Freedom and the Strong State: On German Ordoliberalism

Abstract

Ordoliberalism is the theory behind the German social market economy. Its theoretical stance developed in the context of the economic crisis and political turmoil of the Weimar Republic in the late 1920s. It is premised on the strong state as the locus of liberal governance, and holds that economic freedom derives from political authority. In the context of the crisis of neoliberal political economy and austerity, and debates about the resurgence of the state vis-à-vis the economy, the article introduces the ordoliberal argument that the free economy presupposes the exercise of strong state authority, and that economic liberty is a practice of liberal governance. This practice is fundamentally one of social policy to secure the sociological and ethical preconditions of free markets. The study of ordoliberalism brings to the fore a tradition of a state-centric neoliberalism, one that says that economic freedom is ordered freedom, one that argues that the strong state is the political form of free markets, and one that conceives of competition and enterprise as a political task.

Keywords:

• ordoliberalism
• neoliberalism
• strong state
• free economy
• economic crisis
• freedom and authority
• liberal interventionism
• class
• enterprise
• social market economy

Notes

I researched the ordoliberal tradition with the support of an ESRC grant entitled ‘Ordoliberalism and the Crisis of Neoliberal Political Economy’, RES-000-22-4006. The support of the ESRC is gratefully acknowledged. Earlier versions were presented to the staff/student research seminar at Ruskin College, Oxford (March 2011), BISA in Manchester (April 2011), and a workshop on State Power, New School, New York (May 2011). I want to thank Neal Lawson who was most generous with his time, allowing me to verbalise my account about the ordoliberals, which proved most helpful. Peter Burnham, Paul Langley, John Roberts, Rudi Schmitt, Eric Sheppard, Tim Stanton and Hugo Radice in particular provided generous advice, helpful comments, and encouragement, for which I am most grateful. I wish to express my thanks to the three anonymous referees whose comments helped to sharpen the argument. Finally, I thank Colin Hay for his careful handling of the editorial process.

Peck (2010) doubts Foucault's claim that Chicago neoliberalism derives from German ordoliberalism. In his defence, Foucault did not argue that Chicago neoliberalism is a German derivative, but that it developed core ordoliberal ideas in its own distinctive deregulatory manner. Friedman's support of, and indeed advisory role in, the Pinochet dictatorship is well known and does not contradict his market-liberal stance.

Ordoliberalism was the first serious attempt at addressing the challenges of collectivism, and in this effort it criticised and rejected laissez-faire liberalism as a mere doctrine of faith that is unable to stand up for itself. Its claim to amount to a third way is based on this.

Hayek's Road to Serfdom (1944) brought this insight to wider attention but did not provide its original formulation, which lies in the ordoliberal thought of the late 1920s. Hayek's work is key to Freiburg neoliberalism and will be referenced as such.

Nicholls' (1994) account of German post-war recovery provides some insights. Tribe (1995) expounds ordoliberalism in the context of the evolution of German economic thought. Peck's (2010) account on the evolution of what he calls ‘neoliberal reason’ acknowledges the distinctive character and importance of ordoliberalism but does not go into depth. Peacock and Willgerodt (1989) published key texts in English translation. See also Paul, Miller and Paul (1993), and the school of constitutional economics associated with James Buchanan (1991) and Victor Vanberg (2001).

Hayek emphasises the liberal utility of the rule of law as a restraint on democratic power, as abstract provider of the rules of engagement of individuals in apolitical exchange relations, and as formal facilitator and premise of individual freedom. On these issues, see Agnoli (2000), Bonefeld (1992, 2005), Cristi (1998), Demirovic (1987), and May (2011). In this conception, man is free if s/he needs to obey no person but solely the laws. The ordoliberals agree with this dictum but add that Man has not just to comply with the law but has to do so willingly and with conviction to secure the market-liberal utility of freedom.

