A Political Economy of Power
Ordoliberalism in Context, 1932–1950
Raphaël Fèvre
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Library of Congress Cataloging-in-Publication Data
Names: Fèvre, Raphaël, author.
Title: A political economy of power : Ordoliberalism in context, 1932–1950 / Raphaël Fèvre. Description: New York : Oxford University Press, 2021. | Series: Oxford studies history economics series | Includes bibliographical references and index.
Identifiers: LCCN 2021025221 | ISBN 9780197607800 (hardback) | ISBN 9780197607824 (epub)
Subjects: LCSH: Economic policy. | Economics—Germany—History—20th century. | Historical school of economics. | Power (Social sciences) Classification: LCC HC54 .F48 2021 | DDC 338.9009—dc23 LC record available at https://lccn.loc.gov/2021025221
DOI: 10.1093/oso/9780197607800.001.0001
1 3 5 7 9 8 6 4 2
Printed by Integrated Books International, United States of America
CONTENTS
Acknowledgments vii
Introduction: The Making of Ordoliberalism 1
1. From the Ashes of the Western Liberal Order 23
2. Science Against Interests 61
3. Economy Through Orders 93
4. Authority Taming Power 143
5. Epilogue: Time for Responsibility 187
Conclusion: Ordoliberalism, from Crystallization to Ossification 213
Bibliography 219 Index 253
ACKNOWLEDGMENTS
This book on German ordoliberalism is largely based on a PhD dissertation that was completed in Lausanne, in October 2017. I wish to express my warm thanks to my co- supervisors, Jérôme Lallement and Roberto Baranzini, for their academic and personal guidance and for allowing me a viable compromise between freedom in the conduct of my research and the rigorous demands of intellectual work. I am also indebted to Richard Arena, Patricia Commun, Lisa Herzog, Harro Maas, and Emmanuel Picavet who examined my dissertation and contributed to shape its final version.
From 2012 to 2017, I have received the support of the University of Lausanne, where I enjoyed exceptional working conditions as a researcher and PhD student. I do remember as golden years this period spent at the Centre Walras Pareto. I learned more than I can tell in this remarkably fertile and inspiring environment, and all my gratitude and affection go to its members. I have a special thought for Michele Bee, Nicolas Brisset, Maxime Desmarais-Tremblay, Antoine Missemer, Thomas Mueller, François Allisson, and Nicolas Eyguesier, who maintained the uncertain but happy space between collegiality and friendship. They have been invaluable intellectual companions, initiating me to the subtleties of the academic environment and orienting the pursuit of my research. In Lausanne, I also benefited from the constant guidance and support of Pascal Bridel, Harro Maas, and Biancamaria Fontana. Bianca was particularly instrumental in generating (and nurturing) my interest in pursuing my academic work in Cambridge.
The manuscript of this book was written during an eighteen-month visiting fellowship at the University of Cambridge (funded by a postdoctoral Mobility Grant of the University of Lausanne). I was hosted by the Department of Politics and International Studies and benefited from the support of Clare Hall. The frequency and richness of intellectual exchanges, well beyond the usual disciplinary practices, make of Cambridge a remarkable place to pursue research in general and to work on the history of ideas
in particular. I am most grateful to Duncan Kelly, who not only showed interest in my work from the start, but also was a constant source of support through our regular discussions over lunch at Jesus College.
I finished writing and polishing this book in Nice, where I joined the Groupe de Recherche en Droit, Economie et Gestion (GREDEG) at the Université Côte d’Azur in the Fall of 2020. Despite the restrictions due to the pandemic, my colleagues warmly welcomed me and helped me feel at home very quickly. I am thankful to Richard Arena, Nicolas Brisset, Muriel Dal Pont Legrand, and many others for their friendliness.
In recent years, I have benefited from numerous discussions on and around my work, feeding my reflection through casual talks, seminars, summer schools, international conferences, and workshops. The most regular of these meetings was the Albert Oliver Hirschman seminar led by Annie Cot and Jérôme Lallement at Université Paris 1—a hub of passionate debates from which I learned a great deal thanks to Cléo ChassoneryZaïgouche, Aurélien Goustmedt, Dorian Jullien, Jean- Sébastien Lenfant, Erich Pinzon Fuchs, Matthieu Renault, Francesco Sergi, and all the members of the REHPERE team network. On many occasions, I also had the privilege to discuss my work with a number of specialists of ordoliberalism, such as Thomas Biebricher, Patricia Commun, Nils Goldschmidt, Harald Hagemann, Stefan Kolev, Daniel Nientiedt, Jean Solchany, and Keith Tribe, who offered me generous help and advice.
Finally, I wish to thank David Pervin and James Cook at Oxford University Press for adopting this project, and Steve Medema for welcoming it into the Oxford Studies in the History of Economics. I am particularly grateful to Steve and to the two reviewers for their encouraging and incisive suggestions. Biancamaria Fontana, Duncan Kelly, and Erwin Dekker were kind enough to read parts of the manuscript. I am indebted to them for being so characteristically generous with their time and for the acuity of their comments.
