SOCIAL MARKET ECONOMY. THE GERMAN MODEL

by Muresan, Sorin
Published in Romanian Journal of Economic Forecasting, 2005, volume 6 issue 3, 65-90

Abstract

This article presents the economic system of Germany. It shows that after the Second World War, this country has risen to the fourth economic power world-wide and to the major economic power in Europe. The principles underlying the German economic system deeply influence the shape of the European Union and its institutions. This article aims to acquaint European economists, businessmen and foreign policy experts with its roots, principles, institutions, organization, implementation and future perspectives. 
After the Second World War, the US American Marshall Plan for recovery in Europe, together with the specific social conditions in Western Germany, gave way to a particular economic model: it is known as “Social Market Economy” (Soziale Marktwirtschaft). This post-war economic and social system successfully merges the essence of the German spirit with the post-war spreading of neo-liberalism and free market economics in Continental Europe and in Germany.
The creation and implementation of a whole set of legislation and institutions specific to Western Germany, brought about the well known German economic miracle (deutsches Wirtschaftswunder) as the successful reconstruction programme in the 1950-1960s. The increasing economic weight of Western Germany, reached its apex during the later years of the Cold War. It boosted the battered political weight of this country in Europe and made possible a quick re-unification with Communist Eastern Germany in 1990. All this was possible due to the economic power of the “Soziale Marktwirtschaft”.
Although Germany itself has drifted during the last decade away from the original economic and social model of the “Soziale Marktwirtschaft”, this system can still be a point of orientation for some of the emerging markets in Central and Eastern Europe and in other countries around the world.

Keywords: social market model, economic history, institutional building
JEL Classification: B22, B25