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This chapter highlights Ludwig Erhard's initiatives in the realization of the social market economy in West Germany. Even during the Korean crisis, Erhard pressed ahead with his support for the most rapid possible re-establishment of multilateral trade. The concept of state-protected competition was an indispensable component of the social-market system. The main economic function of the state employed by Erhard was to keep the ring for the competitive market, and ensure that nobody was shut out of it by price rings, monopolies, or unfair trading-practices. He made strenuous efforts in the implementation of the anti-cartel law. Mitbestimmung in the coal and steel industries had been granted to the trade unions by the Allied occupation authorities in the British zone before 1949. It involved the election of worker representatives on to the supervisory boards of large firms. The Social Democrats saw it as a form of workers' control or, more specifically, control by trade unions. Erhard continued to press for a free-trade policy within the EEC and for an agreement with the European Free Trade Area (EFTA), which the British had established as some sort of riposte to the Treaty of Rome.

This chapter focuses on the political structure as well as political developments, and economic policies of the Social Democratic Party (SPD). The Social Democrats reconsidered the fundamental principles upon which their political movement was based, keeping in view the brutalities of the Third Reich and the similarities between dictatorships of a Fascist or a Communist complexion. Nazi repression also left its mark on the SPD, whether in exile or at home. Elementary objectives which Marxists had previously dismissed as self-evident or even secondary were given far greater importance because they affected only the ‘superstructure’ of society. Social Democrats gave central importance to ‘liberal’ objectives, namely, individual freedom from the fear of arrest, democratic rights to elect one's governors, and freedom of speech and assembly. Social Democratic economic policy was committed to implementing social market economy, considering the schemes of ownership, planning, controls, and fixed prices.

This chapter focuses on the challenges faced by Erhard and the obstacles to his economic policies, due to the Korean crisis. During the period before the Korean war, Erhard persistently continued his efforts to reduce controls and to lower taxation, and was making steady efforts to be back in the competitive world trade. Two measures which were forced upon him in conflict with his free-market principles were, firstly, the levy on consumer-goods industries to provide capital for improvements in other sectors, and the decision to agree with US demands for allocation of raw materials to particularly ‘vital’ areas of the economy, but to leave this allocation in the hands of West German business associations.

This chapter provides a conclusion regarding various aspects and theories of social market economy implemented in West Germany after the Great Depression. Income generated by the market was not necessarily distributed with social justice or with social conditions acceptable to civilized people. A state's budget redistributed income, and it was important to establish the proper principles of social justice upon which such taxation measures are based, always assuming they were in conformity with the market. The West German economy has been a tremendous advertisement for the blessings of market forces and competition. Even the most determined workers could not satisfy the needs of their fellow citizens effectively without a market-orientated economy. Even though protectionism and the price-fixing of German industrial practice were not abolished completely, they did lose respectability. Anti-cartel and anti-monopolistic policies were more weakly applied, but the propaganda campaign which accompanied them served to inculcate the idea of competition into the political culture of West Germany as something positive. The market worked in a semi-automatic fashion, and required ‘sensible management’ (sinnvolle Bedienung), since the organization of credit and money could not in practice be set up as a self-operating mechanism.

This chapter takes an account of the issues faced by the SPD in implementing economic reforms in the early 1950s. Reformers within the party were trying to reassess the fundamental values upon which social democracy was based. Karl Schiller was in strong favour of liberalizing the Social Democratic attitude towards competition and the market mechanism. The democratization of economic life through co-determination, planning through the direction of investment, and the support for heavy industry emerged as relatively realistic demands. The struggles for industrial co-determination, from the Social Democratic viewpoint, had important ideological implications. Worker participation in profits and the extension of share-ownership amongst a broader spectrum of the population was directly related to the issue of co-determination. Defenders of the term ‘welfare state’ of the social market economy regarded the versions supported by socialists as incompatible with the maintenance of stable prices and sound money.

This chapter takes an account of the efforts to establish neo-liberalism in post-war Germany. Businessmen set up a branch of the old German Democratic Party in Munster and contacted Miiller-Armack to discuss efforts needed to stabilize the currency crisis. He stressed that without a free-price mechanism it was impossible to make rational decisions about the allocation of resources. Müller-Armack developed his concept of the social market economy and in May 1948, he presented a blueprint, outlining its objectives and the means by which it could be achieved. The collapsing system of government controls needed to be replaced by the free market. Consumer choice would have the power to establish real prices and encourage production. Social security should be achieved and workers needed to be given ‘social right to participate’ in the organization of their work (ein soziales Mitgestaltungsrecht), without, reducing managerial initiative and the responsibility of the employer. Monopolies needed to be resisted to prevent the abuse of economic power. The Wangeroog programme emphasized preventing the abuse of property and opposing monopolies, but specifically provided for market-regulation agreements, and claimed that a general ban on such agreements was ‘untenable for economic reasons’.

