In 1948, the Social Market Economy was introduced in Germany by Ludwig Erhard as the economic system. Since then, Germany has been acting under this guiding principle and found a legal affirmation of the concept in 1990 as it fixed the Social Market Economy as the basis for the economic union of the Federal Republic and Democratic Republic of Germany (“Grundlage der Wirtschaftsunion ist die Soziale Marktwirtschaft”, Art 1-3). In times of economic growth and prosperity, the Social Market Economy seemed to work well and further expansion of the social system did not cause any serious problems, but soon the circumstances changed. Important driving factors and trends like the reunification, the demographic development and the globalization have altered the conditions for successful economic policy. In the last decade, excessive national debts and high unemployment rates have revealed a serious crisis and initiated a strong debate whether the Social Market Economy is still able to adapt to and master the challenges in the age of globalization. Globalization proceeds inexorably and affects all areas of life. More and more companies are relocating their production plants into low-cost countries in Eastern Europe or the Far East as a result of Germany’s labor costs, which seem far too high. Nowadays, globalization is held responsible for nearly every reduction of jobs and social disparities, so that many people are afraid of its consequences. At the same time, several Scandinavian countries are known for their well-functioning economic policy and seem to have found an answer to the globalization challenge maintaining a high standard of living, social justice and international competitiveness. Even if in Germany the economic revival of the last two years has attenuated the debate, a fundamental solution to the problem has not been found and the serious continuing challenge of the globalization cannot be neglected. The fast European Integration process as one expression of globalization yields many unexploited chances and opportunities. For a few years, an increasing number of politicians have been postulating the amendment of the European Integration by a social dimension. A European model of Social Market Economy would promise a solution to the current problems. Indeed, it is worthwhile and important to search for and discuss new models and opportunities in order to find answers to the challenges of globalization. This thesis aims at making a contribution to the comprehension of the current debate whether Social Market Economies are still able to deliver what they promised and whether the concept is still adequate facing the challenges of globalization. It remains to be evaluated what needs to be done to fulfil the demands of modern societies. The thesis furthermore analyzes the question whether Social Market Economies are damned to fall behind other emerging societies in the fast developing world economy. The objective of the thesis is the inves.

1. In 1948, the Social Market Economy was introduced in
Germany by Ludwig Erhard as the economic system. Since then,
Germany has been acting under this guiding principle and found
a legal affirmation of the concept in 1990 as it fixed the Social
Market Economy as the basis for the economic union of the
Federal Republic and Democratic Republic of Germany
(“Grundlage der Wirtschaftsunion ist die Soziale
Marktwirtschaft”, Art 1-3).
In times of economic growth and prosperity, the Social Market
Economy seemed to work well and further expansion of the
social system did not cause any serious problems, but soon the
circumstances changed. Important driving factors and trends
like the reunification, the demographic development and the
globalization have altered the conditions for successful
economic policy. In the last decade, excessive national debts
and high unemployment rates have revealed a serious crisis and
initiated a strong debate whether the Social Market Economy is
still able to adapt to and master the challenges in the age of
globalization. Globalization proceeds inexorably and affects all
areas of life. More and more companies are relocating their
production plants into low-cost countries in Eastern Europe or
the Far East as a result of Germany’s labor costs, which seem
far too high. Nowadays, globalization is held responsible for
nearly every reduction of jobs and social disparities, so that
many people are afraid of its consequences.
At the same time, several Scandinavian countries are known for
their well-functioning economic policy and seem to have found
an answer to the globalization challenge maintaining a high
standard of living, social justice and international
competitiveness. Even if in Germany the economic revival of
the last two years has attenuated the debate, a fundamental
solution to the problem has not been found and the serious

2. continuing challenge of the globalization cannot be neglected.
The fast European Integration process as one expression of
globalization yields many unexploited chances and
opportunities. For a few years, an increasing number of
politicians have been postulating the amendment of the
European Integration by a social dimension. A European model
of Social Market Economy would promise a solution to the
current problems. Indeed, it is worthwhile and important to
search for and discuss new models and opportunities in order to
find answers to the challenges of globalization.
This thesis aims at making a contribution to the comprehension
of the current debate whether Social Market Economies are still
able to deliver what they promised and whether the concept is
still adequate facing the challenges of globalization. It remains
to be evaluated what needs to be done to fulfil the demands of
modern societies. The thesis furthermore analyzes the question
whether Social Market Economies are damned to fall behind
other emerging societies in the fast developing world economy.
The objective of the thesis is the investigation and evaluation of
potential perspectives and opportunities of the German Social
Market Economy.
Therefore, the thesis will first inspect how precisely the
globalization is challenging the Social Market Economy. After
the identification of the main problems and developments, the
thesis will discuss in what way reforms such as the Agenda
2010 and other current programs solved the problems. Having
identified the main problems and discussed actual reforms and
approaches, an analysis of Denmark including a comparison of
the Danish model of Social Market Economy will investigate if
it is possible to take advantage of their success. Subsequently,
potential benefits of a European model of Social Market
Economy will be examined and discussed. It will be clarified
whether a European model constitutes an efficient solution to

