Law and liberalism

Born in 1891, Eucken grew up in an upper-middle-class Protestant family notable for its academic distinction. His father, philosopher Rudolf Eucken, won the Nobel Prize for Literature in 1908 for his work on Kantian ethics. Among Rudolf Eucken’s many writings may be found a critique of socialism published in 1920.Footnote ³ The development of free societies, he insists, requires definitive philosophical and spiritual choices, an insight that his son would incorporate into his own thought.

Walter Eucken took a different academic path from his father when he decided to pursue economics. He was a student at the universities of Kiel and Jena and undertook his doctorate in economics at the University of Bonn, initially under the supervision of Heinrich Dietzel, one of the rare German university economists who was not an adherent of the German Historical school of economics. Eucken then served as an assistant to Hermann Schumacher, a member of the Historical school, finishing his doctorate in 1914.Footnote ⁴

Like most Germans of his generation, the formative experience for Eucken was World War I. Having served as an officer in the Kaiser’s army on the Western and Eastern fronts, Eucken emerged from the war as a conservative nationalist and suspicious of the Weimar Republic. Within a short time, however, Eucken disassociated himself from the nationalist right. This was primarily because of growing doubts about economic policies—tariffs, subsidies to politically connected sectors like agriculture and heavy industry, corporatism, and so on—promoted by that brand of German politics. Living in Berlin in the early 1920s and serving as an advisor to the federation of German industry, Eucken concluded that these policies corrupted politics and produced suboptimal economic outcomes.Footnote ⁵

Eucken’s path was similar to that of other market-orientated German economists, such as Alexander Rüstow and Röpke. All three men advised government officials throughout this period on topics ranging from reparations to unemployment. The experience helped turn them against dirigiste policies. Eucken particularly noted how interest groups would effectively capture the drafting of laws that determined economic policy as well as the ways in which private actors used devices like contracts to establish cartels to exclude competitors from entire economic sectors.Footnote ⁶

Eucken’s first formal forays into economic policy debates reflect and reinforce his skepticism about the efficacy of deep-state intervention into the economy. Eucken’s work on monetary theory, for instance, challenges the notion that inflation is caused by currency speculation, a negative balance of payments, and excessive imports. Inflation in post-war Germany, he insists, was caused by government deficit spending and the Reichbank’s loose interest-rate policy.Footnote ⁷ For Eucken, inflation was a monetary phenomenon that proceeded from loose monetary and credit policy.Footnote ⁸ Throughout the rest of the 1920s and early 1930s, Eucken broadened his critique of economic nationalism. He argues, for example, for Germany’s return to the gold standard,Footnote ⁹ maintaining that this would limit the state’s ability to pursue monetary policy according to the desires of powerful interest groups. Eucken also emphasizes the advantages of German businesses borrowing capital from abroad at cheaper interest rates.Footnote ¹⁰ This position reflects his belief in the importance of free international capital markets at a period when autarkic policies were becoming popular throughout Germany.

After his appointment as professor of economics at University of Freiburg in Breisgau in 1927, Eucken began to integrate insights from history and law into his economic thought. In 1932, Eucken presented a historical-institutional stage-theory explanation of the relationship between the economy, the state, and society. Mercantilism, Eucken argues, involves sovereign states encouraging economic enterprises that enhance government power. The age of liberal capitalism reflected the dismantling of such structures. However, Eucken holds, the decades after Bismarck were characterized by a regression to extensive government intervention in the economy.Footnote ¹¹

According to Eucken, a state that constantly expands its functions becomes, paradoxically enough, feeble and unable to perform its limited but essential roles.Footnote ¹² While entrepreneurial activity continues in the sense of technical innovation, government economic policy becomes indistinguishable from the interests of politically connected businesses.Footnote ¹³ The situation is worsened by the fact that the state is highly susceptible to dynamics created by the emergence of mass movements that exert increasing power because of the steady democratization of political life. In these conditions, the state struggles to resist the pressures of interest groups and the masses. Economic liberty is subsequently squeezed from above and below. Eucken’s attention to these pressures does not mean that he was opposed to democracy or questioned the fact that some groups were bound to have more power than others. He does believe, however, that the market and the rules underpinning it need some protection from these top-down and bottom-up pressures.

