economy, but also as a holistic and democratic social order, Erhard and in particular Müller-Armack emphasised public acceptance and civic engagement as prerequisites for the success of the socio-economic model.[46] For instance, Müller-Armack stressed that by "more socialism" he meant the social engagement for and with the people.[47] Equally, Erhard pointed out that the principles of the social market economy could only be achieved if the public was determined to give them priority.[48]

Important figures in the development of the concept include Eucken, Röpke, Alexander Rüstow, Franz Böhm, Oppenheimer, Erhard, Constantin von Dietze and Müller-Armack, who originally coined the term Soziale Marktwirtschaft.[49] They share an involvement in the Anti-Nazi Opposition, whose search for a post-Nazi order for Germany is an important background for the development of this concept. Early protagonists had close contacts to the oppositional church-movement Bekennende Kirche and Dietrich Bonhoeffer and emphasized the reference of their concept to Catholic and Protestant social ethics.[50]

Rhine capitalism

Michel Albert described a similar concept, "Rhine capitalism". He compared the so-called "neo-American model" of a capitalistic market economy introduced by the administrations of Ronald Reagan and Margaret Thatcher with what he called Rhine capitalism, present in Germany, France and in some of the Northern European economies.

While the neo-American model builds largely on the ideas of Friedrich von Hayek and Milton Friedman, Rhine capitalism according to Albert has its foundations on publicly organized social security. Albert analyzes the Rhenish model as the more equitable, efficient and less violent one. However, according to Albert complex psychological phenomena and the functioning of the press lets the American model appear more attractive and dynamic to the general public.[51]

Social capitalism model

Social capitalism as a theory or political or philosophical stance challenges the idea that the capitalist system is inherently antagonistic to social goals or to a political economy characterized by greater economic equality.[10] The essence of the social market economy is the view that private markets are the most effective allocation mechanism, but that output is maximized through sound state macroeconomic management of the economy. Social market economies posit that a strong social support network for the less affluent enhances capital output. By decreasing poverty and broadening prosperity to a large middle class, capital market participation is enlarged. Social market economies also posit that government regulation and even sponsorship of markets can lead to superior economic outcomes as evidenced in government sponsorship of the Internet or basic securities regulation.

Main elements

The main elements of the social market economy in Germany are the following:[52]

  • The social market contains central elements of a free market economy such as private property, free foreign trade, exchange of goods and free formation of prices.
  • In contrast to the situation in a free market economy, the state is not passive and actively implements regulative measures.[53] Some elements such as pension insurance, universal health care and unemployment insurance are part of the social security system. These insurances are funded by a combination of employee contributions, employer contributions and government subsidies. The social policy objectives include employment, housing and education policies as well as a socio-politically motivated balancing of the distribution of income growth. In addition, there are provisions to restrain the free market (e.g. anti-trust code, laws against the abuse of market power and so on). These elements help to diminish many of the occurring problems of a free market economy.[54]


The social market economy was born and formed in times of severe economic, but equally socio-political crises. Its conceptual architecture was set by particular historical experiences and political prerequisites: Germany's preoccupation with the social question since the late 19th century, the criticism of liberal capitalism triggered by the world economic crisis of the early 1930s and a pronounced anti-totalitarianism as well as anti-collectivism formed by the experiences of the Third Reich. These led to the eventual development of the social market economy as a viable socio-political and economic alternative between the extremes of laissez-faire capitalism and the collectivist planned economy not as a compromise, but as a combination of seemingly conflicting objectives namely greater state provision for social security and the preservation of individual freedom.[55]

One of the major factors for the emergence of the German model of capitalism was to ameliorate the conditions of workers under capitalism and thus to stave off the threat of Karl Marx's militant socialist movement. Germany implemented the world's first welfare state and universal healthcare program in the 1880s. Chancellor Otto von Bismarck developed a program in which industry and state work closely to stimulate economic growth by giving workers greater security. To trump the militant socialists, Bismarck gave workers a corporate status in the legal and political structures of the German Empire.[56] In March 1884, Bismarck declared:

The real grievance of the worker is the insecurity of his existence; he is not sure that he will always have work, he is not sure that he will always be healthy, and he foresees that he will one day be old and unfit to work. If he falls into poverty, even if only through a prolonged illness, he is then completely helpless, left to his own devices, and society does not currently recognize any real obligation towards him beyond the usual help for the poor, even if he has been working all the time ever so faithfully and diligently. The usual help for the poor, however, leaves a lot to be desired, especially in large cities, where it is very much worse than in the country.[57]

Bismarck's program centered squarely on providing universal social insurance programs designed to increase productivity and focus the political attentions of the German workers on supporting Kaiser Wilhelm I. The program included universal healthcare, compulsory education, sickness insurance, accident insurance, disability insurance and a retirement pension, none of which were then in existence to any great degree anywhere else in the world.

After the collapse of the totalitarian Third Reich with its statist and corporatist economic policy, economists and academics at the University of Freiburg im Breisgau in Germany advocated a neoliberal or new liberal and socio-economic order. In this context, it is important to distinguish between the ordoliberal Freiburg School (or Freiburg School of Law and Economics) and the Freiburg Circles. Frequently, the two schools of thought were believed to be the same,[58] although the first emerged from the latter and among the members of the Freiburg School only the founders Walter Eucken and Franz Böhm belonged to the Freiburg Circles and conversely no member of the Freiburg Circles can be attributed to the Freiburg School, which partly advocated different economic objectives. Both schools of economic thought considered that a certain form of planning was necessary for a transitional period following the war. However, whereas the pivotal members of the Freiburg Circles, Erwin von Beckerath, Adolf Lampe and Jens Jessen, favoured productive governmental intervention, i.e. an economy regulated by a relatively strong state,[59] Eucken, Böhm and Constantin von Dietze believed in self-regulating market forces and limited indirect state interference.[60] According to Eucken and his competitive order labelled ordoliberalism, the state must solely create a proper legal environment for the economy and maintain a healthy level of competition through measures that follow market principles. Thus, the paramount means by which economic policy can seek to improve the economy is by improving the institutional framework or "ordo".