The social market economy was a first key term used in the formation of the Federal Republic of Germany, firstly to describe how a market economy (i.e. capitalism) could contribute to social order, and secondly to suggest that the market alone could not preserve social order but required social supplements. The term was initially associated with the self-described neoliberals (now known as ordoliberals), and justified a return to the free market. Even within this group, however, there were differences about how a market economy could be “social” and what kinds of measures were necessary to make capitalism compatible with social order and democracy. Beyond this group, Social Democrats also adopted similar ideas at the same time. Despite the intentions of the most economically liberal of the ordoliberals, the idea of a social market economy came to include extensive state intervention to preserve social order.

This chapter deals with the impact of neo-liberal ideas on national policy agendas in Germany, Britain, and the United States in the second half of the twentieth century. It looks at the attempts to overcome interventionism and to place liberal ideology at the heart of new policy proposals. In Germany, the chapter details the nature of ordo-liberalism and the rise of the Social Market Economy in the 1950s; in Britain, it explores the grassroots opposition within the Conservative Party in the 1960s and 1970s and the origins of the New Right; and, in the United States, the chapter examines the impact of neoconservatism on economic policy measures. Its main contention is that neo-liberalism in the post-war years did not represent one single strand of thought, but rather a heterogeneous movement of ideas. All exhibit similarities and represent a variation on a common doctrine: a distrust of the state.

This chapter focuses on Erhard's economic policies as economic director of the Bizone and his alliance with the CDU. Erhard considered that a party like the CDU would obviously give the freedom and worth of the individual personality high priority, and would also bring with it consequential requirements in the field of economic policy. The chapter also highlights the Ahlen Programme, a socio-economic statement influenced by Christian Socialist thinking including an apparent commitment to replace capitalist strivings for profit and power with devotion to the common good. The social market economy of Erhard is in sharp contrast to the so-called ‘free economy’ of the liberalistic variety. He was of the view that in order to prevent a relapse into the ‘free economy’, it is necessary to protect creative competition by independent control of monopolies.

This book discusses the concept of social market economy, ‘socialism with a human face’, a form of liberalized collectivism. It cites examples from former Communist countries, specifically, the case of the social market economy in West and East Germany. It also highlights problems encountered with the introduction of free-market capitalism. The book elaborates various socio-economic theories and emphasizes that the issues of mass unemployment and working-class alienation are present even today as they were during the Great Depression. The concept of corporatism and its impact on Germany's economic society is also discussed.

This chapter traces the long-term development of German capitalism from the vantage point of uneven and combined development. It argues that Germany’s postwar social market economy was built upon an externally oriented developmental model inherited from its belated insertion into the world market, and used to enroll capital and labor in a global export offensive. The underlying vision of Germany as the workshop of an advanced industrial and newly industrializing world coincided with the postwar plans of the United States for an open, multilateral global economy. And yet the chapter cautions that the prevailing image of Germany as a liberal “trading state” (Handelsstaat) that had traded power for wealth as its prime objective fails to capture the novel ways in which the German state, from the crisis of the 1970s onward, has come to exert its influence internationally to sustain this export-led social model.

This chapter explores how the German political economy was transformed by the global rise of neoliberalism and how this change feeds into Germany’s approach to the eurocrisis. Rather than being pushed down an Anglo-American road, German policymakers still seek to preserve what is left of the domestic compromise between capital and labor. The chapter argues that China’s massive demand for German exports informs the long-term vision of a neoliberal Europe structurally adjusted to support the global position of German manufacturers. At the same time, the perceived threat of US interest rates rising out of step with economic conditions in Europe and emerging markets hardened the German stance on austerity during the fever-pitched policy battles at the height of the eurocrisis. Together, these international pressures and opportunities have produced the predicament of German primacy as a transformative and yet destabilizing force within the EU.

This chapter focuses on Ludwig Edward's contribution to the origin of the social market economy. Erhard was not in favour of the social aspects of the new economic liberalism, but liked the productive advantages of the market economy. The federal structure of Germany during the bizonal phase is highlighted here. Erhard's published a number of articles in the Neue Zeitung about his ideas. He blamed capitalism for betraying the basic principles of the market economy, ‘namely competition and price freedom’. As Economics Minister in Munich he faced many problems ranging from looting to demobilization, and also with developing Bavaria's export capacity. In the American zone, on the other hand, the Germans were able to exercise more self-government as the result of the creation of Land, or state, governments.

