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

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

77

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

78

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

79

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.