Social market economy
From Freepedia
Social market economy was the peculiar German and Austrian model (pattern) of economy during Cold War era. It is called soziale Marktwirtschaft in German. It is not to be confused with socialist market economy which is the economic model for the People's Republic of China.
Under Konrad Adenauer's administration as chancellor of West Germany (1949-1963), Ludwig Erhard helped create the social market model. It tries to maintain balance among high growth rate, low inflation, low unemployment rate, good work conditions, welfare and public services through state intervention.
Outside Germany the Constitution of Italy, approved in 1947, also supplied a constitutional basis for a social market economy.
Art. 41 of the Constitution of Italy Private economic initiative is free. It cannot be conducted in conflict with public weal or in such manner that could damage safety, liberty, and human dignity. The law determines appropriate planning and controls so that public and private economic activity is given direction and coordinated to social objectives.
Starting at the 60s social market economy was the main economic model in continental Western Europe, pursued by both centre right (usually led by Christian Democrat parties) and centre left (usually led by Labour, Social Democrat or Socialist parties) administrations.
In Southern Europe states (especially Italy) immense public services, high salary growth rates and low unemployment rate were strongly preferred to low inflation, low national debt, low national expense and others economic health policies. This Services State (roughly for Italian Stato Assistenziale, now derogatory) model of social market is generally considered less succesfull than more thrifty Northern European models.
Following the fall of Berlin Wall in 9 November 1989 centre right parties gradually espoused neo-liberal economic policies while centre left parties developed the more free-market oriented Third Way. Nevertheless a strong emphasys on social market economy is still present in the European Constitution.
Art. I-3 of the Treaty establishing a Constitution for Europe The Union shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.
