Free or Social Market Economy:
Which model for Europe?
PD Dr. Michael Wohlgemuth
Freiburg (Germany)
Free and social: a contradiction?
“The freer the
economy, the more
social it is”
“Je freier die Wirtschaft,
desto sozialer ist sie auch”
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Freedom and prosperity
3
Freedom and poverty
4
Freedom and quality of life
5
Freedom in Europe
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Social Market Economy: the idea
“a regulative policy that seeks
to combine, on the basis of a
competitive economy, free
initiative and social progress”
Social irenics “embracing
different creeds and ideologies”
Alfred Müller-Armack
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Social Market Economy: the problem
Though the abuse of the word ‘social’ is
international, it has taken perhaps its most
extreme forms in West Germany … where
the constitution of 1949 employed the
expression sozialer Rechtsstaat (social rule
of law) and whence the conception ‘social
market economy’ has spread – in a sense
which its populariser Ludwig Erhard never
intended … to him the market economy did
not have to be made social but was so
already as a result of its origin …
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Social Market Economy: empty?
… But while the rule of law and
the market are, at the start,
fairly clear concepts, the
attribute ‘social’ empties them
all of any clear meaning
(Hayek 1988: 117)
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Free Market Economy: the problem
“…
that many of the pretending
defenders of ‘free enterprise’ are in fact
defenders of privileges and advocates of
government activity rather than opponents
of all privilege … There is no hope of a
return to a freer system until the leaders
of the movement are prepared to first
impose upon themselves that discipline of
a competitive market which they ask the
masses to accept”
Hayek 1947
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The need for a “competitive order”
Economic Constitution
The “economic constitution” (Freiburg School)
a)  “Private Law Society”:
 
 
 
Private Property
Freedom of contract
Liability
Walter Eucken
c)  “Ordnungspolitik”
 
 
 
Anti-trust, open markets
Stable currency
Predictable, stable economic policies
Franz Böhm
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The need for a political constitution
Political constitution (Rule of law)
the policy of the state:
“should be directed at dissolving economic power groups or at
least containing their functions.”
“should be directed at shaping the general forms of economic
order, instead of directing the economic process.”
Eucken 1950
a self-binding commitment to respect universalisable rule of just
(government-) conduct.
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Social Market Economy in the EU
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European Social Models
GDP/capita
(Eurostat 2009)
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European Social Models
GDP/capita
(Eurostat 2009)
Regional
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European Social Models
GDP Growth
(Eurostat 2009)
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European Social Models
Unemployment
(Eurostat 2009)
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European Social Models
Public Debt
(Eurostat 2009)
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European Social Models
Tax Burden
(Eurostat 2009)
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European Social Models
Income distribution
(Eurostat 2009)
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European Social Models
Social benefits /
capita
(Eurostat 2009)
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European social values and models
What is often called „the European Social Model“
(a centralistic welfare state) is neither
  European, nor
  Social, nor a
  Model.
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What market economy do people
want?
Quelle: Bundesverband Deutscher Banken 11/2008
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Idea and reality
  Does Germany have a „social market
economy“?
  „Soziale Marktwirtschaft“ =
  Ideal type (original idea / concept) or
  Real type (present state / politics)?
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What people miss
Quelle: Bundesverband Deutscher Banken 11/2008
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More of the same?
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Realities
„I do not want to
win the LudwigErhard-award,
but the coming
elections“
Margaret Thatcher //
Helmut Kohl
(PM 1979-1990)
(Kanzler 1982-1998)
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