Ordoliberalism

Ordoliberalism is the German variant of social liberalism that emphasizes the need for the state to ensure that the free market
produces results close to its theoretical potential.[1]

Ordoliberal ideals became the foundation of the creation of the post-World War II German social market economy and its attendant
Wirtschaftswunder.

The term "ordoliberalism" (German: Ordoliberalismus) was coined in 1950 by Hero Moeller, and refers to the academic journal
ORDO.[2]

Contents
Linguistic differentiation
Development
Implementation
Theory
Criticism
See also
References
Further reading
External links

Linguistic differentiation
Ordoliberals separate themselves fromclassical liberals. Notably Walter Eucken, with Franz Böhm, founder of ordoliberalism and the
Freiburg School,[3] rejected neoliberalism.[4]

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 connected to the term neoliberalism. Oddly the term neoliberalism was
originally coined in 1938, at theColloque Walter Lippmann, by Alexander Rüstow, who is regarded an ordoliberal today.[5]

Because of the connected history ordoliberalism is also sometimes referred to as "German neoliberalism". This led to frequent
confusion and "mix ups" of terms and ideas in the discourse, debate and criticism of both economic schools of liberalism until in
1991 the political economists Michel Albert with Capitalisme Contre Capitalisme and in 2001 Peter A. Hall and David Soskice with
Varieties of Capitalism aimed to separate the concepts and develop the new terms liberal market economy and coordinated market
economy to distinguish neoliberalism and ordoliberalism.

Development
The theory was developed from about 1930 to 1950 by German economists and legal scholars from the Freiburg School, such as
Walter Eucken, Franz Böhm, Hans Grossmann-Doerth, and Leonhard Miksch.

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. However the social market economy was implemented in
economies where corporatism was already well established, so ordoliberal ideals were not as far reaching as the theory's economic
founders had intended.[6]
Since the 1960s, ordoliberal influence on economics and jurisprudence has significantly diminished[7] however many German
economists define themselves as Ordoliberals through the present day, the ORDO is still published, and the Faculty of Economics at
the University of Freiburg is still teaching ordoliberalism. Additionally, some institutes and foundations such as the Walter Eucken
Institut and the Stiftung Ordnungspolitikare engaged in the ordoliberal tradition.

Implementation
Ordoliberalism was a major influence on the economic model developed in post-war
West Germany. Ordoliberalism in Germany became known as the social market
economy.

The Ordoliberal model implemented in Germany was started under the government
administration of Konrad Adenauer. His government's Minister of Economics,
Ludwig Erhard, was a known Ordoliberal and adherent of the Freiburg School.
Under Adenauer, some, but not all, price controls were lifted, and taxes on small
businesses and corporations were lowered. Furthermore, social security and pensions
Ludwig Erhard with Konrad
were increased to provide a social base income. Ordoliberals have stated that these
Adenauer in 1956, while Erhard was
policies led to the Wirtschaftswunder, or economic miracle.[8] Minister of Economics.

Theory
Ordoliberal theory holds that the state must create a proper legal environment for the economy and maintain a healthy level of
competition (rather than just "exchange") through measures that adhere to market principles. This is the foundation of its
legitimacy.[9] 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
.[10]
government, since strong economic power can be transformed into political power

According to 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 policy—balancing tax
revenue against government expenditure—is the domain of the government, whilst macro-economic policy is the preserve of
employers and trade unions."[11] 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.[12] The Ordoliberal
idea of a social market economy is often seen as a progressive alternative beyond left and right[13] and as a third way between
collectivism and laissez-faire liberalism.[14]

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),[15] whereas advocates of the third-way social democracy model have been known to oversee multiple economic
deregulations. The third way social democracy model has also foreseen a clash of ideas regarding the establishment of the welfare
benefits of social welfare.[16]
state, in comparison to the ordoliberal's idea of a social market model being open to the

Ordoliberals are also known for pursuing a minimum configuration of vital resources and progressive taxation.[17] The ordoliberal
emphasis on the privatization of public services and other public firms such as telecommunication services;[15] wealth redistribution
and minimum wage laws as regulative principles makes clear the links between this economic model and the social market
economy.[18]
Wilhelm Röpke considered ordoliberalism to be "liberal conservatism", against capitalism in his work Civitas Humana ("A Humane
Order of Society", 1944). Alexander Rüstow 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[9][19] and valued the idea ofsocial justice.[20] "Social security and social justice", wroteEucken, "are the greatest concerns of
our time".[21]

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 posited. Both groups took up the same problem, but in vastly dif
ferent
directions.[22] The political philosophy of Ordoliberals was influenced by Aristotle, de Tocqueville, Hegel, Spengler, Mannheim,
Max Weber, and Husserl.[23]

Criticism
According to Sebastian Dullien and Ulrike Guérot, ordoliberalism is central to the German approach to the European sovereign-debt
[24]
crisis, which has often led to conflicts with other European countries.

