Ordoliberalism and the ‘Freiburg School’ have gained traction in contemporary political economy in response to two factors: a rising interest in governmentality studies and the banking, financial and sovereign debt crisis in Europe. In the face of these crises, Germany has assumed a position of quasi-hegemony in the European Union, making decisions about bailouts, the politics of crisis management and the rise of austerity.
This volume gathers together English translations of seminal ordoliberal texts by thinkers ranging from Walter Eucken and Wilhelm Röpke to Franz Böhm, Alexander Rüstow and Hans Grossmann-Doerth. Offering some foundational insights into ordoliberalism, these essays give insight into a field that is much misunderstood outside Germany. The second half of the book comprises of analyses of contemporary issues in light of ordoliberal thought, showing how its ideas endure and relate directly to austerity policy across Europe.
Review
This book is indispensable reading for everyone interested in current debates on institutional economics, economic policy, the crisis of the Euro, and the role of Germany in it. It assembles several master texts from the Ordoliberal School, most of which were never published in English, and provides a lucid introduction into a widely unknown “Third Way” tradition in economic theory and policy. -- Wolfgang Streeck, Max Planck Institute for the Study of Societies, Cologne
An excellent handbook on the influential and peculiar German version of neoliberalism. It contains classical texts as well as contemporary analyses of the content and impact of ordoliberalism by leading scholars. No one can understand European politics today without knowledge about ordoliberalism. This book is a good starting point. -- Professor Peter Nedergaard, Ph.D., Department of Political Science, University of Copenhagen
Understanding the tenets and implications of Ordoliberalism is essential for grasping what is happening in European political economy and governance today. The Birth of Austerity provides this understanding through its carefully selected and translated works by the Ordoliberals themselves and its fine ensemble of analyses by contemporary critical thinkers. The introduction by Biebricher and Vogelmann is a model of clarity and insight. This is an important and immensely useful volume. -- Wendy Brown, Class of 1936 First Professor of Political Science, University of California, Berkeley
Offering some foundational insights into ordoliberalism, these essays give insight into a field that is much misunderstood outside Germany. The second half of the book comprises of analyses of contemporary issues in light of ordoliberal thought, showing how its ideas endure and relate directly to austerity policy across Europe. ― Foucault News
About the Author
Thomas Biebricher is Professor of Political Theory and Philosophy at the Goethe-Universität. He has published multiple articles on ordoliberalism and neoliberalism and is author of Neoliberalismus zur Einführung (Junius Publishers Hamburg).
Frieder Vogelmann is a Research Fellow in Political Theory at the Institute for Intercultural and International Studies, Bremen University.
1 Introduction Thomas Biebricher and Frieder Vogelmann, 1, PART I: SOURCES, Contextualisation 1: The Ordo Manifesto, 23, 2 The Ordo Manifesto of 1936 Franz Bohm, Walter Eucken and Hans Grofimann-Doerth, 27, Contextualisation 2: Walter Eucken, 41, 3 Structural Transformations of the State and the Crisis of Capitalism Walter Eucken, 51, 4 The Different Types of Economic System Walter Eucken, 73, 5 Competition as the Basic Principle of the Economic Constitution Walter Eucken, 81, 6 What is the Competitive Order? Walter Eucken, 99, Contextualisation 3: Franz Bohm, 109, 7 Economic Ordering as a Problem of Economic Policy and a Problem of the Economic Constitution Franz Bohm, 115, 8 Decartelisation and De-concentration: A Problem for Specialists or a Fateful Question? Franz Bohm, 121, Contextualisation 4: Alexander Rüstow, 137, 9 State Policy and the Necessary Conditions for Economic Liberalism Alexander Rüstow, 143, 10 General Sociological Causes of the Economic Disintegration and Possibilities of Reconstruction Alexander Rüstow, 151, 11 Social Policy or Vitalpolitik (Organic Policy) Alexander Rüstow, 163, PART II: ANALYSES, 179, 12 Ordoliberalism as Governmentality Johanna Oksala, 181, 13 Europe after Ordoliberalism: A Philippic Christian Joerges, 197, 14 Is Germany's and Europe's Crisis Politics Ordoliberal and/or Neoliberal? Brigitte Young, 221, 15 Economic Order and Political Intervention: Michel Foucault on Ordoliberalism and its Governmental Rationality Lars Gertenbach, 239, Index, 261, Contributors, 271,
CHAPTER 1
Introduction
Thomas Biebricher and Frieder Vogelmann
As the smouldering European Debt Crisis was about to heat up once more in spring of 2015 and relations between Germany and Greece in particular were becoming ever more strained over the tension-fraught question of how to deal with the latter country's skyrocketing amount of public debt, The Economist offered a surprising explanation for the enduring conflict: Germany's resistance against any 'haircut' or fundamental debt restructuring as well as its insistence on fiscal rules that would have to be applied rigorously not only to Greece but all members of the European Monetary Union was not so much due to any material interest, it was rather attributable to a particular German heritage in economic thought named ordoliberalism – a tradition probably entirely unknown to the large majority of the journal's non-German readership.
