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Social market economy

Free economic activity

The German economy has been based on the social market economy concept since the middle of the 20th century. This approach dates back to Ludwig Erhard, the first Federal Minister for Economic Affairs (from 1949 to 1963) in the Federal Republic of Germany. It guarantees companies free economic activity and provides for social equilibrium. 

The social market economy was never particularly enshrined in the German constitution as the constitution does not contain a separate section on the economy. Key elements of the German legal system, including the fundamental rights, freedom of contract and association or the right to make your own career and job choice, form the basis for the social market economy. 

 

Social equilibrium 

In addition to the free market, social equilibrium is the second principle of the social market economy. It is intended to provide social protection for those who are unable to earn their own living due to age, illness or unemployment. Germany has an elaborate network of social security systems for this: statutory health, nursing care, unemployment and pension insurance, financed in equal measure by employers and employees alike. Virtually all of the residents of the country are covered by sickness insurance. 

The social partnership of employers or employers' associations and trade unions regulates working conditions and is laid down in the German Labour Law. The German constitution guarantees the collective bargaining rights of the social partners. It allows them to independently regulate the working conditions in collective agreements.



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Bildungswerk der Baden-Württembergischen Wirtschaft e.V.
Davidstraße 41,
D-73033 Göppingen

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Karin Nagel

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