3. the current crisis.
Concluding these perspectives, the thesis will try to give an
outlook on how the Social Market Economy in Germany can
adapt to and even benefit of globalisation.
2 SOCIAL MARKET ECONOMY IN THE GLOBALIZATION
2.1 The Concept of Social Market Economy
2.1.1 DEFINITION
The concept of Social Market Economy was first introduced by
Ludwig Erhard with the monetary union on 20th June 1948.
More than the enactment of a certain, widely accepted policy
the monetary union was rather a solo by Erhard and some of his
colleagues like Mr. Müller-Armack (Cassel & Rauhut, 1998, p.
4). “We are committed to two big moral objectives: freedom and
social justice.” Therefore, they tried to implement an economic
policy which combines the principle of [market] freedom with
the principle of social justice (Müller-Armack, 1956, p. 390).
Although Germany maintained this principle of economic policy
for 60 years, the term “Social Market Economy” does not have a
generally accepted and precise definition but induces a lot of
interpretations. Nevertheless, it has become a widely spread and
accepted politico-economic overall concept, which aims at
competition and social balance at the same time. Nowadays, the
principle can be found in Article 20 of the German Constitution
and in the preamble of the unification treaty in 1990
(Althammer, 2007, p. 193).
It has its roots in the teachings of Adam Smith and supports
liberal positions such as the division of labor, free trade, and
competition. There is a consensus that these traits, basically,
guarantee economic growth, performance, as well as efficiency
and, therefore, the best economic system. Nevertheless, social
security and, therewith, the redistribution of income are favored
objectives, which have been set from the very first, so that as

4. many people as possible benefit from the achievements of the
market economy (Paraskewopoulos, 1998, p. 225). However, the
implied principle of subsidiarity signifies that social security is
only required to maximize individual opportunities for
development and, therefore, is rather a system of help for self-
help. Based on this, personal provision, individual
responsibility, and private initiatives have priority, which
naturally demands that everybody has the means to
accommodate himself and his family. This corresponds to the
traditional image that a society is configured from the bottom
up (Cassel & Rauhut, 1998, p. 12). Also, Müller-Armack once
said that the social purpose must be ensured without disturbing
the functioning of the market (Müller-Armack, 1956, p. 391).
Summarizing, the Social Market Economy is based on five
principles and values. Primarily, the concept of Social Market
Economy has the duty to respect and ensure the freedom of the
individual, because freedom is a foundation of a pluralistic
society enabling every individual to pursue its own wishes and
self-actualization. The only restrictive factors are the common
welfare and the freedom and rights of other human beings
(Schlecht, 1998, p. 37).
As competition is the second dominant principle, the consumer
is in the main focus of Social Market Economies. Consequently,
efficient production, innovations and technical progress are
enforced, free consumption arises and finally income is
distributed depending on performance. Furthermore,
competition is known to prevent any oversized concentration of
power and, therefore, guarantees, the rights of the citizens
(Schlecht, 1998, p. 38).
Thirdly, Erhard stated that, notwithstanding the fact that the
majority of people will gain its income through this market
process, a substantial need for amendment through socio-
political measures remains. However, the intentional

