German economic policy is underpinned by the principles of the social market economy. These include having a government that sets rules and enforces them, thus establishing a reliable framework for businesses to thrive in competition with one another. At the same time, the rules are designed to leave scope for the government to promote social equality and ensure that everyone benefits from our joint prosperity.
For years, Germany has been posting solid growth rates. This year, in 2018, the German economy is expected to add another 2.4% (according to the annual projection). This GDP growth also translates into a strong labour market. At present, some 44.6 million people in Germany earn a salary or wage. Unemployment is at its lowest rate in 25 years. Our goal is to achieve full employment by 2025. Our GDP growth also generates prosperity, with real net wages and salaries having risen by an annual average of more than 1.6% since 2013. The solid economic growth we have seen in recent years has also resulted in a substantial increase in purchasing power for large parts of our society.
Making the social market economy shipshape for the future
Germany is doing well at the moment. But the major trends of the 21st century, notably globalisation, digitisation, demographic change, recent developments within the EU, and the energy transition all represent major challenges for us to tackle. This does not mean that we are having to reinvent the social market economy. But we must make use of our current position of strength to prepare for the future. In its almost 70-year-old history, the German social market economy has seen constant adjustments that have allowed Germany to remain one of the most competitive economies and one that can offer high levels of prosperity to its people.
First and foremost, we must invest in forward-looking technologies an innovation that will strengthen our core industries and our SMES, and to promote digitisation in our businesses.
Priority for industry, SMEs and cutting-edge technologies
We want our SMEs to remain the backbone of the German economy and to continue to create well-paid jobs that are also secure. This is why we need a new age of entrepreneurship covering industries from bakeries through to digital start-ups.
The German economy owes much of its current success to the fact that we have bucked the global trend and safeguarded our industrial sector. If we want to keep it that way, we must expand our digital infrastructure and invest in forward-looking technologies such as artificial intelligence and find applications for these in our country.
European policy also needs to be designed with the future in mind. The EU is the world’s largest free-trade zone. This makes us an economic heavyweight and also gives us the possibility to shape global standards. As we design the Digital European Single Market, we need to keep a close eye on the developments around the platform economy. Germany is a strong exporter and will therefore continue to advocate free trade internationally, and speak out against protectionism.
Design the energy transition in a reasonable way
The principles of the social market economy also apply to the energy transition. This means that we need to design it in a way that allows for economic success and social security. The share of renewables in our electricity supply is to increase to 65% by 2030, which is a major leap. As we tackle this challenge, we need to make sure not to ask too much of our businesses or consumers. We must ensure that our energy supply remains stable, at a cost that does not harm our businesses’ ability to compete or our consumers’ ability to buy.
Germany also promotes the principle of the social market economy at international level. This is necessary if we are to successfully maintain our high standards, promote inclusive growth and social inclusion, and provide a reliable framework for companies in a globalised economy.