Social market economy
Encyclopedia : S : SO : SOC : Social market economy
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The social market economy was the main economic model used in Western and Northern Europe during the Cold War era. It originated in West Germany, and it is known as Soziale Marktwirtschaft in German.
In West Germany, the social market model was created and implemented by the Christian Democrat Ludwig Erhard, Minister of Economics under Konrad Adenauer's chancellorship and German Chancellor in his own right from 1963 to 1966.
The social market economy seeks a middle path between socialism and capitalism (i.e. a mixed economy) and aims at maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, social welfare, and public services, by using state intervention. Important figures in the development of the concept include Franz Oppenheimer, Walter Eucken, Wilhelm Röpke, Franz Böhm and Alfred Müller-Armack (who originally coined the term Soziale Marktwirtschaft).
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 (usually led by Christian Democratic parties) and the centre left (usually led by Labour or Social Democratic parties).
Southern European states, especially Italy, preferred large-scale public services, high salary growth rates and a low unemployment rate over low inflation, low national debt, low public expenditure and other economic health policies. This Service State (Italian Stato Assistenziale, now derogatory) version of the social market is generally considered less successful than the more thrifty Northern European models.
Following the fall of the Berlin Wall on 9 November 1989, most centre right parties gradually moved towards the highly capitalist economic policies of neoliberalism, and a significant portion of the centre left made a similar move, developing the "Third Way". Nevertheless, a commitment to some form of social market economy was present in the European Union Constitution (now in limbo following the referenda in France and the Netherlands).
See also
- Mixed economy
- Ordoliberalism
- Social Market Foundation
- Note: The social market economy is not to be confused with the socialist market economy - the economic system of the People's Republic of China.
External links
- [Initiative Neue Soziale Marktwirtschaft (in German)]
- [The Social Market Economy] - U.S. Library of Congress
- [Essay on Germany's Social Market Economy]
- [Short Definition from the Economist]
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