The question of how to obstruct interest-group capture of an economic sector came to dominate Eucken’s thinking, especially after he encountered two Freiburg legal scholars, Hans Grossmann-Doerth and Franz Böhm. All three wanted to identify the legal principles and framework required to protect market economies from efforts to acquire privileges via the state. But they also argue that, once known, these universally knowable principles and rules have to be chosen.

As early as 1932, Eucken was arguing that there has to be a decisive political choice to generate and maintain a competitive economy by reducing the scope for arbitrary power. According to Eucken, market economies require a government strong enough to withstand interest-group pressures, but whose own authority is limited by the same principles. In short, the political order has to embody a highly developed system of checks and balances that inhibits the potential for arbitrary power, while also securing the freedom of those with the legitimate authority to make laws from pressures exerted by interest groups.Footnote ¹⁴

Undergirding Eucken’s framework for realizing these arrangements are one fundamental, seven constitutive, and four regulative principles. The fundamental principle required for market competition, he argues, is a free price system. The constitutive principles include an affirmation of price stability and a strongly anti-inflationary monetary stance; defense of private property; open markets and free trade; freedom to contract, without permitting people to contract in ways that restrict others’ liberty to contract; liabilities for people’s contractual choices, thus linking risk to responsibility; constancy in economic policy to minimize uncertainty; and, finally, recognizing the interdependence of these constitutive principles.

Concerning direct government interventions, Eucken tries to limit these by making them conform to “regulative principles,” which he considers compatible with a competitive order. One such principle is prohibiting practices like cartels that undermine excessively other market actors’ liberty. The second principle is “incomes policy,” that is, redistributive policies when market outcomes prove socially unacceptable or politically destabilizing. Third, under the title of “economic calculation,” Eucken specifies policies that address the externalities of economic progress, such as environmental protection. Eucken’s fourth regulative principle concerns the labor market. He is not opposed to minimum wages and the formation of trade unions, but he specifies that they have to be provided within the limits established by market competition.Footnote ¹⁵

The roots of order

As we look at these three sets of principles, we can identify potential conflicts between, for instance, the fundamental principle of free competition and those regulative principles that seek to address market outcomes that might be politically destabilizing. Addressing these tensions inevitably has a political element. But political decisions, Eucken knows, mean reflection on more than technical questions. Politics has normative dimensions that require normative answers.

Here, it is important to recognize that Eucken’s normative grounding for markets is not found in utilitarianism. The ultimate foundation for free economies, he believes, is the principle that humans are ends in themselves. This reflects Christian and Kantian influences on Eucken’s thought, but also his belief in the concept of “ordo,” something first given formal expression in the “Ordo Manifesto,” published by Eucken, Böhm, and Grossmann-Doerth in 1936.Footnote ¹⁶

In developing the idea of ordo, liberals like Eucken look back to concepts found in the writings of some Stoic philosophers and Augustine as well as ideas developed and clarified by Thomas Aquinas, other Catholic scholastics, and early Protestant theologians like Philip Melanchthon. For Augustine, ordo is a way of describing the interdependence of different realms (orders) of life. The political and social order, for instance, are different, and yet they necessarily shape each other.Footnote ¹⁷ For twentieth-century ordo-liberals, this implies that while areas of human life such as the economy and civil society have their own distinct nature, they nonetheless shape each other; after all, they are both inhabited by the same human beings acting economically and associatively. This means that although politics, the economy, and law are distinct orders in which different activities occur, these orders are not self-sufficient. This means that who studies, for example, monetary policy could and should think about how this relates to law, and vice versa. Eucken, Böhm, and Grossmann-Doerth summarize that ordo means “viewing individual economic questions as constituent parts of a greater whole. The treatment of all practical political-legal and political-economic questions must be keyed to the idea of the economic constitution.”Footnote ¹⁸

Another root of the ordo idea is found in Catholic and Protestant scholastic thinkers from Aquinas onward who emphasize that there are pre-given fundamental realities created by God that human reason can know under its own volition and that can be brought into place via the use of free choice.Footnote ¹⁹ This reflects basic principles of natural law reasoning concerning our ability to know certain normative truths rather than create them ex nihilo as well as the role played by human agency in actualizing these realties.Footnote ²⁰ This adds a distinctly anti-relativist position to twentieth-century ordo-liberal thought insofar as they do not believe that rules concerning institutions like property or the workings of contract are culturally specific time-bound phenomena.

