Ordoliberalism

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This article is about political philosophy of Ordoliberalism. For their economic
system, see Freiburg School. For the practical implementation in Germany,
see Social market economy.

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Ordoliberalism is the German variant of social liberalism that emphasizes the

need for the state to ensure that the free marketproduces results close to its
theoretical potential.[1]
Ordoliberal ideals (with modifications) drove the creation of the post-World War
II German social market economy and its attendantWirtschaftswunder. However,
ordoliberals promoted the concept of the social market economy, and this concept
promotes a strong role for the state with respect to the market, which is in many
ways different from the ideas that are nowadays connected with the term
neoliberalism.[2]
The term "Ordoliberalism" was coined in 1950 by Hero Moeller, and refers to the
academic journal ORDO.[3]
Contents
1Linguistic differentiation

2Development

3Implementation

4Theory

5Criticism

6See also

7References

8Further reading

9External links

Linguistic differentiation[edit]
Ordoliberals separate themselves from classical liberals. Notably Walter Eucken,
with Franz Bhm, founder of Ordoliberalism and theFreiburg School,[4] rejected
Neoliberalism.[5]
Development[edit]
The theory was developed from about 19301950 by German economists and legal
scholars from Freiburg School such as Walter Eucken, Franz Bhm, Hans Grossmann-
Doerth, Leonhard Miksch and others.
Ordoliberal ideals (with modifications) drove the creation of the post-World
War II German social market economy. They were especially influential on forming a
firm competition law in Germany.
Since the 1960s ordoliberal influence on economics and jurisprudence has
significantly diminished[6] however many German economists define themselves as
Ordoliberals till today, the ORDO (journal) is still published, and the Faculty of
Economics at theUniversity of Freiburg is still teaching it. Additionally some
Institutes and Foundations like the Walter Eucken Institut or the Stiftung
Ordnungspolitik are engaged in the ordoliberal tradition.
Implementation[edit]
Ludwig Erhard with Konrad Adenauer in 1956, while Erhard was Minister of
Economics.
Ordoliberalism was a major influence of the economic model developed in the post-
war West Germany. Ordoliberalism in Germanybecame known as the Social Market
Economy. The Ordoliberal model implemented in Germany was started by the
government ofKonrad Adenauer. His government's Minister of Economics, Ludwig
Erhard, was a known Ordoliberal and adherent of the Freiburg School. Under
Adenauer's government, 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 basis. Ordoliberals have stated that
these policies led to the 'Wirtschaftswunder, or economic miracle.[7]
Theory[edit]
Ordoliberal theory holds that the state must create a proper legal environment for
the economy and maintain a healthy level ofcompetition (rather than just
"exchange") through measures that adhere to market principles. This is the
foundation of itslegitimacy.[8] The concern is that, if the state does not take active
measures to foster competition, firms with monopoly (or oligopoly) power will
emerge, which will not only subvert the advantages offered by the market economy,
but also possibly undermine good government, since strong economic power can be
transformed into political power.[9]
Quoting Stephen Padgett: "A central tenet of ordo-liberalism is a clearly defined
division of labor in economic management, with specific responsibilities assigned to
particular institutions. Monetary policy should be the responsibility of a central
bank committed to monetary stability and low inflation, and insulated from political
pressure by independent status. Fiscal policybalancing tax
revenueagainst government expenditureis the domain of the government,
whilst macro-economic policy is the preserve of employers andtrade unions (Funk,
2000, pp. 20-1; Dyson, 2001, p.141)."[10] The state should form an economic order
instead of directing economic processes, and three negative examples ordoliberals
used to back their theories were Nazism, Keynesianism, and Russian socialism.
[11]
The Ordoliberal idea of a social market economy is often seen as
a progressive alternative beyond left and right[12] and as a third
way between collectivism and laissez-faire liberalism.[13]
While the ordoliberal idea of a social market is similar to that of the third-way social
democracy advocated by the likes of the New Labour government (especially during
the Premiership of Tony Blair), there are a few key differences. Whilst they both
adhere to the idea of providing a moderate stance
between socialism and capitalism, the Ordoliberal social market model often
combines private enterprise with government regulation to establish
fair competition (although German network industries are known to have been
deregulated),[14] whereas advocates of the third-way social democracy model have
been known to oversee multiple economicderegulations. The third way social
democracy model has also foreseen a clash of ideas regarding the welfare
state's establishment, in comparison to the ordoliberal's idea of a social market
model being open to the benefits of social welfare.[15]
Ordoliberals are also known for pursuing a minimum configuration of vital
resources and progressive taxation.[16] The Ordoliberal emphasis on
the privatization of public services and other public firms such
as telecommunication services;[14] wealth redistributionand minimum wage laws as
regulative principles makes clear the links between this economic model and the
social market economy.[17]
Wilhelm Rpke considered ordoliberalism to be "liberal conservatism",
against capitalism in his work Civitas Humana ("A Humane Order of Society",
1944). Alexander Rstow also criticized laissez-faire capitalism in his work Das
Versagen des Wirtschaftsliberalismus ("The Failure of Economic Liberalism", 1950).
The ordoliberals thus separated themselves from classical liberals[8][18] and valued
the idea of social justice.[19] "Social security and social justice", wrote Eucken, "are
the greatest concerns of our time".[20]
Michel Foucault also notes the similarity (beyond just historical contemporaneity)
between the Ordo/Freiburg school and the Frankfurt School of critical theory, due to
their inheritance from Max Weber. That is, both recognise the "irrational rationality"
of the capitalist system, but not the "logic of contradiction" that Marx recognized.
Both groups took up the same problem, but in vastly different directions. [21] The
political philosophy of Ordoliberals was influenced
by Aristotle, Tocqueville, Hegel, Spengler, Karl Mannheim, Max Weber, and Husserl.
[22]