In the same year, debates among scholars working in the Governmentality Studies would frequently draw on the French philosopher Michel Foucault (1926–1984) and his analysis of ordoliberalism in their attempts to come to terms with contemporary neoliberalism, the latter being conceptualized not as an economic doctrine or ideology but as a political rationality of government: 'As Foucault saw it, the neoliberal governmentality first developed by the Ordoliberals in and around the 1930s in Germany had become the explicit program of most governments in capitalist countries by 1979 when he delivered his lectures'. As exemplified by a statement from Johanna Oksala, the reference to ordoliberalism as a crucial step in the development of current neoliberal practices of government was already a well-established common place among Foucault scholars and the Governmentality Studies, although how to interpret the ordoliberal tradition as well as Foucault's analysis of it is still a subject of a lively debate.
How is it that ordoliberalism, which is represented almost exclusively by German thinkers and originated in the 1930s, is discussed in such widely diverging intellectual contexts as The Economist on the one hand and Foucault Studies on the other in the year 2015? And what exactly is this ordoliberalism in the first place, which is practically unknown in the Anglo-American world and has been largely relegated to obscurity even in its intellectual country of origin until fairly recently? What are its specific contours as a current within the liberal tradition, and what are its core tenets if there are any? These are the basic questions that this volume seeks to address, with part I being devoted to the second, where we present a selection of seminal ordoliberal texts either in their entirety or in the form of excerpts, some of them available in English for the first time. Part II of the book seeks to illuminate the first question with four chapters that assess the contemporary significance of ordoliberalism in various contexts from the Governmentality Studies to the political economy of the European Union with the politics of austerity being the common denominator. Both parts hang together: We believe that both of these interrelated discussion threads that revolve around the question of what it means to govern according to ordoliberal precepts, whether in the European or other spatio-temporal contexts, are worth pursuing further as the potential of these discussions is far from realized yet. However, these debates, especially when they take place between the continental European and the Anglo-American world, have been severely hampered because many of the classical ordoliberal texts are either not translated into English or, when they are, they are next to unavailable as books have gone out of print and articles are buried in obscure journals. This makes for an unfortunate situation where it is often difficult to assess the claims made about ordoliberalism in the various contexts for lack of access to the primary sources. We seek to alleviate this situation and thus facilitate the discussions surrounding ordoliberalism by making some seminal ordoliberal texts or excerpts thereof available to English-speaking readers, some of them translated for the first time. We hope that these sources together with the four original chapters will provide the base for an even more productive discussion of ordoliberalism in the future. In the rest of this introduction, we will outline ordoliberalism and the two debates in which it has re-appeared, focusing on the relation between ordoliberalism's Ordnungspolitik and the politics of austerity.
WHAT IS ORDOLIBERALISM?
Ordoliberalism was born in Weimar Germany over the course of the 1930s, and its genesis must be understood in this particular spatio-temporal context and the perspective its main protagonists took in analysing it. For the most part of its relatively brief existence the Weimar Republic was crisis-ridden in any number of ways. From the very beginning, the newly found republic was confronted with heavy clashes between various political factions, and when these oftentimes violent conflicts subsided the country faced severe economic difficulties related to the war reparations resulting in the runaway inflation of the early 1920s that left significant strata of the petit bourgeoisie in particular traumatized as they lost their savings. Yet it almost goes without saying that, economically and politically speaking, the worst was yet to come, as the Great Depression hit Germany along in 1929 and spelt socio-economic disaster for a country that had only just begun to stabilize itself in the latter half of the decade. The economic crisis, finally, created a political crisis that had already been built into the structures of the Weimar political system and that, in combination with a polarization of the party system and a widespread failure to identify with a pluralist parliamentary democracy, would ultimately result in the collapse of the republic as the Nazis came into power and swiftly transformed the system into a totalitarian dictatorship. The ordoliberals were all keenly aware of both the economic and the political problems of Weimar and were convinced that one could not be addressed without the other, which committed them to a view on society that was self-consciously non-economistic in the sense of treating the various spheres of society and the problems occurring therein as interrelated.
