Social market economy

The social market economy (SOME; German: soziale Marktwirtschaft), also called Rhine capitalism, Rhine-Alpine capitalism, the Rhenish model, and social capitalism,[1] is a socioeconomic model combining a free-market capitalist economic system alongside social policies and enough regulation to establish both fair competition within the market and a welfare state.[2][3] It is sometimes classified as a regulated market economy.[4]

The social market economy was originally promoted and implemented in West Germany by the Christian Democratic Union of Germany under Chancellor Konrad Adenauer in 1949,[5] and today the term is used by ordoliberals, social liberals, and social democrats, who generally reject full state ownership of the means of production but support egalitarian distribution of all goods and services in a market segment. Its origins can be traced to the interwar Freiburg school of economic thought.[6]

The social market economy was designed to be a middle way between laissez-faire forms of capitalism and socialist economics.[7] It was strongly inspired by distributism and ordoliberalism,[8] which was influenced by the political ideology of Christian democracy.[7][9]

Social market refrains from attempts to plan and guide production, the workforce, or sales but support planned efforts to influence the economy through the organic means of a comprehensive economic policy coupled with flexible adaptation to market studies. Combining monetary, credit, trade, tax, customs, investment, and social policies, as well as other measures, this type of economic policy aims to create an economy that serves the welfare and needs of the entire population, thereby fulfilling its ultimate goal.[10]

The social segment is often wrongly confused with socialism by right-wing critics.[11][12] Although aspects were inspired by democratic socialism and social democracy, the social market approach rejects the communist ideas of replacing private property and markets with social ownership and economic planning. The social element of the model instead refers to support for the provision of equal opportunity and protection of those unable to enter the market labor force because of old-age, disability, and/or unemployment.[13]

Some authors use the term social capitalism with roughly the same meaning as social market economy.[14][15][16] It is also called "Rhine capitalism",[17] typically when contrasting it with the Anglo-Saxon model of capitalism.[18][19][20] Rather than see it as an antithesis, some authors describe Rhine capitalism as a successful synthesis of the Anglo-American model with social democracy.[21] The German model is also contrasted and compared with other economic models, some of which are also described as middle ways or regional forms of capitalism, including Tony Blair's Third Way, French dirigisme, the Dutch polder model, the Nordic model, Japanese corporate East Asian model of capitalism, and the contemporary Chinese socialist market economy.[22] A 2012 comparative politics textbook distinguishes between the "conservativecorporatist welfare state" (arising from the German social market economy) and the "labor-led social democratic welfare state".[23] The concept of the model has since been expanded upon into the idea of an eco-social market economy as not only taking into account the social responsibility of humanity but also the sustainable use and protection of natural resources. Countries with a social market economy include Austria, the Czech Republic, Germany, Poland, and the United Kingdom.


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