This chapter talks about the concept of “neoliberalism,” which some authors erroneously identify with “classical mainstream economics,” and its relationship with the idea of “social market economy.” The neoliberal trend in economics maintains the supremacy of the free market and private enterprise over the state and social policy, and will soon lead to neoliberal policies that limit the role of the state in the economy. Neoliberalism in itself is seen not as a utopia, but as an effective method of protecting group interests at the cost of the interests of others. The chapter explains how economic liberalization was incorrectly presented as identical to the shift to a market economy, and that it is the combination of government with the market that will continue to change the world. The key element here is the coexistence in time and space of globalization and neoliberalism.

Competition policy has been said to lie at the heart of the German social market economy and to have been a key influence on the EC competition regime. This chapter assesses the impact of Europeanization on the competition law policy domain in the light of earlier claims that suggest a marginalization of the Federal Cartel Office. The question is pursued through three case studies that involve three different Europeanization dynamics: those of domestic assimilation of EU policy provisions, of informing policy change at the EU level, and of ‘collision’ between national and Commission policy preferences. The cases cover three distinct policy issues: the Europeanization of domestic competition law, attempts to shape changes to the EC regime's Regulation 17/62, and efforts of the DG Competition to prohibit the fixed-book price agreement between Austria and Germany. While those cases leading to domestic policy change suggest a considerable degree of national ‘resilience’, the example of ‘informing EC policy change’ points to the declining influence of the German approach vis-à-vis other national competition law experiences, Commission preferences, and changing competition policy ‘ideas’.

This chapter explores how German elites molded a bare majority to support a “Christian” policy to respond to the dire economic situation still facing the country, under the leadership of the first post-Nazi chancellor, Konrad Adenauer. The first advocates of the “social market economy” argued that the policies underpinning it reflected “our Christian way of thinking”: principles ultimately rooted in Christian scripture. Their party affiliation was either the Christian Democratic Union (CDU) or the Christian Social Union (CSU), whose leaderships ran their campaigns in conjunction with each other and together formed a bloc (CDU/CSU) in national legislative bodies. The last time German politicians had attempted to forge an interconfessional “Christian” economic policy, Protestant liberals and Catholics had infamously failed in their charge. Twenty years later, however, the attempts met with more success.

This chapter examines the myth and reality of Ordo-liberal intellectual capture of Germany and the role of Ordo-liberalism in efforts to construct a new post-war national unifying myth. It focuses on the genesis of the concept of the social market economy and its relationship to Ordo-liberalism; on the distinction between fundamentalists and realists in Ordo-liberalism; and on the differences between philosopher-economists and statesmen-economists. Close attention is paid to the ideas and role of Ludwig Erhard and his network of support; the institutional appropriation of Ordo-liberalism by the Bundesbank, the federal cartel office, and the federal economic ministry’s economic policy division; and the role of Ordo-liberalism in competition policy, in European economic and monetary union, and in German policy during the euro area crisis. At the same time, stress is placed on the gaps in Ordo-liberal thinking and counter-national unifying myths, drawing on social Catholicism, social partnership, and civilian power. The chapter has three main case studies: of Ordo-liberalism in the Great Depression, focusing on the Brauns Commission, the Lautenbach Plan, and the role of Wilhelm Röpke; central bank independence, monetary policy reform in the early 1970s, and the ‘monetarist revolution’; and Alfred Müller-Armack’s proposal for a European Stabilization Board. These case studies use archival evidence. The chapter closes with reflections on the significance of Ordo-liberalism in Germany.

This chapter focuses on France and Germany, the two largest economies of the European Union, comparing recent economic and social developments. It finds that the two economies rely on different growth models, with important social implications. Germany’s postwar economic growth model was strongly based on exports and typically proved more volatile, while gross domestic product (GDP) growth in France was more focused on domestic demand and is usually more stable while on average generating a somewhat lower growth. The flexible German labour market allowed unemployment to decrease, albeit at the expense of higher income poverty and a larger low-wage sector. In France, instead, lower income poverty and a smaller low-wage sector were accompanied by a relatively higher unemployment rate. Recently, the gap between the two growth models and the resulting differences in social outcomes has appeared to be narrowing, reflecting the slowdown in the global cycle and more institutional focus in Germany on inclusiveness and in France on flexibility.

After the Second World War, Western Europeans had to rebuild their nations’ economies. This chapter describes the varieties of capitalism they adopted: social democratic, organicist, and social market. The chapter looks at how these economies differed in terms of property rights, government planning, labor relations, and social welfare. It illustrates a key insight of institutional economics: that there are a variety of capitalisms dependent on different institutional arrangements. The chapter also looks at important social changes, such as the increasing affluence of European society and the early stages of European integration. All these developments set the stage for postwar Catholic thinking about the economy.