4th
Social Market Economy
The social market economy seeks a market economic system rejecting both socialism and laissez-faire capitalism, combining private enterprise with measures of government regulation attempt to establish fair competition, low inflation, low levels of unemployment, a standard of working conditions, and social welfare. Nominally respecting the free market, the social market economy is opposed to both a strictly planned economy and laissez-faire capitalism. Erhard once told Friedrich Hayek that the free market economy did not need to be made social but was social in its origin. The term “social” was chosen rather than “socialist” to distinguish the social market economy from a system in which the state claimed the right to direct the economy.
In a social market economy, collective bargaining is often done on a national level not between one corporation and one union, but national employers’ organizations and national trade unions.
Important figures in the development of the concept include Franz Oppenheimer, Walter Eucken, Wilhelm Röpke, Franz Böhm and Alfred Müller-Armack, who originally coined the term Soziale Marktwirtschaft.
