The Economics Book

222

MAKE

MARKETS

FAIR

THE SOCIAL MARKET ECONOMY

I

n the aftermath of World

War II West Germany had

to rebuild its economy and

political system from scratch.

Chancellor Konrad Adenauer

carried out this task in 1949,

following the Allied occupation.

The model he chose had its roots in

the ideas of Franz Böhm and Walter

Eucken of the Freiburg school of

the 1930s, which resurfaced in the

1940s as “ordoliberalism.” Its chief

advocates were Wilhelm Röpke

and Alfred Müller-Armack.

IN CONTEXT

FOCUS

Society and the economy

KEY THINKERS

Walter Eucken (1891–1950)

Wilhelm Röpke (1899 –1966)

Alfred Müller-Armack

(1901–78)

BEFORE

1848 Karl Marx and

Friedrich Engels publish

the Communist Manifesto.

1948 German economists

Walter Eucken and Franz

Böhm establish the journal

ORDO, which gives its name

to ordoliberalism, a movement

that advocates the social

market economic model.

AFTER

1978 Chinese Premier

Deng Xiaoping introduces

capitalist elements into the

Chinese economy.

1980s Milton Friedman’s

monetarist arguments against

government intervention are

adopted by the US and UK.

A free market economy... A socialist economy...

... encourages economic

growth and development.

It can also be volatile, suffer

from market failures, and

produce monopolies.

This can lead to inequality.

... ensures more equal

distribution of wealth.

It lessens the effects of

monopolies and market failure

and stabilizes the economy.

But it can hamper economic

growth and development.

A social market economy aims to make

markets fair by creating a middle way.