Criticism[edit]
Ordoliberalism has its critics. According to Sebastian Dullien and Ulrike Gurot,
ordoliberalism is central to the German approach to euro crisis resolution, which has
often led to conflicts with other European countries. [23] For Nobel Laureate F.A.
Hayek's comment on the Ordo liberals, see his 1951 "The Transmission of the Ideals
of Freedom."[24]
Indeed, ordoliberal economist Hans-Werner Sinn of the University of Munich argues
in his 2014 book The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs that the
"European Central Bank has become too accommodating and that its plans to
buy sovereign debt are illegal". Additionally, he argues that
the eurozone bailouts during the eurozone crisishave "created moral hazard,
allowing feckless Mediterranean countries to get away with minimal reforms and
only limited fiscal discipline".[25]
See also[edit]
Allocative efficiency

Freiburg School

Liberal conservatism
 Radical centrism

Social market economy

References[edit]
1. ^ Ptak, Ralf (2009). "Neoliberalism in Germany: Revisiting the
Ordoliberal Foundations of the Social Market Economy". In Mirowski,
Philip; Plehwe, Dieter. The Road From Mont Plerin: The Making of The
Neoliberal Thought Collective. Cambridge, MA.: Harvard University
Press. pp. 124125. ISBN 978-0-674-03318-4.
2. ^ Boas, Taylor C.; Gans-Morse, Jordan (2009). "Neoliberalism: From
New Liberal Philosophy to Anti-Liberal Slogan". Studies in Comparative
International Development. 44(2): 137161. doi:10.1007/s12116-009-
9040-5. ISSN 0039-3606.
3. ^ Ptak, Ralf (2004). Vom Ordoliberalismus zur Sozialen
Marktwirtschaft: Stationen des Neoliberalismus in Deutschland (in
German). VS Verlag. p. 23. ISBN 3-8100-4111-4.
4. ^ Nils Goldschmidt (2005). Wirtschaft, Politik und Freiheit: Freiburger
Wirtschaftswissenschaftler und der Widerstand. Mohr
Siebeck. ISBN 978-3-16-148520-6. Retrieved 21 July 2013. p. 315
5. ^ Lder Gerken (1 January 2000). Walter Eucken und sein Werk:
Rckblick auf den Vordenker der sozialen Marktwirtschaft. Mohr
Siebeck. ISBN 978-3-16-147503-0. Retrieved 21 July 2013. p. 37
6. ^ Gabler Verlag (ed.), Gabler Wirtschaftslexikon, Stichwort: Freiburger
Schule (online)
7. ^ http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_o
rdoliberals.html
8. ^ a b Megay, Edward N. (1970). "Anti-Pluralist Liberalism: The German
Neoliberals".Political Science Quarterly. Political Science Quarterly, Vol.
85, No. 3. 85 (3): 422442.doi:10.2307/2147878. JSTOR 2147878.
9. ^ Massimiliano, Vatiero (2010). "The Ordoliberal notion of market
power: an institutionalist reassessment". European Competition
Journal. 6 (3): 689707.doi:10.5235/ecj.v6n3.689.
