The Social Market Economy - Assembled in Germany, Not Made in Germany!

Author:Marcus Marktanner
Position:Kennesaw State University, USA
Pages:77-113
SUMMARY

While the concept of the Social Market Economy has a "Made in Germany" image, "Assembled in Germany" is more correct. A "made in" claim requires that a particular product and all of its components originate from the country. This is not true for the Social Market Economy. Instead, Social Market Economics is a utility model that has incorporated lessons from both international economic history and ... (see full summary)

 
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T EA U R, V. 1 N. 0/2014
The Social Market Economy – Assembled in Germany,
Not Made in Germany!
Marcus Marktanner*
Abstract. While the concept of the Social Market Economy has a “Made in Germany” image,
“Assembled in Germany” is more correct. A “made in” claim requires that a particular product and
all of its components originate from the country. This is not true for the Social Market Economy.
Instead, Social Market Economics is a utility model that has incorporated lessons from both
international economic history and the international history of economic thought. This article
provides an overview of these lessons. It concludes that re-emphasizing the many international
influences of and parallels and differences to other political-economic theories is necessary to re-
position Social Market Economic thought as the only real-world alternative to the romanticisms of
socialism, unfettered market liberalism, and economic macro-management.
Key-words: Social Market Economy; Germany; Socio-Economic Models
1. Introduction
e Social Market Economy is often given a “Made in Germany” label (see
for example Merkel, 2009). is is misleading, because a “made in a certain
country” claim typically requires that the product and all of its components
originate from this country (see, for example, the denition of the Federal
Trade Commission, 1998). is is not the case with Social Market Economic
thought.
Instead of “Made in Germany,” Social Market Economics should be thought
of as “Assembled in Germany,” because it includes many foreign components.
Eventually, Social Market Economic thought has incorporated philosophical
* Kennesaw State University, USA
SME: not only made in Germany
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thought from ancient Greek to renaissance thinking. It includes economic
components from French Physiocracy, Anglo-Saxon Laissez-Faire Liberalism,
Austrian Business Cycle eory, and political organization ideas already
advocated by the founding fathers of the United States.
Moreover, Social Market Economics is foremost a normative value system,
which is not unique either. It seeks, in the denition of Alfred Mueller-Armack
(1901-1978), to combine the freedom in the market with equitable social
development. Of course, no economic paradigm would argue that it strives
for driving a wedge between the haves and the have-nots (Mueller-Armack,
1956, p. 390). In fact, the importance of equitable social development can
be found in ancient Greek political philosophy, Confucianism, medieval
Christian scholastics, Islamic political philosophy, and any other major
political philosophy.
e “Made in Germany” label of Social Market Economics is not only false,
it is also counterproductive to fruitful international policy dialogue. is
is particularly true if the “Made in Germany” model of the Social Market
Economy is marketed as an export hit (see, for example, Haibach, 2010).
Because political dialogue is often a vanity fair, no country wants to model
its political-economic constitution after another one. Territorial labels like
Westminster Democracy, Manchester Capitalism, Anglo-Saxon Liberalism,
Washington Consensus, and German Social Market Economy are often
misinterpreted as intellectual colonialism. Eventually, Socialism was not
at last therefore successful because Karl Marx (1818-1883) and Friedrich
Engels (1820-1895) claimed universal truth. Highlighting the international
components of Social Market Economic thought and its “Assembled in
Germany” nature is therefore important to help it gain greater interest and
acceptance among a wider international audience.
e remainder of this chapter is organized as follows: Section two addresses the
question of why the Social Market Economy’s “Made in Germany” image is
so popular. It is argued that this image is more a reection of actual economic
policy developments in Germany and Europe after World War II than of
the actual theory behind it. To illustrate the dierence between theory and
practice, section three presents again the theoretical aspects of Social Market
Economic thought, especially as regards to the dierences to Socialism and
Anglo-Saxon Laissez-Faire Liberalism. Section four to seven then link these
theoretical components to their international origins. Specically, section four
focuses on the international components of the State-constituting, section
T EA U R, V. 1 N. 0/2014
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ve of the market-governing, and section six of the market-interfering aspects
of Social Market Economics. Section seven concludes with a brief summary.
2. What Explains the Made in Germany Image?
Although Social Market Economics has many roots in European and Anglo-
Saxon political and economic philosophy, internationally it has always been
perceived as Germany’s economic model. e reason for this is mostly the
fact that political leaders like Mueller-Armack, Ludwig Erhard (1897-1977),
and Konrad Adenauer (1876-1967) used the term Social Market Economy
to advertise Germany’s economic model after World War II. And while the
term Social Market Economy has always been Germany’s post World War II
political-economic model, at least in ocial political rhetoric, Social Market
Economics has also always been a branch of economic thought with claims
for universal applicability. is latter aspect is much less known.
Social Market Economics as a distinct branch of economic thought has never
gained much of an international academic reputation. One important reason
for this is that the founding fathers of the Social Market Economy wanted
to contribute primarily to political discourse, not intellectual estheticism.
In particular, the intellectual founding fathers of Social Market Economic
thought wanted to alert against the aws of the Republic of Weimar, the
rise of fascism, and the alleged moral superiority of Socialism over market
freedom. Wilhelm Roepke’s (1899-1966) 1946 book e German Question is
a particular strong plea in this regard.
Another reason why Germany did not advocate much the universal applicability
of Social Market Economic thought had to do with its political position after
World War II. After Germany had been liberated from Hitler’s ird Reich
delusions of grandeur, Germany was not necessarily in a position to credibly
propagate a third way of economic thought. Ocially, it could not even
formulate its own economic policy without the approval of the Unites States.
Despite these initial constraints, Germany’s economic policy emancipated
itself quickly from the United States. Between 1948 and the rst oil crisis
of 1973, German economic policy was strongly inuenced by Social Market
Economic principles. In 1973, Germany even broke with the Unites States
hegemony of economic policy under the Bretton Woods system of xed
exchange rates by letting the then German Mark oat against the US dollar.

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