combination of the political theory concept of aliberal democracycom-
bined with some general sense of a semi-legal right to the protection of a
welfare state. In most cases where a party actually calls itself ‘social democrat’,
the explicit use of the title is an attempt to establish a special identity to a more
right-wing version of what is in fact a generally unrevolutionary and unradical
form ofsocialism, and does not usually connote any specific theoretical or
ideological position.
Social Market Economy
The social market economy is unique to modern Germany, and it is the result
of a set of political and economic principles imposed by the first governments
of the new Federal Republic in the 1950s. Much of the credit for the supposed
German economic miracle occurring in the middle of the 20th century, is
given to this socio-economic philosophy, enshrined in the German constitu-
tion and applied, at least in theory, to this day. Although the major external
characteristics of the social market philosophy are easy enough to describe, it is
extremely difficult to go into depth. At its simplest, the social market economy
is one that combines a deep commitment to free-market economics with an
equally deep commitment to very generous statewelfareand educational
policies. The extra ingredient, which other countries who try to balance both
market economies and decent welfare provision sometimes omit, is a commit-
ment on the part of the state to ensure the conditions for effective and non-
distorted economic competition. A good example is the deliberate depoliti-
cization of the interest rate mechanism by entrusting the exchange rates to a
completely independentcentral bank, which cannot be politically coerced.
As a result, a minimal inflation rate has always been a hallmark of the German
economy; the associated risk of high unemployment has been acceptable
because of the generous welfare provisions.
Other aspects would include writing into law quite complex worker
representation in the operation of even large private companies; legislatively
balancing funds to minimize income discrepancies between the states in the
federation; a counter-cyclical fund for government expenditure, equally
legislatively protected; and well established government support for private
savings schemes.
In truth elements of the social market mechanisms are found in many
countries; The USA, for example, has always had tough anti-trust laws, and
France has always had a highly independent central bank and high welfare
expenditure. What differentiates Germany is the explicitness of the philosophy
and the complete consensus in politics that such an approach is vital. It is all
part of the way the post-war German political system set itself to avoid the
excesses of both the left and right during the inter-war years. Similarly, it is part
Social Market Economy