Social market economy
The social market economy (SOME; German: soziale Marktwirtschaft), also called Rhine capitalism, Rhine-Alpine capitalism, the Rhenish model, and social capitalism,[1] is a socioeconomic model combining a free-market capitalist economic system alongside social policies and enough regulation to establish both fair competition within the market and generally a welfare state.[2][3] It is sometimes classified as a regulated market economy.[4]
This article is about the economic model combining free-market capitalism with social policies. For the economic system in the People's Republic of China, see Socialist market economy.
The social market economy was originally promoted and implemented in West Germany by the Christian Democratic Union under Chancellor Konrad Adenauer in 1949,[5] and today the term is used by ordoliberals, social liberals, and social democrats, who generally reject full state ownership of the means of production but support egalitarian distribution of all goods and services in a market segment. Its origins can be traced to the interwar Freiburg school of economic thought.[6]
The social market economy was designed to be a middle way between laissez-faire forms of capitalism and socialist economics.[7] It was strongly inspired by ordoliberalism,[8] which was influenced by the political ideology of Christian democracy.[7][9]
Social market refrains from attempts to plan and guide production, the workforce, or sales but support planned efforts to influence the economy through the organic means of a comprehensive economic policy coupled with flexible adaptation to market studies. Combining monetary, credit, trade, tax, customs, investment, and social policies, as well as other measures, this type of economic policy aims to create an economy that serves the welfare and needs of the entire population, thereby fulfilling its ultimate goal.[10]
The social segment is often wrongly confused with socialism by right-wing critics.[11][12] Although aspects were inspired by democratic socialism and social democracy, the social market approach rejects the communist ideas of replacing private property and markets with social ownership and economic planning. 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, and/or unemployment.[13]
Some authors use the term social capitalism with roughly the same meaning as social market economy.[14][15][16] It is also called "Rhine capitalism",[17] typically when contrasting it with the Anglo-Saxon model of capitalism.[18][19][20] Rather than see it as an antithesis, some authors describe Rhine capitalism as a successful synthesis of the Anglo-American model with social democracy.[21] The German model is also contrasted and compared with other economic models, some of which are also described as middle ways or regional forms of capitalism, including Tony Blair's Third Way, French dirigisme, the Dutch polder model, the Nordic model, Japanese corporate East Asian model of capitalism, and the contemporary Chinese socialist market economy.[22] A 2012 comparative politics textbook distinguishes between the "conservative–corporatist welfare state" (arising from the German social market economy) and the "labor-led social democratic welfare state".[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. Countries with a social market economy include Austria, the Czech Republic, Germany, Poland, and Japan.
Misconceptions[edit]
Although one of the main factors for the emergence of the European model of capitalism was the attempt to ameliorate the conditions of workers under capitalism and thus stave off the emergence of socialism or socialist revolution,[91] American critics and Eurosceptics identify the social market model with the notions of the welfare state and sometimes mistakenly identify it as being socialistic.[11][12][16]
Economic performance[edit]
In 1996, while the US nominal GDP per capita was $29,968, the EU nominal GDP per capita was $19,752.[92] Twenty four years later, in 2020, the US nominal GDP per capita was $63,544 while the EU nominal GDP per capita was $33,928. The EU nominal GDP per capita was about two thirds (66%) of the US one, in 1996. In 2020, the EU nominal GDP per capita dropped from two thirds to about a half (53%) of the US one. In nominal terms, a European citizen has become 20% poorer with respect to a US citizen, over the period 1996-2020. During the 24 years between 1996 and 2020 it has become relatively cheaper for a US citizen to stay in the EU, and it has become relatively more expensive for a EU citizen to stay in the US.[92] Over this period of 24 years, from 1996 to 2020, the consumer price index has increased by 65% in the US,[93] and by 51% in the EU.[94] According to the consumer price index then, despite livelihood expenses have grown 14% less for a EU citizen compared to a US one, in the period 1996-2020, the EU citizen has become, nominally, 20% poorer.
This might however be partly explained by a number of poorer countries joining the EU in the 2000s, as well as a shift away from social market economy towards neoliberal austerity. The World Bank Group wrote the European growth model achieved economic convergence effectively, helped poorer European nations reach the standard of their richer neighbors and become high-income economies. Indermit Gill stated " One can say without exaggeration that Europe invented a ‘convergence machine’, taking in poor countries and helping them become high income economies."[95]