From order to prosperity: The importance of competition in the Social market economy model

Abstract

Searching for an institutional structure which enables economic success is in the midst of the practical efforts of governments all around the world, as well as the academic studies endeavoring to understand the sources of success in the most prosperous national economies. The supremacy of the German economy in the European Union, as well as worldwide - from the level of the GDP per capita to high productivity, innovativeness and export performances - is the basic motivation this study rests on. Due to the fact that, unlike a failure, an economic success is always achieved in the long run, this study is aimed at revealing the (historical) institutional roots that have paved the way for the economic success of contemporary Germany. In that context, the model of the Social market economy, i.e. the competitive order (Wettbewerbsordnung), its meaning and importance in solving the allocative equation and reaching the high levels of economic efficiency are the subject matter of analysis in this paper. The key results refer to the identification of the diverse economic and social benefits that a competitive order brings into being, as well as the determination of and pointing to the essential institutional preconditions which such an order is feasible in.