Social market economy

The social market economy is a German success story. Our social and economic order is a supporting pillar of our community and a guarantor of economic success, prosperity and social stability. Germany is one of the richest countries in the world today, partly because of the social market economy.

Social market economy is our value foundation
Freedom and responsibility, subsidiarity and solidarity are values on which our economic order is based and which underpin the success of the social market economy. The hallmark of the social market economy is the simultaneous pursuit of economic success and social balance. A legal framework for fair competition and economic development for the benefit of all is the political foundation. The social market economy offers freedom for self-development and creativity and rewards performance. It strengthens the responsibility of the individual and enables solidarity for all.
Combining freedom with responsibility - creating equal opportunities
At the heart of the social market economy is the free individual with a natural striving for personal development. Inseparably linked to this is the principle of responsibility for one's own conduct of life. Personal responsibility is the fundamental contribution of every human being to the community. Those who are unable to do so are compensated by social insurance or welfare systems and supported by the community of solidarity.
The total of all social benefits provided in Germany reached a record value of around €1040 billion in 2019 - i.e. over one trillion euros. In recent years, social benefits have consistently accounted for around one-third of GDP. In 1960, by contrast, the social benefit ratio was only 18.3%. Companies and employees must not be overburdened with social security contributions, especially in view of the demographic development in Germany - after all, every state social benefit must first be earned. (Source: BMAS 2019)
The extensive social security systems must not lead to permanent dependence on social benefits. Rather, all people must be enabled to stand on their own two feet in the long term. Only those who take responsibility for themselves can also take responsibility for others. It is therefore important to invest in education and training. Every individual must be given the opportunity to contribute to society and the economy with his or her own abilities. Independence and initiative, creativity and a willingness to take responsibility are prerequisites for a dynamic market economy - these virtues must be actively promoted and taught at an early age.
Strengthen the autonomy of collective bargaining
The right to conclude collective agreements is an expression of the principle of subsidiarity in the social market economy. Employers' associations and trade unions jointly regulate working conditions without the state having any direct influence on them. With more than 77,000 collective agreements, the social partners in Germany have created a differentiated system of industrial relations that brings the economic necessities in a company into the desired harmony with the social participation of the employees. In this way, instead of blanket state regulation, individual responses can be developed close to the reality of the company. The principle of social partnership - the will to find consensual solutions - makes stability and social peace possible, strengthens social justice and contributes significantly to growth, employment and prosperity. Particularly in times of crisis, social partnership gains decisive importance through the joint assumption of responsibility by the collective bargaining parties and contributes to general acceptance.

Facts and figures

In 2019, Germany provided social benefits worth around €1,040 billion - that's over a trillion euros.