But who were the ordoliberals that we focus on in this volume? First and foremost, ordoliberalism is associated with Walter Eucken, who spent most of his academic career as a professor of political economy at the Albert-Ludwigs-Universität where he was central figure of the so-called Freiburg School. In addition to Eucken, the nucleus of this school was personified by the Franz Böhm and Hans Großmann-Doerth. The latter was a professor of law in Freiburg, and the former received his training in law there before he moved to the university in Jena, only to return to Freiburg briefly after World War II as a professor in this field. The remaining ordoliberal we focus on in this volume is Alexander Rüstow. Rüstow, who had received his doctorate in philosophy but had also studied political economy and other social sciences, was never institutionally affiliated with the university in Freiburg but was in particularly close intellectual exchange with Eucken ever since the late 1920s and provided ordoliberal thought with some key ideas and theorems. Although there were different emphases and specific arguments in the respective agenda of all of these scholars, they are commonly and rightly referred to as the core personnel of the ordoliberal tradition.
As is often the case, the label ordoliberalism was not invented nor claimed by those to whom it refers to, but, nevertheless, it is an apt one as it gives a fairly accurate indication of where its proponents positioned themselves in the fierce intellectual and political struggles on the eve of the Weimar collapse. So what are the convictions and tenets they shared and which thus constitute the substantive core of this tradition? The first basic conviction has already been mentioned earlier; it is a perspective on society that puts a particular emphasis on functioning markets as the indispensable precondition for the material reproduction of society but is equally adamant that functioning markets in turn rely on certain societal preconditions. Therefore, the ordoliberal perspective is an explicitly interdisciplinary one with the fields of law and political economy at its centre. Not the least because of the resulting complexities of such a broad scope of their approach, the ordoliberals are also convinced that science, and only science, is capable of developing an accurate analysis of the multiple interdependencies between the economic and the non-economic spheres of society and thus of offering apt diagnoses as well as corresponding therapeutic recommendations. This, in turn, implies that social science, according to the ordoliberals, has to be practical in the sense of having a responsibility to inform political decision making; it must not be practised for its own sake, and this view is a testimony to the ordoliberals' view of themselves as being called upon to act as a stabilising 'rational' factor in the crisis-prone context of Germany in the 1930s.
As already indicated, the ordoliberals were of a broadly liberal persuasion when it came to the superiority of markets over other modes of societal coordination for the purpose of material reproduction. This is to say, conversely, that they were particularly opposed to all kinds of collectivism, especially Soviet communism but also the collectivist elements in Fascism and National Socialism, for both normative reasons, that is, the resulting restrictions on individual freedom, but also functional ones: Central planning could not work, as Friedrich August Hayek and other neoliberals had already argued over the course of the Socialist Calculation Debate that dated back to the 1920s. Without a properly functioning price mechanism as the functional core of markets, allocation could not even remotely approximate efficiency, and the key to the particular ordo liberal way of spelling out this neo liberal core conviction, which is ultimately rooted in the marginalist revolution led by Carl Menger and his adherents in the Austrian school around Hayek and Ludwig Mises, is already contained in the very name of this tradition, namely ordo, or order.
The ordoliberals subscribe to a social ontology according to which society can be conceived of as an 'interdepedence of orders', and, accordingly, the basic maxim of an ordoliberal understanding of its object of inquiry must be 'thinking in terms of orders' ( Denken in Ordnungen ). Whatever the social sphere in question, be it the economy, the political system or the legal system, all of them are constituted by some kind of order that may be functioning, malfunctioning or, possibly, in complete disarray. Needless to say, the task, from an ordoliberal perspective, is to identify the elements and structures of functioning (and otherwise desirable) orders, and in the case of the economy this would be the so-called competitive order, which safeguards proper competition and, by the same token, the functionality of the price mechanism. What is of crucial importance, then, is what the ordoliberals call 'the politics of ordering' ( Ordnungspolitik ), that is, what kind of economic policy is implied by such an understanding of functioning markets. On the one hand, the emphasis on a market order puts some distance between the ordoliberals and their classical liberal forebears to the extent that the latter were willing to stand by and leave markets to themselves under the banner of ' Laissez-Faire, Laissez-Aller! ' This is a position at times fervently criticised by the ordoliberals, who claim that this misguided kind of liberalism has indirectly paved the way for the collectivisms of the twentieth century. On the other hand, it obviously sets them apart from these collectivisms but also other interventionist policy paradigms such as Keynesianism, which was already in its ascent in the early days of ordoliberal theorising in the 1930s. Against Keynesian demand management, the ordoliberals emphasise that Ordnungspolitik is not to intervene directly into markets but must only be directed at the framework of markets, sometimes referred to as the 'economic constitution' ( Wirtschaftsverfassung ). This is to say that Ordnungspolitik must constitute, enforce and whenever necessary adapt the respective rules and regulations so competition and price mechanism can function properly – which means that not just any kind of competition but only competition based on performance ( Leistungswettbewerb ) is acceptable. Economic policy thus is to embark upon what the ordoliberals shrewdly promulgate as a 'Third Way' between capitalism and communism that is neither confined to mere stoic passivity in the face of economic upheaval nor intended to subject the economy to the plans of a central administration. But how and why does the postulation of this Third Way as an alternative in economic policy making mark the 'birth of austerity' invoked in the title of this volume?
