What Type of Economic System Does Germany Have?

The country of Germany operates under a “soziale Marktwirtschaft,” which translates into English as a social market economy. The system was adopted after World War II and reflects the principles of a free enterprise market as well as an economy where all members of society benefit.

The social market economy in Germany is a form of capitalism but with a strong social policy, including social insurance, health care and collective bargaining. A social market economy differs from the similar term “socialism” in that the government does not have the authority to control the economy; it is structured but not dictated.