It goes without saying that none of this would have been possible without the loving support of my friends and family. I am especially grateful to my mother, Florence, who has constantly encouraged me in the pursuit of my studies as well as in my personal choices. I also owe her a taste for books and reading, without which writing a monograph on the history of ideas would have been clearly far less easy and enjoyable.
Through his incomparable wittiness, continuing support, and affection, Michele’s contribution to all of this is immense: per il suo sguardo che abbellisce ciò che abbraccia, possa un semplice silenzio esprimere la mia riconoscenza
R. F. Lausanne– Cambridge–Nice (2012–2021)
N.B. All translations from materials not already translated into English are mine. By and large, I have used existing translations while remaining free to amend them.
Chapter 5 of the book was first published as “Denazifying the Economy: Ordoliberals on the Economic Policy Battlefield (1946–50),” in History of Political Economy (Fèvre 2018c) but has been restructured differently in the book and augmented by the subsection “5.2.3 Toward a Consumer Democracy?”
Introduction The Making of Ordoliberalism
In March 1950, German economist Walter Eucken traveled to England determined to disseminate the key ideas from his work through a series of lectures at the London School of Economics (LSE). Before he could deliver his fifth and final lecture, Eucken suffered a heart attack and died at the age of fifty-nine. Eucken never saw the publication of The Foundations of Economics, a translation of his 1940 magnum opus. Moreover, he could not react to the first occurrence of the neologism “ordoliberalism” (Moeller 1950), which characterized the intellectual project he shaped more than anyone else. In the first talk in his LSE cycle—later published as This Unsuccessful Age (1951)—Eucken noted with disarming simplicity, “I begin with the problem of economic power” (Eucken 1951, 31, emphasis in original). Eucken’s seemingly ordinary sentence can be rephrased to capture the central argument of this book: for ordoliberals, in the beginning was economic power. More precisely, I will argue that the entire ordoliberal project, typically framed as a subvariety of liberalism, is better understood if considered as an autonomous form of economic knowledge driven by power issues. In short, the making of ordoliberalism from 1932 to 1950 coincided with the building of a political economy of power
I.1 ORDOLIBERALISM: FROM ACTUALITY TO HISTORY
In January 2016, Angela Merkel was invited to lecture at the University of Freiburg to celebrate the 125th anniversary of Walter Eucken’s birth.1 In her speech, the Federal Chancellor reaffirmed the importance of ordoliberal intellectual roots for contemporary Germany and, in particular, her “firm conviction” that the historical “ordoliberal principles” would have “neither lost their importance nor their relevance” (Merkel 2016). Angela Merkel’s ordoliberal outlook is by no means unique among German politicians: the Free Democratic Party (FDP), the Christian Democratic Union (CDU), and, to a lesser extent, even the Social-Democratic Party (SPD) endorsed an orthodox ordoliberal line when addressing the Euro crisis (Dullien and Guérot 2012; Jacoby 2014; Uterwedde 2007). This reference to ordoliberalism has also resonated across the wide spectrum of German politics—albeit in a spirit of opposition to the CDU— from left- wing party leaders of Die Linke to the far-right of Alternative für Deutschland (Siems and Schnyder 2014; Havertz 2019).
Merkel’s explicit endorsement of ordoliberalism is also shared by prominent European leaders such as Wolfgang Schäuble (2014), the former German Finance minister, or Mario Draghi (2013), President of the European Central Bank (ECB) from 2011 to 2019, in line with former (Tietmeyer 1999) and current (Weidmann 2013) presidents of the Deutsche Bundesbank. Beyond German borders, ordoliberalism has long been recognized as a major intellectual source that shaped the European Union from the beginning.2 However, one issue still remains: How do we understand the recent revival of principles that has been at the heart of the
1. Freiburg im Breisgau is part of the Land of Baden-Wurttemberg and is located in the extreme southwest of Germany, at the foot of the Black Forest mountain range, a few kilometers from the borders of France and Switzerland. Eucken was professor of economics at the University of Freiburg from 1927 until his death.
2. Both the Treaty of Rome of 1957, which introduced a single market and the idea of free and undistorted competition, supplemented by the Maastricht Treaty in 1992, which established the Economic and Monetary Union, were partly shaped by ordoliberal ideas (Behrens 2015; Denord and Schwartz 2010; Ebner 2006; Mongouachon 2011; Strassel 2009; Warlouzet 2008). In the same way, the Stability and Growth Pact of 2011/2012 has been judged ordoliberal (Drexl 2011; Lechevalier 2015); it notably provided for a strong control of deficits and public debt in order to limit the discretionary budgetary policy of the Member States. If the ECB has been labeled ordoliberal (Dehay 1995, 2003), this perspective is now open to a more nuanced narrative (Bibow 2009, 2013). On ordoliberalism in relation to European economic policy, see also the collective volume edited dy Malte Dold and Tim Krieger (2019).
