Social Market Economy
Social market economy (Soziale Markwirtschaft) or social capitalism is known as the continental Western European, especially German, model of capitalism. For this reason, it is also called Rhine capitalism.
Because of the word 'social' (Sozial), it is easy to mistake it for a concept related to socialism or social democracy, but it actually refers to a moderate liberal market economy based on social justice, such as Catholic social teaching. It pursues harmony between the free market and social justice, and aims for a welfare state.
After World War II, the social market economy introduced by Konrad Adenauer's Christian Democratic Union government in West Germany has become the economic system of several Western European countries, including Germany today.
Orientation
The social market economy is based on German ordoliberalism[2]. Ordoliberalism rejects both the laissez-faire economy of the period before the Great Depression and the centrally managed economy of socialism, Nazism, and fascism. From a standpoint that values the liberal market economy, it also viewed critically 'middle-of-the-road economic policies' such as Keynesianism, supported by social liberals and social democrats.
The social market economy, based on this ordoliberalism, aims for capitalism with a human face. Because ordoliberalism is ultimately a concept derived from economic liberalism and neoliberalism, it values the free market, but it is very wary of the harms, such as monopoly, that appear in laissez-faire economies.
Classical liberals such as Adam Smith pointed only to the monopoly of government public power and advocated a laissez-faire economy, but ordoliberals such as Walter Eucken also pointed to monopoly capital created by the concentration of economic power in the market. Ordoliberalism holds that active government intervention is necessary to establish a fair market order so that monopoly capital cannot engage in unfair transactions or unfair competition.
The social market economy is realized by respecting the following three major social principles.
Principle of Self-Responsibility
This is the principle that dignity as the principle of respect for the person inherent in human dignity, the sacredness of its rights, and individual freedom should serve as universal values and as the most important standard for evaluating social relations. This principle takes precedence over the other principles, such as the principle of solidarity or the principle of subsidiarity.
Principle of Solidarity
The aforementioned 'principle of self-responsibility' is accompanied by the principle of solidarity. In other words, the principle of self-responsibility inherently contains the 'principle of solidarity,' which entails respect for the personhood of others and the duty to form community. Of course, this principle does not emphasize equality, because doing so would violate the first principle, the 'principle of self-responsibility.'
Principle of Subsidiarity
This is a subsidiary principle that provides support, coordination, and intervention when problems cannot be resolved through individual achievement and the principle of solidarity. However, it must not act in a way that undermines the freedom and self-responsibility of individual members and families. Subsidiarity should, after all, serve as a catalyst for efforts to develop self-responsibility and the capacity for self-help.
Topics: market economy,economic system
Category: Wiki/Economy
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