10.^ Stephen Padgett, "Political Economy: The German Model under
Stress", in Stephen Padgett, William E. Paterson, Gordon
Smith, Developments in German Politics 3, pp. 126-127. Duke
University Press, 2003.
11.^ Foucault, Michel (2010). Senellart, Michael, ed. The Birth of
Biopolitics: Lectures at the College de France (1978-9). Graham
Burchell (trans.) (1st Picador Paperback ed.). New York: Palgrave
MacMillan. pp. 10710.
 12.^ [1][dead link]
13.^ "Google Drive Viewer". Docs.google.com. Retrieved 2013-08-01.
14.^ a b http://www.ifw-kiel.de/das-ifw/organisation/siebert/siebert-
pdf/Washington2003.pdf
15.^ "Definition Soziale Marktwirtschaft | Gabler
Wirtschaftslexikon" (in German). Wirtschaftslexikon.gabler.de.
Retrieved 2013-08-01.
16.^ http://toulouse-justice-2011.fr/fullpapers/b4woersdorfer.pdf
17.^ Greening EU Competition Law and Policy - Suzanne Kingston -
Google Books. Books.google.co.uk. 2011-10-27. Retrieved 2013-08-01.
18.^ Friedrich, Carl J. (1955). "The Political Thought of Neo-
Liberalism". American Political Science Review. 49 (2): 509
525. doi:10.2307/1951819. JSTOR 1951819.
19.^ Oswalt, Walter. "Zur Einfhrung: Walter Eucken (18911950)". In
Goldschmidt, Nils; Wohlgemuth, Michael. Grundtexte zur Freiburger
Tradition der Ordnungskonomik (in German). p. 128. ISBN 978-3-16-
148297-7.
20.^ OSO (1999-02-22). "Ordoliberalism: A New Intellectual Framework
for Competition Law : Law and Competition in Twentieth-Century
EuropeProtecting Prometheus Oxford Scholarship Online".
Oxfordscholarship.com. Retrieved 2013-08-01.
21.^ Michel Foucault, The Birth of Biopolitics, 105.
22.^ Foucault, The Birth of Biopolitics, 103105.
23.^ Dullien, Sebastian; Gurot, Ulrike (2012). The Long Shadow of
Ordoliberalism: Germany's Approach to the Euro Crisis (PDF). London:
European Council on Foreign Relations. ISBN 978-1-906538-49-1.
24.^ Hayek, Friedrich A. (2012). "The Transmission of the Ideals of
Freedom". Econ Journal Watch. 9 (2): 1639.
25.^ "Ordoliberalism revisited". The Economist. October 18, 2014.
Further reading[edit]
Peacock, Alan; Willgerodt, Hans, eds. (1989). Germanys Social Market
Economy: Origins and Evolution. London: Macmillan. ISBN 0-333-48563-7.
Glossner, Christian, ed. (1989). The Making of the German Post-war Economy:
Political Communication and Public Reception of the Social Market Economy
After World War Two. London: I.B.Tauris. ISBN 1-780-76421-9.
Nedergaard, Peter; Snaith, Holly (September 2015). "'As I drifted on a river I
could not control': the unintended ordoliberal consequences of the Eurozone
crisis". Journal of Common Market Studies. Wiley. 53 (5): 1094
1109. doi:10.1111/jcms.12249.