This compliments yet another source of the ordo concept developed by figures like Eucken. Like many German intellectuals of his generation, Eucken was influenced by Kantian philosophy, especially its emphasis on the categorical imperatives that should be followed in the context not only of one’s personal life but also when state institutions make decisions. There are, Eucken believes, limits to the idea that the workings of self-interest would lead to the realization of economic and moral goods for all. The pursuit of self-interest, Eucken thinks, is not beneficial when private parties decide that it is in their interest to enlist state power to undermine the freedom of other market players. Such collusions of private and public power undermine essential market mechanisms such as free prices, paving the way for extensive economic intervention and, eventually, centrally planned economies. Eucken’s vision of political economy was thus shaped by his commitment to the Kantian normative goal of a social, political, and legal order in which each individual’s liberty from all other individuals and the state is preserved.Footnote ²¹

Taken together, the emphasis on the interdependence of orders, a confidence in the capacity of human reason to know normative truths that are given rather than created, as well as the importance of adhering to general rules thus constitute the essence of ordo as understood by twentieth-century ordo-liberals. It is important to note, however, how these convictions are intellectually expressed by representative ordo-liberal thinkers. Eucken, for instance, stresses that the ordo agenda is primarily a matter of positive social-science inquiry. In his Grundsätze der Wirtschaftspolitik , Eucken claims that “the regulative framework with which we are concerned here did not emanate from natural law … . The emphasis among all these principles lies upon their positive approach.”Footnote ²²

This is the voice of the strict social scientist. Yet in the same book, Eucken holds that his free competitive order is “in another sense … a natural order … , one which corresponds to the nature of things and of Man.”Footnote ²³ That can be read as a veiled reference to natural law insofar as it suggests that there are aspects of human existence that do not change, precisely because they are rooted in who people are as human beings. It is, however, ambiguous insofar as much depends here on what Eucken means by human nature. A clearer reference to natural law is found in Eucken’s claim in his earlier book Die Grundlagen der Nationalökonomie that there is an order of morality and things that transcends historical circumstances, such that violating it invariably has negative consequences.Footnote ²⁴

Yet for all Eucken’s confidence in the idea of ordo and its reliance on this mixture of philosophical sources, he also believes that resolving the deeper crises of capitalism and liberalism more generally require a return to a “comprehensive spiritual order of life.” Human life, he argues, could “only be given a comprehensive meaning again by religion, by the belief in God.” Liberalism, Eucken wrote in a letter to Alexander Rüstow, had degenerated “as soon as it lost its religious and metaphysical content.” Eucken even told Rüstow that he himself would be unable to live or work if it was not for his Christian faith and certainty about God’s existence.Footnote ²⁵

Eucken read the works of Lutheran theologians closely, especially as the authoritarian nature of the National Socialist state became more and more obvious throughout the 1930s. He also joined clandestine groups of clergy and religiously motivated civil servants, academics, and army officers in Freiburg who opposed Adolf Hitler. By 1943, these groups were contemplating the future for Germany after what they now recognized would be a lost war. Eucken even coauthored an outline for a market-orientated economic future for Germany at the request of Lutheran theologian Dietrich Bonhoeffer. Eucken also saw religious organizations as having a major role in shaping the moral order within which economic and social activity occur. Christianity, whether its Catholic or Protestant expressions, is, he argues, one of three ordering powers alongside the state and science (“science” being understood here as the academy in general).Footnote ²⁶

Culture and liberty

Although Eucken was firmly convinced of the need to ground market economies in particular legal arrangements and a specific moral-cultural framework, his formal academic work reflects far more upon the first than the second. In his private writings and forums, he did not hesitate to discuss questions of the relationship between the economy and religion in normative terms. Eucken’s academic articles and public commentaries on these issues, however, tend to be limited to sociological and historical reflections that skirt the normative dimension of these matters. His friend and perhaps the most influential of all the ordo-liberals, Röpke, took a different approach.

Like Eucken, Röpke served in the Kaiser’s army. He returned home in 1918 as a highly decorated war veteran and immediately began studies in law and then economics first at the universities of Tübingen and Göttingen, before earning his doctorate in 1921 under the supervision of Walter Troeltsch, a specialist in the economics of unemployment, at the University of Marburg. While Röpke’s doctoral thesis concerns the very technical subject of German potash mines,Footnote ²⁷ this happened to be one of the most heavily cartelized industries in Germany. It marked the start of his ongoing interest in preventing monopolies and cartels. By contrast, Röpke’s habilitation dissertation addresses the economics of business cycles,Footnote ²⁸ a topic to which he would consistently return in the context of analyzing international trade issues and business-cycle theory.