In drawing on both Eucken's ordoliberal competitive order and Wilhelm Röpke's economic humanism leading to a "Civitas Humana",[61] the ordoliberal competitive order was further developed by the Cologne School around the economist and anthropologist Alfred Müller-Armack, who therefore coined the term Soziale Marktwirtschaft ("social market economy") in a publication in December 1946.[62] Although it evolved from ordoliberalism as a new variant of neoliberalism, this concept was not identical with the conception of the Freiburg School. In contrast to Eucken, who favoured a strictly procedural or rule-oriented liberalism in which the state solely sets the institutional framework and abstains generally from interference in the market, Müller-Armack emphasised the state's responsibility actively to improve the market condition and simultaneously to pursue a social balance.[63] In putting social policy on a par with economic policy, Müller-Armack's concept was more emphatic regarding socio-political aims than the ordoliberal economic concept. However, the social market economy as an extension of neoliberal thought was deliberately not a defined economic order, but an adjustable holistic conception pursuing a complete humanistic societal order as a synthesis of seemingly conflicting objectives, namely economic freedom and social security.[29] Although it is often viewed as a mélange of socio-political ideas rather than a precisely outlined theoretical order, the conception possessed an effective slogan, which facilitated its communication to both politics and the public. However, the eventual implementation required not only communication, but also political backup.

Here, Müller-Armack's concept soon met with the conception of the then Chairman of the Sonderstelle Geld und Kredit (Special Bureau for Money and Credit) within the Administration for Finance, i.e. an expert commission preparing the currency reform in the then Anglo-American Bizone, Ludwig Erhard. Although Erhard was rather inclined to Eucken's ordoliberal competitive market order[64] and even considered himself an ordoliberal,[65] he was strongly impressed by Müller-Armack most of all not as a theorist, but instead as one who wanted to transfer theory into practice.[44]

When Erhard succeeded Johannes Semmler as Director of the Administration for Economics in the Bizonal Economic Council on 2 March 1948, the social market economy entered the political sphere. Soon after on 21 April 1948, Erhard informed the parliament about his economic policy and introduced the concept of the social market economy.[66] Although there was no unanimous applause, both the liberal democrats and the conservatives widely welcomed the transition to a more market-oriented economy.[67] Thereupon, the Chairman of the Christian Democratic Union (CDU) in the British zone of occupation, Konrad Adenauer, invited Erhard to also inform the party members about his socio-economic conception at the party convention in Recklinghausen, Germany on 28 August 1948. In a visionary and stirring speech, entitled Marktwirtschaft im Streit der Meinungen ("Market Economy in Dispute"),[68] Erhard defended his concept of the social market economy alluding to the dualism between a controlled economy and a market economy.[69] In view of the upcoming regional and federal elections, Adenauer, who was initially sceptical about Erhard,[70] was not only impressed by the polarising slogan, i.e. "Controlled or Market Economy", but also by the efficacy of Erhard and his programme.[71] The foundation for a successful political alliance was laid.

Bundesarchiv B 145 Bild-F078072-0004, Konrad Adenauer
Konrad Adenauer, a proponent of the social market economy

Chancellor Konrad Adenauer of the ruling CDU implemented a new novel economic order amalgamating the promotion of free competition with the responsibility of the social government. The Wirtschaftswunder or "economic miracle" of West Germany could not have been brought about without secure social peace in the country. Adenauer's program centered on legislation establishing co-determination in the coal and steel industry, the system of employee property formation, the equalization of burdens, the creation of subsidized housing, child benefits, the agricultural Green Plan and the dynamism of pensions.[72] On 20 June 1948, the principles of the "social market economy" espoused by the CDU became the foundation of modern German economic policy:

The "social market economy" is the socially anchored law for the industrial economy, according to which the achievements of free and able individuals are integrated into a system that produces the highest level of economic benefit and social justice for all. This system is created by freedom and responsibility, which find expression in the "social market economy" through genuine performance-based competition and the independent control of monopolies. Genuine performance-based competition exists when the rules of competition ensure that, under conditions of fair competition and equal opportunity, the better performance is rewarded. Market-driven prices regulate the interaction between all market participants.[73]

After the Christian Social Union (CSU) also expressed its commitment to a market economy with social balance and the then newly elected Bavarian Minister for Economic Affairs Hanns Seidel advocated Erhard's liberal and social economic model at the CSU's party convention in Straubing in May 1949,[74] the economic principles elaborated by the Working Committee of the CDU/CSU as liaison body and information centre of the two political parties commonly referred to as the "Union", centred the social market economy.[75] Finally, these principles were adopted as party platform and manifesto for the upcoming federal elections at the CDU's party conference in Düsseldorf on 15 July 1949.[76] In contrast to the previous ideological Ahlener Programm suggesting a rather abstract and anti-materialist Gemeinwirtschaft,[77] these so-called Düsseldorfer Leitsätze not only provided a concrete, pragmatic and materialist economic programme, but also an attractive slogan to reach consensus within the party and the public. While eventually the union of the two recently established political parties (i.e. the CDU and the CSU) possessed a coherent and unifying economic programme enabling a more consistent public front, the oldest German political party, the Social Democratic Party (SPD), led by the advocate of economic planning and extensive socialisation Kurt Schumacher, did not introduce its own economic concept. This not only complicated the parliamentary work of the party in the Economic Council, but also limited the public relations of the party as a whole especially in times of campaigning where the partially complex political programmes were simplified and popularised.

In the run-up to the federal elections in August 1949, the CDU/CSU consequently aligned their party platforms, policies and manifestos and campaigned with the social market economy. In particular, the former advertising manager for consumer goods Ludwig Erhard, who affirmed that he would "go into the upcoming political party clashes with particular energy for the CDU",[78] realised the potential of subtle and systematic marketing to transform the concept from an economic theory, or even abstract economic policy, into the basis of a political party's propaganda and public image that held broad appeal. Eventually, on Sunday 14 August 1949 around 31 million Germans were called to cast a vote for the first German Bundestag and to decide between the social market economy and a controlled economy advocated by the SPD. Of those eligible to vote, 25 million or 78.5 per cent actually went to the ballot boxes and showed a clear commitment to the emerging post-war democracy.