5. accentuation lies on the following: The more successful the
economic policy is, the fewer social services are needed. Thus,
socio-political services are a fundamental component of the
Social Market Economy, but only as a clearly subsidiary
element.
Fourth, the durable protection of the economic order requires
conscious state forming and interventions. An effective
competition policy in order to perpetuate intensive competition
is an important duty of the state.
The fifth principle is formed by constitutive and regulative
general conditions. They include private property, liability
regulations, convertible and stable money as well as free
formation of prices in open markets, freedom of contracts and
establishment. Policies need to be constant and reliable and
must provide public infrastructure and regulations for
environmental protection (Schlecht, 1998, p. 38). It can be
concluded, that Social Market Economy is a general economic
policy concept, an open model for a flexible social and
economical arrangement – depending on social and societal
objectives and scarcities (Schlecht, 1998, p. 36).
2.1.2 HISTORY
Ludwig Erhard made a decisive contribution to the enactment of
the Social Market Economy as he enforced the monetary reform
on 20th June 1948. Other important influences on the
conception originated from Walter Eucken, Friedrich August v.
Hayek, Alfred Müller-Armack, Wilhelm Röpke, Alexander
Rüstow, Franz Böhm and Oswald v. Nell-Breuning (Gutmann,
1998, p. 50).
In the following years, the social and economic order was built
according to the Social Market Economy. With the help of
Ludwig Erhard, the concept mastered its first major challenges
in form of the Korea-Crisis in 1950/51 so that a relapse into a

6. command economy could be prevented. Instead, the Social
Market Economy was soon held responsible for the German so-
called “Wirtschaftswunder” (Cassel & Rauhut, 1998, p. 4).
Dynamic growth rates, declining unemployment rates, stable
level of prices, and increasing real wages led to a general
acceptance of the system and even the Social Democratic Party
renewed its programmatic position under the influence of Karl
Schiller, Heinrich Deist and Herbert Wehner with the
“Godesberger Programm” in 1959 (Schlecht, 1998, p. 39f).
Also, the Independence of the Bundesbank, standing for the
principle of monetary stability, and the Law against
anticompetitive practices were finally established against all
resistance (Streit, 1998, p. 180). First reforms for social balance
like the “Wohnungsbaugesetze” were implemented, but social
measures were still guided by the principle of subsidiarity and,
thus, provided a framework in which acting on one’s own
responsibility was encouraged. This contained for example the
“Tarifsvertragsgesetz” in 1949 and the
“Betriebsverfassungsgesetz” as well as the “Sozialhilfegesetz”
in 1961. Pensions became dynamic and wage-related and,
therefore, they were a substitution of wage instead of a grant.
On the other hand, privatizations as Preussag in 1959, VW und
Veba in 1961 and 1965 were an important withdrawal of the
state. Internationally, Erhard achieved to fix some of the liberal
principles in the Treaty of Rome in 1957 (Cassel & Rauhut,
1998, p. 14).
The 60s were characterised by a heavy shift in favor of a
stronger influence of the state. As a response to the first
economic recession in 1966/67 and cyclical fluctuations,
Keynesian teachings became very popular. The integration of
the world economy advanced, public trade cycle policy and
macroeconomic governance became established elements of
economic policy. In spite of all this, the continuous inflation
could not be repressed (Schlecht, 1998, p. 41).

7. Nevertheless, the 70s led to a period of extensive interpretation
of the idea of the social state, so that the social component
became more important than economic order. Consequently,
economic necessities and financial solidity were not upheld.
Bureaucratization, an inflation of expectations towards society
and the state, the precedence of distribution policies heavily
constrained economic efficiency, dynamics, flexibility, and the
process of adjustment. The state and its representatives became
responsible for employment levels. Willy Brandt significantly
raised the share of government expenditure in GDP and the
situation degraded to stagflation. High inflation occurred
combined with economic recession. The years of full
employment ceased and unemployment increased. Looking
back, this can partly be explained by the negligence of the
supply side and national debt. While Germany experienced a
financial and socio-political “overkill”, core elements of the
Social Market Economy persisted (Schlecht, 1998, pp. 42-44).
In the years of the 80s, a reflection on and return to the
fundamental conception of Social Market Economy took place,
changing the paradigm and the government in 1982. The new
accentuation of regulatory policy aimed at growth, employment
and structural change. The Keynesian approach was widely
dismissed. Instead, budget consolidation, the reduction of the
state’s ratio, debureaucratization, privatizations and fiscal
reforms recreated economic dynamics and confidence finally
building the basis for the German Reunification (Schlecht,
1998, p. 45).
The establishment of a monetary, economic and social union on
1st July 1990 and, therewith, the establishment of the Social
Market Economy throughout Germany as well as massive
financial transfer payments to the new federal states hugely
distinguished the 90s. Notwithstanding the fact that the
reunification took course without serious problems and that

