Renewal 20.

4 16/01/2013 09:50 Page 35

German ordo-liberalism and the

politics of vitality
Werner Bonefeld

According to the profusion of commentary produced about the crisis in the eurozone, a
spectre is haunting Europe: the spectre of ordo-liberalism. Timothy Garton Ash, for
example, has condemned the German government for holding on to the ordo-liberal idea
of austerity and sound money as the revealed truth of economic policy (Garton Ash, 2012).
The European pursuit of sound money does indeed guide and direct national economic
policy in the EU member states, regardless of mass democratic demands for welfare and
employment. It is also to the detriment of the democratic idea of government, which
becomes a mere conduit of European rules of austerity and economic adjustment irrespec-
tive of democratic majorities. However, it is important to realise that ordo-liberalism does
not in fact reject state intervention. On the contrary, it conceives of a free economy as an
eminently political practice, not only in terms of economic policy, but also in social policy.

What is ordo-liberalism?

Ordo-liberalism originated towards the end of the Weimar Republic (1919-33), in a context
of hyperinflation, depression, mass unemployment, politicised labour relations and mass
movements, political violence, and social instability, as well as a politics of austerity that
led to the characterisation of Heinrich Brüning (Chancellor from 30 March 1930 to 30 May
1932) as the Hungerkanzler: the famine Chancellor. The founding ordo-liberal thinkers were
Walter Eucken (1891-1950), Alexander Rüstow (1885-1963), Wilhelm Röpke (1899-1966)
and Alfred Müller-Armack (1901-78). Genuinely anxious to restore a free economy, they
asked what needed to be done to reassert and sustain one, focusing on the state as the
concentrated force of the ‘common wealth’ and the political form of economic liberty.
Laissez-faire, they argued, does not extend to the state. Any such extension in the end
pulverises that very institution, which alone can make competition effective. That is, they
were convinced that laissez-faire is not a principle on which a liberal society can be built.
From the sociological and moral point of view, it is even dangerous because it tends more
to dissolve than to unite. For competition to be effective, the ordo-liberals maintained, it
requires a sound political, social and moral framework. Economic liberty thus requires a
strong state to secure the internal integration of society as the foundation of a competitive
economy.
So for the ordo-liberals, liberalism cannot be indifferent to the state. On the contrary, it
has to fight for the state to secure its power for the sake of a liberal economy. Ordo-
liberals saw the Weimar Republic as a state of ‘lamentable weakness’, which had fallen
‘prey’ to the powerful economic interests of the cartels and big business and which had
become ‘socialised’ by what they called the welfare-seeking interests of the labour
movement. Instead of governing over society, society governed through the state. Weimar
thus resembled a ‘pluralism of the worst kind’ (Rüstow, 1932/1963, 255) and its unlimited

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democratic character had made the state ungovernable, leading to economic disorder,
social dislocation, and moral decay. For the sake of economic liberty, they demanded that
the state be rolled back from society to secure its liberal utility as a strong, market-
enabling and facilitating state, depoliticising socio-economic relations, transforming
quarrelsome workers into responsible entrepreneurs of their own labour-power, and
opening up cartels and monopolies to international competition to secure market adjust-
ment on the basis of factor competitiveness and by means of sound money. For
ordo-liberals, the strong state is defined by its capacity to limit itself to the achievement of
a free economy. It therefore keeps mass democratic demands for welfare support at arms
length. Welfare concessions, they argued, tend to ‘unlimit’ the state by making it respon-
sible for the well-being of society, from the cradle to the grave. They thus rejected the
social-democratic idea of ‘freedom from want’ as a first step towards what they call the
tyranny of planned economic chaos.
The ordo-liberals conceived of their new liberalism as a third way between laissez-faire
liberalism and social democracy. Social democracy was rejected as the theoretical expres-
sion and political practice of a devitalised society of welfare seekers. Though misguided
and detrimental to the prospects of economic freedom, they regarded social democracy as
an understandable reaction to the social and moral deficiencies of free markets, for which
they held laissez-faire liberalism responsible. Laissez-faire liberalism neglects the social
and moral consequences of a free economy that runs roughshod over working class
communities, destroying existing forms of social integration, and that dislodges traditional
forms of morality. Left to its own devices, a free economy destroys its own social and
moral preconditions, causing society to lose its moral compass, social cohesion, and
entrepreneurial vitality. Social democracy is thus seen as a consequence of laissez-faire,
which amounts to little more, ordo-liberals argued, than a theological system based on the
belief in the magic of a free economy to transform private vices into public virtues. Laissez-
faire thus pays lip service to the social and moral preconditions of market freedom, which
it fails to harness and safeguard, creating the very socio-economic conditions that breed
social democracy.
For ordo-liberals, there are therefore more important things than GDP. A competitive
enterprise society depends not only on a legal framework that sets and enforces the rules
of the game. It also depends on the existence of a requisite moral framework and a social
framework as the preconditions of enterprise. Competition is by nature unsocial and
government is therefore required to sustain the fundamental sociability of the unsocial rela-
tions of enterprise and competition. A free economy does not come about just like that,
nor can it sustain itself on its own. The viability of an economy that is governed by supply
and demand is a matter Beyond Demand and Supply, the German language title of one of
Röpke’s books, which in English appeared as A Humane Economy (1998). Economic
competition is founded on social order, and order is not an economic product. It is a polit-
ical practice. The ordo-liberals therefore argued that a free economy results from an
eminently political decision. This decision needs to be made time and time again to secure
and maintain a free economy. Freedom can be used for illiberal purposes: companies can
conspire to fix prices and carve out markets, and workers can strike and force the govern-
ment to concede welfare and employment guarantees. Public authority is the
indispensable requirement to secure the market liberal utility of freedom, which is a precar-
ious thing, particularly in the face of politicised socio-economic relations. Ordo-liberals
therefore argued that only the strong state is able to limit itself to the pursuit of a free
economy.

