Realizing a New Social Market Economy in Europe in the Coming Years

Abstract

Powerful centrifugal forces of nationalism and protectionism are currently threatening the economic, social, and political achievements of Europe and the Western community, undermining the prospects for sustained growth, employment, productivity and social progress. They could reinforce rather than reverse the fateful trend of growing inequality of income and wealth within and among nations. The shortcomings of globalisation, such as the excessive role of volatile short-term finance, make it difficult to benefit from its advantages. Among the large spectrum of different models of market economy implemented in Europe since the 1940s, the “social market economy” has been by far the most successful in both economic and societal terms. Today many elements of the social market economy are incorporated in the tradition and policy “rulebooks” not only in Germany, its country of origin, but also in numerous other European countries, and the European Union itself. There have been two major distinct trends with respect to the model of the social market economy: (1) the original version developed and implemented by Ludwig Erhard that put the emphasis on growth and social progress, and (2) the one promoted by the “Ordo-liberals” with their emphasis on austerity and market fundamentalism. The conclusion of this chapter is that the European Union and its member countries should work together to develop a new social market economy for the years to come inspired by the original first version of the social market economy with emphasis on growth and social progress.