After a year working in the Foreign Office advising Weimar officials on how to pay Germany’s war reparations—an issue on which he continued to write throughout the 1920s and 1930sFootnote ²⁹—Röpke was appointed professor of economics at the University of Jena at the age of 24, thereby becoming in 1924 Germany’s youngest professor. After a short period at the University of Graz, Röpke returned to the University of Marburg in 1929 to take up a full professorship. His subsequent appointments in Istanbul and Geneva, after leaving Germany following his defenestration from the academy on account of his outspoken anti-Nazi views, were to professorships in economics.

At different times throughout his career, Röpke provided formal and informal advice on economic policy to various German governments. This included service on a government commission studying unemployment in 1930–1931, as well as Ludwig Erhard’s currency-reform council which, between 1947 and 1948, forcefully advocated the German economy’s liberalization. In 1950, Chancellor Konrad Adenauer commissioned Röpke to write a defense of his government’s economic policies, a defense which, besides praising Erhard’s liberalizing measures, also criticized emerging trends of government intervention.Footnote ³⁰

During World War II in his Swiss exile, Röpke turned his attention to the relationship between culture and the economy. In 1942, he wrote a book explicating what he calls “the sickness of our civilization” and “the manner of its cure.”Footnote ³¹ Well known as one of Europe’s leading economists and a prominent defender of markets at a time when many were convinced that market liberalism was discredited, many were surprised when Röpke penned a text that went far beyond economics in its scope.

Die Gesellschaftskrisis der Gegenwart (later published in English as The Social Crisis of Our Time) proved to be a best-seller. The book was reviewed by every major newspaper in Switzerland, including those of a socialist disposition. Copies were smuggled into Fascist Italy, Vichy France, Hungary and, eventually, the Third Reich itself. In Nazi Germany, Ludwig Erhard, the future postwar economics minister, carefully perused his clandestine copy of The Social Crisis. It became a major reference point for Erhard’s liberalization of the West German economy in 1948 and the subsequent economic miracle. Ten years after it first appeared, The Social Crisis was still being reviewed in major publications like Foreign Affairs.Footnote ³²

Röpke had become convinced that the deeper roots of twentieth-century Europe’s crack-up went beyond economics and were to be found in the realms of philosophy, politics, culture, and religion. Nineteenth-century liberalism was not exempt from that critique. Röpke argues that too many liberals of that century failed to see that “a market economy needs a firm moral, political, and institutional framework” capable of resisting “the unbridled rule of vested interests” who proved adept at co-opting state power to get their way.Footnote ³³

It is not that market economics or free economies in themselves are the problem. The second, third, and fourth chapters of The Social Crisis outline Röpke’s powerful defense of markets against collectivist alternatives, ranging from Communism to Keynesian full-employment policies. Röpke’s concern is with the moral, political, and cultural contexts within which markets operate. This, he argues, is where things had gone badly wrong.

One source of the problems characterizing Western countries is what Röpke calls “rationalism.” By this, Röpke does not mean natural law. Indeed, his writings make it clear that Röpke regards natural law as an indispensable philosophical foundation for any civilized society. Nor does Röpke view the empirical method with suspicion. Röpke’s target is the application of a priori scientific reasoning, which he associates with figures like Georg W. F. Hegel and movements like the French Revolution, to every field of human life in the name of constructing a more rational social order.Footnote ³⁴ The rationalist mindset, Röpke states, tends to view anything that falls outside the realm of the empirical and measurable as impeding the advance of knowledge. It also facilitates the illusion that you can reorganize societies from the top-down. Therein, Röpke says, lay the road to collectivism.Footnote ³⁵

That rationalism goes together with another nineteenth-century phenomenon: the steady concentration of state power. Monarchical absolutism may have been on its way out, but Röpke believes that power had in other respects become more centralized, including in countries in which constitutional and democratic forms of government had emerged. This was partly a function of many people wanting governments to do more in the economy and using their newly acquired voting rights to support politicians who promised to use the state to protect and subsidize industries or deliver welfare programs.Footnote ³⁶