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Features German ordo-liberalism and the politics of vitality

The politics of vitality

Thomas Balogh, who was an important Keynesian economist and advisor to the Labour Party
in the 1950s and 1960s, captured the ordo-liberal idea of an ordered freedom succinctly when
he defined ordo-liberalism as an attempt at social planning ‘by the “free” price mechanism’
(Balogh, 1950). Indeed, in his book The Road to Serfdom (1944), which in time became the
bible of the neo-liberal critique of all things social democratic, Friedrich Hayek argued that the
liberal state is an indispensable force for economic freedom. He did not reject state
intervention and his critique of planning is therefore not a critique of interventionism as such.
Rather, it is a critique of the purposes and objectives of state intervention. Hayek demanded
liberal state interventionism to facilitate a free economy – and in this context he defines the
liberal state as a ‘planner for competition’ (see Hayek, 1944, 31). However, in distinction to
Hayek, the ordo-liberals argued that this planning for competition is not just a matter of
establishing and enforcing the rules of the game. It also includes planning the moral
sentiments of society to secure ‘the will’ for enterprise. Enterprise is not just a matter of
individual compliance with the rules of the game. For enterprise to be effective depends on
the acceptance of enterprise as a moral obligation. Economic freedom comes with
responsibility. Poverty is thus not unfreedom. Rather, it is an incentive to do better.
Fundamentally, unfreedom amounts to a lack of entrepreneurial aspiration. Ordo-liberals
therefore rejected the welfare state as the institution of a devitalised society. For workers to
succeed as entrepreneurs of their own labour-power, social policy is needed to embed the
values of enterprise by means of moral ‘planning’, which, as Müller-Armack argued in 1978, is
about ‘incorporating’ enterprise into a ‘life-style’ (Müller-Armack, 1978, 328). This incorporation
is a matter of the ordo-liberal social policy of Vitalpolitik – a politics of vitality.
At first sight, Vitalpolitik appears to be a countervailing force to the destructive conse-
quences of a free economy for the social and moral fabric of society. Indeed, ordo-liberals
argue that the logic of the market destroys the cohesion and integrity of what they term a
human economy. Vitalpolitik is however not a politics that opposes the logic of the market.
It is a politics that addresses the destructive effects of markets in order to maintain and
sustain market freedom. The purpose of Vitalpolitik is to achieve and sustain a human
economy as the foundation of enterprise. It is thus a means towards the end of an enter-
prise society, in which individuals assert themselves as self-responsible entrepreneurs of
their own life-circumstances. Vitalpolitik is about governing the mentality of society to facil-
itate the entrepreneur as a self-responsible individual of enterprise. ‘Money’, says Röpke,
‘is coined freedom’ (Röpke, 1950, 252), and Vitalpolitik is therefore an attempt at estab-
lishing a connection between ‘human beings and private property’ to make ‘competition
socially effective’ (Müller-Armack, 1976, 133, 246). Vitalpolitik seeks to engrain in society
the excitement of a property owning democracy, in which, say, homeownership is not only
about having a home to live in. Instead, it is an investment, a piece of enterprise, a
commodity, something for profit, for exchange. Life is lived for the sake of enterprise.
Vitalpolitik relieves individuals from the fear of economic freedom and makes individuals
accept their responsibility for that freedom. It is, thus, about creating individuals who have
the moral stamina and courage for competition and the inner strength to absorb shocks,
who help themselves and others when the going gets tough, and who adjust to market
pressures willingly and on their own initiative. Peacock and Willgerodt summarise the
purpose of ordo-liberal social policy succinctly: it amounts to ‘medication’ that is adminis-
tered in order to help the market ‘organism to self-regulate’ (Peacock and Willgerodt, 1989,
9). In practical terms, Vitalpolitik can include a variety of measures, ranging from facilitating
small-scale private property ownership of, for example, allotment gardens to allow workers