Although the SPD turned out to be the most successful single party by gaining 29.12 per cent of the votes, the CDU/CSU combined attracted more votes, totalling 31 per cent and 139 mandates compared to 131 for the SPD. However, in fact both Volksparteien had suffered large percentage losses over their previous Land election totals by failing to capture a comparable share of the enlarged electorate. The most remarkable advance by winning over a million extra votes and achieving 11.9 per cent of the total votes was that made by the liberal Free Democratic Party (FDP) led by the chairman Theodor Heuss. The economically liberal FDP were in fact the only political party consistently gaining percentage of votes between 1946 and 1949. While these results affirmed the then general pro-market trend in public opinion, eventually, the electorate made its decision contingent on the satisfaction of its practical needs rather than on any particular theoretical economic system. The advantage of the CDU and the CSU lay precisely in the fact that they were quasi-governing across the Bizone and thus increasingly identified with the economic recovery and the improving economic conditions. Although the implementation of the social market economy benefited also from other crucial factors, including the East-West conflict and a favourable political and social climate within Germany and abroad, the stabilising alliance between the conservative and liberal parties, the pro-market composition of the Economic Council and even the Federal Republic's own Grundgesetz (Basic Law), which stressed individual freedom, human dignity and the subsidiarity of societal organisation, it was also the consistent efforts at political communication of the cooperative and corporate model that led to the implementation and eventual electoral validation of the social market economy in post-war West Germany.[79]

At first controversial, the model became increasingly popular in West Germany and Austria since in both states economic success (Wirtschaftswunder) was identified with it. From the 1960s, the social market economy was the main economic model in mainland Western Europe, pursued by administrations of both the centre-right (led by the CDU/CSU) and the centre-left (led by the SPD). The concept of the social market economy is still the common economic basis of most political parties in Germany[80] and a commitment to some form of social market economy is present in Article 3 of the Treaty on European Union.

United Kingdom

In the United Kingdom, the concept of the social market economy was first introduced by the Conservative politician Keith Joseph.[81] Following World War II, the main political parties agreed on the nationalization of industry and close economic regulation. In the 1970s, Joseph introduced the idea as an alternative to the post-war consensus allowing free markets for competition and innovation whilst the role of government was to help hold the ring, provide infrastructure, maintain a stable currency, a framework of laws, implementation of law and order, provision of a safety net (welfare state), defence of property rights and all other rights involved in the economic process. Throughout his political career, Joseph used his position to restate the principles of the social market economy and re-direct Conservative policy in Britain.[82] Joseph eventually set up a think tank in 1974 to study the model and initially called it the Ludwig Erhard Foundation and Institute for a Social Market Economy before settling on the name Centre for Policy Studies.[83] The Social Market Foundation (one of the top 12 think tanks in the country) founded by Conservative politician Daniel Finkelstein also aims at championing ideas of "a market economy with social obligations".


Although one of the main factors for the emergence of the European model of capitalism was to attempt to ameliorate the conditions of workers under capitalism and thus stave off the emergence of socialism or socialist revolution,[84] critics identify the social market model with the notions of the welfare state and sometimes mistakenly identify it as being socialistic.[10][85][86]

