Policy Brief „Future Social Market Economy“
* is a publication from a project from the Bertelsmann Stiftung by the same name. With this project, the Bertelsmann Stiftung aims to contribute to the revival of the Social Market Economy, modernize its principles and position it at the European and global levels as an impulse for a sustainable economic order.
* is a critical position paper / a series of critical position papers on current topics and events revolving around questions of the Social Market economic model in Germany, Europe and the world. Approximately 6-8 publications are released annually in irregular intervals. The language of the publication depends on the context (either German or English). Each author is alone responsible for the content, which does not necessarily represent the opinion of the Bertelsmann Stiftung.
Latest Policy Briefs
Europe’s Sustainability Strategy - A Casualty of the Euro Crisis or an Ambitious Restart?
Europe’s economy should not just grow, it should also target social inclusion and the responsible use of resources. The goal of sustainability may be embedded in the Treaty on European Union and the EU’s economic strategies, but the emphasis on GDP growth and competitiveness in battling the crisis threatens to undermine efforts to establish a common approach for sustainable economic activity. This may be unavoidable during an acute crisis. But in the long term, the EU must show the way forward.
Sustainability and solidarity – basic ideas of new financial structures
Federal financial structures which include fiscal equalization between the states are and will remain to be indispensable. Such structures are required to equalize the significant regional economic differences which exist within the federal republic and to ensure sufficient funding for the responsibilities of the public sector across the nation. The current federal financial structures have a number of structural flaws which regard both the criteria for tax distribution, the design of the debt brake and the role of municipalities. The financial structures will have to be revised beginning in 2020. The objective is to consolidate in the long term the budgets of federation, state and municipal governments and to safeguard a modern welfare state.
Economic impact of Southern European member states exiting the eurozone
While Greece defaulting on its sovereign debt and leaving the European Monetary Union would in and of itself have a relatively minor effect on the world economy, such a move could, however, undermine investor confidence in the Portuguese, Spanish and Italian capital markets and thus provoke not only a sovereign default in those states as well, but also a severe worldwide recession. This would in turn reduce economic growth by a total of 17.2 trillion euros in the world’s 42 largest economies in the lead-up to 2020. Hence it is incumbent upon the community of nations to prevent Greece from a sovereign default as well as leaving the euro, and the domino effect that this event could induce.
Maastricht 2.0 - Proposed reform of EU sovereign debt rules
The European Union’s regulations governing sovereign debt are based on the principle of equal treatment of all member states. The recommendations we make here concerning changes in European Union sovereign-debt reduction rules take account of national particularities, but are by no means arbitrary in nature. According to the calculations we present here, such reformed regulations would do far more to promote economic growth than would be the case under the Fiscal Compact’s European debt brake. By 2030, real gains in growth will amount to more than 450 billion euros more than the outcome that would presumably be obtained under the European debt brake.
Measuring the Modern Social Market Economy
The “Index of Modern Social Market Economies” (MSME Index) defines and measures the features of a modern social market economy in international comparison. In contrast to other indices that measure economic performance, the MSME Index takes an institutional approach, outlining a sys-tem of essential institutions and measurable indicators for the construction and assessment of modern social market economies. Among other insights, the index could guide the European Union toward achieving the “highly competitive social market economy” that it defines in the Lisbon Treaty as its desired economic order.
The "social" in the social market economy – Justice in Europe
The social market economy is coping with its most threatening crisis to date. Not only has it been caught in the global financial and economic crisis, but it has also slipped internally into its own deep crisis (of confidence). Some are posing the "social question" anew, while others are focusing their questions on the "social" of the social market economy. Either way, social justice and participation are core requirements for a sustainable economic and social model. These concepts include central aims such as poverty prevention and inclusion, which as socio-political modes of activity are also subject to cross-national comparison and assessment.
Global imbalances – China-bashing is no solution
The discussion over global current account imbalances has intensified. Notions such as currency wars have come to dominate the debate. Many economists and politicians consider the rapid revaluation of the yuan to be a panacea for global imbalances. However, such a one-dimensional approach runs the risk of triggering a global economic slump. Moreover, an abrupt and massive revaluation of the yuan will do little if anything to address the low U.S. savings rate and the trade surpluses run by other Asian emerging economies. Thus, the elimination of global imbalances demands instead a mix of measures involving action by deficit-running countries as well as countries with a trade surplus.
Shaping Sustainable Economies – Holistic Strategies and Principles
A society acts sustainably if it ensures the long-term stability and productivity of ecological, sociopolitical and economic systems. In the past, issues of sustainability were typically handled separately, neglecting individual measures’ effects on other elements implied by a comprehensive conception of sustainability. The challenge ahead is to develop a holistic strategy for sustainable economic activity that takes into account interdependencies between the various aspects of sustainability, and does not seek to solve problems of sustainability at other aspects’ expense.