Nor, Röpke argues, had democratic regimes proved resistant to the pressures exercised by well-organized interest groups intent on acquiring legal and economic privileges at everyone else’s expense. The German economy’s cartelization may have begun in late-Wilhelmine Germany, but Röpke stresses that the advent of the liberal Weimar Republic—“the freest constitution in the world,”Footnote ³⁷ as The Social Crisis describes it—had not brought an end to such practices. Instead, cartelization and the legalized limitation of competition had grown. This made it easier for the National Socialists to bring more and more of the economy under direct state control once they took power in 1933.Footnote ³⁸

The ambiguity of liberalism

Liberalism’s role in these developments is an issue that Röpke thought long and hard about. On the one hand, he stresses that liberal movements, with their emphasis on equality before the law, helped remove many obstacles based on birth that had inhibited social and economic advancement from the bottom-up. They had also delivered forms of constitutionalism that constrain arbitrary power. Röpke also believes that liberalism’s particular stress on economic freedom had produced enormous prosperity and enabled millions to escape back-breaking poverty and early death. In The Social Crisis, Röpke calls this the “splendor” of capitalism.Footnote ³⁹

Nevertheless, Röpke maintains that a fair amount of liberal thought had been influenced by rationalist tendencies. Liberalism’s emergence in the context of Enlightenment Europe occurred alongside the emergence of the social sciences and the application of empirical methods to understanding humans and society. To some extent, liberalism had become identified with these trends. This had, Röpke claims, accentuated the hostility to religion that characterizes some strands of nineteenth-century continental European liberalism that dismiss faith as mere superstition or associate it with monarchist absolutism. That, he believes, leads to a fatal underestimation of religion’s importance in providing answers to eternal questions that philosophy, science, and economics could not. Röpke also stresses religion’s capacity to express and preserve moral norms that encourage people to address social problems that markets could not.Footnote ⁴⁰

A broader problem with liberalism, Röpke contends, is that its emphasis on the power of empirical reasoning and the social sciences means that it lacks the capacity to inhibit the development of ideologies that seek to provide the same type of comprehensive explanation of life that religion seeks to articulate. For Röpke, man is by nature homo religiosus . Rationalism merely secularizes that innate instinct and thereby contributes to the problem of people trying to build heaven on earth, whether the proletariat paradise promised by Communism or the racially pure world pursued by National Socialism. Either way, the consequences for liberty in general and the market economy are dire.Footnote ⁴¹

By no means does Röpke conclude that liberalism needs to be dispensed with. The Social Crisis underscores that liberalism’s achievements in the realms of economics and constitutional government are substantial. The real challenge, to Röpke’s mind, is twofold. First, can liberalism be purged of rationalist and scientistic tendencies? Second, can it be infused with a normative content that reflects the broad civilizational accomplishments of the West?Footnote ⁴²

Röpke was conscious of the tensions marking Western culture. Not everything bequeathed by Greece, Rome, Judaism, Christianity, and the various Enlightenments fits neatly together. The differences were and are real. Yet Röpke holds that there are sufficient common threads in the realm of institutions and moral norms that can uphold liberty, underline the distinction between vice and virtue, and advance the notion that humans were made as imago Dei (in the image of God). Believers and nonbelievers alike, Röpke holds, could recognize that this conception of human beings is a formidable foundation for human liberty. No one should therefore be surprised that Nazism and Communism sought to eliminate that idea and replace it with racial and class hierarchies, respectively.

Therein lay the goal of The Social Crisis of Our Time and much of Röpke’s subsequent postwar writings. While much of the book focuses on the significance of markets and the problems of collectivism, Röpke tries to remind readers that liberty’s conservation requires a culture that expresses a particular conception of human beings. In that regard, Röpke fully embraces Lord Acton’s dictum that liberty “is the delicate fruit of a mature civilization.”Footnote ⁴³ Markets and constitutionalism are vital for a free society, but if the civilizational roots of liberty are ignored, trivialized, or expunged, tyranny will follow.

Many of these themes are further developed in Röpke’s 1958 book, Jenseits von Angebot und Nachfrag (published in English in 1960 as A Humane Economy: The Social Framework of the Free Market). As the English title indicates, the book is as much about specifying the deeper roots required for long-term sustenance of market economies as it is concerned with explaining basic arguments for economic liberty and a limited state.