8. considerable improvements in the assimilation between East and
West Germany have been made, a sustainable and self-
supporting economic process could not be set up for a long time
(Schlecht, 1998, p. 45).
2.1.3 CURRENT SITUATION
Facing the new millennium with four and a half million
unemployed, a huge budget deficit and economic stagnation, the
new government, again led by the Social Democrats and
Gerhard Schröder, finally had to realize that the current
interpretation of the social state would not be able to master
future challenges nor to guarantee the maintenance of the very
high welfare level. Social security had become more and more a
promise of full supply, which seemed to be irreplevisable by
then (Streit, 1998, p. 182). It seemed obvious that everybody
had to lower his or her standards, expectations, and to work
more in order to transform society to fit for the future.
Therefore, the Agenda 2010 finally began to respond to the
necessity of deeper reforms. However, after two years of
economic growth in 2006 and 2007, a balanced national budget
and a reduction of unemployment rates, the atmosphere again
changed. The Social Market Economy went through all these
crises, but, nevertheless, it has lost much of its former glamour
and its attractiveness for foreign countries (Cassel, 1998, p. V).
After 60 years, the Social Market Economy in Germany is in a
conceptual crisis and discredited, despite all exporting and
stability successes and the still high niveau of welfare
According to Cassel and Rauhut (1998, p. 24), it is even
degenerated to an empty phrase, used to argue arbitrarily in
nearly every political argumentation, because politicians and
economic scientists have failed in finding sustainable solutions
to essential conflicts and changing challenges of globalizations
and other trends. It seems crucial to bring to mind the original
idea of the economic concept. Social Market Economy was
never meant to be a set of rules with clear acting guidelines. Its

9. adaptability can therefore be seen as its strength and guarantee
for timelessness as well as its biggest weakness. While the
liberty of the market is relatively precise in its meaning,
debates and discussions have traditionally been strong about the
question what social security really means and to which extent
it should be realised in a welfare state. Although its openness to
newer developments, problems and ideas, it cannot be blamed
for the current situation. Being open to different accentuations
of its two components “Social” and “Market Economy”, it is not
surprising that different interest groups and parties pursue
different and sometimes even contradictory objectives under the
same maxim (Gutmann, 1998, p. 51). There remain only a few
who argue that it is sufficient to realise a free market, because
the result of a big Gross Domestic Product would facilitate
social compensations. Despite all this, “social” became a
likeable euphemism sometimes legitimating even unsocial
reforms. It can be stated, that the element of social balance has
often been dominated by opportunistic majority-seeking (Streit,
1998, pp. 180-182). Cassel and Rauhut (1998, p. 23) even claim
that chances of a proper implementation of Social Market
Economy are extremely low in a parliamentary-democratic
system. It seems to be at least part of the problem that the term
„social compensation” is ambiguous and, hence, not suitable for
control of success and that it does not create a strong feeling of
obligation to the concept.
Nowadays, the social state follows the principle of insurance,
social autonomy, and pluralism of institutions (Althammer,
2007, p. 194). There are three layers of sociality: First, there
are social effects of competition itself such as low prices.
Erhard already assigned an automatical dependence as he stated
in 1954: “The higher the level of economic freedom, the more
social the economy is” (Erhard, 1954, p. 119). Second, there are
social effects of public regulatory policies, and, third, there are
social effects of public redistribution (Althammer, 2007, p.
198).

10. Currently, the interpretation of the component of social policy
favors a relatively vast design and its social security net is one
of the most expanded in the world (Paraskewopoulos, 1998, p.
228). Its expressions are the three pillars: Basic social care
(social benefits and unemployment compensation), several
further transfer payments like BAföG, child and housing
benefits as well as social insurances in the form of health,
accident, nursing, pension and unemployment insurance. At the
same time, a relatively extended interpretation of freedom can
be observed, although some sectors are not marked by
competition and the labor market is completely exempted from
competition (Cassel & Rauhut, 1998, p. 17). After all, it can be
concluded that social security instead of economical progress
became the center of attention and that there are several
violations of the principle of subsidiarity. Further development
was due to happen as a result of rent-seeking and political
processes.
There certainly is a conflict of aims between social security,
redistribution and economic efficiency (Paraskewopoulos, 1998,
p. 224). However, today, it can be concluded that the economic
political practice has essentially removed itself from the
original conception and, yet, has not accomplished the conflict
of aims towards a sustainable solution and reform of the
German model of Social Market Economy (Paraskewopoulos,
1998, p. 224).
In times when the economic situation is unstable, when the
budgetary situation is fierce, when unemployment rates are still
high and trends like demographic development and especially
the globalization are still seriously challenging the German
society, there is a need to rethink the model of Social Market
Economy. On account of this, it is important to clarify the
omnipresent term of globalization and to define in what way
society is precisely challenged.

