Social market economy

The social element of the model instead refers to support for the provision of equal opportunity and protection of those unable to enter the market labor force because of old-age, disability, or unemployment.

[23] The concept of the model has since been expanded upon into the idea of an eco-social market economy as not only taking into account the social responsibility of humanity but also the sustainable use and protection of natural resources.

[24] The social market economy is opposed to laissez-faire policies and to socialist economic systems,[25] and combines private enterprise with regulation and state intervention to establish fair competition, maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, social welfare and public services.

[33] This socio-economic imperative actively managed by a strong state—in contrast to the ordoliberal minimal state solely safeguarding the economic order[34]—is often labelled by the ambiguous but historical term Der Dritte Weg ("The Third Way").

Already in the late 19th century, the Kathedersozialisten ("Catheder Socialists") engaged in social reforms in the Verein für Socialpolitik, turning away from pure liberalism to demand a purposive state policy designed to regulate economic life and advocating a middle course between anarchic individualism, traditionalistic corporatism and bureaucratic statism.

[37] This position was widely shared by Oppenheimer's doctoral student and friend Ludwig Erhard,[38] though the latter displaced adjective and subject by promoting a social liberalism,[39] and he never liked the expression Third Way.

[47] On 17 August 1948, Erhard referred to Müller-Armack by whom he was strongly impressed most of all not as a theorist but as one who wanted to transfer theory into practice,[48] as well as his concept of the social market economy.

Soon after, at the second party congress of the Christian Democratic Union of Germany (CDU) in the British zone in Recklinghausen on 28 August 1948, Erhard circumscribed the concept as a "socially committed market economy".

[49] Whereas most neoliberal economists viewed the concept not only as an economic path between the Scylla of an untamed pure laissez-faire capitalism and the Charybdis of a collectivist planned economy but also as a holistic and democratic social order, Erhard and in particular Müller-Armack emphasised public acceptance and civic engagement as prerequisites for the success of the socio-economic model.

[52] Important figures in the development of the concept include Eucken, Röpke, Alexander Rüstow, Franz Böhm, Oppenheimer, Erhard, Constantin von Dietze and Müller-Armack, who originally coined the term Soziale Marktwirtschaft.

Early protagonists had close contacts to the oppositional church-movement Bekennende Kirche and Dietrich Bonhoeffer and emphasized the reference of their concept to Catholic and Protestant social ethics.

While the neo-American model builds largely on the ideas of Friedrich von Hayek and Milton Friedman, Rhine capitalism according to Albert has its foundations on publicly organized social security.

However, according to Albert complex psychological phenomena and the functioning of the press lets the American model appear more attractive and dynamic to the general public.

Chancellor Otto von Bismarck developed a program in which industry and state work closely to stimulate economic growth by giving workers greater security.

If he falls into poverty, even if only through a prolonged illness, he is then completely helpless, left to his own devices, and society does not currently recognize any real obligation towards him beyond the usual help for the poor, even if he has been working all the time ever so faithfully and diligently.

After the collapse of the totalitarian Third Reich with its statist and corporatist economic policy, economists and academics at the University of Freiburg im Breisgau in Germany advocated a neoliberal or new liberal and socio-economic order.

[citation needed] In drawing on both Eucken's ordoliberal competitive order and Wilhelm Röpke's economic humanism leading to a "Civitas Humana",[65] the ordoliberal competitive order was further developed by the Cologne school around the economist and anthropologist Alfred Müller-Armack, who therefore coined the term Soziale Marktwirtschaft ("social market economy") in a publication in December 1946.

[33] Although it is often viewed as a mélange of socio-political ideas rather than a precisely outlined theoretical order, the conception possessed an effective slogan, which facilitated its communication to both politics and the public.

[citation needed] Chancellor Adenauer of the ruling CDU implemented a new novel economic order amalgamating the promotion of free competition with the responsibility of the social government.

Adenauer's program centered on legislation establishing co-determination in the coal and steel industry, the system of employee property formation, the equalization of burdens, the creation of subsidized housing, child benefits, the agricultural Green Plan and the dynamism of pensions.

This system is created by freedom and responsibility, which find expression in the "social market economy" through genuine performance-based competition and the independent control of monopolies.

[citation needed] In the run-up to the federal elections in August 1949, the CDU/CSU consequently aligned their party platforms, policies and manifestos and campaigned with the social market economy.

In particular, the former advertising manager for consumer goods Ludwig Erhard, who affirmed that he would "go into the upcoming political party clashes with particular energy for the CDU",[82] realised the potential of subtle and systematic marketing to transform the concept from an economic theory, or even abstract economic policy, into the basis of a political party's propaganda and public image that held broad appeal.

However, in fact both Volksparteien had suffered large percentage losses over their previous Land election totals by failing to capture a comparable share of the enlarged electorate.

While these results affirmed the then general pro-market trend in public opinion, eventually, the electorate made its decision contingent on the satisfaction of its practical needs rather than on any particular theoretical economic system.

Although the implementation of the social market economy benefited also from other crucial factors, including the east–west conflict and a favourable political and social climate within Germany and abroad, the stabilising alliance between the conservative and liberal parties, the pro-market composition of the Economic Council and even the Federal Republic's own Grundgesetz (Basic Law), which stressed individual freedom, human dignity and the subsidiarity of societal organisation, it was also the consistent efforts at political communication of the cooperative and corporate model that led to the implementation and eventual electoral validation of the social market economy in post-war West Germany.

[citation needed] Defunct In the United Kingdom, the concept of the social market economy was first introduced by the Conservative politician Keith Joseph.

In the 1970s, Joseph introduced the idea as an alternative to the post-war consensus allowing free markets for competition and innovation whilst the role of government was to help hold the ring, provide infrastructure, maintain a stable currency, a framework of laws, implementation of law and order, provision of a safety net (welfare state), defence of property rights and all other rights involved in the economic process.

Indermit Gill says: "One can say without exaggeration that Europe invented a ‘convergence machine’, taking in poor countries and helping them become high income economies.