A Humane Economy is about as far removed from a dry economics textbook as one can imagine. It is also unapologetically normative in its content. The damage that Röpke believes had been inflicted by socialism and postwar Keynesianism upon the moral culture of Western societies is central to Röpke’s censure of these models of political economy. Röpke’s critique of welfare states is concerned not only with the ways in which they progressively compromise the ability of markets, businesses, and entrepreneurs to create wealth. Equally problematic, Röpke insists, was how welfare states facilitate increasing dependency on the state in ways resembling the “soft despotism” foreshadowed 118 years earlier in Alexis de Tocqueville’s Democracy in America.Footnote ⁴⁴

There is, however, another theme at work in A Humane Economy. On the one hand, Röpke explained in detail why neither socialism nor mixed economies can resolve basic economic problems like scarcity in ways that markets can. On the other hand, Röpke also maintains that the logic of market economies cannot and should not be applied to resolving noneconomic problems:

In short, while Röpke has little time for public figures who expostulate loudly about economic policy but decline to inform themselves of some basic economic truths, he is also critical of those who think economics explains everything. “Adam Smith,” he states, “whose fame rests not only on his Wealth of Nations but also on his Theory of Moral Sentiments, would have known better.”Footnote ⁴⁶

This raises the question of where we find the values and principles which Röpke considers so important for ensuring that life within the context of market economies remains truly humane. On one level, he locates them in moderate Enlightenment thought. From Röpke’s standpoint, this is personified by individuals like Smith, Montesquieu, and James Madison; movements such as the Scottish Enlightenment; and books such as Montesquieu’s Spirit of the Laws and Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations. Another source is what Röpke calls “the spiritual heritage of classical and Christian tradition,”Footnote ⁴⁷ especially the principle of human dignity which finds expression in the idea of the human person as the imago Dei . This idea, he believes, is a powerful normative foundation for rich conceptions of human reason, freedom, and personal responsibility. Explaining his most essential convictions on such matters, Röpke writes:

While this Jewish and Christian conception of humanity is, Röpke says, decisive for his championing of “an economic order ruled by free prices and markets,”Footnote ⁴⁹ it is also core to his opposition to economistic mindsets as well as all forms of collectivism. It is not therefore only the negative economic consequences of command economies that explain the depth of Röpke’s opposition to Communism. He also regards Marxism’s atheism and materialism as antithetical to what it means to be human.Footnote ⁵⁰

From principles to practice

As the examples of Eucken and Röpke illustrate, much of the ordo-liberal project gravitates toward the place of markets vis-à-vis legal institutions and moral-cultural norms. The extent to which ordo-liberal thinkers engage these matters is what gives ordo-liberalism its distinctiveness among different schools of economic thought in the broad spectrum of classical liberal and conservative economic and political thought.

But how much of this agenda managed to shape the direction of liberalism, postwar economic policy, and political economy more generally? The results are mixed. In terms of policy, ordo-liberal ideas certainly underlay the liberalizing economic reforms implemented by Ludwig Erhard in West Germany in June 1948. This was the beginning of the German economic recovery that took Germany from ruins to having the strongest economy in Western Europe in the space of ten years. This was, and remains, the greatest ordo-liberal success.

Throughout the late 1940s and 1950s, ordo-liberal thinkers continued to work at cultivating individuals in a position to shift policy. From his professorship at Geneva’s Graduate School of International Studies, Röpke corresponded extensively with right-leaning Christian Democrats like Luigi Sturzo in Italy and Germany’s Konrad Adenauer as he prodded them toward more market-friendly positions throughout the 1950s. This also involved writing extensive opinion pieces that appeared in quality newspapers of record, such as the conservative liberal Frankfurter Allgemeine Zeitung, in which Röpke sought to explain basic ordo-liberal principles and then showed how they might be given expression in debates on topics ranging from reforming welfare states to the idea of European economic integration.Footnote ⁵¹

In France, the leading figure most associated with ordo-liberal ideas, Jacques Rueff, waged a lonely campaign to persuade ministers of successive governments of the Fourth Republic of the necessity to reform the country’s finances. Eventually, he provided Charles de Gaulle with the liberalization program that saved France from fiscal and monetary collapse in 1958.Footnote ⁵² This occurred against a background of Rueff delivering well-publicized addresses to gatherings of business leaders, academics, and civil servants. Like Röpke, Rueff made a point of writing for prestige newspapers like Le Monde, where he laid out his critique of Keynesian economics, tried to explain why the French economy started experiencing severe difficulties in the mid-1950s, and pressed his case for reforms of the international monetary system.Footnote ⁵³