ORDOLIBERALISM AND THE POLITICS OF AUSTERITY
According to Mark Blyth who has written its authoritative intellectual and natural history, austerity can be understood as 'a form of voluntary deflation, in which the economy adjusts through the reduction of wages, prices, and public spending to restore competitiveness, which is (supposedly) best achieved by cutting the state's budget, debts, and deficits'. How does a politics of 'voluntary deflation' relate to Ordnungspolitik? We argue that the relation is best seen by scrutinising the role of the state in ordoliberalism, particularly with regard to economic crises and general social policy, and by looking at the role ordoliberalism envisions for itself with regard to the state.
To begin with, if the ordoliberals want to maintain their position that supposedly transcends the feud between planners and interventionists on the one hand and laissez-faire advocates and Manchester libertarians on the other, they obviously have to affirm that the state has some positive functions vis-à-vis the economy, but they have to clarify how these tasks differ from what Keynes and liberal socialists let alone communists propose. In other words, they need to define and demarcate the state's agenda and nonagenda in its various aspects, that is, the kind of state action as well as the scope of it that is acceptable and, arguably, even indispensable. Conversely, this ought to provide them with a clear line of demarcating certain kinds of actions and societal spheres and contexts that are off limits for the state. As an aside, we should also note that the ordoliberals realise that the appropriate economic policy may presuppose a particular political order, that is, a certain state structure that is indispensable for the successful implementation of Ordnungspolitik, but while some of the ordoliberal texts in this volume elaborate on this issue, we will not pursue it further here. Instead, let us draw on what we already know about the politics of ordering and identify what kinds of policies are ruled out by it because they would impede the workings of the price mechanism and performance competition. First of all, this would be a deliberately expansionary monetary policy along the lines of what Keynes suggested as one instrument of stimulating the economy. Flushing markets with cheap money artificially boosts demand and thus leads to sales when, in actuality, goods would normally only sell at cheaper prices or increased quality. Consequently, this leads to a distortion of the price system, and the same goes for the inflationary effects that may be the result of an expansionist monetary policy. Eucken in particular argued that an intact monetary system was of the utmost importance for functioning markets. Accordingly, manipulating the value of money, be it internally or externally through currency policy, that is, devaluation, is not considered a viable option from an ordoliberal perspective. It is therefore no coincidence that especially in the work of Wilhelm Röpke, who is the most internationally oriented ordoliberal, the gold standard is occasionally still lauded for its workings although Röpke harboured no hopes of revitalising it ever since the 1930s. After all, one of the prime effects of the gold standard was that it precluded any deliberate monetary/currency policy and instead established a system that would ideally adjust trade balances through the quasi-automatic contraction and expansion of the monetary system. According to Röpke, the best available alternative after the gold standard has become untenable is an independent central bank that wisely protects the monetary system and resists any short-term political instrumentalisation.
For similar reasons, a policy of fiscal stimulus would have to be ruled out because its effects amount to a state subsidy to enterprises that are no longer competitive and competition only truly works if it creates winners and losers, with the latter ultimately being forced off the market. In short, ordoliberalism generally rules out policies to stimulate the economy either through fiscal or monetary means along the lines of what Keynes would have suggested. In a crisis, companies may go out of business, and employees may lose their jobs. But while Eucken concedes that our 'social conscience forbids us to tolerate mass unemployment', he still insists that 'the policy of full employment [Keynesian demand management; TB & FV] makes for an instability on other markets, which is extremely dangerous, and, in addition, forces economic policy in the direction of central planning'.
Description:
Ordoliberalism and the ‘Freiburg School’ have gained traction in contemporary political economy in response to two factors: a rising interest in governmentality studies and the banking, financial and sovereign debt crisis in Europe. In the face of these crises, Germany has assumed a position of quasi-hegemony in the European Union, making decisions about bailouts, the politics of crisis management and the rise of austerity.
