The Journey Home-Wilhelm Röpke & the Humane Economy

"It is fairly normal, nowadays, for left-liberal thinkers to pay lip-service to the Hayekian theory of the market. Yes, they will say; the market is necessary as a transmitter of economic signals. And yes, without markets economies have no ready way to regain equilibrium in the wake of a disturbance. But markets have no respect for social order; they neither generate nor perpetuate the sense of community on which we all depend. They depend upon and encourage both self-interest and competition, and regard nothing as sacred, nothing as beyond the reach of buying and selling. Is it surprising, therefore, if capitalist societies today are witnessing social breakdown on a hitherto unimaginable scale, as the pursuit of self-interest drives all concern for the community from the thoughts and emotions of consumers? Isn’t the ‘consumer society’ precisely what we must expect, from a philosophy which makes ‘consumer sovereignty’ into the first principle of economic life?

Röpke would have endorsed some of that. But he was determined not to draw the conclusion that left-liberal thinkers draw, namely that we need to control the market through the state. Powers exercised by the state, he believed, inevitably end up in the hands of unanswerable bureaucrats, and can also never be recaptured by society, whatever the extent of their abuse. If the market needs to be constrained for the common good, then the constraint must come from below, not from above. It must be a social constraint, rather than a political constraint. And thus was born the idea of a ‘social market’ economy—an idea which was to influence German ministers of finance throughout the period of reconstruction following the end of the Second World War. Röpke, who had fled from Nazi Germany to Switzerland, believed that he had found a model for the social market, in the Swiss forms of local democracy. He was also (although of Protestant background) strongly influenced by the social teachings of the Roman Catholic Church, and in particular by the doctrine of ‘subsidiarity’ expounded in the encyclical Quadragesimo anno, which Pope Pius XI issued in 1931. Pius intended this as a description of the Church’s own organisation, through the episcopate, according to which decisions are always taken at the ‘subsidiary’ level—the lowest level compatible with unified government. But he also implied that economic and political life might be similarly organized, so that power was always passed up from the bottom and never imposed from above."