See also


  1. ^ Social Market, Economics Dictionary on
    Ralph M. Wrobel. "Social Market Economy as Alternative Approach of Capitalism after the Financial and Economic Crisis" (PDF).
  2. ^ Kopstein & Lichbach 2005, p. 156
  3. ^ Spicka 2007, p. 2.
  4. ^ Steffen Mau (2003). Moral Economy of Welfare States. Routledge. p. 74. ISBN 978-1-134-37055-9.
  5. ^ a b Abelshauser 2004, p. 89-93.
  6. ^ Nils Goldschmidt, Hermann Rauchenschwandtner (2007). The Philosophy of Social Market Economy: Michel Foucault's Analysis of Ordoliberalism. Universität Freiburg, Freiburger Diskussionspapiere zur Ordnungsökonomik. Retrieved 16 March 2013.
  7. ^ Lamberts, Emiel (1997). Christian Democracy in the European Union, 1945/1995: Proceedings of the Leuven Colloquium, 15-18 November 1995. Leuven University Press. p. 478. ISBN 9789061868088.
  8. ^ "GHDI – Document – Page".
  9. ^ Marcus Marktanner. "Addressing the Marketing Problem o f the Social Market Economy" (PDF).
  10. ^ a b c Steven Hill (2010). Europe's Promise: Why the European Way is the Best Hope in an Insecure Age. University of California Press. pp. 19–20. ISBN 978-0-520-24857-1.
  11. ^ Matthias Zimmer (1997). Germany--phoenix in Trouble?. University of Alberta. p. 157. ISBN 978-0-88864-305-6.
  12. ^ Lowell Turner (1998). Fighting for Partnership: Labor and Politics in Unified Germany. Cornell University Press. p. 18. ISBN 0-8014-8483-9.
  13. ^ Naoshi Yamawaki (2002). "Walter Eucken and Wilhelm Röpke. A reappraisal of their economic thought and the policy of ordoliberalism". In Yuichi Shionoya (ed.). German Historical School. Routledge. p. 199. ISBN 1-134-62044-6.
  14. ^ Abigail B. Bakan; Eleanor MacDonald (2002). Critical Political Studies: Debates and Dialogues from the Left. McGill-Queen's Press. pp. 69–70. ISBN 978-0-7735-6956-0.
  15. ^ Sally Wheeler (2002). Corporations and the Third Way. Hart Publishing. p. 17. ISBN 978-1-901362-63-3.
  16. ^ Tadeusz Kowalik (2003). "Systemic Variety under the Conditions of Globalization and Integration". In Grzegorz W. Kołodko (ed.). Emerging Market Economies: Globalization and Development. Ashgate Publishing, Ltd. pp. 214–215. ISBN 978-0-7546-3706-6.
  17. ^ Susan Albers Mohrman; Philip H. Mirvis; Christopher G. Worley; Abraham B. Shani (2013). Building Networks for Sustainable Effectiveness. Emerald Group Publishing. p. 16. ISBN 978-1-78190-887-7.
  18. ^ Melanie Walker; Jon Nixon (2004). Reclaiming Universities from a Runaway World. McGraw-Hill International. p. 78. ISBN 978-0-335-21291-0.
  19. ^ Lowell Barrington (6 January 2012). Comparative Politics: Structures and Choices (2nd ed.). Cengage Learning. pp. 43 and 71. ISBN 1-133-71036-0.
  20. ^ Müller-Armack, A., Soziale Marktwirtschaft – Handwörterbuch der Sozialwissenschaften, vol. 9, Göttingen, 1956, p. 249.
  21. ^ James C. Van Hook, Rebuilding Germany: The Creation of the Social Market Economy 1945–1957, Cambridge University Press, 2004, ISBN 0-521-83362-0, p. 185
  22. ^ Gabler Wirtschaftslexikon: Soziale Marktwirtschaft
  23. ^ Mark E. Spicka (2007), Selling the Economic Miracle: Economic Reconstruction and Politics in West Germany, 1949–1957, Berghahn Books, ISBN 978-1-84545-223-0 p. 80
  24. ^ Mark E. Spicka (2007), Selling the Economic Miracle: Economic Reconstruction and Politics in West Germany, 1949–1957, Berghahn Books, ISBN 978-1-84545-223-0 p. 53
  25. ^ Müller-Armack, A., Soziale Marktwirtschaft – Handwörterbuch der Sozialwissenschaften, vol. 9, Göttingen, 1956, p. 390; Idem, Wirtschaftsordnung und Wirtschaftspolitik, Studien und Konzepte zur Sozialen Marktwirtschaft und zur Europäischen Integration, Freiburg im Breisgau, 1966, p. 245.
  26. ^ Hayek, F. A. v., "Was ist und was heisst 'sozial'?", in: Hunold, A. (ed.), Masse und Demokratie, Erlenbach-Zurich/ Stuttgart, 1957, pp. 71 ff. See also the contributions of Wünsche, H. F., Welcher Marktwirtschaft gebührt das Beiwort "sozial"? and Wartin, C., Zur sozialen Dimension marktwirtschaftlicher Ordnungen, in: Hohmann, K.; Schönwitz, D.; Weber, H. J.; Wünsche, H. F. (eds.), Grundtexte zur Sozialen Marktwirtschaft, Band 2, Das Soziale in der Sozialen Marktwirtschaft, Stuttgart/New York, 1988, pp. 21-31, and pp. 411-415.
  27. ^ Nicholls, A. J., The Bonn Republic – West German Democracy 1945–1990, London/ New York, 1997, pp. 59 ff.
  28. ^ Röpke, W., Civitas Humana – Grundfragen der Gesellschafts- und Wirtschaftsordnung, Erlenbach-Zürich, 1944.
  29. ^ a b Müller-Armack, A., Auf dem Weg nach Europa. Erinnerungen und Ausblicke, Tübingen/ Stuttgart, 1971, pp. 50 ff.
  30. ^ In regard to the different conceptions of the state see the study Lange-von Kulessa, J.; Renner, A., Die Soziale Marktwirtschaft Alfred Müller-Armacks und der Ordoliberalismus der Freiburger Schule – Zur Unvereinbarkeit zweier Staatsauffassungen, in: ORDO 49, Stuttgart, 1998, pp. 79-104.
  31. ^ Nipperdey, Th., Deutsche Geschichte 1866–1918. Erster Band: Arbeitswelt und Bürgergeist, Munich 1993, p. 336.
  32. ^ Oppenheimer, F., System der Soziologie (III/1). Band 3: Theorie der reinen und politischen Ökonomie, Teil 1: Grundlagen, Jena, 1910, p. 9. The economist Franz Oppenheimer (1864–1943) also published his economic conception in Sprung über ein Jahrhundert, Bern/ Leipzig, 1935 under the pseudonym F. D. Pelton.
  33. ^ Oppenheimer, F., Weder so – noch so. Der dritte Weg, Potsdam, 1933.
  34. ^ Oppenheimer supervised Erhard's doctoral thesis titled 'Wesen und Inhalt der Werteinheit', namely a study on various historical schools' perception of character and content of value, in the years 1922 to 1925.
  35. ^ Erhard, L., Franz Oppenheimer, dem Lehrer und Freund (1964), in: Hohmann, K. (ed.), Ludwig Erhard. Gedanken aus fünf Jahrzehnten, Reden und Schriften, Düsseldorf/ Vienna/ New York, 1988b, p. 861.
  36. ^ Regarding the influence of Oppenheimer on Erhard, see Wünsche, H. F., Der Einfluss Oppenheimers auf Erhard und dessen Konzeption von der Sozialen Marktwirtschaft, in: Caspari, V.; Schefold, B. (eds.), Franz Oppenheimer und Adolph Lowe, Zwei Wirtschaftswissenschaftler der Frankfurter Universität, Marburg, 1996, pp. 141-161; Haselbach, D., Franz Oppenheimer's Theory of Capitalism and of a Third Path, in: Koslowski, P. (ed.), The Theory of Capitalism in the German Economic Tradition. Historism, Ordo-Liberalism, Critical Theory, Solidarism, Berlin et al., 2000, pp. 54-86.
  37. ^ Erhard, L., Wirtschaft und Bildung (17 Aug 1957), reprinted in: Hohmann, K. (ed.), l.c., 1988b, p. 515.
  38. ^ Comparative study Goldschmidt, N., Alfred Müller-Armack and Ludwig Erhard: Social Market Liberalism, in: CREPHE-CREA Histoire du Liberalisme en Europe, Brochure no. 21, Paris, 2004.
  39. ^ Erhard, L., Wirken und Reden, Ludwigsburg, 1966, p. 320.
  40. ^ F. A. Hayek, The Fatal Conceit: The Errors of Socialism (University of Chicago Press, 1991), p. 117.
  41. ^ Erhard, L., Deutsche Wirtschaftspolitik – Der Weg der Sozialen Marktwirtschaft, Düsseldorf/Vienna/New York/Moscow, 1992 (originally published in 1962), p. 592.
  42. ^ Nicholls, A. J., l.c., 1994
  43. ^ Hentschel, V., Ludwig Erhard – Ein Politikerleben, Berlin, 1998, pp. 75-78.
  44. ^ a b Hentschel, V., Ludwig Erhard – Ein Politikerleben, Berlin, 1998, p. 25.
  45. ^ Erhard, L., Marktwirtschaft im Streit der Meinungen, printed in: Erhard, L., Deutsche Wirtschaftspolitik – Der Weg der Sozialen Marktwirtschaft, Düsseldorf/ Vienna/ New York/ Moscow, 1992, p. 70. Finally, Erhard used and described the term in an article in the Berliner Tagesspiegel on 23 April 1949.
  46. ^ Müller-Armack, A., The Social Market Economy as an Economic and Social Order, in: Review of Social Economy 36, Washington, D.C., 1978, pp. 326 f.
  47. ^ Müller-Armack, A., Religion und Wirtschaft, Bern/ Stuttgart, 1950, pp. 559 ff.
