Evolution of the Social Market Economy

  • Hans Otto Lenel
Part of the Trade Policy Research Centre book series (TPRC)

Abstract

The work on the theory of economic systems and on the resulting policy in Germany as well as its outcome can only be fully understood by considering the situation of economics and economic policy at the beginning of the 1930s and during the following decade. In economics, the influence of the ‘Historical School’ and the accompanying neglect of theoretical thinking had passed its peak by the end of the 1920s.2 A number of German economists—only a few to begin with—had recognised that the economist cannot do justice to his task without sufficient theoretical training. Walter Eucken, Wilhelm Röpke, Alexander Rüstow and others searched for a new approach to economic problems. They were also encouraged to undertake this search by the discontent with German economic policy, which was at that time being pursued without any clear idea or sufficient analysis of underlying forces.

Keywords

Economic Crisis Income Assimilation Turkey Expense 

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Notes and References

  1. 2.
    See Joseph A. Schumpeter ‘s remarks about the necessary requirements for becoming an economist in Germany in his’ History of Economic Analysis (New York: Oxford University Press, 1954) p. 804.Google Scholar
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    The book is still of great importance, although some topics are seen differently today, 39 years after Walter Eucken’s death. See, for example, Erich Hoppmann, ‘Die Funktionsprinzipien und Funktionsbedingungen des Marktsystems’, in Lothar Wegehenkel (ed.), Marktwirtschaft und Umwelt (Tübingen: J. C. B. Mohr [Paul Siebeck], 1981).Google Scholar
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    Müller-Armack, ‘Konjunkturpolitik als Voraussetzung der Währungsreform’, loc. cit., p. 257. Whoever experienced the desperate situation at the time can really only be astonished that it is disputed by the economic historian, Werner Abelshauser, in ‘West German Economic Recovery 1945–51: a Reassessment’, in Three Banks Review, Edinburgh and London, No. 135, 1982. He puts the date of the economic revival at the end of 1947 and claims, among other things, that the capital stock in industry in the areas occupied by the British and Americans had increased by 20 per cent from 1936 to 1945. He claims that in 1948, the capital stock amounted to 111 per cent of the 1936 figures (p. 35) and that German industry had been well equipped with tangible assets in 1945 (p. 37). It seems to me that his essay is a comment on the fallibility of statistics (which, in this case, are mostly Werner Abelshauser’s estimates) rather than a contribution to the interpretation of the economic history of that time. See also Walter Eucken’s remarks on the situation in his book Grundsätze der Wirtschaftspolitik (Bern and Tübingen: Francke and J. C. B. Mohr [Paul Siebeck], 1952) p. 368Google Scholar
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    The first reports were published in Göttingen by Otto Schwartz & Co. in 1950 and reveal the intellectual work done on the reshaping of the system. Walter Eucken and Franz Böhm, among others, belonged to the Advisory Council during the crucial time before, and shortly after, the currency reform and the lifting of price controls in 1948.Google Scholar
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    Gäfgen writes of a ‘vast multitude’ of conceivable forms of economic system, but then limits the ‘scope of order policy’ without mentioning criteria for this limitation. See Gäfgen, op. cit., p. 61.Google Scholar
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    Henry M. Oliver, ‘German Neoliberalism’, Quarterly Journal of Economics, Cambridge, Massachusetts, Vol. 74, 1960, p. 140, unjustly doubts that Ordonnerais gave equal status to the aim of a system which ‘respects human dignity’, because Eucken treats it in less detail. The appropriate ‘Kantian’ considerations are not in my opinion ‘at least far in the background’. The experience of a system which did not respect human dignity after 1933 was sufficiently plain.Google Scholar
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    For him it is also part of the social character of a market economy that competition policy, monetary policy and anti-cyclical policy are pursued. See Alfred Müller-Armack, ‘Stil und Ordnung der Sozialen Marktwirtschaft’, in Müller-Armack, Wirtschaftsordnung und Wirtschaftspolitik, op. cit., p. 234.Google Scholar
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© Trade Policy Research Centre 1989

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  • Hans Otto Lenel

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