This volume gathers together English translations of seminal ordoliberal texts by thinkers ranging from Walter Eucken and Wilhelm Röpke to Franz Böhm, Alexander Rüstow and Hans Grossmann-Doerth. Offering some foundational insights into ordoliberalism, these essays give insight into a field that is much misunderstood outside Germany. The second half of the book comprises of analyses of contemporary issues in light of ordoliberal thought, showing how its ideas endure and relate directly to austerity policy across Europe.
Review
This book is indispensable reading for everyone interested in current debates on institutional economics, economic policy, the crisis of the Euro, and the role of Germany in it. It assembles several master texts from the Ordoliberal School, most of which were never published in English, and provides a lucid introduction into a widely unknown “Third Way” tradition in economic theory and policy. -- Wolfgang Streeck, Max Planck Institute for the Study of Societies, Cologne
An excellent handbook on the influential and peculiar German version of neoliberalism. It contains classical texts as well as contemporary analyses of the content and impact of ordoliberalism by leading scholars. No one can understand European politics today without knowledge about ordoliberalism. This book is a good starting point. -- Professor Peter Nedergaard, Ph.D., Department of Political Science, University of Copenhagen
Understanding the tenets and implications of Ordoliberalism is essential for grasping what is happening in European political economy and governance today. The Birth of Austerity provides this understanding through its carefully selected and translated works by the Ordoliberals themselves and its fine ensemble of analyses by contemporary critical thinkers. The introduction by Biebricher and Vogelmann is a model of clarity and insight. This is an important and immensely useful volume. -- Wendy Brown, Class of 1936 First Professor of Political Science, University of California, Berkeley
Offering some foundational insights into ordoliberalism, these essays give insight into a field that is much misunderstood outside Germany. The second half of the book comprises of analyses of contemporary issues in light of
ordoliberal thought, showing how its ideas endure and relate directly to austerity policy across Europe. ― Foucault News
About the Author
Thomas Biebricher is Professor of Political Theory and Philosophy at the Goethe-Universität. He has published multiple articles on ordoliberalism and neoliberalism and is author of Neoliberalismus zur Einführung (Junius Publishers Hamburg).
Frieder Vogelmann is a Research Fellow in Political Theory at the Institute for Intercultural and International Studies, Bremen University.
Excerpt. © Reprinted by permission. All rights reserved.
The Birth of Austerity
German Ordoliberalism and Contemporary Neoliberalism
By Thomas Biebricher, Frieder Vogelmann
Rowman & Littlefield International, Ltd.
Copyright © 2017 Thomas Biebricher and Frieder Vogelmann
All rights reserved.
ISBN: 978-1-78660-110-0
Contents
1 Introduction Thomas Biebricher and Frieder Vogelmann, 1,
PART I: SOURCES,
Contextualisation 1: The Ordo Manifesto, 23,
2 The Ordo Manifesto of 1936 Franz Bohm, Walter Eucken and Hans Grofimann-Doerth, 27,
Contextualisation 2: Walter Eucken, 41,
3 Structural Transformations of the State and the Crisis of Capitalism Walter Eucken, 51,
4 The Different Types of Economic System Walter Eucken, 73,
5 Competition as the Basic Principle of the Economic Constitution Walter Eucken, 81,
6 What is the Competitive Order? Walter Eucken, 99,
Contextualisation 3: Franz Bohm, 109,
7 Economic Ordering as a Problem of Economic Policy and a Problem of the Economic Constitution Franz Bohm, 115,
8 Decartelisation and De-concentration: A Problem for Specialists or a Fateful Question? Franz Bohm, 121,
Contextualisation 4: Alexander Rüstow, 137,
9 State Policy and the Necessary Conditions for Economic Liberalism Alexander Rüstow, 143,
10 General Sociological Causes of the Economic Disintegration and Possibilities of Reconstruction Alexander Rüstow, 151,
11 Social Policy or Vitalpolitik (Organic Policy) Alexander Rüstow, 163,
PART II: ANALYSES, 179,
12 Ordoliberalism as Governmentality Johanna Oksala, 181,
13 Europe after Ordoliberalism: A Philippic Christian Joerges, 197,
14 Is Germany's and Europe's Crisis Politics Ordoliberal and/or Neoliberal? Brigitte Young, 221,
15 Economic Order and Political Intervention: Michel Foucault on Ordoliberalism and its Governmental Rationality Lars Gertenbach, 239,
Index, 261,
Contributors, 271,
CHAPTER 1
Introduction
Thomas Biebricher and Frieder Vogelmann
As the smouldering European Debt Crisis was about to heat up once more in spring of 2015 and relations between Germany and Greece in particular were becoming ever more strained over the tension-fraught question of how to deal with the latter country's skyrocketing amount of public debt, The Economist offered a surprising explanation for the enduring conflict: Germany's resistance against any 'haircut' or fundamental debt restructuring as well as its insistence on fiscal rules that would have to be applied rigorously not only to Greece but all members of the European Monetary Union was not so much due to any material interest, it was rather attributable to a particular German heritage in economic thought named ordoliberalism – a tradition probably entirely unknown to the large majority of the journal's non-German readership.