  48. ^ Erhard, L., Wohlstand für alle, Gütersloh, 1963, p. 11.
  49. ^ Friedrich, Carl J. (1955). "The Political Thought of Neo-Liberalism". American Political Science Review. American Political Science Association. 49 (2): 509–525. doi:10.2307/1951819. JSTOR 1951819.
  50. ^ Christine Blumenthal-Lampe: Das wirtschaftspolitische Programm der Freiburger Kreise: Entwurf einer freiheitlich-sozialen Nachkriegswirtschaft, Berlin 1973; Harald Jung: Soziale Marktwirtschaft und weltliche Ordnung, Berlin 2009.
  51. ^ Michel Albert. Capitalism Against Capitalism. Whurr; 1993. ISBN 978-1-870332-54-5.
  52. ^ Roman Herzog Institute: Social Market Economy in Germany Archived 2011-02-24 at the Wayback Machine (german)
  53. ^ keyword "social market economy" = “Soziale Marktwirtschaft” Duden Wirtschaft von A bis Z. Grundlagenwissen für Schule und Studium, Beruf und Alltag. 2. Aufl. Mannheim: Bibliographisches Institut & F.A. Brockhaus 2004. Lizenzausgabe Bonn: Bundeszentrale für politische Bildung 2004.
  54. ^ Gabler Wirtschaftslexikon: Eintrag: keyword "social market economy" = Soziale Marktwirtschaft
  55. ^ Glossner, C. L.; Gregosz, D., The Formation and Implementation of the Social Market Economy by Alfred Müller-Armack and Ludwig Erhard, Sankt Augustin/Berlin, 2011, S. 32.
  56. ^ E. P. Hennock. "Social Policy under the Empire: Myths and Evidence" German History 1998 16(1): 58–74; Herman Beck, The Origins of the Authoritarian Welfare State in Prussia. Conservatives, Bureaucracy, and the Social Question, 1815–70. 1995.
  57. ^ Frederic B. M. Hollyday, Bismarck (1970) p. 65
  58. ^ E.g. Götz, H. H., Die geistigen Väter der sozialen Marktwirtschaft, in: Eick, J. (ed.), So nutzt man den Wirtschaftsteil einer Tageszeitung, Frankfurt am Main, 1971, pp. 57-61 or Rieter, H.; Schmolz, M., The Ideas of German Ordoliberalism 1938–1945: Pointing the Way to a New Economic Order, in: The European Journal of the History of Economic Thought 1, London, 1993, pp. 87-114.
  59. ^ Blumenberg-Lampe, C. (ed.), Der Weg in die Soziale Marktwirtschaft: Referate, Protokolle, Gutachten der Arbeitsgemeinschaft Erwin von Beckerath 1943–1947, Stuttgart, 1986, p. 192.
  60. ^ Grossekettler, H., Adolf Lampe, die Transformationsprobleme zwischen Friedens- und Kriegswirtschaften und die Arbeitsgemeinschaft Erwin von Beckerath, in: Goldschmidt, N. (ed.), Wirtschaft, Politik und Freiheit, Freiburg im Breisgau, 2005, p. 104 and Blumenberg-Lampe, C., Das Wirtschaftspolitische Programm der "Freiburger Kreise", Berlin, 1973, p. 64.
  61. ^ Röpke, W., Grundfragen rationeller Wirtschaftspolitik, in: Zeitschrift für Schweizer Statistik & Volkswirtschaft, no. 1, 1941, p. 112; Idem, Civitas Humana – Grundfragen der Gesellschafts- und Wirtschaftsordnung, Erlenbach-Zurich, 1944.
  62. ^ Müller-Armack, A., Wirtschaftslenkung und Marktwirtschaft, Hamburg, 1946, p. 88. However, the question of the origins of the term Soziale Marktwirtschaft is still controversial. In his autobiography Wahrheit und Wirklichkeit. Der Weg aus den Weltkriegen in die Soziale Marktwirtschaft und eine künftige Weltordnung, Homburg-Saarplatz, 1996, pp. 571 ff., Karl Günther Weiss, academic assistant to the former permanent representative of the State Secretary in the Reich Ministry of Economics, Otto Ohlendorf, argues, the term 'social market economy' was the outcome of a discussion with Ludwig Erhard on 12 Jan 1945. There is also some evidence that Harold Rasch, who in 1946/47 was deputy head of the inter-zonal economic administration in Minden, used the term in late 1947 and early 1948 independently of Müller-Armack (1901–1978); cf. Rasch, H., Grundlagen der Wirtschaftsverfassung, Bad Godesberg, 1948.
  63. ^ Müller-Armack, A., Soziale Marktwirtschaft – Handwörterbuch der Sozialwissenschaften, vol. 9, Göttingen, 1956, p. 390; Idem, Wirtschaftsordnung und Wirtschaftspolitik, Studien und Konzepte zur Sozialen Marktwirtschaft und zur Europäischen Integration, Freiburg im Breisgau, 1966, p. 245.
  64. ^ Commun, P., Erhards Bekehrung zum Ordoliberalismus: Die grundlegende Bedeutung des wirtschaftspolitischen Diskurses in Umbruchszeiten, in: Freiburg Discussion Papers on Constitutional Economics 04/4, Freiburg im Breisgau, 2004.
  65. ^ Erhard, L., Deutsche Wirtschaftspolitik – Der Weg der Sozialen Marktwirtschaft, Düsseldorf/ Vienna/ New York/ Moscow, 1992 (originally published in 1962), p. 592.
  66. ^ Wörtliche Berichte über die 1.-40. Vollversammlung des Wirtschaftsrates des Vereinigten Wirtschaftsgebietes (Zweizonen-Wirtschaftsrat) in Frankfurt am Main, 8 vols., Wiesbaden/ Frankfurt am Main, 1947–1949, pp. 436 ff.
  67. ^ Görtemaker, M., Geschichte der Bundesrepublik Deutschland: Von der Gründung bis zur Gegenwart, Munich, 1999, p. 148.
  68. ^ Stoltenberg, G., Konrad Adenauer und die Soziale Marktwirtschaft, in: Die Politische Meinung, edited by the Konrad-Adenauer-Stiftung (KAS), vol. 45 (373), Sankt Augin, 2000, pp. 21 f.
  69. ^ Erhard, L., l.c., 1992, pp. 69-85.
  70. ^ Müller-Armack, A., l.c., 1971, p. 247.
  71. ^ Schwarz, H.-P., Adenauer. Der Aufstieg. 1876–1952, Stuttgart, 1986, p. 602.
  72. ^ "Biography of Konrad Adenauer, Konrad-Adenauer-Stiftung".
  73. ^ Christian Democratic Union, The CDU and the Social Market Economy: Düsseldorf Guidelines for Economic Policy, Agricultural Policy, Social Policy and Housing (1949)
  74. ^ Wirtschaftspolitische Richtlinien der CSU in Bayern, (supposedly end of 1948).
  75. ^ Wirtschaftspolitische Leitsätze der Arbeitsgemeinschaft der CDU/CSU, (presumably April 1949).
  76. ^ Narr, W.-D., CDU-SPD. Programm und Praxis seit 1945, Stuttgart, 1966, p. 95.
  77. ^ Ahlener Programm, in: Heck, B. (ed.), Die CDU und ihr Programm – Programme, Erklärungen, Entschliessungen, Melle/ Sankt Augin, 1979, pp. 3-5.
  78. ^ Wengst, U., Die CDU/CSU im Bundestagswahlkampf 1949, in: Viertelsjahreshefte für Zeitgeschichte (VfZ) 34, no. 1, Munich, 1986, p. 25.
  79. ^ Glossner, C. L., The Making of the German Post-War Economy – Political Communication and Public Reception of the social market economy after World War II, London, 2010.
  80. ^ Hamburg Programme of the SPD, page 24, Archived 2008-09-11 at the Wayback Machine
    CDU on 60 years of social market economy,
    Wiesbaden Programme of the FDP, page 14,
  81. ^ Esmond Birnie (1994). "Christianity and the Social Market Economy in Britain, Germany and Northern Ireland" (PDF). Journal of the Irish Christian Study Centre. 5.
  82. ^ Biffen, John (12 December 1994). "Keith Joseph" – via The Guardian.
  83. ^ "Why is Labour still so obsessed with the German model?".
  84. ^ Comparing Economic Systems in the Twenty-First Century, 2003, by Gregory and Stuart. ISBN 0-618-26181-8. "The European Model" (P.207): "Karl Marx also influenced the European model indirectly through his warnings about the inherent instability of capitalism. Western Europe, composed of prosperous nations ruled by Marx's hated bourgeoisie, feared that if the economy were left to its own devices, Marx's prediction of collapse would come true, and the proletariat would overthrow the ruling class... Chancellor Otto von Bismarck introduced social welfare legislation in Germany between 1883 and 1888, despite violent political opposition, as a direct attempt to stave off Marx's socialist revolution."
  85. ^ David B. Reynolds (2002). Taking the High Road: Communities Organize for Economic Change. M.E. Sharpe. p. 31. ISBN 978-0-7656-0745-4.
  86. ^ P. G. C. van Schie; Gerrit Voermann (2006). The Dividing Line Between Success and Failure: A Comparison of Liberalism in the Netherlands and Germany in the 19th and 20th Centuries. LIT Verlag Münster. p. 103. ISBN 978-3-8258-7668-5.


