SOCIAL MARKET ECONOMY
| GERMANY |
| SOZIALE MARKTWIRTSCHAFT SOCIAL MARKET ECONOMY |
The basic form of economic organization in the Federal Republic is called a social market economy. Like a free market economy, it is an economic system in which the supply of and demand for goods and services, co-ordinated and made consistent with each other by movements in prices, are in principle left to the individual decisions of buyers and sellers. In addition to this an attempt is made, by means of regulatory framework legislation, to prevent restraints on competition resulting from monopolies and cartels ( merger ). And all this is backed by a social policy directed at a socially desirable degree of corrective adjustment of income distribution and at protection of the weaker members of society. In labour law there are elements of economic democracy in the corresponding regulations of the works constitution and co-determination . The structural principles of the social market economy are secured in the Basic Law: the principle of the welfare state, the economic system and system of regulating competition, community tasks and the traditional fundamentals such as private ownership, freedom of contract and consumption, freedom of information and association, freedom of settlement and freedom of occupation. Expropriation and nationalization are possible by or in virtue of a statute and in return for compensation. Thus, the Basic Law does not decide in favour of any particular economic system and enables the legislators to pursue any constitutional economic policy which they think suitable.
Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.