In the same year, debates among scholars working in the Governmentality Studies would frequently draw on the French philosopher Michel Foucault (1926–1984) and his analysis of ordoliberalism in their attempts to come to terms with contemporary neoliberalism, the latter being conceptualized not as an economic doctrine or ideology but as a political rationality of government: 'As Foucault saw it, the neoliberal governmentality first developed by the Ordoliberals in and around the 1930s in Germany had become the explicit program of most governments in capitalist countries by 1979 when he delivered his lectures'. As exemplified by a statement from Johanna Oksala, the reference to ordoliberalism as a crucial step in the development of current neoliberal practices of government was already a well-established common place among Foucault scholars and the Governmentality Studies, although how to interpret the ordoliberal tradition as well as Foucault's analysis of it is still a subject of a lively debate.
How is it that ordoliberalism, which is represented almost exclusively by German thinkers and originated in the 1930s, is discussed in such widely diverging intellectual contexts as The Economist on the one hand and Foucault Studies on the other in the year 2015? And what exactly is this ordoliberalism in the first place, which is practically unknown in the Anglo-American world and has been largely relegated to obscurity even in its intellectual country of origin until fairly recently? What are its specific contours as a current within the liberal tradition, and what are its core tenets if there are any? These are the basic questions that this volume seeks to address, with part I being devoted to the second, where we present a selection of seminal ordoliberal texts either in their entirety or in the form of excerpts, some of them available in English for the first time. Part II of the book seeks to illuminate the first question with four chapters that assess the contemporary significance of ordoliberalism in various contexts from the Governmentality Studies to the political economy of the European Union with the politics of austerity being the common denominator. Both parts hang together: We believe that both of these interrelated discussion threads that revolve around the question of what it means to govern according to ordoliberal precepts, whether in the European or other spatio-temporal contexts, are worth pursuing further as the potential of these discussions is far from realized yet. However, these debates, especially when they take place between the continental European and the Anglo-American world, have been severely hampered because many of the classical ordoliberal texts are either not translated into English or, when they are, they are next to unavailable as books have gone out of print and articles are buried in obscure journals. This makes for an unfortunate situation where it is often difficult to assess the claims made about ordoliberalism in the various contexts for lack of access to the primary sources. We seek to alleviate this situation and thus facilitate the discussions surrounding ordoliberalism by making some seminal ordoliberal texts or excerpts thereof available to English-speaking readers, some of them translated for the first time. We hope that these sources together with the four original chapters will provide the base for an even more productive discussion of ordoliberalism in the future. In the rest of this introduction, we will outline ordoliberalism and the two debates in which it has re-appeared, focusing on the relation between ordoliberalism's Ordnungspolitik and the politics of austerity.
WHAT IS ORDOLIBERALISM?
Ordoliberalism was born in Weimar Germany over the course of the 1930s, and its genesis must be understood in this particular spatio-temporal context and the perspective its main protagonists took in analysing it. For the most part of its relatively brief existence the Weimar Republic was crisis-ridden in any number of ways. From the very beginning, the newly found republic was confronted with heavy clashes between various political factions, and when these oftentimes violent conflicts subsided the country faced severe economic difficulties related to the war reparations resulting in the runaway inflation of the early 1920s that left significant strata of the petit bourgeoisie in particular traumatized as they lost their savings. Yet it almost goes without saying that, economically and politically speaking, the worst was yet to come, as the Great Depression hit Germany along in 1929 and spelt socio-economic disaster for a country that had only just begun to stabilize itself in the latter half of the decade. The economic crisis, finally, created a political crisis that had already been built into the structures of the Weimar political system and that, in combination with a polarization of the party system and a widespread failure to identify with a pluralist parliamentary democracy, would ultimately result in the collapse of the republic as the Nazis came into power and swiftly transformed the system into a totalitarian dictatorship. The ordoliberals were all keenly aware of both the economic and the political problems of Weimar and were convinced that one could not be addressed without the other, which committed them to a view on society that was self-consciously non-economistic in the sense of treating the various spheres of society and the problems occurring therein as interrelated.