  • Koppstein, Jeffrey; Lichbach, Mark Irving (2005), Comparative Politics: Interests, Identities, And Institutions In A Changing Global Order, Cambridge University Press, ISBN 0-521-60395-1.
  • Crouch, Colin; Streeck, Wolfgang (2000), Political Economy of Modern Capitalism: Mapping Convergence and Diversity, SAGE Publications Ltd., ISBN 978-0-7619-5653-2.
  • Spicka, Mark E. (2007). Selling the Economic Miracle: Reconstruction and Politics in West Germany. Berghahn Books. ISBN 978-1-84545-223-0.
  • Abelshauser, Werner (2004). Deutsche Wirtschaftsgeschichte: seit 1945. C.H.Beck. ISBN 978-3-406-51094-6.

External links

Alexander Rüstow

Alexander Rüstow (April 8, 1885 – June 30, 1963) was a German sociologist and economist. In 1938 he originated the term neoliberalism at the Colloque Walter Lippmann. He was one of the fathers of the "Social Market Economy" that shaped the economy of West Germany after World War II. He is the grandnephew of Wilhelm Rüstow, the grandson of Cäsar Rüstow and the father of Dankwart Rustow.

American Solidarity Party

The American Solidarity Party (ASP) is a Christian democratic political party in the United States. Its motto is "Common Good, Common Ground, Common Sense." Founded in 2011 and officially incorporated in 2016, the party has a National Committee and is active in state and local chapters and through on-line communication. It is regarded as a minor third party.

Those who join the American Solidarity Party affirm their "recognition of the sanctity of human life, the necessity of social justice, our responsibility for the environment, and the possibility of a more peaceful world." In keeping with a consistent life ethic and the "inviolable dignity and rights of every human person from conception to natural death," the ASP opposes abortion, euthanasia, and capital punishment, and is concerned with human rights in the areas of immigration, criminal justice reform and foreign policy.The ASP encourages social development along the lines of subsidiarity and sphere sovereignty, emphasizing the importance of strong families, local communities, and voluntary associations. This also involves strong protection for religious freedom in both private and public life. The American Solidarity Party favors a social market economy, seeking widespread economic participation and ownership, expressed in the flourishing of independent businesses and small farms, while respecting both private property and the dignity of labor, and providing a safety net for the poor and vulnerable. In order to promote environmental stewardship and sustainability, the ASP platform calls for conservation and a transition toward more renewable sources of energy, while rejecting population control measures.

Centre for Policy Studies

The Centre for Policy Studies (CPS) is a think tank and pressure group in the United Kingdom. Its goal is to promote coherent and practical policies based on its founding principles of: free markets, small state, low tax, national independence, self determination and responsibility. While being independent, the centre has historical links to the Conservative Party.

