Ordoliberalism

Ordoliberalism is not a single and unified historical tradition. Its roots can nevertheless be traced back to the so-called Freiburg School of National Economics, in particular, to the work of economists Walter Eucken (1891–1950), Adolf Lampe (1897–1948), and Friedrich Lutz (1901–1975). Together with jurists such as Franz Böhm (1895–1977) and Hans Großmann-Doerth (1894–1944) the economists made up the so-called Freiburg Circles that served as an important platform for different resistance movements during the National Socialist era.[1] The ordoliberals, in particular, played a central role in the transition from the planned war-time economy to the “social market economy” of the post-war period and the creation of the so-called Wirtschaftswunder, the German economic miracle.[2]

Although the concept of neoliberalism was attached also to ordoliberals in the 1950s and 1960s, their views on the role of state and social policies differed rather substantially from the more laissez-faire oriented versions of neoliberalism.[3] Free market economy, according to ordoliberals, could only function within a competitive environment that is sustained by a strong and effective legal framework – what both Eucken and Böhm called an “economic constitution” (Wirtschaftsverfassung).[4] The ordoliberal thinkers wanted to rebuild economics as a science of economic “orders” (Lat. ordo) with a focus on structural features and formal principles, what Eucken called the “rules of the game” (Spielregeln).[5] They criticized both Fascism and Socialism for their trust in central planning, and argued against Keynesianism that all decisions concerning employment and the rate of investment should be left to the market participants themselves.[6] The conscious shaping of political institutions and legal culture, rather than mere trust in the invisible hand of the market place, was to be made the basic principle of liberal governance.

Although ordoliberalism gained political success only at the end of 1940s, its emergence was closely tied to the collapse of the liberal order in the interwar period. The representatives of the Freiburg School aimed at reconfiguring classical liberalism in at least two regards. From a theoretical perspective, they criticized classical liberalism for its trust in laissez-faire ideology and naturalistic concepts. According to them, the market was to be seen as an artificial construction that is constantly in danger of losing its essential principle, that of competition. Practically speaking, liberal theory was to be provided with a new, stable foundation that would secure the success of market economy despite changing political trends. Legal or constitutional order, rather than politics, was to become that central mechanism through which this continuity is secured.[7]

[1] On the programmatic declaration of ordoliberalism, see introduction in Böhm, Franz (1937) Die Ordnung der Wirtschaft als geschichtliche Aufgabe und rechtsschöpferische Leitung. In Böhm, Eucken and Großmann-Doerth eds.: Ordnung der Wirtschaft.  Stuttgart and Berlin: W. Kohlhammer. The concept ”ordoliberalism” is a later invention, and it refers to the journal ORDO established by Eucken and Böhm in 1948.

[2] Ludwig Erhard (1897–1977), who served as a Minister of Economics under Chancellor Adenauer from 1949 onwards – and became the chief economic architect of the Federal Republic – was a strong proponent of ordoliberal policies, contributing to the post-war currency reforms and the creation of a politically neutral Bundesbank in 1957. See e.g. Sally, Razeen (1996) “Ordoliberalism and the Social Market: Classical Political Economy from Germany”, New Political Economy, 1(2), 233–257.

[3] On differences between ordoliberalism and the Austrian School, see Ptak, Ralf (2009) “Neoliberalism in Germany: Revisiting the Ordoliberal Foundations of the Social Market Economy”. In Mirowski, Philip Plehwe, Dieter (eds.) The Road From Mont Pèlerin: The Making of The Neoliberal Thought Collective. Cambridge, MA: Harvard University Press, 98–138.

[4] Eucken, Walter (1989/[1939]) Die Grundlagen der Nationalökonomie. 9th edition. Berlin: Springer-Verlag, 52ff., Böhm 1937: xix.

[5] Eucken 1989: 51ff., 240; 1990: 314. Böhm 1937: 120ff, and Böhm, Franz (1980) Freiheit und Ordnung in der Marktwirtschaft. Baden-Baden: Nomos.

[6] See Eucken, Walter (1948) “On the Theory of the Centrally Administered Economy. An Analysis of the German Experiment”, Economica 15(58), 79–100.

[7] Vanberg, Viktor (2001) The Constitution of Markets: Essays in Political Economy. London: Routledge.