But who were the ordoliberals that we focus on in this volume? First and foremost, ordoliberalism is associated with Walter Eucken, who spent most of his academic career as a professor of political economy at the Albert-Ludwigs-Universität where he was central figure of the so-called Freiburg School. In addition to Eucken, the nucleus of this school was personified by the Franz Böhm and Hans Großmann-Doerth. The latter was a professor of law in Freiburg, and the former received his training in law there before he moved to the university in Jena, only to return to Freiburg briefly after World War II as a professor in this field. The remaining ordoliberal we focus on in this volume is Alexander Rüstow. Rüstow, who had received his doctorate in philosophy but had also studied political economy and other social sciences, was never institutionally affiliated with the university in Freiburg but was in particularly close intellectual exchange with Eucken ever since the late 1920s and provided ordoliberal thought with some key ideas and theorems. Although there were different emphases and specific arguments in the respective agenda of all of these scholars, they are commonly and rightly referred to as the core personnel of the ordoliberal tradition.
As is often the case, the label ordoliberalism was not invented nor claimed by those to whom it refers to, but, nevertheless, it is an apt one as it gives a fairly accurate indication of where its proponents positioned themselves in the fierce intellectual and political struggles on the eve of the Weimar collapse. So what are the convictions and tenets they shared and which thus constitute the substantive core of this tradition? The first basic conviction has already been mentioned earlier; it is a perspective on society that puts a particular emphasis on functioning markets as the indispensable precondition for the material reproduction of society but is equally adamant that functioning markets in turn rely on certain societal preconditions. Therefore, the ordoliberal perspective is an explicitly interdisciplinary one with the fields of law and political economy at its centre. Not the least because of the resulting complexities of such a broad scope of their approach, the ordoliberals are also convinced that science, and only science, is capable of developing an accurate analysis of the multiple interdependencies between the economic and the non-economic spheres of society and thus of offering apt diagnoses as well as corresponding therapeutic recommendations. This, in turn, implies that social science, according to the ordoliberals, has to be practical in the sense of having a responsibility to inform political decision making; it must not be practised for its own sake, and this view is a testimony to the ordoliberals' view of themselves as being called upon to act as a stabilising 'rational' factor in the crisis-prone context of Germany in the 1930s.
As already indicated, the ordoliberals were of a broadly liberal persuasion when it came to the superiority of markets over other modes of societal coordination for the purpose of material reproduction. This is to say, conversely, that they were particularly opposed to all kinds of collectivism, especially Soviet communism but also the collectivist elements in Fascism and National Socialism, for both normative reasons, that is, the resulting restrictions on individual freedom, but also functional ones: Central planning could not work, as Friedrich August Hayek and other neoliberals had already argued over the course of the Socialist Calculation Debate that dated back to the 1920s. Without a properly functioning price mechanism as the functional core of markets, allocation could not even remotely approximate efficiency, and the key to the particular ordo liberal way of spelling out this neo liberal core conviction, which is ultimately rooted in the marginalist revolution led by Carl Menger and his adherents in the Austrian school around Hayek and Ludwig Mises, is already contained in the very name of this tradition, namely ordo, or order.
The ordoliberals subscribe to a social ontology according to which society can be conceived of as an 'interdepedence of orders', and, accordingly, the basic maxim of an ordoliberal understanding of its object of inquiry must be 'thinking in terms of orders' ( Denken in Ordnungen ). Whatever the social sphere in question, be it the economy, the political system or the legal system, all of them are constituted by some kind of order that may be functioning, malfunctioning or, possibly, in complete disarray. Needless to say, the task, from an ordoliberal perspective, is to identify the elements and structures of functioning (and otherwise desirable) orders, and in the case of the economy this would be the so-called competitive order, which safeguards proper competition and, by the same token, the functionality of the price mechanism. What is of crucial importance, then, is what the ordoliberals call 'the politics of ordering' ( Ordnungspolitik ), that is, what kind of economic policy is implied by such an understanding of functioning markets. On the one hand, the emphasis on a market order puts some distance between the ordoliberals and their classical liberal forebears to the extent that the latter were willing to stand by and leave markets to themselves under the banner of ' Laissez-Faire, Laissez-Aller! ' This is a position at times fervently criticised by the ordoliberals, who claim that this misguided kind of liberalism has indirectly paved the way for the collectivisms of the twentieth century. On the other hand, it obviously sets them apart from these collectivisms but also other interventionist policy paradigms such as Keynesianism, which was already in its ascent in the early days of ordoliberal theorising in the 1930s. Against Keynesian demand management, the ordoliberals emphasise that Ordnungspolitik is not to intervene directly into markets but must only be directed at the framework of markets, sometimes referred to as the 'economic constitution' ( Wirtschaftsverfassung ). This is to say that Ordnungspolitik must constitute, enforce and whenever necessary adapt the respective rules and regulations so competition and price mechanism can function properly – which means that not just any kind of competition but only competition based on performance ( Leistungswettbewerb ) is acceptable. Economic policy thus is to embark upon what the ordoliberals shrewdly promulgate as a 'Third Way' between capitalism and communism that is neither confined to mere stoic passivity in the face of economic upheaval nor intended to subject the economy to the plans of a central administration. But how and why does the postulation of this Third Way as an alternative in economic policy making mark the 'birth of austerity' invoked in the title of this volume?