German Federal Republic’s economy and politics since 1948 and a central part of Europe for many years?3
The sixtieth anniversary of the Treaty of Rome in 2017 did not coincide with sixty years of an ordoliberal Europe. Indeed, the European Union’s economic policy embodied a “complex amalgam of nationally specific management traditions” around French indicative planning, which incorporates British and Swedish Keynesian poles as well as German ordoliberalism (Thompson 1992, 148). The 2007 financial crisis, and even more so the sovereign debt crisis that followed from 2010 to 2015, posed imperative challenges to the economic governance of Western countries in general and those in Europe in particular. Under German leadership, the European Union responded by restating a form of ordoliberal orthodoxy, culminating in a violent Greek episode. To some extent, the sovereign debt crisis marked a turning point at which ordoliberalism became the prevailing model for European economic policies and particularly at the expense of Keynesianism.4 In other words, today’s European Monetary Union (EMU) is allegedly locked in the ideological “iron cage” of ordoliberalism (Denord et al. 2015; Ryner 2015).
What are the central features of the current ordoliberal orthodoxy? Followers and critics of the ordoliberal Europe agree on its fundamentals, which center around three interrelated axioms.5 The first axiom is that an
3. Merkel’s praise of ordoliberalism during ceremonial occasions is not tantamount to engaging in actual ordoliberal policies. Clearly, the economic policy of West (and then reunified) Germany since 1948 has by no means followed a uniform path but has been marked by the ups and downs of ordoliberal-oriented policies. From mid-1960 to mid-1970 for instance, Keynesianism gained traction in West Germany due in particular to Karl Schiller, then Minister of the economy, who successfully set forth demand stimulus measures to cut the downturn of 1966–1967 (see Scherf 1986; Hagemann 2010). Yet, remarkably, and this is what interests us here, the dominant ordoliberal culture permeates the entire political sphere and has become an almost mandatory reference point for the German elite (Georgiou 2016, 67).
4. In contrast to this widely shared reading (Bibow 2018; Biebricher 2014a; Esch 2014; Ojala and Harjuniemi 2016; Olender 2012; Temin and Vines 2015), Brigitte Young argued that the ordoliberal influence on the European management of crises has been overestimated (2014a, 2015, 2018; Young and Semmler 2011). For instance, the unconventional monetary policy of quantitative easing pursued by the ECB since September 2014 would be much more interventionist (pragmatic/discretionary) than ordoliberal (rule-based) (Cerny 2016; Feld et al. 2015, 2017; Hien and Joerges 2018). In any case, the current crisis accompanying the global pandemic of COVID-19 is pushing European governance toward a more assertive Keynesianism, with unprecedented amounts of public spending.
5. Various versions of what Franz- Josef Meiers (2015, 11–14) termed the “categorical imperatives of ordoliberalism” can be found in the literature (Bonatti and Fracasso 2013, 1028–1031; Nedergaard and Snaith 2015, 1101; Ryner 2015, 281–282; Young 2015, 81–83).
independent Central Bank committed to price stability should manage monetary policy separate from national sovereignties. The second axiom involves the refusal to finance economic activity, even to stabilize the business cycle, through fiscal policy that might increase (public) debts. Ordoliberalism thus defined would exist at the heart of recent European policy, marked by monetary and fiscal austerity (Blyth 2013; Matthijs 2016; Biebricher and Vogelmann 2017).6 Finally, a third axiom of contemporary ordoliberalism includes a defense of competition based on a structural supply policy as the primary tool to fight unemployment. This policy advocates the privatization of public enterprises and services, or legislative measures compatible with flexible labor. Collectively, these three objectives point to an economic policy by the rule (as opposed to discretion) in which the economic expert becomes predominant (in contrast to politics).
By its ability to shape public discourse and action, contemporary ordoliberalism is more concerned with a political culture than with its original economic paradigm. Thus, we face two objects of different natures, the former nevertheless with roots in the latter, in a relationship that has yet to be clarified. How can we explain that ordoliberalism may be a final survivor of the “third ways” from the postwar period and that it still makes sense to refer to this stream of thought today? A related question involves how ordoliberal thought has achieved such political longevity in spite of its inability to survive in contemporary economics.
This book’s central hypothesis seeks the political robustness of ordoliberalism in endogenous factors or, specifically, in the ordoliberal approach and ideas themselves. First, answering these questions requires a clear conceptualization of ordoliberalism in its discursive context. Therefore, this book aims to restore the seminal ordoliberal project to its time and explain how it is the fruit of interwar doctrines, analyses, and debates across the field of social sciences in general and economics in particular. Defining ordoliberalism is tantamount to explaining how this identity played a positive role in founding a new political rationality and a negative one in marginalizing competing programs in the postwar period.
Through a study of the history of economic thought, this work aims to illuminate a subsequent political practice to observe how ideas “become effective forces in history,” to borrow Max Weber’s (1905, 48) formula.
6. Commentators pointed at the—mainly Protestant—ethical values underlying austerity: German inflexibility to “align responsibility with liability” (Schäfer 2016, 969–973) was seen as the action of “northern saints” conducting a “moral struggle” against “southern sinners” (Fourcade 2013, 625; Matthijs 2016, 376; Matthijs and McNamara 2015, 230).
A historical look at ordoliberalism will provide new insights on the principles at the heart of contemporary ordoliberal orthodoxy, such as the objectives of competition and price stability. This historical portrait will offer a singularly more complex—and, at times, conflicting—image than the alleged long- term continuity typically suggested.