11. 2.2 Globalization
2.2.1 GENERAL CHARACTERIZATION
One of the most challenging trends for the Social Market
Economy is definitely globalization. The age of globalization
can be defined as an era of worldwide integration of economic,
technological, sociocultural and political processes finally
unifying people of the world into a single society (Croucher,
2004, p. 10).
Fast technical progress in modern information and
communication media, rising cultural exchange and increasing
mobility of people are some expressions of globalization.
Economically, globalization, ahead of all other things, means
international and global competition. More and more economic
interconnections are established as well as international trade
on financial and goods markets is taking place, is even of
growing importance. The most important characteristics of
globalization are worldwide deregulation and the coalescence of
global markets, the collapse of the Eastern Bloc, the creation of
a European domestic market along with the introduction of the
Euro and the Eastern Enlargement as well as processes of
regional integration and the emergence of supranational bodies
in different parts of the world such as free trade agreements like
NAFTA, MERCOSUR, and ASEAN (Kesting & Nielsen, 2003,
p. 369).
It can be concluded that interdependencies affecting all areas of
life are increasing in number and strength. In this context, it
also needs to be stated that globalization has always taken place
in human history. Nonetheless, globalization has without doubt
accelerated enormously since the downfall of the iron curtain
due to political changes as well as technical progress and,
nowadays, seems to be unstoppable. The world and its

12. interdependencies and, most notably, its economic integration
have become very complex and even too complex for most so
that due to a general lack of competences it is hard to
understand and explain current proceedings (Weizsäcker, 2000,
p. 48). As a result, many people perceive globalization as a
threat and are heavily alienated by it. An anti-globalization
movement emerged, which sees more disadvantages than
advantages.
Nevertheless, Weizsäcker (2000, p. 47) claims that throughout
the 20th century all levels of society in Germany have benefited
from globalization. Generally, the material living standard has
at least known a tenfold increase, but the benefits can also be
measured in the individualizations of lifestyles, rising local
mobility, an essential reduction in working hours and, thus,
greater autonomy in spending one’s time. Further manifestations
are an increasing variety of products and more, smaller
industrial sectors with, at the same time, augmenting
productivity. Globalization also means the refinement of
division of labor and increasing professionalization
(Weizsäcker, 2000, pp. 13-15). Moreover, in the German
context, it has to be stated that the prosperity of the society like
in all industrialized countries has profited from free world
trade. The German “Wirtschaftswunder” is a prime example of
export-led growth and, insofar, Germany has benefited
significantly by free international trade (Weizsäcker, 2000, p.
50). After the Second World War, it can be ascertained that the
doctrine of beneficent effects of international trade became
accepted. Even economists have widely agreed upon this. In
practice, the GATT system pursues this objective but free
international trade is not realized yet.
2.2.2 CHALLENGES OF GLOBALIZATION
However, the actual public opinion in society definitely differs
strongly. The current debate in the media is marked by negative
reports about the relocation of firms leaving Germany and

13. sometimes thousands of unemployed. The explanation is nearly
always the same, stating that the business location “Germany”
is no longer competitive and that production has to be relocated
into low-cost countries in order to gain benefits of lower labor
costs. Indeed, while the historical benefits and basic positive
model of globalization are undoubted, the face of globalization
has changed and its effects have become more tangible.
Furthermore, it is important to understand that globalization has
always required ongoing adjustments and reforms. In order to
realize the positive welfare effects, a couple of challenges must
be mastered.
As a main challenge, the increased stress of worldwide
competition can be identified. Since the economic involvement
of countries with lower living standards, there is an excess
supply of unqualified employees (Weizsäcker, 2000, p. 53).
Consequently, unqualified employees in industrialized countries
in Europe have the impression of soon losing their job. Instead,
in the U.S., unqualified employees rather feel the compulsion to
reductions of wages or social services (Kesting & Nielsen,
2003, p. 372). Thus, a second challenge emerges. There is an
enforced pressure for industrial restructuring because of free
trade and free capital movement towards Central and Eastern
Europe (Kesting & Nielsen, 2000, p. 374). This structural
change needs active designing, because it creates winners and
losers, at least for the short term.
Moreover, the globalization enforces the institutional
competition, which builds up the pressure to reduce taxes and
deregulations, environmental and social policies (Hillebrand &
Welfens, 1998, p. 415). The institutional competition has
intensified due to deeper international market integration and
the controlling function of national economic policies by
financial markets (Kösters, 1998, p. 442). Nevertheless, this has
also the positive effect of identifying best political practices in
order to achieve a new and more efficient institutional

