Social Market Economy: origins, meanings and interpretations (original) (raw)
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Social Market Economy: An Inquiry into the Theoretical Bases of German Model of Capitalism
2002
In this study, the concept of ءSocial Market Economy̕ which was the leading idea in the post-Second World War economic order of Germany will be analysed. This analysis will also take into consideration the Economic School of Ordoliberalism which emerged in the inter-war period and greatly influenced the construction of the idea of ءSocial Market Economy̕ with its theoretical principles. Some politicians and theoreticians in the post-war period also contributed to the development of the concept. Within this theoretical framework, the post-war economic policies and developments will be surveyed and the newly established economic order will be compared with the ideals of Social Market Economy theoretical programme. In particular, the impact of the Social Market Economy upon the evolution of German Model of Capitalism will be explored by taking into account the significant changes in the role of the state in the economy and the conduct of relations between the social partners especially...
West Germany: Economic policy in a "Social Market Economy
1969
Si:nce West Germany emerged once more as a sovereign nation after World War II, it has become known as a " Social Market Economy " to describe its economic policy making mecha nism. This system places a strong emphasis on the free interplay of the market forces of supply and demand, tempered only by the need to eliminate its excesses by providing social benefits to the less privileged members of society. Theoretically, therefore, the " Social Market Economy " occupies the middle ground between the capitalist and socialist states. The thesis suggests a spe cific definition of the term as an observable entity. West Germany's economy has functioned very successfully during this era, and it is generally believed that the practice of " Social Market " economic policy has been responsible. Al though there is some truth in this assertion, the overwhelming evidence suggests that " Social Market " policy had little di rect credit for the "...
German Neoliberalism and the Idea of a Social Market Economy: Free Economy and the Strong State
The German ordoliberal tradition developed in the Germany of the Weimar Republic amidst a server crisis of an entire political economy. It proposed a neoliberalism in which free economy is the practice of the strong state. It rejected laissez-faire liberalism as a deist idea that is unable to defend free economy at a time of need. For them free economy is only possible by means of strong state authority to contain the proletarianisation of workers, and they developed neoliberal social policy proposals to transform workers into citizens of private property. This transformation is a matter of an ever vigilant security state that may resort of dictatorial means of imposing order in case of a liberal emergency. The article presents the main ideas of ordoliberalism and argues that the present crisis has led to the resurgence of the strong as the concentrated force of economy, as ordoliberalism says it must.
Germany's Social Market Economy and the New Systems Competition
The Journal of Markets and Morality, 2006
World championship in exporting manufactures notwithstanding, weak gross domestic product (GDP) growth and the largest number of unemployed since the 1930s have tarnished the splendor of Germany's once celebrated social market economy (SME). In search of the reasons for their country's present mediocrity, contemporary (ordo-) liberal German economists point to construction defects in the economic constitution that escaped the attention of the founders of the SME. This article reviews the legacy of the father of the SME as well as the liberal critique of the evolution of the SME in postwar Germany under the old systems competition (OSC) between capitalist West and communist East. The liberal white hope, that is the new systems competition (NSC), ensued by European integration and globalization, is presented as a mechanism for overcoming national policy blockades in reforming (labor) market institutions in accordance with the common socioeconomic preferences of all citizens.
The Social Market Economy: Origins and Interpreters
Following the European Council which was held in Lisbon in March 2000, the heads of state or government launched the so-called " Lisbon Strategy " , with the objective of making the EU most competitive economic area in the world and to achieve full employment by 2010. This ambitious strategy has been developed over the years and today we can say that it is based on the following three pillars: an economic pillar, a social pillar and an environmental pillar. With particular reference to the first pillar, it is widely believed that the process of European unification, the establishment of " independent authorities " , the creation of an economic area informed by the principle of competition that, starting from Rome, via Maastricht, reaches in Lisbon, have received a special impetus from the reflections of so-called German " Ordoliberals " of the first half of the twentieth century. The most original contribution of the Ordoliberals was to attack the problems of the competitive market from an " institutional approach " : the order of competition is in itself a " public good " and as such should be protected. According to Viktor J. Vanberg, the constitutionalist perspective on the market brings the Ordoliberals of the Freiburg School in line with the institutional research of James Buchanan, who universalized the liberal ideal of voluntary cooperation, transferring it from the scope of market choices to that of institutional choices. The EuroAtlantic Union Review, Vol. 2 No. 1/2015
Ordoliberalism and European Economic Policy, 2019