Rebuilding the ordoliberal political economy requires that three preliminary issues be addressed. First, who are the authors who legitimately composed the corpus of the original ordoliberal project? Second, can they be brought together around common analyses and ideas despite their differences? Third, do these authors make it possible to identify the singularity of ordoliberalism as a current, a doctrine, or as a school of thought? The following sections in this introduction will answer these questions.
I.2 WHO ARE THE ORDOLIBERALS? GENEALOGY OF A RESEARCH COMMUNITY
The neologism “ordoliberalismus” was coined in 1950, by the Tubingen economist Hero Moeller. Moeller was inspired by Ordo, an academic journal founded by Walter Eucken and Franz Böhm in 1948. Its editorial board included Wilhelm Ropke, Alexander Rustow, and Friedrich A. Lutz, with Fritz W. Meyer and Hans Otto Lenel as editorial secretaries.7 As a central place to promote ordoliberal ideas in the postwar period, Ordo’s advocates shared the “dogma of competition” according to Moeller (1950, 224). Nolens volens, Moeller’s expression became authoritative, as indicated by the first monograph on the Nature and Purposes of Ordoliberalism (Wesen und Ziele des Ordoliberalismus) by Ernst-Wolfram Durr (1954).8 Years later, Bohm, Lutz, and Meyer (1961) made this neologism their own in the foreword to the twelfth volume of Ordo.
With the term “ordo,” Eucken, Bohm, and others signaled their attachment to a tradition inspired by Augustine of Hippo (354–430).9 As such,
7. Ordo—Jahrbuch fur die Ordnung von Wirtschaft und Gesellschaft is still published today (http://www.ordo-journal.com/de/). Bonker, Labrousse, and Weisz (2001) traced the evolution of the journal through a bibliometric analysis of its contributors and articles subjects.
8. Articles by Carl J. Friedrich (1955) and Henry M. Oliver (1960a, 1960b) were among the first English-language works to mention a “German neoliberalism” and the “Ordo group.”
9. Augustine developed the concept of “ordo” in Book XIX of The City of God (1998). “Ordo” refers to “the organisation of elements within a whole according to a hierarchical principle,” it’s an ideal of balance and measure (Bouton-Touboulic 1999, 297, 329–332).
Ordo resonates with one of Eucken’s fundamental concepts: order (Ordnung). The concept of order can be interpreted in two ways in ordoliberal literature. On the one hand, it refers to different spheres of social life, such as the political, economic, or cultural; although distinct from each other, these are unified by similar internal principles of cohesion and necessity. Order was a way of thinking about reality that goes beyond disciplinary frameworks (Böhm 1950). On the other hand, the concept of order involves a duality: it serves to distinguish the “positive order” from the “natural order,” terms that Eucken (1952, 372) considered born of the Enlightenment and imported into economic thought by Francois Quesnay.
The term “ordo” was also highly symbolic. In the context of the early postwar period, the reference to Augustine emphasized the Latin and Christian culture common to Europeans at a time when continental Europe lacked cohesion, to say the least. The ordoliberals’ affirmation of their Christian roots—primarily Protestant, but also Catholic (see Krarup 2019)—provided a structure for western German political parties in the postwar period.
A study of ordoliberal thinking requires distinguishing between the authors and works that are internal and external to the concept; in short, drawing the boundaries of ordoliberalism. Three groups of authors can be distinguished within ordoliberalism: its founders, students (or followers), and satellites. Among the founders, there are two clusters. On the one hand, the economist Walter Eucken (1891–1950) and the lawyers Franz Bohm (1895–1977) and Hans Großmann-Doerth (1894–1944) initiated the Freiburg School (Freiburger Schule der Nationalokonomie). On the other hand, the cultural approach of Wilhelm Ropke (1899–1966) and Alexander Rustow (1885–1963) also led to the first ordoliberals. Unlike the former, Ropke and Rustow were forced into exile because of their liberal opinions and joined the University of Istanbul in 1933.10 The Freiburg School also includes slightly younger followers: K. Paul Hensel (1907–1975), Friedrich A. Lutz (1901–1975), Karl Friedrich Maier (1905–1993), Fritz W. Meyer (1907–1980), and Leonhard Miksch (1901–1950). These students had completed their doctorate or habilitation theses and/or had a research assistant position under Eucken’s supervision.
10. Turkey was a host country for many German- speaking scholars. They participated in the modernization of higher education in Istanbul. For instance, Ropke was one of the promoters of a Faculty of Economics independent of the Faculty of Law (Ege and Hagemann 2012, 961–963). In 1937, Ropke joined the Graduate Institute of International Studies of Geneva, where he held the chair of international economics until his retirement.
