Page 74 - The Making of the German Post-war Economy

1.3

THE COLOGNE SCHOOL AND

SOCIAL MARKET ECONOMICS

The Social Market Economy as a regulative policy aims to combine,
on the basis of a competitive economy, free initiative and social progress. 1
(Alfred Müller-Armack, 1956)

In order to return to economic liberalism after more than a decade of a
controlled economy, and in view of the absence of functioning market
principles in the immediate post-war years, the ordo-liberal competitive
order was further developed by the Cologne School around the economist
and anthropologist Alfred Müller-Armack who therefore coined the term
‘Soziale Marktwirtschaft’ (Social Market Economy) in a publication in
December 1946. Although it evolved from ordo-liberalism, this concept
2
was not identical with the conception of the Freiburg School as it
emphasised the state’s responsibility actively to improve the market
condition and simultaneously to pursue a social balance. In contrast to
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Eucken, who sought an answer to the social question by establishing a
functioning competitive order within a constitutional framework, Müller-
Armack conceived the Social Market Economy as a regulatory policy idea
aiming to combine free enterprise with a social programme that is
underpinned by market economic performance. In putting social policy
4
on a par with economic policy, Müller-Armack’s concept was more
emphatic regarding socio-political aims than the ordo-liberal economic
concept. This dual principle was also to be found in the name of the
model. Although the adjective ‘social’ was often criticised as a decorative
5
fig leaf or conversely, a gateway for antiliberal interventionism, it meant
more than simply distinguishing the concept from that of laissez-faire
capitalism on the one side and of ordo-liberal conceptions on the other.
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In drawing on Röpke’s anthropo-sociological approach of an economic
humanism leading to a ‘Civitas Humana’, Müller-Armack pursued a
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