It was co-founded by Sir Keith Joseph, Alfred Sherman and Margaret Thatcher

in 1974 to challenge the post war consensus of Keynesianism, and to champion economic liberalism in Britain. With this in mind Keith Joseph originally wanted the think tank to study the social market economy, naming it the 'Ludwig Erhard Foundation' and 'Institute for a social market economy' until it was eventually settled on the benign 'Centre for Policy Studies'.The centre has since played a global role in the dissemination of free market economics alongside policy proposals claimed to be on the basis of responsibility and individual choice. It also asserts that it prioritises the concepts of duty, family, liberty, and the rule of law. The CPS states that it has a goal of serving as "the champion of the small state."

Christian Democratic People's Party of Switzerland

The Christian Democratic People's Party of Switzerland (German: Christlichdemokratische Volkspartei der Schweiz, CVP; French: Parti Démocrate-Chrétien, PDC; Italian: Partito Popolare Democratico, PPD; Romansh: Partida cristiandemocratica Svizra , PCD) is a Christian-democratic political party in Switzerland. It is the fourth-largest party in the National Council, with 28 seats, and the largest in the Council of States, with 13 seats. It has one seat, that of Viola Amherd, on the Swiss Federal Council.

The party was founded as the Catholic Conservative Party in 1912. The party peaked in the 1950s, having three members of the Federal Council (1954–58) before agreeing to the Magic formula. It adopted its current name in 1970. From 1979 to 2003, the party's vote declined, mostly in the favour of the Swiss People's Party, and the party was reduced to one Federal Councillor at the 2003 election.

The party sits in the centre to centre-right of the political spectrum, advocating Christian democracy, the social market economy, and moderate social conservatism. The party is strongest in Catholic rural areas, particularly Central Switzerland and Valais.

Christian democracy

Christian democracy is a political ideology that emerged in nineteenth-century Europe under the influence of Catholic social teaching, as well as Neo-Calvinism. Christian democratic political ideology advocates for a commitment to social market principles and qualified interventionism. It was conceived as a combination of modern democratic ideas and traditional Christian values, incorporating the social teachings espoused by the Catholic, Lutheran, Reformed, and Pentecostal traditions in various parts of the world. After World War II, the Protestant and Catholic movements of the Social Gospel and Neo-Thomism, respectively, played a role in shaping Christian democracy. Christian democracy continues to be influential in Europe and Latin America, although it is also present in other parts of the world.In practice, Christian democracy is often considered centre-right on cultural, social, and moral issues (and is thus a supporter of social conservatism), and it is considered centre-left "with respect to economic and labor issues, civil rights, and foreign policy" as well as the environment. Specifically, with regard to its fiscal stance, Christian democracy advocates a social market economy.Worldwide, many Christian democratic parties are members of the Centrist Democrat International and some also of the International Democrat Union. Examples of major Christian democratic parties include the Christian Democratic Union (CDU) in Germany, the Austrian People's Party (ÖVP), Ireland's Fine Gael, the Christian Democratic Party in Chile, In the Caribbean, Aruban People's Party (AVP), Christian Democratic Appeal (CDA) from the Netherlands, The Switzerland's Christian Democratic People's Party and the People's Party in Spain.Today, many European Christian democratic parties are affiliated with the European People's Party. Those with soft Eurosceptic views in comparison with the pro-European EPP are members of the Alliance of Conservatives and Reformists in Europe, or the more right-wing European Christian Political Movement. Many Christian democratic parties in the Americas are affiliated with the Christian Democrat Organization of America.

Eco-social market economy

The eco-social market economy (ESME), also known as the socio-ecological market economy (SEME) or social and ecological market economy, aims at balancing free market economics, the strive for social fairness and the sustainable use and protection of the natural resources. It was developed by Austrian politician Josef Riegler during the 1980s, expanding on the original concept of the social market economy, an economic model first advocated by Konrad Adenauer, and is considered the economic format which the majority of nations in Europe follow.

Freiburg school

The Freiburg School (German: Freiburger Schule) is a school of economic thought founded in the 1930s at the University of Freiburg.

It builds somewhat on the earlier historical school of economics but stresses that only some forms of competition are good, while others may require oversight. This is considered a lawful and legitimate role of government in a democracy in the Freiburg School. The School provided the economic theoretical elements of ordoliberalism and the social market economy in post-war Germany.

Keith Joseph

Keith Sinjohn Joseph, Baron Joseph, (17 January 1918 – 10 December 1994), known as Sir Keith Joseph, 2nd Baronet, for most of his political life, was a British barrister and politician. A member of the Conservative Party, he served in the Cabinet under four prime ministers: Harold Macmillan, Sir Alec Douglas-Home, Edward Heath and Margaret Thatcher. He was a key influence in the creation of what came to be known as "Thatcherism" and the subsequent decline of one-nation conservatism and the postwar consensus.

Keith Joseph was the first to introduce the concept of the social market economy into Britain, an economic and social system inspired by Christian democracy. He also co-founded the Centre for Policy Studies writing its first publication: Why Britain needs a Social Market Economy.

List of companies of Austria

Austria is a federal republic and a landlocked country of over 8.7 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Hungary and Slovakia to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the west. The territory of Austria covers 83,879 km2 (32,386 sq mi).

Austria is the 12th richest country in the world in terms of GDP (Gross domestic product) per capita, has a well-developed social market economy, and a high standard of living. Until the 1980s, many of Austria's largest industry firms were nationalised; in recent years, however, privatisation has reduced state holdings to a level comparable to other European economies. Labour movements are particularly strong in Austria and have large influence on labour politics. Next to a highly developed industry, international tourism is the most important part of the national economy.

For further information on the types of business entities in this country and their abbreviations, see "Business entities in Austria".

Ludwig Erhard

Ludwig Wilhelm Erhard (German: [ˈluːtvɪç ˈʔeːɐ̯haʁt]; 4 February 1897 – 5 May 1977) was a German politician affiliated with the CDU, and the second Chancellor of the Federal Republic of Germany (West Germany) from 1963 until 1966. He is often famed for leading the West German postwar economic reforms and economic recovery (Wirtschaftswunder, German for "economic miracle") in his role as Minister of Economic Affairs under Chancellor Konrad Adenauer from 1949 to 1963. During that period he promoted the concept of the social market economy (soziale Marktwirtschaft), on which Germany's economic policy in the 21st century continues to be based. In his tenure as Chancellor, however, Erhard lacked support from Adenauer, and failed to win the public's confidence in his handling of a budget deficit and his direction of foreign policy. His popularity waned, and he resigned his chancellorship on 1 December 1966.