Especially for Europe, a growing socio-economic divide can be observed, both between nations and within the nations themselves. In light of this division, and of Europe’s differing economic cultures, the question must be asked as to whether – and if so, how – a European form of Ordnungspolitik can even be constructed, and what this regulatory, ‘ordoliberal’ concept might mean for the development of European society. Our argument in the following paper is as follows: Ordoliberalism – elaborated here with reference to constitutional political economy and Amartya Sen’s capability approach – supplies a normative, regulatory organizational template for a modern Europe, one which legitimizes the relevance of a genuinely European social policy. The goal here – as in what is perhaps Walter Eucken’s most widely quoted remark – is to create a „funktionsfähigen und menschenwürdigen Ordnung der Wirtschaft, der Gesellschaft, des Rechtes und des Staates“ (Eucken 1940/1989: 239). This goal is key to European development, and should not be lost sight of. However, for such an order to be realized, two problems must first be solved. Firstly, there is the problem, also of central importance to the Freiburg School, of the restriction of power. Secondly, an observation from constitutional political economy, namely that the members of a polity must be able to freely decide upon their shared social arrangements, and in such a way that they agree upon a societal order that is in the interests of all the individuals involved. Whereas Eucken’s ordoliberal concept primarily elaborates upon the necessity of so-called ‘negative civil liberties’ (referring, essentially, to rights of protection against state intervention, that is, the absence of force), Amartya Sen in particular systematically supplements these observations – albeit by no means as a direct reaction to Eucken – by positing the genuine validity of ‘positive civil liberties’ (that is, material and social rights which enable every citizen to exercise their civil liberties). Although Eucken’s work can be drawn on for the construction of a positive conception of freedom – explicitly noting as he does that necessary for the functionality of an economic order are both the formation of negative civil liberties, or rights of protection, and the realization of positive civil liberties, or genuine, material rights of performance – in our opinion, the focus of Eucken’s research (a result, chiefly, of exposure to the Weimar Republic and National Socialism) is the question of power, and thus the establishment of protective rights. For this reason, too, we shall also sketch out here Alexander Rüstow’s concept of Vitalpolitik (‘organic policy’), which while discussing positive civil liberties might also be able to offer inspiration for the creation of a “highly competitive social market economy” (Art. 3(3) of the EU Treaty) in the European Union. This paper is structured as follows: First, we sketch out the traditional definition of the objectives of Walter Eucken’s Freiburg School (Section 2). Subsequently, in Section 3, the potential of a normative amendment to the above, revolving around citizens’ ability to give voluntary consent, will be discussed from the perspective of constitutional political economy. However, societal circumstances cannot be legitimized solely by fundamentally positive functional characteristics such as the efficient regulation of competition; legitimation derives instead from the actual consent of the individuals involved. As such, the rules of a society and the resulting patterns of the distribution of goods must be the object of economic and ordopolitical analysis, something which Alexander Rüstow has already advocated in his calls for Vitalpolitik (Section 4). One concept which meets the Freiburg School’s traditional demands for sociopolitical inclusion while simultaneously accounting for the affected individuals’ ability to consent is Amartya Sen’s capability approach (Section 5). Finally, we discuss the observations sketched out here in the context of a modern European economic framework, demonstrating that the EU’s Cohesion Policy can be considered a kind of Vitalpolitik of nations, with the goals of anchoring the concept of inclusion on a European level, and realizing a European social market economy in line with the Freiburg School’s ordoliberalism (Section 6). The paper closes with a brief summary (Section 7).
Debating Lessons from Germany After the Social Democratic Century
German Politics
This article seeks to stimulate a debate about the propositions that this special issue advances on German political economy by presenting responses from two experts who were not otherwise involved. Both scholars independently engage with the volume's characterisations of empirical developments and arguments for conceptual innovation. Their comments highlight three themes in particular: the malleability of 'conflictual partnership' in industrial relations, the growing political prominence of consumer interests, and the revitalisation of social movements. In a rejoinder, the editors spell out how the proposed shift in the scholarly lens on Germany from stability to imbalance helps address these themes. The rejoinder closes with an invitation for scholars and practitioners to draw on the volume as they interpret, manoeuvre within, and try to positively shape what will undoubtedly be a challenging future. † The authors are listed in alphabetical order to underscore the collaborative nature of this article. This article has been republished with minor changes. These changes do not impact the academic content of the article.
Social Market Economy in the context of the eurocrisis and as a feasible policy option
The specific model of growth of the German economy has some guiding theoretical principle in Soziale Marktwirtschaft (SMW) (Mueller-Armack, 1956). Although SMW was conceived in the context and with a particular attention to European integration, the present crisis has highlighted how it is difficult to integrate the German economy to the rest of the Europe. The expansionary and deficit-spending-pull policies of the other countries, particularly the “Latin”, tend to be difficult to convert into the stability-shaped configuration of Germany. This fact is causing some worry to those who considered the framework of the SMW as a valuable and viable model of economy.The first part of the paper considers in which extent the present German economy can be assimilated to the framework of the SMW. In particular, we discuss three points: 1. how much abandoning income policies, i.e. the policy of blocking salary growth negotiated with trade unions (1999-2011) can be in harmony with SMW; 2. How over-evaluated currency as the euro/dollar at 1,40 can be considered a strong currency in line with SMW;3. In which case a fiscal stimulus is needed and how it should be performed.The second part of the paper, therefore, looks at the epistemological dimension of the SMW to highlight the fundamental principles that should inform a reform policy in this direction. Moreover, we will discuss how to transform such principles in a set of policies that fit different contexts. The actual issue is that most of the points listed by Mueller-Armack as the fundamental elements of SMW tend to be context specific. As a consequence, a broader perspective on the spirit and history of SMW should be considered, extending the insights to Wilhelm Röpke and other scholars, singling out the true objectives from the instrumental ones. Finally the paper will discuss the exportability of SMW in two specific contexts: in Italy and in Argentina. It will find a relation between the structure of the economy and the reforms needed to achieve such kind of economic order. The result will be contrasted with other competing theories.