14. equilibrium (Hillebrand & Welfens, 1998, p. 405).
Another challenge often been referred to is that globalization
reduces the repertoire and effectiveness of national economic
policies (Kesting & Nielsen, 2003, p. 370), empowering world
markets and multinational companies to determine national
policies (Weizsäcker, 2000, p. 48). This can be justified in
policy constraints such as the disappearance of macroeconomic
instruments. It has become impossible to effectively control
money supply and interest rates. In consequence, the
effectiveness of national monetary policy is undermined and the
economy becomes vulnerable to speculative capital movements.
Furthermore, Keynesian demand management appears to be less
effective due to spillover effects of demand expansion across
borders (Kesting & Nielsen, 2003, p. 370). Notwithstanding
this, Denmark has found a way to avoid negative impacts as will
be shown further in the fourth chapter. Countries of the
European Union are institutionally constrained by the three
percent deficit limit imposed by the EU Stability and Growth
Pact (Kesting & Nielsen, 2003, p. 374). As a further challenge
for governments, the need of enhancing the attractiveness for
international mobile capital as well as creating and guaranteeing
functioning, flexible markets can be determined (BMWI, 2008).
In addition, some economists attribute also challenges regarding
ideological implications to globalization. As supranational
organizations like OECD and IMF consistently advocate neo-
liberalism, arguments of competitiveness and flexibility
dominate debates about globalization (Kesting & Nielsen, 2003,
p. 371). However, the main focus and emphasis of society and
economy necessitates clear definition and alignment of
strategies and measures.
In summary, globalization can, thus, be seen as a challenge to a
country’s and a society’s ability to determine its position and
implement necessary reforms in order to cope with global stress
of competition and to develop national strengths to create

15. comparative advantages.
2.2.3 DISCUSSION OF ECONOMICAL IMPACTS AND
MECHANISMS
There is a consensus that globalization has the effect of
promoting professionalization and international division of
labor (Weizsäcker, 2000, p. 15). Therefore, there is a need for
industrial structural change. Furthermore, there is also
consensus that globalization intensifies international
competition, but as Germany has a relatively high standard of
taxes, labor costs, environmental obligations, and an extensive
net of social security, its economy is often assumed to be non-
competitive (Weizsäcker, 2000, p. 234). Following the most
popular interpretation, it is argued that more favorable
investment opportunities in foreign countries lower social
measures and that social services, in the end, become cost-
factors and, therefore, an important competitive disadvantage.
High unit labor costs have the result of investments avoiding
German and preferring foreign locations (Paraskewopoulos,
1998, p. 234). Because globalization undermines capacities for
compensation and the political basis for financing the welfare
state, tax cuts and reduction of social security contributions are
the result. Thus, globalization is held responsible for the
necessity of welfare retrenchment and, more directly, increased
international competition is often blamed to be associated with
downward pressure on wages (Kesting & Nielsen, 2003, pp.
370-372).
However, there is no consensus regarding this question. Other
economists argue differently about those mechanisms and draw
different conclusions. Weizsäcker (2000, p. 57) argues that each
country has its own preferences towards the extension of social
security and creates its societal system accordingly. The system
of market economy is based on freedom of choice for
consumers. The question, which social policy is executed, is
finally a question how the national income is used or consumed.

