University of Arkansas, Fayetteville


This paper offers a narrative historical description of the German Social Market Economy, from its inception following World War II, up to the recent Agenda 2010 reforms enacted under the administration of Chancellor Gerhard Schroder. It is the purpose of this work to explore why the German Social Market System enjoyed such a high degree of success in its early years, and which flaws might be causing the chronic problems of low growth and high unemployment that have plagued Germany more recently. In particular, the paper argues that a high-cost and highly inflexible labor market resulting from Germany's system of autonomous collective wage bargaining may be stymieing business growth and scaring away foreign investment.