National Schools of Economic Thought in Germany and the Theory of Social Market Economy

Abstract

Since the 19th century, development of economic scientific schools in Germany was under the influence of specific historical realities – processes of industrialization, unification of the German states, world wars, economic crises, and so on. At different historical stages, representatives of the three generations of the German historical school — social school, ordoliberalism of the Freiburg school, or the theory of the social market economy — mostly advocated the idea of state reformism and paternalism demanding the existence of a “strong state” that provides the institutional framework of law and order (“ordnungsrahmen”). To some extent, they exerted intellectual influence on the development of the principles of economic policy in Germany forming its economic constitution and determining the nation's economic culture. This article traces the history of the genesis of the ideological foundations of the social market economy — the concept that laid the basis for the “economic miracle” in the post-war West Germany. As is known, the theoretical framework of this concept was based on various streams of socio-economic and legal thought. Firstly, we focus on the cultural and historical context of the formation of national economic schools in Germany in the second half of the 19th and beginning of the 20th century. Then we examine the main features of the crisis of the German economic science in the Weimar period and analyze the background for the emergence of the neoliberal economic thought in the second quarter of the 20th century. Furthermore, we explore the methodological nature of the ordoliberal doctrine of the Freiburg school (the theory of the competitive order) and systematize the basic principles of the theory of the social market economy. Finally, we do a brief historiographical excursus into the scientific discourse in Russia on the theory and practice of the social market economy in Germany.