Nobel laureate Friedrich Hayek commented on the Ordoliberals in his 1951 article, "The rTansmission of the Ideals of Freedom".[25]

See also
Allocative efficiency
Freiburg School
Liberal conservatism
Radical centrism
Social market economy

References
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 Pèlerin: The Making of The Neoliberal Thought Collective
.
Cambridge, MA.: Harvard University Press. pp. 124–25.ISBN 978-0-674-03318-4.
2. Ptak, Ralf (2004). Vom Ordoliberalismus zur Sozialen Marktwirtschaft: Stationen des Neoliberalismus in Deutschland
(in German). VS Verlag. p. 23. ISBN 978-3-8100-4111-1.
3. Nils Goldschmidt (2005).Wirtschaft, Politik und Freiheit: Freiburger Wirtschaftswissenschaftler und der Widerstand
(https://books.google.com/books?id=SvNEWSk_HFQC) . Mohr Siebeck. p. 315.ISBN 978-3-16-148520-6. Retrieved
21 July 2013.
4. Lüder Gerken (2000). Walter Eucken und sein Werk: Rückblick auf den Vordenker der sozialen Marktwirtschaft(http
s://books.google.com/books?id=xx8lxh7PZKMC) . Mohr Siebeck. p. 37. ISBN 978-3-16-147503-0. Retrieved 21 July
2013.
5. Boas, Taylor C.; Gans-Morse, Jordan (2009)."Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan".
Studies in Comparative International Development
. 44 (2): 137–61. doi:10.1007/s12116-009-9040-5(https://doi.org/
10.1007%2Fs12116-009-9040-5). ISSN 0039-3606 (https://www.worldcat.org/issn/0039-3606).
6. Abelshauser, Werner (2005). The Dynamics of German Industry: Germany's Path toward the New Economy and the
American Challenge (https://books.google.com/books?id=hkbkBgAAQBAJ) . Berghahn Books. pp. 146–148.
ISBN 9781782387992. Retrieved 9 October 2018.
7. Gabler Verlag (ed.), Gabler Wirtschaftslexikon, Stichwort: Freiburger Schuleonline
( (http://wirtschaftslexikon.gabler.d
e/Archiv/7246/freiburger-schule-v8.html))
8. "Ordoliberals" (https://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_ordoliberals.html). Commanding
Heights: The Battle for the World Economy. PBS. 2002.
 9. Megay, Edward N. (1970). "Anti-Pluralist Liberalism: The German Neoliberals".Political Science Quarterly. 85 (3):
422–42. doi:10.2307/2147878 (https://doi.org/10.2307%2F2147878). JSTOR 2147878 (https://www.jstor.org/stable/2
147878).
10. Massimiliano, Vatiero (2010). "The Ordoliberal notion of market power: an institutionalist reassessment".European
Competition Journal. 6 (3): 689–707. doi:10.5235/ecj.v6n3.689 (https://doi.org/10.5235%2Fecj.v6n3.689).
11. Padgett, Stephen (2003). "Political Economy: The German Model under Stress".In Padgett, Stephen; Paterson,
William E.; Smith, Gordon.Developments in German Politics 3(https://books.google.com/?id=Bo-C2uExHw8C&pg=
PA126&dq=A+central+tenet+of+ordo-liberalism+is+a+clearly+defined+division+of+labor+in+economic+management
#v=onepage&q=A%20central%20tenet%20of%20ordo-liberalism%20is%20a%20clearly%20defined%20division%20
of%20labor%20in%20economic%20management&f=false) . Duke University Press. pp. 126–27.ISBN 978-
0822332664.
12. Foucault, Michel (2010).Senellart, Michael, ed.The Birth of Biopolitics: Lectures at the College de France (1978–9)
.
Translated by Burchell, Graham (1st PicadorPaperback ed.). New York: Palgrave MacMillan. pp. 107–10.
13. [1] (http://www.esrc.ac.uk/my.../391448ec-84a9-42a5-bb79-4be1e721524a)
14. "Google Drive Viewer" (https://docs.google.com/viewer?a=v&q=cache:r39x55yOrK4J:www
.bisa.ac.uk/index.php%3F
option%3Dcom_bisa%26task%3Ddownload_paper%26no_html%3D1%26passed_paper_id%3D137+&hl=en&gl=uk