Finally, Ludwig Erhard (1897–1977) and Alfred Muller- Armack (1901–1978) on the one hand, and Heinrich F. von Stackelberg (1905–1946) on the other are considered “satellites” of ordoliberal thought because they are not strictly ordoliberals. The Minister of Economy and then-Federal Chancellor Ludwig Erhard and the academic Alfred Muller- Armack bore a political project based in part on ordoliberal ideas, which they renamed the “Social Market Economy” (Soziale Marktwirtschaft). Erhard and MullerArmack were satellites who intervened downstream of ordoliberal thought, which contributed to its political shaping. In contrast, the market structure theorist Stackelberg acted as a satellite to intervene primarily upstream of ordoliberal thinking as a theoretical resource, as I will discuss in Chapter 3. This partition has merit in renewing the coherence between the authors who are at the heart of this book, both founders and students, while delineating the satellites’ external but no less decisive role in defining ordoliberalism’s political and theoretical identity. Alternatively, ordoliberalism’s temporal categorization can be outlined by three main stages, which are marked by different historical contexts. I have chosen to organize these around key dates and not in a purely linear manner: the outbreak (1932–1936), the blooming (1940–1942), and the acme (1948–1950) of ordoliberal thought.11 The following chronological presentation highlights some of the works most cited in this book and frames some of its central questions.
Starting the history of ordoliberalism in 1932 raises the question of its prehistory. At this stage, two indications about the twenties are worth highlighting. First, this emphasizes the importance of certain academic socialization circles, such as the Verein fur Socialpolitik, in which ordoliberals primarily interacted with such historicists as Werner Sombart and Arthur Spiethoff, but also with Austrians like Hayek, Ludwig von Mises, and Joseph A. Schumpeter. In 1922, and at Rüstow’s initiative, Eucken, Ropke, and Lutz founded a subcommittee of the Verein called the “German Ricardians.” Under Ricardo’s patronage, Rustow sought to bring together economists who wanted to revive economic theory as opposed to historicist canon, whether liberal or socialist (such as Adolf Lowe and Emil Lederer), although Austrian economists kept their distance with this project (Commun 2016, 24–27; Janssen 2009).
11. The secondary literature rather distinguishes two periods (Rieter and Schmolz 1993; Simonin 1999): from a separation between a phase of silent intellectual formation (1938–1945) which contrasts with that of public expression in favor of an economic and political project (1946–1966).
Second, the traumatic experience of German hyperinflation, which peaked in 1923, is noteworthy. Nevertheless, it would be incorrect to associate the ordoliberal aversion to price fluctuations with this single episode of open inflation because the repressed inflation of 1936–1948 in particular will occupy ordoliberal monetary concerns. However, hyperinflation has convinced the ordoliberals of the importance of price stability, not only for economic order, but above all for moral and social order as a whole. Stefan Zweig’s analysis is particularly telling in its illustration of this idea; in The World of Yesterday, Zweig described the collapse of German society’s values concomitant with the collapse of the paper mark’s value:
I have a pretty thorough knowledge of history, but never, to my recollection, has it produced such madness in such gigantic proportions. All values were changed, and not only material ones; the laws of the State were flouted, no tradition, no moral code was respected, Berlin was transformed into the Babylon of the world. (Zweig 1943, 313)
Dissatisfied with historicists’ analyses of hyperinflation, the first ordoliberal generation sought to emancipate itself from their trained tradition, which was still fairly dominant in interwar Germany. Analyzing ordoliberalism as both a rupture from and continuity with the German Historical School presents tensions that will reoccur at different stages in the first three chapters of this book.
I.2.1 The Birth (1932–1936)
The cornerstone of the history of ordoliberal political economy can be traced back to 1932, in which Eucken (1932b) published an important article to diagnose contemporary disorders, called “Structural Changes of the State and the Crisis of Capitalism” (“Staatliche Strukturwandlungen und die Krisis des Kapitalismus”). Eucken framed a long- term outlook to explain the driving forces behind the transition from laissez- faire liberalism to an interventionist reaction “born of a particular combination of economic interests, anti- capitalist sentiments, aspirations for a national policy and quasi-religious convictions” (Eucken 1932b, 306). The early thirties began with an unprecedented economic crisis, coupled with a political crisis of parliamentary democracy, which suggests the state’s powerlessness in the face of the turbulent market economy. Germany was the European country most severely affected by the Great Depression, which began in the United States.
Given the scale of the crisis and the radical nature of the responses to it, the stakes were not only economic, but also political, social, and cultural. In a January 1935 lecture delivered to the Austrian Society of Economists in Vienna, Ropke (1936c, 1307) stressed that the end of the economic crisis lay in the establishment of new spiritual foundations to “morally reconcile the masses” with the liberal market economy. A few years earlier, Alexander Rustow (1932, 183) was “convinced that it is not the economy that determines our destiny, but the State; and that the State also determines the destiny of the economy,” in a presentation to the thirty- second session of the Verein fur Socialpolitik. Thus, at the time of Eucken’s 1932 article, Rustow (1932, 183) voiced the need for “liberal interventionism,” of which the existence of a “strong state” was the preliminary condition. The following year, Hans Großmann-Doerth (1933, 27) in his inaugural lecture at the University of Freiburg called for a “state that once again holds the power to impose its will,” or a state that would be “free from the economy.”
