The superiority of Germany’s so-called “social market economy” is an article of faith for virtually all of Germany’s major political parties (with the possible exception of the “post-communist” Left Party, which would prefer an outright socialist one). The expression is commonly associated with Ludwig Erhard, post-War West Germany’s first economics minister under the Christian Democratic Chancellor Konrad Adenauer. In current usage, the expression strongly connotes a rejection of a “pure” market economy or “unbridled” capitalism, such as the advocates of the “social market” model presumed to exist in the United States and other “Anglo-Saxon” countries.
In a series of seminars held recently in Berlin, Ankara, and Abu Dhabi, Germany’s Konrad Adenauer Foundation examined the “commonalities” between the social market economy and “Islamic economics.” As reported in the German daily Die Frankfurter Allgemeine Zeitung, the participants:
came to the conclusion that [the commonalities] were great and that, for example, the recent financial crisis would not have broken out if today’s economic order had been oriented to the common values shared by both. The politicians present, including those from the [German] Bundestag, did not disagree.
The Konrad Adenauer Foundation is a publicly funded “political foundation” affiliated with the Christian Democratic Union, the party of German Chancellor Angela Merkel. Chancellor Merkel sits on the executive board of the foundation.
The report in the Frankfurter Allgemeine Zeitung is written by the paper’s Abu Dhabi-based correspondent Rainer Hermann. Alluding to Walter Eucken, one of the theoretical fathers of the “social market economy,” Hermann goes so far as to suggest that Islamic scholarship in the person of Ibn Khaldun anticipated the “social market” model by some six centuries. “Already in the 14th century, Ibn Khaldun had recognized the elements and institutions developed by the economists around Walter Eucken, even if he used a different vocabulary.”
One of the participants in the Abu Dhabi event was Holger Haibach, a Christian Democratic member of the Bundestag. According to a summary of the proceedings published by the Konrad Adenauer Foundation, Haibach alluded to the strong economic growth currently being experienced in both Germany and the United Arab Emirates, in order to suggest the economic systems of the two countries must be “following the right approaches.” It should be noted that while Germany is experiencing strong growth, this is decidedly not the case for most of its euro-zone partners, some of which, of course, are presently struggling to stave off bankruptcy. Per Article 3 of the Treaty on European Union, all European Union member states are committed to the “social market economy.”
Frank Spengler, a representative of the Konrad Adenauer Foundation, added:
It is notable that both economic systems have deep roots in the respective religions: Islamic economic thought is based on the Sharia, whereas the social market economy builds on Christian social doctrine.
The Abu Dhabi Council for Economic Development was represented at the event by its Director General Fahad Saeed Al-Raqbani. According to the summary of the proceedings, Haibach, Spengler, and Al-Raqbani all agreed that such a “value-based economic system” is “not only more sustainable and more suited to human needs, but could alleviate the consequences of future crises or even prevent them altogether.”
The Berlin event featured a presentation by Zaid el-Mogaddedi, the managing director of the Institute for Islamic Banking and Finance in Frankfurt. According to a summary of his presentation, el-Mogaddedi explained that:
The entire activity of a practicing Muslim, including economic activity, is based in his faith. From this there follows a responsibility before God, which is expressed in various principles of action. Financial transactions that are detrimental to human beings, as well as highly speculative risks, are rejected in Islam.
El-Mogaddedi explained further that the “prohibition on financial interest is one of the central pillars of Islamic banking” and that:
Financial investments in certain goods like alcohol or in the armaments industry are not wanted. The compliance of investments with the relevant norms is examined by ethics commissions, so-called Sharia boards, and then they are approved or rejected. If the tenets of Islamic banking had a wider application, the financial crisis could have been prevented….
The latter point is enthusiastically seconded by Rainer Hermann, who notes that a real estate bubble, such as formed on the U.S. housing market, would have been “impossible” in a system of “Islamic banking.” The correspondent of Germany’s leading “conservative” daily concludes that the German and “Islamic” models are:
…more than pure economic models. By virtue of their “social” components, they are also models of society, which are strongly oriented toward solidarity and the social anchoring of property. In both cases, they do not leave everything to the market, but rather intervene when a sense of justice makes this desirable. This is no different in the Islamic economy than in the social market economy of German inspiration.