&pid=bl&srcid=ADGEEShgu-KV-_z-Rd5F456Ye-SfRrehkgqTkt-sFcUWZtjtyowxWCEWOR83ae6Fa9XMXs3MrQjAoG
Ey6VbvjVSkw0hTxlhLtb7K7nSDezGPZqIoek6T09XH3y_488LnbVWxAiltEqt9&sig=AHIEtbSc3XM5GM5Ff1ZRPz7zT
_w2StGrZA). Docs.google.com. Retrieved 2013-08-01.
15. Siebert, Horst (28 May 2003), "Germany's Social Market Economy: How Sustainable is the W elfare State?" (http://w
ww.ifw-kiel.de/das-ifw/organisation/siebert/siebert-pdf/Washington2003.pdf) (PDF), Paper presented at the American
Institute for Contemporary German Studies, Johns Hopkins University
16. "Soziale Marktwirtschaft"(http://wirtschaftslexikon.gabler.de/Definition/soziale-marktwirtschaft.html). Gabler
Wirtschaftslexikon (in German). Retrieved 2013-08-01.
17. "Archived copy" (https://web.archive.org/web/20131203004642/http://toulouse-justice-2011.fr/fullpapers/b4woersdorf
er.pdf) (PDF). Archived from the original (http://toulouse-justice-2011.fr/fullpapers/b4woersdorfer
.pdf) (PDF) on 2013-
12-03. Retrieved 2012-11-09.
18. Kingston, Suzanne (27 October 2011).Greening EU Competition Law and Policy(https://books.google.com/?id=e2U
IjKCfRosC&pg=PA13). Cambridge University Press. ISBN 9781139502788. Retrieved 1 August 2013.
19. Friedrich, Carl J. (1955). "The Political Thought of Neo-Liberalism".American Political Science Review. 49 (2): 509–
25. doi:10.2307/1951819 (https://doi.org/10.2307%2F1951819). JSTOR 1951819 (https://www.jstor.org/stable/19518
19).
20. Oswalt, Walter (2008). "Zur Einführung: Walter Eucken (1891–1950)".In Goldschmidt, Nils; Wohlgemuth, Michael.
Grundtexte zur Freiburger Tradition der Ordnungsökonomik (in German). p. 128. ISBN 978-3-16-148297-7.
21. OSO (1999-02-22). "Ordoliberalism: A New Intellectual Framework for Competition Law". Oxfordscholarship.com.
doi:10.1093/acprof:oso/9780199244010.001.0001/acprof-9780199244010-chapter-7 (https://doi.org/10.1093%2Facp
rof%3Aoso%2F9780199244010.001.0001%2Facprof-9780199244010-chapter-7) (inactive 2018-08-26).
22. Michel Foucault, The Birth of Biopolitics, 105.
23. Foucault, The Birth of Biopolitics, 103–105.
24. Dullien, Sebastian; Guérot, Ulrike (2012). The Long Shadow of Ordoliberalism: Germany's Approach to the Euro
Crisis (http://www.ecfr.eu/page/-/ECFR49_GERMANY_BRIEF_A W.pdf) (PDF). London: European Council on
Foreign Relations. ISBN 978-1-906538-49-1.
25. Hayek, Friedrich A. (2012)."The Transmission of the Ideals of Freedom"(https://econjwatch.org/articles/the-transmis
sion-of-the-ideals-of-economic-freedom?ref=articles)
. Econ Journal Watch. 9 (2): 163–69.

Further reading
Peacock, Alan; Willgerodt, Hans, eds. (1989).Germany's Social Market Economy: Origins and Evolution . London:
Macmillan. ISBN 978-0-333-48563-7.
Glossner, Christian, ed. (1989).The Making of the German Post-war Economy: Political Communication and Public
Reception of the Social Market Economy After World W ar Two. London: I.B.Tauris. ISBN 978-1-780-76421-4.
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. 53 (5): 1094–09.
doi:10.1111/jcms.12249.
External links
Aktionsgemeinschaft Soziale Marktwirtschaft, German Ordoliberal association.
Walter Eucken Institut, German research institute in the tradition of ordoliberalism.
Centro Studi Tocqueville-Acton, Italian Centre Studies on Social Market Economy and liberal tradition in the light of
Catholic social thought.
ORDO official website
Back issues of ORDO Yearbook Vol. 1 - Vol. 65 (1948-2014) via JSTOR

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