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Describe & Change



The Social Market Economy

The philosophy of a social market economy is not to create a welfare state through the public redistribution of consumption opportunities, but to create a wealth state through public investments into equal economic opportunities. This philosophy assumes a human being that is self-interested and self-responsible, yet also demonstrates a sense of solidarity within the social fabric of a referee state. Social market economics is about identifying the order, rules, and economic policy principles of an economy with the objective of balancing the freedom in the market with equitable socioeconomic development.

Social market economics was a movement of many scholars. The list of pioneers is long and combines thinkers from various schools of thought, all of which focus on different lessons learned from history. Wilhelm Roepke, Alfred Mueller-Armack, and Walter Eucken are only three out of many scholars that contributed to the movement of a social market economy. Wilhelm Roepke, for example, was an agent of economic humanism. He emphasized the need to respect the nature of man and society in economic analysis. Alfred Mueller-Armack, a representative of the School of Cologne, established the need for a market economic order regulates by principles. Lastly, Walter Eucken, a scholar of the School of Freiburg, developed the concepts of order-liberalism and order policy, which describes a set of principles that aim to put the vision of a social market economy into practice.

State-Constitutional Principles
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This Graph illustrates the selected country's ranking for the two State-Constitutional Principles Democracy and Subsidiarity.
State-Political Principles
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This Graph illustrates the selected country's ranking for the two State-Political Principles Isolation from special interest groups and Primacy of order over discretionary policy.
Market-Organizational Principles
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This Graph illustrates the selected country's ranking for the seven Market-Organizational Principles free prices, free trade, free contracts, private property, private liability, price stability, constancy of economic policy.
Market-Failure Correcting Principles
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This Graph illustrates the selected country's ranking for the four Market-Failure Correcting Principles competition, income, labor market, and environmental policy.


The Social Market Economy's Potential

I want to live by my own resources, I want to take my own decisions in life and be responsible for my own destiny. From the state, I expect only that it will create the preconditions which allow me to live in such a way. Ludwig Erhard

Social Peace Inequality of economic opportunities and income enforces redistribution through the democratic decision process, which the rich have an incentive to undermine and the poor to promote. As a result, personal freedoms will be more under attack than in a society with greater equality of income and economic opportunities. Conversely, a social market economy promotes conflict free plurality and, thus, social peace.

Equal Opportunity A social market economy aims at full employment and social progress. It emphasizes an individual's freedom to achieve well-being. This freedom is to be understood in terms of Amartya Sen's capabilities approach. Individuals enjoy equal opportunities to do and be what they value.

Ecological Sustainability Countries with a greater social market economic profile will have more resources available to diversify their economies and protect their natural resources. Hence, a social market economy promotes a high level of protection and improvement of the quality of the environment and, thus, ecological sustainability.

Balancing the Freedom in the Market with Equitable Socio-Economic Development

The extent to which state-constitutional, state-political, market-organizational, and market-failure correcting principles are established determines social market economic performance.

The Social Market Economy as a Formula for Peace, Prosperity and Sustainability

Applying social market economic principles generates higher per capita incomes, but also carries a social peace dividend, creates more equal opportunities, and promotes ecological sustainability.

Income Today

Potential Income

Social Peace Today

Social Peace Potential

Equal Opportunity Today

Equal Opportunity Potential

Ecological Sustainability Today

Ecological Sustainability Potential


The Social Market Economy's Impact

The social market economy was developed as a political and economic concept during the inter-war period as an alternative to laissez-faire capitalism and totalitarianism in socialism and fascism.

The concept of the social market economy suggests that market freedom combined with policies to promote equitable socio-economic development fosters both peace and economic prosperity. Germany’s post World War II experience lived up to this promise. In 2007, the social market economy also became the European Union’s guiding economic vision.

• Countries with greater social market economic profiles experience greater economic prosperity • Social market economic principles prioritize equal opportunities • Social market economic principles promote social peace through the reduction of political polarization associated with redistributive conflict from inequitable development • Social market economic principles contribute to the ecologically sustainable use of resources •

Social Market Economy
Social Peace
Equal Opportunity
Ecological Sustainability

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This graph illustrates Social Market Economy, Social Peace, Equal Opportunity, Ecological Sustainability performance globally.

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This graph compares a country's position within the overall relationship between Social Market Economy and Income, Social Peace, Equal Opportunity, Ecological Sustainability performance.