4 characteristics of the social market economy
The social market economy was introduced as a further development of the free market economy by Ludwig Erhard and Alfred Müller-Armack. This restricts the freedoms in economic markets to maintain social justice. Certain features are characteristic of this economic system.
1. Feature # 1: The autonomy of the market
Market autonomy means that the companies that come into contact with one another in the market decide for themselves which products to offer when and at what price. Every entrepreneur draws up an economic plan himself. In contrast to the planned economy, the state has no influence on this. At the same time, however, the entrepreneur alone bears the entrepreneurial risk, as there is no guarantee of purchase for the goods produced.
2. Feature No. 2: Private ownership of the means of production
In addition to consumables such as raw materials and intermediate products, the means of production also include consumables such as machines, buildings and vehicles. In the social market economy, these means of production also belong to the company or company. the owner of the company as the profit made with them. The latter serves to compensate for the entrepreneurial risk.
3. Feature No. 3: The commercial principle
Companies in the social market economy act according to the commercial principle. One tries to make a profit while observing the economic principle. The opposite is found in institutions such as health insurance companies, public offices or cooperatives, since they are after work according to the needs-based principle, i.e. they are solely out to meet their needs and are not allowed to make a profit do.
4. State control - the most important of the characteristics of the social market economy
The preceding three characteristics are typical not only of the social, but also of the free market economy. If the markets regulate themselves completely freely, however, the law of the strongest always applies. To determine the position of the weaker parties such as B. To strengthen the consumer or the employee, the state intervenes in the social market economy to regulate it. This enables a social balance. Laws such as the Cartel Act or the labor laws are intended to ensure that all parties involved can act with one another on the same level. Subsidies enable ailing industries to survive. This is the most typical of the characteristics for this economic system.
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