Angela Merkel and the Social Market

Today Angela Merkel will address both Houses of Parliament, eat lunch with the Prime Minister and take tea with the Queen. While the expectations are that the conversation will focus on the ‘European project’, Merkel’s intellectual ancestors created the closely linked ‘social market project’ too.

It is in Merkel’s party, the CDU, and the stiftungs associated with it, that the idea of the social market formed and developed. It was David Owen, Robert Skidelsky and others who brought it into British politics, founding the Social Market Foundation in 1989. But badging us in British party political terms has become impossible. That’s hardly surprising. As one of my predecessors as Director, Philip Collins, put it, the SMF represents an “idea from the European right imported by the dissident left”. Lord Lipsey, a former chair, suggested that we’re “a rump groupuscule of the extreme centre”. Especially in the week of Merkel’s visit to London, can we make it simpler and just say that we’re the voice of the CDU in Westminster? Or could we dare to be, even in these sceptical times, the think tank of the Lisbon Treaty, which claims as one of its founding principles the objective of creating “a highly competitive social market economy”?

Hardly. The SMF, despite its roots, has become non-internationalist in its outlook. This is something I want to change. Engaging systematically with other social market streams of thought should be an important part of what we do, building perhaps on the enthusiasm that various parts of our politics have begun to develop for German things: a couple of regional banks, or Sparkassen, over here, a dozen Fraunhofer centres for innovation, or catapult centres as the Government is calling them, over there – not to mention employee directors on company boards or technical apprenticeships. While some of these might well work as transplants in the UK, behind them we can also find a deeper, different political economy, one that has as much of a critique to offer of Keynesianism as it does of free market fundamentalism.

It’s easy to lose those bearings in the turn of blog posts, tweets, briefing notes and events. And there’s little worse than being governed by the dead hand of orthodoxy, social market or otherwise. Staying relevant to British political debate is critical. Disappearing into the intellectual history of the CDU doesn’t feel like the right choice for us to make.

That said, among the best moments of my first few months as Director of the SMF, there has been our report on employee owned business, which taps into the heart of fundamentally British institutions such as John Lewis and the cooperative movement, while observing that overall the ownership structure of our economy is strange – being slanted so far in favour of the plc – when compared with almost any other major economy in the world, including the German one. It’s heartening that all three major political parties have something to say about this aspect of the ‘social economy’.

Equally something clicked when a leading economist, who might prefer not to be named, claimed – while exaggerating for effect – that the Chancellor, George Osborne, is just as much of an unreconstructed Keynesian in the end as his Shadow. The challenge we should be putting to both of them, he suggested, is to think in terms of investment rather than demand, as well as the requirements of at the very least maintaining, if not replenishing, our natural as well as physical capital. Once again, Germany has a better story to tell on these matters. In terms of individual welfare too, our political debate tends to prioritise income over assets, consumption over saving. The latter terms were very much our focus when looking, for example, in a recent report at how the ‘bank of mum and dad’ works in low income families and what policy might be able to do to support it.

In terms of a wider statement of the principles of the social market economy, I’ve found this document useful. It is a set of guidelines for achieving no less than prosperity, social justice and sustainable economic activity across Europe, signed by – among others – Bernhard Vogel and Hans-Gert Pottering, who are prominent members of Merkel’s party, as well as being the former and present Chairman of the Konrad Adenauer Foundation, our closest German counterparts and a think tank named after the Chancellor responsible for implementing Germany’s post-war social market economy.

Will Merkel speak up for the social market tradition when she’s in London? Let’s see.


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