Social market economy

{{economics}}
A '''social market economy''', also known as '''Rhine capitalism''' (named after the river Rhine) or '''social capitalism''', is an [[economic]] system which consists of two components: the central elements of a [[free market]] ([[free trade]], exchange of goods and free formation of prices) and a [[welfare state]] ([[universal health care]], old-age pension and unemployment insurance) as part of an extensive social security system to help eliminate the harmful effects of a ''[[laissez-faire]]'' system; thus it can be classified as a mixed economy, coupling high economic freedom with a degree of government regulation to prevent [[Banking crisis|abuses of private power]].<ref>[http://www.bmz.de/en/publications/type_of_publication/strategies/konzept158.pdf Social and Ecological Market Economy: Principles in German Development Policy]</ref><ref>[http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/7837266.stm Germany's orderly 'social market'], BBC News.</ref>

The social market remains one of the primary features of many nations in [[Europe|Central Europe]], admired by many political parties in the political center.

== History ==
The term "social market economy" (German: ''soziale Marktwirtschaft'') originated during the 1930s amongst a group of economists that originated the Freiburg School (the {{wpl|Ordoliberalism|ordoliberals}}) of economics, from the University of Freiburg (Freiburg in Breisgau, in the German state of Baden-Württemberg). Sent into exile by the [[Nazism|Nazi]] regime, they developed the social market theory in response to [[fascism]], seeing an open market was essential to [[democracy]], but at the same time requiring the [[state]] to halt the emergence of [[social Darwinism]] (as it would threaten universal freedom).<ref>Believe it or not, they also had ties to the [[Austrian school]] (compare the nature of American/British and German economies today and you can see what happened to those ties).</ref>

After [[World War II]] (1939-1945) and the split of [[Germany]] into [[West Germany|Western]] and [[East Germany|Eastern]] sectors (1949-1990), ordoliberal thought was quickly implemented in Bonn, especially by Konrad Adenauer (Chancellor from 1949 to 1963) and by Ludwig Erhard (Federal Minister of Economics from 1949 to 1963) under the auspices of the [[Political parties of Germany#Christian Democratic Union of Germany|Christian Democratic Union of Germany]]. The result was the ''Wirtschaftswunder'' ("economic miracle")<ref>{{wpa | Wirtschaftswunder}} </ref> that helped re-establish the economy of western Germany.

== Comparisons to the Third Way and social democracy ==
While the social market economy is similar to the [[Third Way]] and [[social democracy]] in providing a moderate stance between [[capitalism]] and [[socialism]], there are a few key differences:
* The [[New Labour]] government in the [[United Kingdom]] (1997–2010) oversaw multiple economic [[deregulation]]s while maintaining a [[welfare state]].
* The administration of [[Bill Clinton]] in the [[United States]], working together with a [[Newt Gingrich]]-led [[Congress]], performed similar deregulations, yet practically ended the U.S.'s welfare state.
* The social democratic Nordic model in [[Scandinavia]] engages in a little more wealth distribution, where the overall [[tax]] burden in countries such as [[Denmark]], [[Norway]] and [[Sweden]] can reach up to 50% of the total [[GDP]] (social markets tend to range around the 30s).

Collective bargaining practices can also vary in social market economies: in [[Canada]], [[trade unions]] still negotiate with individual companies (with limited government intervention), while in some European nations it is done on a [[Social corporatism|national level between employer's organizations and worker's groups]].

== See also ==
* [[Frankfurt School]] — which also exchanged some ideas with the Freiburgers
* [[Keynesianism]]
* [[Christian democracy]]
* [[Social democracy]]
* [[Social liberalism]]

== External links ==
* [http://www.economist.com/economics-a-to-z/s#node-21529660 ''The Economist'''s definition]
* [http://countrystudies.us/germany/136.htm The Social Market Economy], U.S. Library of Congress

== References ==
{{reflist}}
[[Category:Economics]]
[[Category:Social justice]]

Categories: Economics, Social justice