Jens Weidmann: Social market economy - continuing the success story with practical support and advice

Keynote speech by Dr Jens Weidmann, President of the Deutsche Bundesbank and Chair of the Board of Directors of the Bank for International Settlements, marking the 70th anniversary of the German Economic Institute, virtual, 27 May 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

1 Introduction

Mr Kirchhoff,

members of the Presidium and of the Management Board of the German Economic Institute,

ladies and gentlemen,

It gives me great pleasure to be with you here today to deliver the keynote speech. First things first: please accept my heartfelt congratulations on your institute's 70th anniversary. The history of the German Economic Institute is closely intertwined with that of our country's economic system. That's why we need to turn the clock back a little further than 70 years to understand how the German Economic Institute we know today came into being.

To the spring of 1948, in fact, when much of Germany still lay in ruins, and many people didn't have enough to eat or a roof over their heads. Rationing and price controls were in force, so people needed to present a ration coupon to buy groceries. And shops had nothing but empty shelves. Only the black market was booming.

Around this time, the British and American occupation zones saw a new director of the economic council take office. Journalists flocked to attend the newcomer's inaugural press conference. One of them was Marion Gräfin Dönhoff, a young economist who later became the editor-in-chief and co-publisher of the German weekly newspaper "DIE ZEIT". Horrified at what she heard there, she reported back to her colleagues, telling them that if Germany wasn't already ruined in the first place, this man with his crazy plan to do away with all the economic controls would certainly pull it off. Heaven help us if he should ever become the economics minister, she added.

The man who elicited such a dire warning from Marion Gräfin Dönhoff turned out to be none other than the later economics minister Ludwig Erhard. In parallel to introducing the Deutsche Mark, he dared the unthinkable. Turning a deaf ear to the warnings of his advisors and the Allies' experts, he lifted restrictions and did away with many price controls and rationing rules. In doing so, Erhard did more than just underline his fundamental trust in the organisational forces of the market. He also laid the foundations for a new economic system – one that is widely known as the social market economy and has been a hallmark of the Federal Republic to this very day.

I would like to use my keynote speech today to discuss the guiding principles of the social market economy, how it has evolved and what the future holds in store for it. My remarks will also touch upon the role played by the economic policy advice of the German Economic Institute and other institutions.