Ordo-liberal efforts at persuasion also involved working with journalists, civil servants, central bankers, and churchmen in a position to shape policy. They proved exceptionally proficient at networking with people who were very much like them in terms of social background. This is one reason why many ordo-liberals served as formal and informal advisors to governments in West Germany, Austria, France, Belgium, Italy, and the Netherlands. Some held high office. Einaudi, for example, served as Governor of the Bank of Italy, Minister of Finance, Deputy Prime Minister, and President of Italy. Franz Böhm became a member of the German parliament, while Rueff was made a judge of the European Court of Justice and continued to serve as an informal advisor to de Gaulle on the topic of international monetary policy throughout the 1960s.Footnote ⁵⁴

Other ordo-liberals focused on identifying like-minded individuals who they thought would go far and taught their proteges to do the same. One of Eucken’s students was Josef Höffner, a Catholic priest and ordo-liberal-friendly economist who later became the Cardinal-Archbishop of Cologne. Of Höffner’s own students, the most prominent was Hans Tietmeyer. A conservative Catholic who had studied theology, Tietmeyer’s economics were thoroughly ordo-liberal. His career reached its pinnacle when he became head of Germany’s central bank in 1993.Footnote ⁵⁵ It is safe to say that Tietmeyer ensured that the schema for the European Central Bank (ECB) was based on the Bundesbank’s inflation-first approach rather than the more expansive role envisaged for the ECB by French officials that involved prioritizing full employment and using monetary policy to pump-prime the economy.Footnote ⁵⁶ Throughout the 1990s, Tietmeyer pursued the realization of this objective via official negotiations with other European central bankers as well as academic papers and speeches in which he made the case for an ECB focused on maintaining price stability.Footnote ⁵⁷

In many of these cases, ordo-liberals were better able to pursue their case because of their demonstrated commitment to a market economy grounded in sets of values and social expectations that, for instance, postwar Christian Democrat movements took seriously. The ordo-liberal attention to normative principles of a philosophical and religious character underscored to the leaders of right-leaning Christian Democratic parties that they were not dealing with prewar liberals whose anticlericalism and often outright hostility to Christianity made them suspect to Protestant and Catholic politicians alike.

Assessing ordo-liberalism

While their focus on the interdependence of orders and willingness to engage positively with legal, philosophical, and religious ideas that preceded nineteenth-century liberalism may have gained ordo-liberal thinkers’ entrees into political circles where free market ideas had hitherto not gained much traction, it is unclear that ordo-liberal efforts at integrating ideas had much impact outside relatively rarified circles. Certainly, in countries like Germany, political leaders of all parties continue to pay lip service to the works of figures like Eucken and Röpke.Footnote ⁵⁸ But it is more difficult to find evidence of ordo-liberal ideas exercising much influence on contemporary German economic policy. Indeed, there is strong evidence that ordo-liberal thought was steadily marginalized among German economists from the mid-1950s onward.Footnote ⁵⁹

We may postulate the following reasons for this. First, for all their early successes, ordo-liberals found their ideas opposed not just by those who embraced expansive economic roles for the state, but also different segments of liberal opinion. Ordo-liberals were critical of John Maynard Keynes not only because of his propensity to pursue interventionist policies based on perpetual short-termism but also because of his social liberal propensity (at least as a young man) to subordinate traditional mores to the imperative of self-expression. Nothing could have been more alien to ordo-liberal emphases on the cultivation of classical and Christian virtues and the need to ground freedom on objective moral principles.Footnote ⁶⁰

At the same time, ordo-liberal ideas conflicted with those liberals with more laissez-faire positions. In the face of multiple crises afflicting the West, ordo-liberals concluded that laissez-faire liberalism had proved inadequate. They were especially critical of laissez-faire liberalism’s apparent inability to confront crony capitalists. For their part, some followers of the Austrian and Chicago schools were uneasy about the socially conservative and religious leanings of most ordo-liberals, and critical of their view of state power. The latter issue led to clashes between Eucken and Ludwig von Mises at the second Mont Pelerin Society meeting in 1949, and Rueff and Mises at a colloquium in Ostend in 1957.Footnote ⁶¹ Central to these arguments was a debate about whether it was possible to design what ordo-liberals call a competitive order by following and implementing the framework of principles and rules outlined by ordo-liberal thinking.Footnote ⁶² Figures like Mises regarded this as a form of planning, though he later stated that ordo-liberal principles associated especially with Eucken and Röpke had been critical to the successful liberalization of the West German economy in 1948.Footnote ⁶³

