Social Market Economy and Its Universal Validity

Author:Stefan Gehrold
Position::European Office of Konrad Adenauer Stiftung, Brussels, Belgium
Pages:129-151
SUMMARY

The purpose of this analysis was to outline the concept, the principles and the universality of social market economy. Its elements are not only valid in Europe, but they can rather be applied worldwide. As most of the highly developed countries in the world show signs of the institutions of social market economy and the good economic performance can be traced back to these institutions, social... (see full summary)

 
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T EA U R, V. 1 N. 0/2014
Social Market Economy and Its Universal Validity
Stefan Gehrold*
Abstract. The purpose of this analysis was to outline the concept, the principles and the
universality of social market economy. Its elements are not only valid in Europe, but they can
rather be applied worldwide. As most of the highly developed countries in the world show signs of
the institutions of social market economy and the good economic performance can be traced back
to these institutions, social market economy is applicable worldwide.
Furthermore, the successful implementation of the principles of social market economy in countries
with unstable social and economic conditions, as shown in the example of post-war Germany,
underlines the universality of the concept.
There is absolutely no proof that a European model is by any means more competitive or more
social or more successful, than an American model. If anything can be said at all, the contrary
seems more likely. The theory of the superiority of a European Economic Model is a myth.
Key-words: Social Market Economy; International Experiences; Social Models
1. Foreword
Social Market Economy is not a clear-cut, but rather an open concept. e
past 50 years of German economic policy were characterized by Social Market
Economy and its principles have been implemented in other European
countries as well. e recent nancial and economic crisis stresses the need
for a framework of international rules. erefore the question arises if Social
Market Economy is a concept which can be successfully adopted worldwide.
e following contribution outlines the term ‘Social Market Economy’
and its main principles. It then answers the question if the European
* European Oce of Konrad Adenauer Stiftung, Brussels, Belgium
Social Market Economy and Universal Validity
130
Social Market Economy is universally applicable. e main nding of the
contribution is that economic progress in dierent countries can be attributed
to the implementation of the principles of Social Market Economy, which are
adapted to the political and economic landscape of the country in question.
Furthermore, the ‘New German Miracle’ in post-war Germany shows that
Social Market Economy can help a country in dicult times to increase
prosperity and to foster economic progress. Due to these arguments, the
concept can be applied worldwide. At the same time post-war Germany is in
itself an example of how badly an economy can stumble and stagger, once the
principles of social market economy are neglected and ignored. Germany’s
economy shrank only three times in post-war history: two times because of
irresponsible social, scal and economic policy on a national level between
1969 and 1982 and between 1998 and 2005 and once because of the subprime
crisis in 2008, again a consequence of ignoring market rules by ooding the
markets with cheap money and violating the principle of liability.
2. The Concept of Social Market Economy
e term “Social Market Economy” was rst coined by Alfred Müller-Armack
in 1946.
Social Market Economy is a market-based economic order, in which a
regulatory framework created by the State ensures economic competition and
the freedom of citizens. e main concern for Walter Eucken, founder of
the Freiburg School, was to have a “humane and functioning order” which
combines political and economic freedom (Kruber, 2002). e term “social”
of Social Market Economy refers to the functioning of the market itself.
e concept was rst promoted and implemented in West Germany by the
Christian Democratic Union under Chancellor Konrad Adenauer in 1949
(Spicka, 2007).
Many scholars contributed to the dierentiation of Social Market Economy.
One has to mention proponents of ordoliberalism, such as Walter Eucken,
Franz Böhm and many of their students. Both are adherents of the Freiburg
School, which is a school of economic thought founded in the 1930s at the
University of Freiburg. Wilhelm Röpke and Alexander Rüstow, who were
advocating social humanism, were also contributing to the development of
social market economy.

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