ORDOLIBERALISM AND THE POLITICS OF AUSTERITY
According to Mark Blyth who has written its authoritative intellectual and natural history, austerity can be understood as 'a form of voluntary deflation, in which the economy adjusts through the reduction of wages, prices, and public spending to restore competitiveness, which is (supposedly) best achieved by cutting the state's budget, debts, and deficits'. How does a politics of 'voluntary deflation' relate to Ordnungspolitik? We argue that the relation is best seen by scrutinising the role of the state in ordoliberalism, particularly with regard to economic crises and general social policy, and by looking at the role ordoliberalism envisions for itself with regard to the state.
To begin with, if the ordoliberals want to maintain their position that supposedly transcends the feud between planners and interventionists on the one hand and laissez-faire advocates and Manchester libertarians on the other, they obviously have to affirm that the state has some positive functions vis-à-vis the economy, but they have to clarify how these tasks differ from what Keynes and liberal socialists let alone communists propose. In other words, they need to define and demarcate the state's agenda and nonagenda in its various aspects, that is, the kind of state action as well as the scope of it that is acceptable and, arguably, even indispensable. Conversely, this ought to provide them with a clear line of demarcating certain kinds of actions and societal spheres and contexts that are off limits for the state. As an aside, we should also note that the ordoliberals realise that the appropriate economic policy may presuppose a particular political order, that is, a certain state structure that is indispensable for the successful implementation of Ordnungspolitik, but while some of the ordoliberal texts in this volume elaborate on this issue, we will not pursue it further here. Instead, let us draw on what we already know about the politics of ordering and identify what kinds of policies are ruled out by it because they would impede the workings of the price mechanism and performance competition. First of all, this would be a deliberately expansionary monetary policy along the lines of what Keynes suggested as one instrument of stimulating the economy. Flushing markets with cheap money artificially boosts demand and thus leads to sales when, in actuality, goods would normally only sell at cheaper prices or increased quality. Consequently, this leads to a distortion of the price system, and the same goes for the inflationary effects that may be the result of an expansionist monetary policy. Eucken in particular argued that an intact monetary system was of the utmost importance for functioning markets. Accordingly, manipulating the value of money, be it internally or externally through currency policy, that is, devaluation, is not considered a viable option from an ordoliberal perspective. It is therefore no coincidence that especially in the work of Wilhelm Röpke, who is the most internationally oriented ordoliberal, the gold standard is occasionally still lauded for its workings although Röpke harboured no hopes of revitalising it ever since the 1930s. After all, one of the prime effects of the gold standard was that it precluded any deliberate monetary/currency policy and instead established a system that would ideally adjust trade balances through the quasi-automatic contraction and expansion of the monetary system. According to Röpke, the best available alternative after the gold standard has become untenable is an independent central bank that wisely protects the monetary system and resists any short-term political instrumentalisation.
For similar reasons, a policy of fiscal stimulus would have to be ruled out because its effects amount to a state subsidy to enterprises that are no longer competitive and competition only truly works if it creates winners and losers, with the latter ultimately being forced off the market. In short, ordoliberalism generally rules out policies to stimulate the economy either through fiscal or monetary means along the lines of what Keynes would have suggested. In a crisis, companies may go out of business, and employees may lose their jobs. But while Eucken concedes that our 'social conscience forbids us to tolerate mass unemployment', he still insists that 'the policy of full employment [Keynesian demand management; TB & FV] makes for an instability on other markets, which is extremely dangerous, and, in addition, forces economic policy in the direction of central planning'.
(Continues...) Excerpted from The Birth of Austerity by Thomas Biebricher, Frieder Vogelmann. Copyright © 2017 Thomas Biebricher and Frieder Vogelmann. Excerpted by permission of Rowman & Littlefield International, Ltd..
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