Social market economy
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The social market economy is essentially the economic system that most liberals today aspire to. The model consists of two components: the central elements of a free market (ie. private property, free foreign trade, exchange of goods and free formation of prices), and 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 abuses of private power.
The social market remains one of the primary features of most nations in the European Union, admired by both the centre-left and centre-right there. Although, by American standards, it is in socialist commie territory.
The term originated during the 1930s by a group of economists from the University of Friedburg (the Ordoliberals). Sent into exile by the Nazi regime, they developed the social market theory in response to fascism, stating that an open market was essential to democracy, but at the same time, the state must halt the emergence of Social Darwinism.
After World War II and the split of Germany into Western and Eastern sectors, Ordoliberal thought was quickly implemented, especially by Konrad Adenauer and Ludwig Erhard of the CDU. The result was the Wirtschaftswunder ("economic miracle") that helped re-establish the country into what it is today. Since then, it has become a catch-all name for any government that has provided strong public benefits for its citizens.
- The New Labour government in Britain (1997-2010) oversaw multiple economic deregulations 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 Soviet Canuckistan, trade unions still negotiate with individual companies (with limited government intervention), while in Europe it is done on a national level between employer's organizations and worker's groups.
- The Economist's definition
- The Social Market Economy, US Library of Congress
- The UK's Social Market Foundation ("John Major's favourite thinktank")
- ↑ Roman Herzog Institute: Social Market Economy in Germany (have a translator ready)
- ↑ It even led to an unemployment rate of less than 1% in the early 60s and 70s.