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Principles of the "Social Market Economy" (December 19, 1962)

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Experience has shown that this goal, self-evident though it may seem, requires quite a subtle understanding of an order; and this is what the Social Market Economy should bring about. Thus the Social Market Economy is an integration formula that tries to lead the essential forces in our modern society to true cooperation. This situation of tension in society cannot be viewed as a static tension that can be solved through a one-time coupling of market economy and society security. The state of tension and conflict in our society is of course subject to change over time and requires that the respective strategic formulas for this irenic balance be continually sought anew so that they are up to their task. The Social Market Economy is therefore a strategy within the social arena. Whether it proves successful and attains its goal will never be determined precisely; rather, it will only become apparent in the ongoing process of resolving those internal conflicts of our society that we must face as reality. In the initial phase of its existence, the Social Market Economy, I believe, has resolved the issue of easing tensions in Central Europe and radiated its political effects outward. No longer challenged from within or without, it can now face the tasks of the future.

The essence of the Social Market Economy lies in producing – beyond restorative policies that conserve the past, or social dirigisme, which withers a society’s free initiative, or an undirected, uncontrolled market mechanism – a social solution in which all goals are brought into the most realistic possible balance. It is an irenic formula, not a utopian approach that tackles social problems from any side through power, intervention, dirigisme, conservatism, or the belief in a harmony that can be mechanically implemented.

The integration formula of the Social Market Economy as such is generally applicable. But it exists and gains its fruitfulness within the situation of our modern society. Its situation is determined by the fact that the speed of our progress in all areas of production, which technology has accelerated beyond comparison, and a mass society that is both mobilized and threatened by this development, are pressing for a balance within the framework of a free world. The value of this formula is confirmed by our experience that it is fundamentally possible to stabilize modern mass society through the channels of a free order in such a way. Not only will the upheaval of modern development be made tolerable for mass society; at the same time, society will also be able to share in the successes of this development as a whole. As an irenic formula, as a stylistic unity, the Social Market Economy not only encompasses an economic order coordinated by the market; the adjective “social” also indicates that this order pursues sociopolitical objectives. The significance of this sociopolitical side has not yet become very clear in this initial phase of the creation of the Social Market Economy. People were surprised to discover the social effects of the functioning of a competitive order and were otherwise content with a narrower interpretation of the word “social,” in the sense of older social policies as aid for certain disadvantaged social strata. I think it is now time to give more attention to the social policy goals of the Social Market Economy.

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