When ordoliberals called for a strong state, did this support the newly established National Socialist state following Adolf Hitler’s appointment as chancellor in January 1933? More generally, what was the ordoliberals’ position toward Nazism? A brief answer involves first noting the ordoliberals’ various relationships with the National Socialist regime, which ranged from exile and open protest (Ropke and Rustow) to a withdrawal and intellectual resistance that intensified beginning in 1942 (Eucken and Bohm).12 Some ordoliberals participated in debates on implementing certain official economic reforms (Erhard and Miksch), sometimes accompanied by Nazi party membership and enthusiasm, at least in the early years (Muller- Armack, Großmann-Doerth, and Stackelberg). This theme is still controversial in recent historiography and some elements are subsequently addressed in the development of this book, particularly in Chapters 3 and 5.
In 1936, Franz Bohm, Walter Eucken, and Hans Großmann-Doerth signed a short text entitled Our Task (Unsere Aufgabe), which introduced the Ordnung der Wirtschaft collection, including contributions from Lutz (1936), Bohm (1937), and Miksch (1937b).13 In fact, the foundations of the Ordo journal in 1948 were laid in 1936 with this series of monographic contributions, embodying what Franz Bohm (1957) retrospectively termed a “research and teaching community between lawyers and economists” at
12. On Eucken’s resistance to Nazism, see in particular the volume edited by Nils Goldschmidt (2005a).
13. Apparently, Eucken wrote most of Our Task alone (Goldschmidt 2005b, 11). The English translation of this text by Alan Peacock and Hans Willgerodt was the opportunity to rename the text The Ordo Manifesto of 1936 (Böhm, Eucken, and GroßmannDoerth 1936).
the University of Freiburg. Our Task was a programmatic, decisive text to illuminate the bases on which ordoliberals oppose historicism and how they view the scientist’s role in the political sphere.
I.2.2 The Blooming (1940–1942)
Published during the Second World War, Eucken’s (1940a) The Foundations of Political Economy (Die Grundlagen der Nationalokonomie) and Ropke’s (1942c) The Social Crisis of Our Time (Die Gesellschaftskrisis der Gegenwart) were the most authoritative works of ordoliberal thought, although very different in form.
As Eucken’s book title suggests, the Grundlagen laid a foundation for the ordoliberal political economy. From an epistemological perspective, Eucken aimed to overcome the “great antinomy” between history and theory brought to the fore by the famous battle of the methods (Methodenstreit) between Gustav von Schmoller and Carl Menger. From a theoretical perspective, Eucken developed a typology to describe not only the different forms of economic orders or the administered versus exchange economies, but also the different forms of markets and monetary systems within the exchange economy. This perspective will reveal the role of Eucken’s epistemological (Chapter 2) and theoretical ambitions (Chapter 3) in forming the ordoliberal political economy. This will also demonstrate the extent to which an analysis of economic power plays a decisive role.
In The Social Crisis of Our Time, Ropke adopted a much broader outlook than Eucken; although focused on economic issues, Röpke’s reflections embraced a cultural challenge to modern Western civilization. The Crisis of Our Time is the first work in what Ropke considered as a trilogy published during the war (see Röpke 1942c, 1944b, 1945b). Rustow (1942, 267) believed that together they “faced the same problem, but from a reverse perspective: while Professor Ropke insisted on the economic aspects, only scratching the surface of sociological issues, I focused on the field of sociology and the history of thought, briefly mentioning the economic aspects of our problem.” This differentiation between economic, political, sociological, and legal arguments is one difficulty that this book will face.
During the war, the ordoliberal project of a “third way” (dritter Weg) increasingly developed. Did this third way synthesize laissez-faire and planning, or was this an alternative approach? How did the ordoliberals justify the impasse they sought to establish in the opposition between laissezfaire liberalism, on the one hand, and planning, on the other? Moreover,
was power of the same nature, and did it lead to the same difficulties in the hands of private agents versus a state bureaucracy? Furthermore, how did state intervention— which “must not be in opposition to the functioning of the market mechanism or disturb the structure of the market, but on the contrary, maintain it” (Rüstow 1942, 281)—make it possible to overcome this impasse? Bohm (1942), Eucken (1942b), and Miksch (1942) were daily witnesses to the planned National Socialist war economy and voiced the competitive mechanism’s potential as not only an economic instrument that contributes to efficiency, but also a political instrument that promotes freedom.
I.2.3 The Acme (1948–1950)
The year 1948 was key for the ordoliberals in many ways. After the June 15 monetary reform established by the Allies, Ludwig Erhard, Director of the Administration of the Unified Economic Zone, promulgated price liberalization on June 20. In this context, the ordoliberals conducted decisive, expert work within political circles and in public opinion. As previously mentioned, the Ordo’s creation in the same year provided support for—and the beginning of an institutionalization of—ordoliberal ideas as this journal aimed to combine political militancy and scientific rigor. Lionel Robbins witnessed this twofold dimension when he wrote to Ordo’s editors that they had “succeeded in producing a journal which promises to be of absolutely first- class importance not only for professional economists, but also for all those who have the future of society of the west at heart.”14
Until the early fifties, West Germany’s economy was devastated and marked by chronic shortages and mass unemployment. Ropke (1950b) asked Is the German Economic Policy the Right One? (Ist die deutsche Wirtschaftspolitik richtig?) with the intent to push Erhard’s market-oriented reforms and indicate that a return to administrative price- fixing, or planned resource allocations, would seriously undermine the country’s economic recovery. However, 1950 was also marked by the deaths of Eucken at age fifty-nine and Miksch at age forty-nine, and thus ordoliberals lost not only their greatest contributor and one of its founders, but also two of its most active and influential members.