Market economy

A market economy is an economic system in which the decisions regarding investment, production and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.Market economies range from minimally regulated free market and laissez-faire systems where state activity is restricted to providing public goods and services and safeguarding private ownership, to interventionist forms where the government plays an active role in correcting market failures and promoting social welfare. State-directed or dirigist economies are those where the state plays a directive role in guiding the overall development of the market through industrial policies or indicative planning—which guides yet does does substitute the market for economic planning—a form sometimes referred to as a mixed economy.Market economies are contrasted with planned economies where investment and production decisions are embodied in an integrated economy-wide economic plan and economy’s means of production are owned and operated by a single organizational body.


Ordoliberalism is the German variant of social liberalism that emphasizes the need for the state to ensure that the free market produces results close to its theoretical potential.Ordoliberal ideals became the foundation of the creation of the post-World War II German social market economy and its attendant Wirtschaftswunder.

The term "ordoliberalism" (German: Ordoliberalismus) was coined in 1950 by Hero Moeller, and refers to the academic journal ORDO.

Social Market Foundation

The Social Market Foundation (SMF) is an independent British public policy think-tank based in Westminster, London. It is one of the 'Top 12 Think Tanks in Britain' and was named 'UK Think Tank of the Year' by Prospect in 2012. Its purpose is to "advance the education of the public in the economic, social and political sciences" and to "champion ideas that marry a pro-market orientation with concern for social justice". Policy ideas are based on the concept of the social market economy.

Social and Economic Council

The Sociaal-Economische Raad (English: Social and Economic Council; SER) is a major economic advisory council to the cabinet of the Netherlands. Formally it heads a system of sector-based regulatory organizations. It represents the social partners trade unions and employers' organizations. It forms the core organization of the corporatist and social market economy known as the polder model and the main platform for social dialogue.

Steering tax

A steering tax (Often an Ecological incentive tax) is a tax which aims to change the behaviour of the tax payer, as defined by lawmakers, and not particularly to increase tax revenue. The term is not sharply definable because many tax related laws influence buyer behaviour which is not always a wanted effect (compensation reaction). The Pigovian tax is a special case of a steering tax to avoid negative Externality. An ecological tax reform is often understood to refer to the introduction of a steering tax on energy use, according to the Polluter pays principle.In other languages incentive taxes (or fees) are known as "de:Lenkungsabgabe" or "Lenkungs-Steuer" (Switzerland). Some of the eco-taxes ("Ökosteuer") in Germany and Austria are also steering taxes, in the sense of the originally intended Eco-social market economy.

The vehicle Excise Duty in Germany is an example of a steering tax. It is formulated in such a way that there is an incentive to invest in a new car which is as low polluting as possible. Cars with larger pollutant emissions pay a high tax compared to less polluting cars. Electric cars are tax free. In Germany and Switzerland it is legally clarified that the tax revenues should be used to promulgate, or "steer", the targeted behaviour change. The increase of earnings may be as long secondary aim as the rule has an objective earning relevance. This means that the tax may be as long be valid as a tax earning can be expected to take place and therefore the steering effect is justified.

If the aim of steering the payer's behaviour is successful, this means that the aim to increase tax revenues will be unsuccessful. The yield of tax revenue is reduced if the tax payers behave in the targeted way. For example, the consumption of cigarettes was quickly significantly reduced in Germany in 2004 by the increase of the tobacco tax.

Trade association

A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific industry. An industry trade association participates in public relations activities such as advertising, education, political donations, lobbying and publishing, but its focus is collaboration between companies. Associations may offer other services, such as producing conferences, networking or charitable events or offering classes or educational materials. Many associations are non-profit organizations governed by bylaws and directed by officers who are also members.

In countries with a social market economy, the role of trade associations is often taken by employers' organizations, which also take a role in social dialogue.

Welfare capitalism

Welfare capitalism is capitalism that includes social welfare policies. Welfare capitalism is also the practice of businesses providing welfare services to their employees. Welfare capitalism in this second sense, or industrial paternalism, was centered on industries that employed skilled labor and peaked in the mid-20th century.

Today, welfare capitalism is most often associated with the models of capitalism found in Central Mainland and Northern Europe, such as the Nordic model, social market economy and Rhine capitalism. In some cases welfare capitalism exists within a mixed economy, but welfare states can and do exist independently of policies common to mixed economies such as state interventionism and extensive regulation.

Wilhelm Röpke

Wilhelm Röpke (October 10, 1899 – February 12, 1966) was Professor of Economics, first in Jena, then in Graz, Marburg, Istanbul, and finally Geneva, Switzerland, and one of the spiritual fathers of the social market economy, theorising and collaborating to organise the post-World War II economic re-awakening of the war-wrecked German economy, deploying a program sometimes referred to as the sociological neoliberalism (compared to ordoliberalism, a more sociologically inclined variant of German liberalism).With Alfred Müller-Armack and Alexander Rüstow (sociological neoliberalism) and Walter Eucken and Franz Böhm (ordoliberalism) he elucidated the ideas, which then were introduced formally by Germany's post-World War II Minister for Economics Ludwig Erhard, operating under Konrad Adenauer's Chancellorship. Röpke and his colleagues' economic influence therefore is considered largely responsible for enabling Germany's post-World War II "economic miracle". Röpke was also a historian and was nominated to the Nobel Prize in Literature in 1965.


The term Wirtschaftswunder (German: [ˈvɪʁtʃaftsˌvʊndɐ] (listen), "economic miracle"), also known as the Miracle on the Rhine, describes the rapid reconstruction and development of the economies of West Germany and Austria after World War II (adopting an ordoliberalism-based social market economy). The expression referring to this phenomenon was first used by The Times in 1950.Beginning with the replacement of the Reichsmark with the Deutsche Mark in 1948 as legal tender (the Schilling was similarly re-established in Austria), a lasting period of low inflation and rapid industrial growth was overseen by the government led by West German Chancellor Konrad Adenauer and his Minister of Economics, Ludwig Erhard, who went down in history as the "father of the German economic miracle." In Austria, efficient labor practices led to a similar period of economic growth.

The era of economic growth raised West Germany and Austria from total wartime devastation to developed nations in modern Europe. At the founding of the European Common Market in 1957 West Germany's economic growth stood in contrast to the struggling conditions at the time in the United Kingdom.

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