Second, the ordo-liberal approach assumed that relatively homogeneous elites would remain in charge of European governments and could successfully master economic crises if they stuck to fundamental principles. From the 1960s onward, cultural and social changes in Western nations threw this basic starting point into question. Such transformations included the intensification of mass media, the shift of universities in leftward and hyper-specialized directions, the growing dominance of neo-Keynesian economic ideas as well as econometric methodology throughout the German economics profession, the 1968 student uprisings, the visible decline of Christian churches in parts of Western Europe, and the eclipse of classically oriented education. These developments weakened the political and intellectual clout of ordo-liberals as well as the saliency of their key normative reference points. In the case of the latter, ordo-liberals found themselves out of sympathy with the generation formed by the student rebellions of 1968, and confronting the fact that the sources of knowledge they considered authoritative were increasingly unfashionable among elites and the general population alike.Footnote ⁶⁴

These social changes undermined the effectiveness of the ordo-liberal elite-focused strategy that had proved relatively successful in generating substantive market-orientated fiscal and monetary reforms. Certainly, ordo-liberal ideas remained a reference point for policymakers, especially in Germany and Austria. There is also evidence of substantive acceptance of key ordo-liberal principles by the right wing of the German Social Democrat party that had supplanted the Christian Democrats’ dominance of West German politics by the late-1960s.Footnote ⁶⁵ But even in the country where ordo-liberalism had achieved its greatest policy successes, Christian Democrat and Social Democrat politicians alike found the pressures from below to expand welfare programs and placate trade unions—bottom-up pressures against which ordo-liberals had long warned—increasingly difficult to resist.

Last, ordo-liberalism’s impact and particular agenda was limited by a challenge that all forms of classical liberalism have struggled to master: the weakness of not having their own mass constituency. In the nineteenth century, some liberal parties—most notably, the British Liberal party as well as liberal parties in the Austro-Hungarian Empire, Prussia, Italy, France, and then Imperial Germany—had acquired significant electoral weight and thus significant representation in legislatures. This, however, had begun to disappear in continental Europe as early as the 1890s as liberal parties found themselves supplanted by Social Democrat, Labor, and Socialist parties to the left and nationalist groupings on the right.Footnote ⁶⁶

Ordo-liberalism was a movement that emerged after these political changes. In seeking to integrate free market ideas into deeper philosophical and normative frameworks, and being a product of elite groups, ordo-liberalism naturally gravitated toward trying to influence elite opinion. At some point, however, in the conditions of democracy, such ideas need to gain broader acceptance. Ordo-liberal thinkers in the 1940s were deeply conscious of this reality. Their conclusion was that the political vehicle most likely to provide support for the realization of their ideas were Christian Democrat parties. At a minimum, the leaders of such parties shared the religious views of many ordo-liberals and appreciated that some of the ideas informing ordo-liberal thought had Christian roots.

Occasional tensions emerged when the more market-skeptic and corporatist ideas of the left-leaning factions of Christian Democrat parties clashed with ordo-liberal priorities. But for the most part, ordo-liberal ideas received considerable support from Christian Democrat parties that, unlike classical liberal parties, were adept at gathering mass support, winning elections, and dominating the coalitions that came to characterize center-right governments of countries like West Germany, Austria, Italy, Belgium, and the Netherlands. Unfortunately for ordo-liberals, this also meant that they were left isolated when the strength of Christian Democrat parties began to fade in the late-1960s and their leaders started forming strategic alliances with center-left parties committed to more interventionist economic agendas and larger welfare states.

Despite the faltering of its influence from its high point in the mid-1950s, ordo-liberalism’s long-term significance may well be the way it brought—and, in some contexts, continues to bring—its distinct set of propositions about economic policy’s normative dimensions into public discourse. In that sense, its most important contributions have been to political economy, insofar as this involves integrating moral and philosophical concerns with empirical reflection on economic questions and policies. Ordo-liberalism’s stress on themes such as market liberalism’s fragility in the absence of certain institutional settings and cultural norms or the relationship between self-interest and state power, touches on perennial questions of political economy that cannot be answered on purely empirical grounds. Above all, ordo-liberalism reminds us that normative judgments, whatever their content and roots, have economic import that need to be understood on their own terms. Therein lies ordo-liberalism’s ongoing legacy.