The posthumous publication of the Principles of Economic Policy (Grundsätze der Wirtschaftspolitik) presented Eucken’s (1952) work to a
14. L. Robbins, letter to H. O. Lenel, September 21, 1948 [LSE Archive: ROBBINS/ 3/2/11].
wider audience and elevated him to an almost mythical stature as the gray eminence of the “economic miracle” ( Wirtschaftswunder), of which Erhard was a leading political figure. Orphaned by some of its most important members (Eucken and Miksch), ordoliberal thinking was assimilated to Erhard and Mu ller- Armack’s political syntheses, which marked a weakening of its original specificity. Therefore, the period of analysis in the book ends around 1950, with less interest in the dissemination of an intellectual heritage than in primarily reconstructing original ordoliberal ideas.
This presentation in three periods, from 1932 to 1950, is necessary to understand the constitution of ordoliberal thought. Nevertheless, this book will then offer a certain temporal coherence, justified by a demonstration of the centrality of the notion of power from the first to the last ordoliberal works.
I.2.4 Crystallization of the Ordoliberal Project
This book gives a place of pride to the analysis of Walter Eucken’s work, as his contributions played a central role in works by other ordoliberals and in the constitution of the ordoliberal political economy as a whole. In the search for a balanced approach, the book’s narrative focuses on each member of the ordoliberal project.
In his Foundations, Eucken outlined a detailed scientific philosophy far beyond what any of the other ordoliberal authors contributed separately. In doing so, it is as though Eucken delivered a cornerstone of the epistemological and theoretical conceptions of ordoliberal thought as a whole. His students Friedrich Lutz (1940a, 1944, 1950) and Leonhard Miksch (1942, 1950b) confirmed this hypothesis, and the latter also specified that the Foundations were part of a
joint work that has benefited from a rich mutual inspiration . . . through personalities involved for many years. Eucken did not build this community, and nothing would be more foreign to him. It has developed around him, like the crystal that represents the structure of the molecule that forms its nucleus.
(Miksch 1950b, 289)
Thus, ordoliberalism was the result of a crystallization around a common project. Miksch mentioned that among these “personalities” not only the philosopher Edith Eucken-Erdsiek (Walter Eucken’s wife), as well as Franz Bo hm and Hans Großmann-Doerth, but also Friedrich Lutz, Karl
Friedrich Maier, Fritz Meyer, and himself were a part of this “circle.” Hence others have claimed the Foundations as such; this book was also the product of the common spirit of Freiburg to a certain extent, to which everyone could then contribute in their own way, following—at least implicit—“divisions of labour” (Kolev 2017, 196–197). Outside the Freiburg school, Ro pke (1942c, 1944a, 1963), Ru stow (1980), and, more unexpectedly, Stackelberg (1940, 1948), most enthusiastically welcomed Eucken’s contributions.
If Eucken is the main character in this book’s dramatis personae, Wilhelm Ro pke is the other central figure and by far the most prolific ordoliberal author. His less systematic—but more comprehensive— views, coupled with an unparalleled sense of formula and the polemic, make Ro pke’s the strongest voice of ordoliberal ambitions for the social order as a whole.15
Certainly, ordoliberals do not constitute a “homogeneous group” (Young 2013, 38). However, non-homogeneity does not imply that each of these authors’ individual contributions does not contribute to a common purpose that transcends their necessary heterogeneity. As André Piettre (1962, 339) noted, ordoliberalism exists in the “diverse expression of a common thought,” and these diverse contributions to a common project at times redundant, often complementary, and rarely contradictory— will emerge across this book. In short, to define ordoliberalism is to grasp what ordoliberals as a community of thought sought to achieve regarding a specific issue: the question of power, in this case. To meet this research goal means taking a new look at ordoliberalism vis-à- vis the current literature on the subject.
I.3 COMPETING DEFINITIONS OF ORDOLIBERALISM
The growing literature on ordoliberalism invites two remarks. On the one hand, attempts to define ordoliberalism involve comparisons with other better-known schools of thought. On the other hand, these definitions provided in literature are heterogeneous, if not divergent. Although not mutually exclusive, the current definitions of ordoliberalism revolve
15. Röpke is the ordoliberal author who received the wider attention in the literature. For now, I shall only mention the three intellectual biographies in English (Zmirak 2001), German (Hennecke 2005), and French (Solchany 2015), as well as a recent collaborative volume that followed the 2016 symposium for the fiftieth anniversary of his death (Commun and Kolev 2018).
around three main interpretations: first, ordoliberalism as a part of the institutionalist paradigm; second, ordoliberalism as a kind of neoclassical synthesis; and finally, ordoliberalism as a variety of neoliberalism, and particularly as a variant of Austrian neoliberalism in the current prevailing interpretation.
