Which economic system does democracy have

Background: The state and the economy

Economic systems in comparison

How can the prosperity of a society be best guaranteed? Which economic system is the best and the fairest? In the past, different countries have tried different economies. In the free Market economy the principle of supply and demand applies. Anyone who brings a popular product to market can sell it at a higher price and is more successful than someone whose good is neglected. In such a market economy, however, there are many risks: Not all people have the same starting conditions for participating in the market. If you have money, you can easily buy a business, machines and much more and thus have the necessary Factors of production for the manufacture of goods. People from poorer backgrounds initially only have the Labor as a factor of production. That means they have to put their time and strength in education stuck and for appropriate remuneration to the labour market "to sell". The mechanisms of a completely free market economy mean that the rich get richer and the poor get poorer.

  • 1976 apple harvest in the GDR: the aim was to fulfill the plan

Free market economy and central planned economy

In order to prevent such leanings in a free market, some countries have in the past completely abolished private property and tried to control the economy centrally. Companies and customers had to submit to a grand plan: the state stipulated exactly how many vegetables and how much meat were eaten per year and prescribed the companies in detail which products they should produce and in what quantities. So that everyone could afford everything, the Prices centrally specified. Today there are hardly any countries that rely on a purely planned economy. It is extremely difficult to calculate how much of a certain commodity is needed, and bottlenecks due to poor harvests or missing deliveries are hardly calculable. Goods quickly become very scarce. Another problem: Because the prices are fixed anyway, nobody has to make an effort to make products that are as smart and beautiful as possible. In addition, all companies belong to the state, which is why not everyone feels properly responsible for them.

Social market economy

  • The German Bundestag is committed to the social market economy system

The parts of Germany that were separated after the Second World War, the Federal Republic of Germany (FRG) and the German Democratic Republic (GDR), opted for different ones Economic systems. The GDR led the central planned economy one, the FRG against the "Social market economy".

Basically, the founding fathers of the Federal Republic wanted one free market: Supply and demand determine the price, people earn different amounts because they achieve different amounts, and some have better starting conditions than others. However, attempts were made to protect people from the injustices of a completely free market economy by introducing a "social" market economy.

Intentional "rule break"

Targeted intervention by the state is intended to give all people the same access to economic activity as possible. In doing so, the state clearly violates the rules of the free market economy. But the rule break is intentional and should ensure more social justice. For example, the state pays people who can no longer do certain jobs due to illnesses to retrain. Foreigners receive language courses. Parents receive child benefit. This is not an end in itself, but should serve the economy: only if the state ensures fair conditions - so the assumption - can the market also function optimally and everyone can participate in economic life. Around Inequalities to abolish, the state redistributes the income of its citizens in the social market economy. It levies income-related taxes and guarantees people certain social benefits regardless of income.

Tax justice© SWR / Source: Federal Ministry of Finance

© Text: Kerstin Stoll