ABSTRACT
The German economy, i.e. the economy of the Federal Republic of Germany developed after World War II, is called a ‘Social Market Economy’. On what theory, if any, is this kind of economy based? Was it formed under any particular circumstances? It is not easy to answer these questions, because it is difficult to define the Social Market Economy in terms of economic theory. Alfred Müller-Armack used this term first in a debate about the reconstruction of the German economy. But before it was appropriated by economists, the term came to be used widely by politicians and journalists.1 A Social Market Economy was incorporated in the platform of the Christian Democratic Union (CDU), which became the ruling party of the Federal Republic. In time, the economic policies of Cabinet Minister Ludwig Erhart came to be associated with the term, which was used widely during the rapid economic reconstruction of Germany produced by the so-called ‘economical miracle’ in the 1950s and 1960s. Not only did Müller-Armack coin the phrase ‘Social Market Economy’ but also, as one of Erhart’s most prominent advisers, he was deeply concerned with contemporary economic policy. Therefore, his thoughts on the subject must be considered in order to understand the implications of the Social Market Economy.
