Rhine Capitalism - History of Concept

History of Concept

The term originates from the French economist and (in 1991) Chairman of the Board and CEO Assurances Générales de France (AGF), Michel Albert who first used it in his book Capitalisme contre Capitalisme He compared the so-called “neo-American model” of a capitalistic market economy, introduced by the administrations of Ronald Reagan and Margaret Thatcher with the “Rhine capitalism", present in Germany, France and in some of the Northern European economies.

While the former is based more on the ideas of Friedrich von Hayek and Milton Friedman, the latter, according to Albert, is founded on publicly organized social security. Albert analyzes the Rhenish model as the more equitable, efficient, and less violent one. However, according to Albert, complex psychological phenomena and the functioning of the press lets the American model appear more attractive and dynamic to the general public.

Against this Albert wrote - even in 1991 - for example: “The largest banks know, however, that they are literally 'too big to fail' and can count on a helping hand from government if the worst comes to the worst. America's political leaders would step in to prevent the crash of a major financial institution on the grounds that it could set off a lethal chain reaction culminating in widespread disaster. ... Thus, in yet another intriguing but ominous irony of history, 10 years of ultra-liberalism have resulted in a US financial system whose future may only be assured with the help of federal government handouts” (p. 61).