16. Consequently, there is also freedom of choice regarding the
question how much of the income is raised through taxes and
redistributed for social purposes. In all western societies, social
services are funded through social security contributions and
taxes. In Germany, social expenditures account for two thirds of
the total public expenditure (Weizsäcker, 2000, p. 59). As a
result of international competition, a national level of wages,
the competition wage, is determined by national productivity.
The competition wage consists of two parts: The individual
wage is paid out directly to the employee, while the collective
wage is collected by the state. In Germany, this happens
through income taxes, care insurance, unemployment insurance,
as well as contributions to the pension fund (Weizsäcker, 2000,
pp. 62-64). As the height of the competition wage is fixed,
which means that it is not affected by any changes in social
policies, social policies only decide how much of the
competition wage is used for public purposes and how much is
directly paid out to the employee. For example, if the
government decides to raise social contributions, the collective
wage is raised, so that the determined competition wage is
exceeded for a short time. This implies a decline of the
domestic economy, high unemployment rates, lower exports,
and higher imports. This situation cannot persist, so that wages
would decrease and the competition wage would return to its
original level (Weizsäcker, 2000, p. 61). As a result, the
competition wage is not affected by social policies in the long
term. Because of economical adjustments, this finally implies
that the individual wage is reduced. Therefore, it can be stated
that if market mechanisms work properly, social policy is not
redistribution between employers and employees but instead
redistribution between employees (Weizsäcker, 2000, p. 64).
Hence, Weizsäcker (2000, p. 72) concludes that, in the long
term, there are no competitive disadvantages arising out of
higher levels of social services, and that national policy in the
fields of social policies, taxes and environmental standards are
not constrained at all by international competition.

17. Subsequently, there is also disagreement concerning the
constraints of national economic policies. In contrast to the
argument that competition has a downward effect in these
fields, Weiss (2002, p. 2) concludes that the state has much
more room for maneuvring than it is generally assumed.
Globalization even has enabling effects according to him. For
example, Weizsäcker (2000, p. 93) argues that a state has
autonomy in the determination of levels of profit taxes. The
higher the tax, the lower the competition wage. This means that
higher taxes are passed on the employees and, thus, do not
constitute a competitive disadvantage.
The solution finally seems to be that adjustment is the basic
condition for the functioning of those long-term market
mechanisms in order to master the challenges of globalization.
This is, however, currently not given in Germany due to the still
highly inflexible labor market. Hence, negative consequences
rather follow from market failures and the failure of policies
such as subsidy policies. Therefore, social and political impacts
of globalization vary significantly dependent on the mediating
role of the institutions of nation states (Kesting & Nielsen,
2003, p. 372).
Consequently, since the 80s, Germany has so far been a loser of
increased international competition, but altogether has taken
advantage of globalization (Hillebrand & Welfens, 2008, p.
412). To sum up, an a priori overall negative impact of
globalization cannot be ascertained. Indeed, Germany has so far
rather been a winner of globalization, but is actually struggling
with the effects because of its high rigidity of markets and
inability to adapt and reform according to global trends and
demands. Globalization is seriously challenging the German
Social Market Economy in different ways and is currently
producing several problems in the German economy and
society.

18. 2.3 Current Problems and Reforms
2.3.1 IDENTIFICATION OF PROBLEMS
In conclusion, various problems of different nature can be
diagnosed in the current situation. As it has been shown above,
the globalization, which has increased the stress of competition
essentially, has superficially revealed that labor costs are too
high in Germany. Based on the problem of worldwide excess
supply of human capital, this seems to have an obvious negative
impact on unemployment rates. Even though this does not
constitute a problem in economic theories in the long term, the
obvious problems indicate that the long-term market
mechanisms are not properly functioning. Germany, hence,
faces a problem of inefficient institutions causing difficulties of
adjustments such as the rigidity of the labor market, which is
partly due to high protection of dismissals. However, if this
should not be the case, which appears to be very unlikely in
view of the high unemployment rates, then there is a serious
communication problem. These mechanisms are by no means
apparent for the population. Therefore, a further problem can be
determined: The globalization has significantly increased the
complexity of economical coherences. This becomes a problem
because people are marked by a feeling of uncertainty, and,
furthermore, politicians as well as some economists may fail in
understanding the interrelations and in analyzing reasons and
effects of certain policies. While economically the negative
influences of uncertainty concerning domestic consumption are
obvious, it can also be stated that the German society has
become a society of dissent in questions where consensus would
be important in order to define a strategy and reform agenda.
Instead, the actual situation can easily be observed every day:
The focus is put on debates that are characterized by social envy
such as the one about high salaries of managers. Clearly, some
salaries might be too high, but this is rather an ethical
discussion. Furthermore, news about “capitalistic grasshoppers”

