An Update of the Social Market Economy Is Both Necessary and Possible

German economic policy currently has to react to two developments that have a major impact on markets worldwide: on the one hand, the emergence of powerful internet giants through digitalisation, and on the other hand, China’s economic success, which relies on the influence of large state-owned corporations. Germany can respond to these developments by combining the principle of the social market economy with an updated competition law. This was the recommendation made today by Professor Achim Wambach, president of ZEW Mannheim, at the Federal Ministry for Economic Affairs and Energy (BMWi), where he was awarded a 3,000 euro prize in the series “Impulsreden zur Sozialen Marktwirtschaft” (“Keynote Speeches on the Social Market Economy”) by the Wirtschaftspolitische Club Deutschland e.V. (Economic Policy Club Germany).

“The digital economy is developing dynamically. Our competition law has to adapt accordingly. Dominant US platforms such as Google, Apple, Facebook and Amazon have to be kept in check with pathbreaking competition law and an active competition policy, for example by generally prohibiting these platforms from engaging in self-benefiting behaviour and requiring them to transmit data to their customers in real time,” said Wambach at the award ceremony at the BMWi in Berlin.

“There is also room for manoeuvre in terms of economic policy for the challenges emanating from China. Basically, it is important to negotiate with China that it opens up its markets further so as to level out the playing field,” Wambach continued. “The planned investment deal between Europe and China – which should be followed by a long-term trade agreement – would be an important step towards achieving this goal. During the transitional period, anti-dumping and anti-subsidy measures could be strengthened to demonstrate that the EU does not stand back and tolerate unfair competition practices.

The motto of former Chancellor Ludwig Erhard ‘Prosperity for all and prosperity through competition’ still has merit despite these new developments, but requires adjustments in economic policy. An update of the social market economy is both necessary and possible.”