Is the social market economy still relevant? If you believe representative surveys, the answer is yes. In recent years, the attitude of the population towards our economic order has developed positively. In 2018, not even half had a good opinion of the social market economy, but the tide turned in their favor during the corona crisis. Now, according to Allensbach, approval is 56 percent.^
A nice compliment on the 125th birthday of Ludwig Erhard this Friday, the political father of our economic system. At the same time, the ebb and flow of approval for the social market economy shows that an economic system must also continue to develop and prove itself over and over again.
The currently positive judgment of the population is certainly also closely linked to the economic aid provided by the state during the pandemic and is by no means unchallenged, especially since the number of dissatisfied people is growing in society, as the corona protests are not the first to show.
Adapting the regulatory framework to new challenges and changing conditions is an obligation of all democrats. Politics, business, science, associations and political foundations must see this as an ongoing task.
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Although the social market economy has guaranteed our country social security and prosperity for many decades, it is not set in stone. Some omissions can hardly be overlooked, cracks in social approval are recognizable and must be addressed resolutely.
The state must not go into infinite debt
“We have a duty to think in terms of generations and to build our children and grandchildren a solid foundation for a happy future,” wrote Ludwig Erhard in his book “Prosperity for All”. This sentence has lost nothing of its validity more than 60 years later. On the contrary. In terms of financial policy, this means: as correct and necessary as it was to suspend the debt brake because of the corona crisis in 2020 and 2021, the following must apply: the state must not go into unlimited debt.
The debt brake enshrined in the Basic Law must take effect again – out of responsibility towards future generations and in order to be able to act in other possible crises. With a view to spending, priorities must therefore be set and infrastructure projects in analogue and digital areas must be prioritised
What applies to public finances also applies to our way of living and doing business.
We must not diminish the opportunities of future generations. The founding fathers of the social market economy were shaped by Catholic social teaching and Protestant social ethics: they had the preservation of creation in mind from the very beginning. In this respect, the social market economy has always formed the bracket that connects the principle of economic freedom with the principle of social balance and ecology.
The transformation is a long-distance run
In the 21st century, in times of climate change, digitization and transformation, the social market economy is facing ever more complex challenges, both nationally and internationally. It will therefore be essential for the future acceptance of our economic order whether we succeed in shaping this change in an economically sensible and socio-politically sensitive – i.e. fair – way.
The necessary structural change requires a joint effort by politics and business, science and society. This transformation is a long-distance run, offers design possibilities, contains chances and risks. The economic opportunities must be named and opportunities for participation must be guaranteed for everyone. Understandable fears and insecurities must be countered convincingly.
The conversion of an industrial nation to sustainability requires, on the one hand, long-term, binding targets and, on the other hand, appropriate freedom in terms of methods and instruments. Companies and investors, just like consumers, need planning security. At the same time, given the rapid pace of technological change, we must be open to new developments and innovations.
Use opportunities faster than before
They are crucial for our future international competitiveness. Prosperity for all requires investments in education and research – that is sustainability in the best sense of the word. Entrepreneurial freedom is not unlimited, it rather arises from the responsibility for the common good and society. A fundamental principle of the social market economy is the protection of competition.
Here there is a special challenge for the digital communication networks as well as for a long-term climate and environmental policy: The binding nature of their goals must be combined with a high degree of openness to innovation, personal responsibility and competition for the best solutions. The energy transition – as we are striving for it in Germany – is an example of this: Innovative solutions for climate-friendly forms of generating, using and storing energy compete with each other, while CO2 pricing gives emissions a price tag and those actors who use low CO2 Manage emissions, create competitive advantages.
Our country will maintain its competitiveness if it uses the opportunities offered by technological progress – faster and better than before. In too many areas of our society we are not keeping pace with digitization and are not promoting it sufficiently – the corona pandemic has relentlessly revealed that.
The guiding principles are freedom and responsibility
Right from the start, Ludwig Erhard advocated the free movement of goods and capital. He strove for multilateralism, for “overcoming protectionist and nationalist narrow-mindedness”. In view of the international developments and increasing protectionism worldwide, the commitment to open markets, more international free trade agreements and a reform of the World Trade Organization is more than ever the order of the day, especially for Germany as an export nation. This is all the more true since on January 1, 2022, the People’s Republic of China concluded the world’s largest free trade agreement with 14 other Indo-Pacific nations, which of course does not fully meet the demand for free trade.
“When implementing the principle of the social market economy, you become […] have to adapt to the changing conditions”, as Konrad Adenauer put it in 1946. Ludwig Erhard would certainly agree with that. Today and in the future, we must continue to develop our economic system – shaped by the guiding principles of freedom and responsibility, subsidiarity and solidarity – both nationally and internationally in line with the successful model of the social market economy.
Only if we apply the principles that have remained unchanged to the changed challenges and conditions, and question achievements and claims in a self-critical manner, can we achieve what Ludwig Erhard wanted and made possible: prosperity for everyone.
The authors: Hildegard Müller is chair of the jury for the “Social Market Economy Award” of the Konrad-Adenauer-Foundation and President of the Association of the Automotive Industry. Prof. Norbert Lammert is Chairman of the Konrad Adenauer Foundation and was President of the German Bundestag from 2005 to 2017.
More: How the relationship between state and market is shifting