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.
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.
The extent to which state-constitutional, state-political, market-organizational, and market-failure correcting principles are established determines social market economic performance.
| SMEX |
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.
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 •
No browser support.
This graph illustrates Social Market Economy, Social Peace, Equal Opportunity, Ecological
Sustainability performance globally.
No browser support.
This graph compares a country's position within the overall relationship between Social
Market Economy and Income, Social Peace, Equal Opportunity, Ecological Sustainability
performance.