Building a New Europe: what happened to the social market economy?

Building a New Europe: what happened to the social market economy?

by Pieter Vergouw

Illustration by Célia Mortureux 

The death of Jacques Delors, the first and arguably the most effective president of the European Commission, at the end of last year marks the end of an era in the field of European integration. Recent developments, from Brexit to the confrontational shenanigans concerning EU funds between the European parliament and Hungary’s Viktor Orbán, have seen the aims of the European Union seem further away than ever. These aims, originally enshrined in Article 2 of the Treaty on the European Union (TEU), are to promote peace, its values and well-being of peoples, as well as to offer its citizens an area of freedom, justice and security without internal frontiers. As these objectives are now put to the test, perhaps this is a good time for reflection but also to think about the future of the European project.

There have been fervent debates on the constitution of the Union and the role it should play in the world. Convinced pan-Europeans like Guy Verhofstadt, former prime minister of Belgium, have made the point of a federal Europe, while accusing Eurosceptics such as former UKIP-leader Nigel Farage of ‘trying to destroy the Union from within’. Others, especially in Nordic countries like Denmark, favour a more introspective approach and have focused instead on a stronger role for the European Council, the representative body of the member states. 

In his article ‘The Neo-liberal Bias of the EU Constitutional Order: A Critical Analysis’, Bojan Bugaric takes a different view and argues that the constitution of the EU systematically biases neo-liberal policies. According to Bugaric, this has been prevalent since the beginning of the European project, when Delors’ ambitious integration programmes and his idea of a social Europe was met with strong neoliberal-nationalist resistance. Across Europe, a divided Left was unable to turn the tide and when they did come to power they failed to leave a lasting influence on the EU’s economic constitution.[1] Bugaric argues that the Left never really succeeded in developing a ‘post-national, EU approach’ to social policy. Instead, member states were heavily focused on promoting the alleged success of their own versions of a welfare state as a model for an EU-wide policy.  

A crushing austerity policy that was set in motion during the Eurozone crisis in 2009 has certainly not helped to change things for the better. The establishment of the European Monetary Union (EMU) resulted in member states relinquishing not only their autonomous monetary policies but also accepting substantial restrictions on fiscal policies such as limits on government debts and deficit, prompting scholars to exclaim that the EU at its current trajectory can never be a social market economy.[2]

The term ‘social market economy’ dates back to post-World War II Germany and entailed an economic model that coupled free-market capitalism with a strong commitment to social policies such as universal health care, social housing policies and unemployment benefits. The idea was initially championed by Ludwig Erhard, who was at the time a capable crisis manager in the Konrad Adenauer’s government and who is still hailed as the ‘father of the social market economy and the German economic miracle’.[3]

In the aftermath of the 2007-2008 financial crisis the term was back into the limelight in part because of Angela Merkel when she commented on the unsustainable costs of the German welfare state in the years ahead while praising the role that the social market economy played in German society since the country’s reunification.[4]
Ria Slegers, lecturer at the Open University, has extensively researched the concept of the social market economy. She finds that almost everyone overlooks the characteristic of ‘private responsibility, taken personally’.[5] According to Slegers, the key issues with realizing  a social market economy that works for everyone are that people are too entrenched in their own belief systems and not focusing enough on the bigger picture, to the detriment of other groups. She believes in a society where people take more political responsibility in situations where lobbyists have too much power and the interests of citizens are sidelined. 

Governments are now too exposed to various conflicts of interest that can easily lead to important decisions being made based on effective lobbying, public opinions or poorly substantiated theories accompanied by boisterous soundbites. What immediately comes to mind is Brexit, where prime minister Boris Johnson in 2019 promised an ‘oven-ready deal’ to take Britain out of the EU.[6]
What followed was less warm and fuzzy, namely internal division in society and frosty diplomatic relations between Britain and the EU.

A social market economy needs a fertile climate in order to thrive and to establish this, Slegers urges us to go back to the basics. It is true that a main driver for the European project were economic and security reasons, think of the European Coal and Steel Community (ECSC), where the production of coal and steel was placed into a single common market under joint authority. It is however too easily forgotten that the EU was also established for social reasons. 

Like Bugaric, Slegers acknowledges that with regard to social policies, EU member states have been too busy jealously guarding their own approach to welfare systems, social housing and the like and have been too unwilling to compromise. The result is division instead of unity. As a whole, government policies are geared towards promoting the interests of large corporations, while other groups in society, such as entrepreneurs and ordinary citizens, are neglected. Slegers points to government procurement policies in the Netherlands which disproportionately favours very large companies. Small and medium-sized enterprises (SMEs) on the other hand are sidelined, entangled in bureaucratic red tape which stifles their competitive edge.

Instead, government policy should be organized in such a way that decisions are impartial and independent, and in order to facilitate stability they should function as automatically as possible, i.e. according to a framework with a fixed set of rules. This includes more consistent regulations to protect workers’ rights, ensure fair wages, and prevent exploitation. The overarching goal is to strike a balance where economic growth coexists with social welfare, recognizing that a prosperous society is one where wealth is not concentrated among a few, but broadly distributed. 

This will prevent companies from being sidetracked on compliance issues, while people are overlooked or burdened with ineffective tasks. Consider the corporate training circuit, often regarded as an unwelcome and endless merry-go-round of workshops and online seminars. More people-oriented organizations on the other hand can be the driving force behind social change by offering innovative solutions, promoting inclusivity and social services that are accessible for everyone. 
As a result, these organizations make a valuable contribution to achieving the objectives of the social market economy. 



Bojan Bugaric, ‘The Neo-liberal Bias of the EU Constitutional Order: A Critical Analysis’, in Research Handbook on the Politics of Constitutional Law (Mark Tushnet, Dimitry Kochenov eds.), Edward Elgar forthcoming (February 11, 2023).

Fritz Scharpf, ‘The Asymmetry of European Integration, or why the EU cannot be a ‘social market economy’, Socio-Economic Review 2010, 8, p. 211-250.

Ria Slegers, Sociale Markteconomie: Basis voor een duurzame ontwikkeling in Europa?. Oisterwijk: Wolf Legal Publishers 2016.


Pieter Vergouw is a qualified English and Economics teacher and is currently pursuing a Master’s degree in Law. At Inter, Pieter writes articles on numerous subjects, including adult education, language learning, integrity in sports, tax policy and international law. In his free time he enjoys cooking, playing guitar and restoring antique typewriters.
Célia Mortureux is a second-year Communication Science Bachelor student, at the University of Amsterdam. She has a vivid passion for painting and music, always striving to learn more. She loves to play around with many mediums, like photography, digital illustration, and traditional model drawing. She can often be spotted sketching in cafes or parks on a sunny day with an overpriced oat chai latte. She is also politically engaged, particularly in ocean protection advocacy. You can follow her works at @doodling_un

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