However, analytical lines of distinction are not always that clear in practice. For example, von Mises asserts that uninhibited market forces are the only remedy to resolving economic crisis, and then argues that ‘fascism and similar movements have … saved European civilisation’ (2000: 51). Hayek is equally drawn between the idea of the free economy and the idea of the strong, authoritarian state (see Cristi, 1998).

Röpke's assessment of the Beveridge Report is to the point. It is, he says, an expression of the ‘highly pathological character of the English social structure’, which he defines as ‘proletarianised’ (2002: 147).

Alexander Rüstow's work also belongs in this category. His work shadows that of Röpke, with one notable exception – the enunciation of the strong state in 1932.

Hayek focuses this ordoliberal point succinctly: only the strong state can act as an ‘economic planner for competition’ (Hayek 1944: 31).

The term ‘neoliberalism’ was coined by Rüstow in 1938 during discussions at the Colloque Walter Lippmann, which transformed later into the Mont Pelerin Society – the apparent birthplace of neoliberalism. For recent assessment of these discussions, see Jackson (2010). Rüstow called von Mises a paleo-liberal because of his seemingly unerring faith in the capacity of the market to self-regulate itself. See also footnote 7. I owe the reference to Rüstow's elucidation of neoliberalism as a rejection of (Austrian) laissez-faire to Mirowski and Phelwe (2009: 13).

David Cameron's point that that there are things ‘more important than GDP’, offers a contemporary formulation of this insight. See Miles (2011).

The argument about the state as an insurance company paraphrases King's (1976: 12) neoliberal diagnosis of the 1970s crisis of the (British) state as a crisis of ungovernability. See also Brittan (1977) and Crozier et al. (1975).

Müller-Armack is in fact paraphrasing Benjamin Constant's (1998) critique of democratic government. Constant's stance is a regular point of reference in ordoliberal writing.

This section references mainly the work of Röpke for two reasons: first, he expresses the ordoliberal critique of the welfare state with great clarity and precision. Second, and following Peck (2010: 16), Röpke is the more moderate member of the ordo-school, and his critique is therefore measured in comparison.

Like Schmitt's quantitative total state, Eucken's economic state does not have absolute control over the economy. On the contrary it is a state that has lost its independence vis-à-vis the social interests and has become their prey, and its policy is one of ‘planned chaos’. Eucken's economic state is a state of ‘lamentable weakness’, as Rüstow (1932/1963: 255) puts it when making the same point. Rüstow, too, makes explicit reference to Carl Schmitt's account of the crisis of Weimar ungovernability, on this see below.

See also Bernard Baruch's condemnation of Roosevelt's abandonment of the Gold Standard: ‘the mob’, he says, ‘has seized the seat of government’ (quoted in Schlesinger 1959: 202).

Sam Brittan (1984) argued similarly, advocating the spreading of private property as a means of creating a property-owning democracy, which he saw as resulting from the Thatcher government's privatisation programme. He advocated the privatisation of council houses as a means of transforming quarrelsome workers into pacified shareholders and responsible property-owners, creating a popular capitalism. The circumstance that, by the early 1990s, this property-owning democracy transformed into a property-owning democracy of debt in no way contradicted the attempt at using the market as a restraint on working class solidarity and militancy (Bonefeld 1995).

Individuals thus carry their bond with society in their pocket. On this see, Bonefeld (2006b).

David Cameron's mantra about the Big Society makes the same point in gender neutral terms: ‘You can call it liberalism. You can call it empowerment. You can call it freedom. You can call it responsibility. I call it the Big Society’ (Daily Telegraph, 21 July 2011). See also Norman (2010).

On the connection between Hayek and Schmitt see Cristi (1998), on the connection between ordoliberalism and Schmitt, see Haselbach (1991) and Bonefeld (2006a). Peck (2010: 59) says that Rüstow's ‘authoritarian strand of liberalism would later find a place within the National Socialist project’. In his defence, Rüstow left Germany for Turkey upon Hitler's ascendancy to power. In 1932 he favoured a coup d'etat led by, and commissarial dictatorship under, the conservative politician van Papen (Haselbach 1991).