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German Economy

The Germans proudly label their economy a "soziale Marktwirtschaft ," or "social market economy," to show that the system as it has developed after World War II has both a material and a social--or human--dimension. They stress the importance of the term "market" because after the Nazi experience they wanted an economy free of state intervention and domination. The only state role in the new West German economy was to protect the competitive environment from monopolistic or oligopolistic tendencies--including its own. The term "social" is stressed because West Germans wanted an economy that would not only help the wealthy but also care for the workers and others who might not prove able to cope with the strenuous competitive demands of a market economy. The term "social" was chosen rather than "socialist" to distinguish their system from those in which the state claimed the right to direct the economy or to intervene in it. 

Beyond these principles of the social market economy, but linked to it, comes a more traditional German concept, that of Ordnung, which can be directly translated to mean order but which really means an economy, society, and polity that are structured but not dictatorial. The founders of the social market economy insisted that Denken in Ordnungen --to think in terms of systems of order--was essential. They also spoke of Ordo-Liberalismus because the essence of the concept is that this must be a freely chosen order, not a command order. 

Over time, the term "social" in the social market economy began to take on a life of its own. It moved the West German economy toward an extensive social welfare system that has become one of the most expensive in the world. Moreover, the West German federal government and the states (Länder) began to compensate for irregularities in economic cycles and for shifts in world production by beginning to shelter and support some sectors and industries. In an even greater departure from the Erhard tradition, the government became an instrument for the preservation of existing industries rather than a force for renewal. In the 1970s, the state assumed an ever more important role in the economy. During the 1980s, Chancellor Helmut Kohl tried to reduce that state role, and he succeeded in part, but German unification again compelled the German government to assume a stronger role in the economy. Thus, the contradiction between the terms "social" and "market" has remained an element for debate in Germany.  

Given the internal contradiction in its philosophy, the German economy is both conservative and dynamic. It is conservative in the sense that it draws on the part of the German tradition that envisages some state role in the economy and a cautious attitude toward investment and risk-taking. It is dynamic in the sense that it is directed toward growth--even if that growth may be slow and steady rather than spectacular. It tries to combine the virtues of a market system with the virtues of a social welfare system. 

Germany's Thirty Largest Industrial Firms, 1993

Firm Sales (in billions of deutsche marks) Employees (in thousands)
Daimler-Benz 97.7 366.7
Siemens 81.6 391.0
Volkswagen 76.6 253.0
VEBA 66.3 128.3
RWE 55.8 118.0
Hoechst 46.0 172.5
BASF 43.1 112.0
Bayer 41.0 151.9
Thyssen 33.5 141.0
Bosch 32.5 156.6
BMW 29.0 71.0
Mannesmann 28.0 127.7
Metallgesellschaft 26.1 42.6
VIAG 23.7 80.7
Ruhrkohle 23.4 111.2
Preussag 23.3 73.3
Adam Opel 23.0 50.8
Deutsche Shell 21.4 3.2
Ford 21.2 43.8
Hoesch-Krupp 20.5 78.4
ESSO 19.4 2.4
MAN 19.0 57.8
Bertelsmann 17.2 50.5
Degussa 14.9 32.1
Deutsche BP 14.7 2.8
Ruhrgas 14.3 11.6
Henkel 14.1 40.5
IBM Deutschland 12.6 25.0
Ph. Holzmann 12.5 43.8
Agiv 10.0 42.7

- Domestic Economy and International Economic Relations
- Bundesbank
- The Economic Miracle
- Impact of Unification on German Economy
- Germany in the World Economy
- National German Currency
- Culture of German Management

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