Social Market Economy Analysis

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social market economy, as a particular type of economic system, is characterized by not only a high level of the population welfare. It differs from other types of economic systems by the presence of mechanism, where social and economic institutions rule over the operations of all system components. And these operations aimed at achieving such goals, as social justice, security, high level of life. Social Market Economy can be pointed as a unique German obtainment. However, the similar features of economic order were discussed by the USA economists in the early 20th century. Ideas of market domination ineffectiveness and concern about social factors were announced by individual scientists. Among them were: Torstein Veblen1, who was the creator…show more content…
They developed the concept of "order". And, this scientific direction called ordoliberalism. It defines as a form of political philosophy that emphasizes on maximizing the potential of the free market to produce results3. Generally accepted to call Walter Eucken3 - the father of German ordoliberalism. And due to his doctrine: “The state should adopt institutional order policies which adhere to the principle of competition, and that there must be no interference with the economic process”4. In other words, government should create a frame for economic relations, but not to interfere it. This is how the major idea of the Social Market Economy concept can be noticed. The realization of the Social Market Economy became substantial after the WWII. The postwar society had to choose a new way for overcoming all difficulties. With a rejection of authoritarian-regulated economy the Germans had to look for other option. And the appropriate formula was proposed by the economist Alfred Müller-Armack 5. Regarding this formula, the future of German economics should have been based on the combination of market principles and social cohesion. The basic philosophy of the social market economy is the interaction of the market mechanism and the "social…show more content…
The German model is a market-oriented model. Its effectiveness exists due to comprehensive competition and contractual wage setting, with considering major socio-economic parameters. The Scandinavian model based on social-democratic values. In such model, state has greater social and economic forces. There, authority is elected in a democratic way, and society honestly delegates ability of social & economic regulation. Nevertheless, German and Scandinavian models have the common feature: both are based on market penetration from the side of state and social institutes (such as social partnership). From the legal point of view, there are two major components in Social Market Economy concept : respect of civil and economic law, and implementation of measures for supporting the competitive market. The government doesn’t set any economic goals, as these goals are lying in the basis of individual market solutions. In such circumstances, the main task of authority is to save a balance between market efficiency and social

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