According to the first interpretation, ordoliberalism consists of a comparative institutional approach to economic systems that parallels the French school of regulation (Labrousse and Weisz 2001). This form of comparative economics “starts from the thesis of the diversity of real economies” (Ananyin 2003, 6). Similarly, Karl Pribram had categorized ordoliberalism as an “organic economic science” (1983, 391). This first interpretation emphasizes what ordoliberal thought inherited from the German Historical Schools (Haarmann 2015; Peukert 2000; Schefold 1996, 2003).
The second interpretation maintains the institutionalist approach but instead focuses on a “synthesis of neoclassical and historical schools” (Priddat 2004, 71). This is what emerges from the work of Keith Tribe (1995): while offering a history of the various modalities of study of the economic and political order, from Cameralism to ordoliberalism, his work emphasized the ordoliberal use of neoclassical tools (Tribe 2001, 46; Hodgson 2001, 133). Following this argument, ordoliberalism is sometimes referred to as a “neo-institutionalism before the fact” (Bilger 1964, 117; Richter 2015); as a forerunner of “law and economics” (Grossekettler 1996; Nörr 1996, 2000; Yeager 2005; Hien and Joerges 2017); or as a “predecessor of the constitutional economy,” according to Viktor Vanberg (1988, 1998, 2001; see also Leipold 1990). Vanberg described ordoliberalism as an “articulation of legal and economic perspectives,” which “has as a common concern the constitutional foundations of an economy and a free society” (2006, 911). This last remark provides the basis for a transition from the second interpretation to the third.
The third interpretation specifies ordoliberalism’s place within liberalism in general and within the neoliberal paradigm in particular. Eucken, Röpke, and the other ordoliberals participated in the Mont Pèlerin Society from its inception in 1947 as an integral part of the stories involved in the history of the “neoliberal thought collective” (Burgin 2012; Hartwell 1995; Mirowski and Plehwe 2009; Slobodian 2018; Walpen 2004). The literature examines the links and specificities of the ordoliberal approach within the various competing currents of ideas expressed by the Mont Pèlerin Society, of which Röpke (1961–1962) and Lutz (1964–1967) were presidents (Caré 2016; Kolev et al. 2020; Ptak 2009; Steiner and Walpen 2006).
Much of the recent work on ordoliberalism is engaged in a comparative study with Mises’s and especially Hayek’s views to clarify the link between
ordoliberalism and Austrian economics.16 Moreover, Hayek was a chair of economic policy at the University of Freiburg from 1961 until his retirement in 1967 (see Vanberg 2013). Scholars thus portray ordoliberalism as an “independent brand of liberal theory formation which can only be correctly understood and interpreted in the context of German-language traditions of economics and philosophy” (Goldschmidt 2013, 144). Undeniably, ordoliberals shared Mises’s and Hayek’s cultural background; yet, while common to some extent, Hayek in many ways does not deepen the Freiburg tradition so much as reorient it.17
Among the interpretations of ordoliberalism within neoliberalism, Michel Foucault’s has received the most attention from social scientists. In The Birth of Biopolitics (2008), Foucault analyzed neoliberalism—or specifically, neoliberal “governmentality”—as “the way in which one conducts the conduct of men” (Foucault 2008, 186), as a government of life (hence the term “biopolitics”), and whose object is less the subject of law than the economic man, a rationally driven individual. Foucault devoted half his lessons to ordoliberalism before turning to the “entrepreneur of himself” model (Foucault 2008, 226), associated with Gary Becker’s work and the Chicago School. In spite of a somewhat incomplete reading of the ordoliberals’ original writings, Foucault offers a particularly penetrating analysis of Eucken’s epistemology and suggests a remarkable interpretation of the ordoliberal as a project of society.18 Foucault’s ambition was less to understand ordoliberalism as such than to outline the transition from nineteenth- century classical-liberal governmental reason to a twentieth- century neoliberal government.19
Werner Bonefeld’s The Strong State and the Free Economy (2017) was the first monograph exclusively devoted to ordoliberalism in a postFoucauldian perspective. Bonefeld claimed that the ordoliberal argument would be less centered on economic policy and technique than on social control. Consequently, he contextualized ordoliberalism within the history of “authoritarian liberal thought” that goes from Benjamin Constant to
16. The literature is quite rich here (Biebricher 2014b; Blümle and Goldschmidt 2006; Bönker and Wagener 2001; Goldschmidt and Hesse 2013; Köhler and Kolev 2013; Kolev 2010, 2013, 2015; Kolev et al. 2020; Leen 2003; Meijer 2005; Nientiedt and Köhler 2016; Pongracic 1997; Wohlgemuth 2013; Wörsdörfer 2011, 2013b, 2014).
17. Erwin Dekker’s perspective on The Viennese Students of Civilization (2016) offers new perspectives for discussions between Austrians and ordoliberals.
18. Critical reviews of the Birth of Biopolitics called into question Foucault’s (lack of) first-hand use of primary sources (Lemke 2001; Tribe 2009; Wörsdörfer 2013a).
19. Following this Foucauldian heritage, Francois Denord (2007), Pierre Dardot and Christian Laval (2009), and Serge Audier (2008, 2012) have developed in many ways the French research on the history of neoliberal ideas, including ordoliberal ideas.
