What is a "social market economy"?

[gummybear1952001]

[ncrebel21]

The Social market economy was the German and Austrian economic model during the Cold War era. Known as Soziale Marktwirtschaft in German, it is not to be confused with the socialist market economy - the economic model of the People's Republic of China.

Under Christian Democrat Konrad Adenauer's chancellorship of West Germany (1949-1963), Ludwig Erhard, the economics minister who would later become chancellor, worked towards implementing the social market model. Its aim was to maintain a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, public welfare and public services by using state intervention.

From the 1960s, the social market economy was the main economic model in mainland Western Europe, pursued by administrations of both the centre right (usually led by Christian Democratic parties) and the centre left (usually led by Labour, Social Democrat or Socialist parties).

Southern European states, especially Italy, preferred large-scale public services, high salary growth rates and a low unemployment rate over low inflation, low national debt, low public expenditure and other economic health policies. This Services State (Italian Stato Assistenziale, now derogatory) version of the social market is generally considered less successful than the more thrifty Northern European models.

Following the fall of the Berlin Wall in 9 November 1989, centre right parties gradually espoused neo-liberal economic policies while centre left parties developed the more free-market based Third Way. Nevertheless, a commitment to some form of social market economy was present in the European Union Constitution (now in limbo following the referenda in France and the Netherlands).