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Ordoliberalism is the German variant ofeconomic liberalism that emphasizes the need for government to ensure that thefree market produces results close to itstheoretical potential.[1]
Ordoliberal ideals became the foundation of the creation of the post-World War II Germansocial market economy and its attendantWirtschaftswunder. The term "ordoliberalism" (German:Ordoliberalismus) was coined in 1950 byHero Moeller [de] and refers to the academic journalORDO.[2]
Ordoliberals separate themselves fromclassical liberals. Notably,Walter Eucken, withFranz Böhm, founder of ordoliberalism and theFreiburg School,[3] rejectedneoliberalism.[4]
Ordoliberals promote the concept of thesocial market economy, which favors a strong role for the state with respect to the market and which is in many ways different from the ideas connected to the term "neoliberalism". The term "neoliberalism" was originally coined in 1938 at theColloque Walter Lippmann byAlexander Rüstow, who is regarded as an ordoliberal today.[5]
Because of the connected history, ordoliberalism is sometimes referred to as "German neoliberalism". This has led to frequent confusion and mix-ups of terms and ideas in the discourse, debate and criticism of both economic schools. In 1991 political economistMichel Albert publishedCapitalisme Contre Capitalisme, and in 2001 Peter A. Hall andDavid Soskice publishedVarieties of Capitalism, and both separated the concepts and developed the new terms "liberal market economy" and "coordinated market economy" to distinguish neoliberalism and ordoliberalism.
The theory was developed from about 1930 to 1950 byGermaneconomists and legal scholars from theFreiburg School, such asWalter Eucken,Franz Böhm, Hans Grossmann-Doerth, and Leonhard Miksch.[6]
Ordoliberal ideals (with modifications) drove the creation of the post-World War II German social market economy. They were especially influential on forming a firmcompetition law in Germany. However the social market economy was implemented in economies wherecorporatism was already well established, so ordoliberal ideals were not as far reaching as the theory's economic founders had intended.[7]
Since the 1960s, ordoliberal influence on economics and jurisprudence has significantly diminished;[8] however, many German economists define themselves as Ordoliberals through the present day, theORDO is still published, and the Faculty of Economics at theUniversity of Freiburg is still teaching ordoliberalism. Additionally, some institutes and foundations such as theWalter Eucken Institut and theStiftung Ordnungspolitik are engaged in the ordoliberal tradition.
Germany'sFree Democratic Party (FDP) is a traditional and committed supporter of ordoliberalism,[9] the party having been influenced by the economic theories ofWilhelm Röpke andAlexander Rüstow.[10] Historical FDP party grandeeOtto Graf Lambsdorff, who served asFederal Minister of Economics, was a particular proponent of ordoliberalism.[11]
Ordoliberalism was a major influence on the economic model developed in post-warWest Germany. Ordoliberalism inGermany became known as the social market economy.
The Ordoliberal model implemented in Germany was started under the government administration ofKonrad Adenauer. His government'sMinister of Economics,Ludwig Erhard, was a known Ordoliberal and adherent of theFreiburg School. UnderAdenauer, some, but not all, price controls were lifted, and taxes on small businesses and corporations were lowered. Furthermore, social security and pensions were increased to provide a social base income. Ordoliberals have stated that these policies led to theWirtschaftswunder, or economic miracle.[12]
Ordoliberal theory holds that thestate must create a proper legal environment for the economy and maintain a healthy level ofcompetition through measures that adhere tomarket principles. This is the foundation of itslegitimacy.[13] The concern is that, if the state does not take active measures to foster competition,firms withmonopoly (oroligopoly) power will emerge, which will not onlysubvert the advantages offered by themarket economy, but also possibly undermine good government, since strong economic power can be transformed intopolitical power.[14]
According to Stephen Padgett, "a central tenet of ordo-liberalism is a clearly defined division oflabor in economic management, with specific responsibilities assigned to particular institutions.Monetary policy should be the responsibility of acentral bank committed to monetary stability and lowinflation, and insulated from political pressure by independent status.Fiscal policy—balancingtax revenue againstgovernment expenditure—is the domain of the government, whilstmacro-economic policy is the preserve ofemployers andtrade unions."[15] The state should form an economic order instead of directing economic processes, and three negative examples ordoliberals used to back their theories wereNazism,Keynesianism, andSoviet socialism.[16] It is also seen as athird way betweencollectivism andlaissez-faire liberalism.[17]
While the ordoliberal idea of a social market is similar to that of thethird-way social democracy advocated since the 1990s by the likes of theNew Labour government (especially during thepremiership of Tony Blair), there are a few key differences. Whilst they both adhere to the idea of providing a moderate stance betweensocialism andcapitalism, the ordoliberal social market model often combinesprivate enterprise with governmentregulation to establish faircompetition (although German network industries are known to have beenderegulated),[18] whereas advocates of the third-way social democracy model have been known to oversee multiple economicderegulations. The third waysocial democracy model has also foreseen a clash of ideas regarding the establishment of thewelfare state, in comparison to the ordoliberal's idea of asocial market model being open to thebenefits ofsocial welfare.[19]
Ordoliberals are also known for pursuing a minimumconfiguration of vital resources andprogressive taxation.[20] The ordoliberal emphasis on theprivatization ofpublic services and other public firms such astelecommunication services;[18]wealth redistribution andminimum wage laws asregulative principles makes clear the links between thiseconomic model and thesocial market economy.[21]
Wilhelm Röpke considered ordoliberalism to be "liberal conservatism", againstcapitalism in his workCivitas Humana ("AHumane Order of Society", 1944).Alexander Rüstow also criticizedlaissez-fairecapitalism in his workDas Versagen des Wirtschaftsliberalismus ("The Failure of Economic Liberalism", 1950). The ordoliberals thus separated themselves fromclassical liberals[13][22] and valued the idea ofsocial justice.[23] "Social security and social justice", wroteEucken, "are the greatest concerns of our time".[24]
Michel Foucault also notes the similarity (beyond just historical contemporaneity) between the Ordo/Freiburg school and theFrankfurt School ofcritical theory, due to their inheritance fromMax Weber. That is, both recognise the "irrationalrationality" of thecapitalist system, but not the "logic of contradiction" thatMarx posited. Both groups took up the same problem, but in vastly different directions.[25] The political philosophy of Ordoliberals was influenced byAristotle,de Tocqueville,Hegel,Spengler,Mannheim,Weber, andHusserl.[26]
According toSebastian Dullien andUlrike Guérot, ordoliberalism is central to the German approach to theEuropean sovereign-debt crisis, which has often led to conflicts with other European countries.[27]
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