Today it is becoming increasingly apparent that what we are dealing with is not just a recession, but a crisis of the existing capitalist system itself. It is a system crisis because mainstream economic models and policy settings cannot produce sustainable growth, equitable income distribution or adequate employment creation.

What will emerge from this crisis? A renewed social market economy.

Germany was hit hard by the crisis, and its export industry incurred unprecedented losses. Nevertheless, the effects of the crisis have been less severe in Germany than in other countries.

This should be attributed to Germany's unique institutional approach toward the economy, encompassed under the societal concept of the social and ecological market economy, which is not just an economic model but also a principle that shields its people against the consequences of exogenous shocks.

Even in the face of the ongoing European debt crisis that followed the financial crisis, Germany continues to avoid the worst economic side effects.

Although it is based on private property and market rules, it builds on consensus and collective solidarity rather than competition and individual charity. The key principles that best position the German model to serve as a roadmap for sustained wealth creation aim at benefiting the broadest segments of society.

First, the social and ecological market economy is based on the overarching principle of solidarity. This means that the more able and wealthier members of society have to contribute more to safeguard the opportunities and a decent standard of living for the less able and less fortunate.

Second, the model aims at ensuring equal opportunities. The state should deliver fair and equitable opportunities, irrespective of an individual's economic or social background.

Third, within a social and ecological market economy, capital and labor are unified through a system of social partnership. In order to create a dynamic equilibrium, the private sector, labor and civil society all need to participate in the economic policy dialogue with the state.

To sum up, economic growth and efficiency are not goals in themselves but are merely instruments to produce welfare, progress, inclusion of disadvantaged members of society, and a more equitable wealth and income distribution. It is a social contract that rests on the deliberate assumption to forgo the highest possible growth rate so as to bring about a more humane society based on individual dignity and liberty.

At the same time, however, long-term trends such as the ongoing demographic change are putting substantial fiscal pressure on the German social security system.

Nevertheless, Germany has provided a policy response to adapt to this challenge by postponing the retirement age from 65 to 67 years. In fact, the social and ecological market economy is a dynamic model in which a balance always has to be found between the functioning of market rules and social well-being.

Rather than attempting to solve structural challenges such as unemployment, demographic change, and social exclusion with growth strategies, the welfare state is equipped to solve them by dealing with their causes.

Moreover, and most importantly, its proven adaptability to economic downturns as well as to long-term challenges in a flexible and modest way, has led to a reversal of opinion from skepticism to trust in the social and ecological market economy among Germans.

The financial meltdown has exposed a major weakness in laissez-faire capitalism. It appears that the irresponsible loosening of credit conditions in the run-up of the financial crisis was in part due to political pressure to compensate for the stagnant or falling real income of the poorer segments of the US population.

We will only find viable solutions to the economic crisis and to the challenge of achieving sustainable recovery by placing people at the heart of our economic structures and political strategies - yi ren wei ben.

China is also confronted with a tangible and urgent need for reform. This year's government work report delivered by Premier Wen Jiabao points out that the country's growing affluence has so far been insufficiently translated into social outcomes and that the nurturing of a more equal, better-educated society is the key to avoid economic stagnation.

The 12th Five-Year Plan (2011-15) prominently reflects this, as it focuses on quality of growth, expansion of domestic demand through higher consumption, structural reforms to spur innovation and economic efficiency, and social inclusion.

Of course China will chart its own development path toward a modern and harmonious society, but solidarity, equality of opportunities, and social partnership are likely to play a role in the transformation of China's growth pattern.

A China that emphasizes the quality of growth as well as the quantity could also offer an example for other countries on how economic developments need not be at the expense of social and environmental performance, or global responsibility.

It is time for all of us to develop a more comprehensive understanding of which economic models can contribute to sustained wealth creation and better well-being for all.

The author is chairman of the Management Board, the Deutsche Gesellschaft fr Internationale Zusammenarbeit (GIZ) GmbH.