Ordoliberalism is the German variant of economic liberalism that emphasizes the need for government to ensure that the free market produces results close to its theoretical potential but does not advocate for a welfare state and did not advocate against one either.[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]
Ordoliberals promoted the concept of the social market economy, which calls for 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. Ironically, the term neoliberalism was originally coined in 1938 at the Colloque Walter LippmannbyAlexander Rüstow, who is regarded as 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. In 1991 political economist Michel Albert published Capitalisme Contre Capitalisme, and in 2001 Peter A. Hall and David Soskice published Varieties of Capitalism, and both separated the concepts and developed the new terms liberal market economy and coordinated market economy to distinguish neoliberalism and ordoliberalism.
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.[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, 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 Ordnungspolitik are engaged in the ordoliberal tradition.
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 were increased to provide a social base income. Ordoliberals have stated that these policies led to the Wirtschaftswunder, or economic miracle.[12]
Ordoliberal theory holds that the state must create a proper legal environment for the economy and maintain a healthy level of competition through measures that adhere to market principles. This is the foundation of its legitimacy.[13] The concern is that, if the state does not take active measures to foster competition, firms with monopoly (oroligopoly) 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.[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),[18] 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 state, in comparison to the ordoliberal's idea of a social market model being open to the benefitsofsocial welfare.[19]
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-fairecapitalism in his work Das Versagen des Wirtschaftsliberalismus ("The Failure of Economic Liberalism", 1950). The ordoliberals thus separated themselves from classical liberals[13][22] and valued the idea of social justice.[23] "Social security and social justice", wrote Eucken, "are the greatest concerns of our time".[24]
According to Sebastian Dullien and Ulrike Guérot, ordoliberalism is central to the German approach to the European sovereign-debt crisis, which has often led to conflicts with other European countries.[27]
^Ptak, Ralf (2004). Vom Ordoliberalismus zur Sozialen Marktwirtschaft: Stationen des Neoliberalismus in Deutschland (in German). VS Verlag. p. 23. ISBN978-3-8100-4111-1.
^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. S2CID154973650.
^"Soziale Marktwirtschaft" [Social market economy]. Gabler Wirtschaftslexikon (in German). Archived from the original on 2018-03-16. Retrieved 2013-08-01.
^Oswalt, Walter (2008).『Zur Einführung: Walter Eucken (1891–1950)』[Introduction: Walter Eucken (1891–1950)]. In Goldschmidt, Nils; Wohlgemuth, Michael (eds.). Grundtexte zur Freiburger Tradition der Ordnungsökonomik [Basic texts on the Freiburg tradition of order economics] (in German). Mohr Siebeck. p. 128. ISBN978-3-16-148297-7.
Peacock, Alan; Willgerodt, Hans, eds. (1989). Germany's Social Market Economy: Origins and Evolution. London: Macmillan. ISBN978-0-333-48563-7.
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. ISBN978-1-780-76421-4.