19. and companies cutting jobs and pocketing record profits at the
same time prevail in the media. Besides, companies evidently
have to act on a maxim of profits, but the criteria are rational
and predictable: Countries with qualified and inexpensive labor
forces, a good infrastructure, passable living conditions for
international managers, and convenient tax rates are an
internationally competitive location (Weizsäcker, 2000, p. 55).
Nevertheless, a moral condemnation of capitalism and
neoliberalism has spread out and will neither be enough to
reform the third largest national economy, nor will it help to
solve any other problem (Stadler, 2007, p. 2).
Giragosian 1
Adrineh Giragosian
ENG 228.04: Greece and Rome
Professor McGowan
17 December 2014
gods and men: Horace vs. Pindar
As the texts emerge from Pindar’s Odes through Horace’s
Odes, both gods and men were a key aspect in the poems written
by these poets. In Horace’s Odes a role of faith that is discussed
in his work is through the nature of life, nature had similar
strength and power as gods did to other Roman poets. In
Pindar’s text the role of Greek gods and how men were an
important role to the society. The ancient Greeks called fate a
Necessity or Anake, personified in the great goddess Moira.
Represented sometimes singularly, she was also seen as the
Moiré- the three goddesses who wove, measured and cut the
thread of mortal life in accordance with natural law. After this,
there is little agreement as to the origins, nature, intention or
immutability of Fate.
Pindar is the first Greek poet to reflect on the nature of
poetry and on the poet’s role. Like other poets of the Archaic
Age, he has a profound sense of changes of life, but he also

20. articulates a passionate faith in what men, by the grace of the
gods, can achieve, most famously expressed in his conclusion to
one of his Victory Odes.
“Creatures for a day! What is a man? What is he not? A dream
of a shadow is our mortal being. But when there comes to men a
gleam splendor given of heaven, then rests on them a light of
glory and blessed are their days” (Pythian, 8). In the following
quote it explains the higher power of men and through the grace
of the gods a man can achieve anything. This shows one of the
followings ways it is different from how in Horances text of the
Odes views faith.
Horace is a Greek poet that reflects on nature’s power in
his poems. As proof, this study continues by recasting Odes in
book two poem thirteen. In Horace’s poem celebrating his near-
death escape from a falling tree, as a generic manifesto, which
reflects Horace’s successful integration of epic, elegy, and
tragedy into the entirety of the Odes. After revealing the multi-
generic nature of Odes (II.13), this study concludes by showing
how Horace employs met poetic trees throughout the remainder
of the Odes, and particularly within the three poems which
revisit the falling three episode, to transform the divinities to
whom Horace attributes his salvation into symbols of the very
genres he has adapted to his lyric verse. In doing do, Horace
establishes an interconnected web of arbor centric poems
spanning the Odes which comments on the generically enriched
nature of Horatian lyric. One famous quote of Horace states that
“If any man cannot feel the power of God when he looks upon
the stars, then doubt whether he is capable of any feelings at
all” (Horace,). This quote shows hat how much Horace had faith
to God and the belief he had with the higher power. With this
quote his intention is to say that god is the greatest power and
therefore if you do not have faith in god then you do not belong.
In the first six Odes of book three Horace immediately
establishes his role as “Musarum Sacredos” and calls for
religious silence, as he will sing “Carmina non Prius/Audita.”
This sets the tone for Odes and for the rest of the cycle.

21. Following, is a discussion of hierarchy, obeisance to the gods
and those in power, the university of fate and death,
contentment with what one receives from life, and avoidance of
excessive ambition. In this way he introduces hierarchy and its
enhancing appropriateness; kings on earth rule their people, and
Jupiter in heaven rules over all. Also, in the first odes, fate’s
universality is emphasized, in lines like,
“How sweet and right it is to die for one's country, death
pursues the man who flees, spares not the hamstrangs or
cowardly backs of bttle-shy youths” (Odes, III.2.13). This
quote shows that when you have fate and stand up for your
country you feel the glory and accomplishment at the end.
Those who flee and have no fate to their country are not real
men and do not believe in standing up for something they truly
care about. Horace is a men of fate and belives that one needs to
stand up for something they believe in and have fate in order to
be a true men. With this quote Horace shows that there is
nothing like the feeling of standing up for your country and
protecting it as if it was part of you.
In Pindars Odes Book V.1 he states, “…the wise wear with
a fairer grace, this power which God have given. You who walk
in righteousness, have great prosperity around you.” This poem
was for Arkesilas of Kyrene, winner in the chariot-race. This
quote futher shows the example of nature of life accepting what
the gods have set for us to endure. By winning this race God has
answered his prayers, and he is now walking with power
because he is the winner of the race, through this God gave him
power by achieving this great deed. In the following quote it
states, “…I beg you, now…bring to birth for this man a brave
son…when thus he spoke, the God sent a great eagle, lord of
birds, and sweet delight stung him within” (Pinar, 44). This then
further shows