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to meet subsistence needs by their own effort, including barter, to share ownership.
Indeed, Sam Brittan’s (1984) appreciation of Margaret Thatcher’s privatisation programme,
including the sale of council houses, expresses very clearly the ordo-liberal conception of
Vitalpolitik: the diffusion of private property provides the social foundation of a popular
capitalism, in which economic freedom combines with individual responsibility.
In sum, Vitalpolitik is not a politics against the market. There can be no free economy
without a social policy for a free economy. The connection between the free economy and
political authority is thus fundamental. For the sake of a free economy, the state is indispen-
sable – as a liberal state. Vitalpolitik accurately captures the meaning of the ordo-liberal
notion of the strong state. The state governs to secure the mentality of economic liberty in
the ‘moral and psychological’ make-up of a society that has abandoned the idea of collective
responsibility and solidarity and which, instead, views itself as an investment opportunity.
That is, the ordo-liberal state does not really govern over society. Rather, in its attempt to
avoid the political and economic consequences of moral disorder and social disintegration, it
governs through society to secure the mentality of enterprise. It forms society – a formierte
Gesellschaft – into an enterprise society that is endowed with aspirations for property and
assets, and that comprises self-responsible entrepreneurs who move from one form of
employment to another, willing and able to sustain themselves by their own effort.

Conclusion

I started with a reference to Timothy Garton Ash’s entirely apposite observation about
Germany’s ordo-liberal euro policy. Yet, there is more to ordo-liberalism than sound money
and fiscal conservatism. It entails a particular view of social policy, a conception of the
purpose of the economy, and an understanding of the political form of economic freedom.
The German government conducts its European policy by means of a seemingly
depoliticised rules-based system of economic adjustment, which strengthens the liberal
utility of the character of the European states at the expense of their democratic
constitutions and systems of accountability. The German government demands adherence
to the agreed fiscal rules of monetary union and asks its European partners to commit to
enterprise to maintain internationally competitive labour markets. For the sake of the
economic constitution of Europe as a competitive partner in the global market, it does not
concede to pressures for a European commitment to a policy of full employment and
economic growth, or to the demands of Greek society for a programme of social relief.
For countries like Greece, Spain and Italy, where technocratic government has
replaced democratic government, the original ordo-liberal question is most relevant: how
to fashion and sustain a self-responsible enterprise society of willing entrepreneurs of
economic value and labour-power in a context of severe austerity, unprecedented levels of
mass unemployment, receding economic activity, and particularly in the cases of Greece
and Spain, high levels of social unrest. What is necessary to secure a human economy as
the foundation of a free economy? The contemporary meaning of the ordo-liberal idea of
the strong state as the indispensable precondition of a free economy entails something
quite different in a Germany of unbending rule-based commitments towards a suprana-
tional regime of liberal economic market adjustments than in Greece, where a whole
political economy is on the brink.

Werner Bonefeld is Professor of Politics at the University of York. He researched the ordo-
liberal tradition with the support of an ESRC grant, RES-000-22-4006. Ordo-liberalism
apart, he works on Marx and Adorno.

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Features German ordo-liberalism and the politics of vitality

References
Balogh,T. (1950) An Experiment in ‘Planning’ by the ‘Free’ Price Mechanism, Oxford, Basil
Blackwell.
Brittan, S. (1984) ‘The politics and economics of privatisation’, Political Quarterly 55 (2):
109-28.
Garton Ash, T. (2012) ‘The Greek people now face a stark choice: in or out?’, Guardian
16.5.2012.
Hayek, F. (1944) The Road to Serfdom, London, Routledge.
Müller-Armack, A. (1976) Wirtschaftsordnung und Wirtschaftspolitik, Stuttgart, Paul Haupt.
Müller-Armack, A. (1978) ‘The social market economy as an economic and social order’,
Review of Social Economy 36 (3): 325-31.
Peacock, A. and Willgerodt H. (eds.) (1989) German Neo-Liberals and the Social Market
Economy, London, Macmillan.
Röpke, W. (1998) A Humane Economy, Wilmington Delaware, ISI Books.
Rüstow, A. (1932/1963) ‘Die staatspolitischen Vorraussetzungen des wirtschaftspolitischen
Liberalismus’, in Rede und Antwort, Ludwigsburg, Hoch.

Selected ordo-liberal readings

Eucken, W. (1951) This Unsuccessful Age, London, Hodge.

Eucken, W. (2012) The Foundation of Economics, Berlin, Springer.
Röpke, W. (2002) The Moral Foundation of Civil Society, New Brunswick, Transaction.
Röpke, W. (2009) The Social Crisis of Our Time, New Brunswick, Transaction.
Nicholls, A. (1994) Freedom with Responsibility, Oxford, Oxford University Press.

Critical commentaries

Bonefeld, W. (2012) ‘Freedom and the strong state: on German ordo-liberalism’, New
Political Economy, 17 (5): 633-56.
Foucault, M. (2008) The Birth of Bio-Politics, Basingstoke, Palgrave.
Jackson, B. (2010) ‘At the origins of neo-liberalism: the free economy and the strong state,
1930-1947’, Historical Journal 53 (1): 129-51.
Tribe, K. (1995) Strategies of Economic Order: German Economic Discourse, 1750–1950,
Cambridge, Cambridge University Press.
Tribe, K. (2009) ‘The political economy of modernity: Foucault’s Collége de France lectures
of 1978 and 1979’, Economy and Society 38 (4): 679-98.

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