Encyclopedia of Law and Economics

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Röpke, Wilhelm

  • Stefan KolevEmail author
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DOI: https://doi.org/10.1007/978-1-4614-7883-6_622-3
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Abstract

The purpose of this entry is to delineate the political economy of Wilhelm Röpke. To reach this goal, a history of economics approach is harnessed. First, the entry concisely reconstructs Röpke’s life, intellectual evolution, and heritage. Second, it presents the specificities of his perspective on economic embeddedness focused on the stability of social order and on the role of informal institutions as indispensable stabilizers of this order.

Keywords

Eucken Austrian Business Cycle Theory Ordoliberalism Freiburg School Colloque Walter Lippmann 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Biography

Wilhelm Röpke (1899–1966) was a key figure within a fascinating generation of European economists. Even though not as widely received today as his colleagues and friends F.A. Hayek (1899–1992) and Walter Eucken (1891–1950), Röpke and his age peers had the mixed privilege to experience two world wars, but also the intellectual privilege to be among the most renowned economists in Europe during the period of the Great Depression as well as in the postwar decades. Röpke’s vibrant life, his scholarly achievements as political economist and as social philosopher, but also his seminal role in shaping economic policy at several crucial junctures more than vindicate a detailed portrayal, with the main aim to show how he complements the ordoliberalism of the Freiburg School by his specific research program within the ordoliberal paradigm.

Röpke was born in a small town in the Northwest of Germany and retained a lifelong sympathy for rural, small-scale social contexts like the one of his youth. He studied a combination of economics, law, and administrative science at Tübingen, Göttingen, and Marburg. Having completed both a (historicist) dissertation and a (theoretical) habilitation at Marburg, Röpke moved to Jena to become Germany’s youngest professor at the age of 24 (Gregg 2010, pp. 7–8; Hennecke 2005, pp. 49–53). After a brief stay at Graz, he received a call to Marburg in 1929 and stayed there until 1933, but had to leave almost immediately after the National Socialist seizure of power because of his perennial outspoken opposition (Nicholls 1994, pp. 56–59; Hennecke 2005, pp. 99–114). Röpke and his close associate Alexander Rüstow (1885–1963) received positions at Istanbul, together with several other German émigrés. Both were eager to come back to Central Europe, and Röpke was lucky to receive a call in 1937 to the Graduate Institute of International Studies in Geneva, where he remained for the rest of his life.

Unlike Eucken or his Viennese colleagues, Röpke was not the type of scholar to form a school of his own (Boarman 1999, pp. 69–73) – instead, he was a highly gifted networker and succeeded soon to set up an international network connecting various European countries, one to be expanded after 1945 to the Americas (Zmirak 2001, pp. 201–206). Röpke and Rüstow were among the most active figures at the Colloque Walter Lippmann in Paris 1938, the birthplace of “neoliberalism” – a term with a history reaching well into the nineteenth century, but now to be used for a reformulation of liberalism by twentieth-century social scientists (Gregg 2010, pp. 82–86; Burgin 2012, pp. 67–78). Along with Hayek, Röpke acted in the immediate postwar years as the second initiator of the 1947-founded Mont Pèlerin Society, a hub for the few remaining liberal scholars, until that point isolated at their individual locations in Europe and the United States (White 2012, pp. 233–238; Kolev et al. 2014). Simultaneously, Röpke functioned as a crucial “spin-doctor” to Ludwig Erhard and was the mastermind behind some of Erhard’s strategic plans for postwar Germany under the auspices of the Social Market Economy (Commun 2004; Goldschmidt and Wohlgemuth 2008, pp. 262–264). However, Röpke’s enthusiasm for the effects of the “economic miracle” faded away during the 1950s, leading to a deepening pessimism about the prospects of liberty, in combination with voicing ever-sharper conservative positions on social issues. After the “Hunold affair” within the Mont Pèlerin Society, a fall-out with Hayek and the American fraction in the Society ensued (Plickert 2008, pp. 178–190; Burgin 2012, pp. 137–143), with further detrimental effects for Röpke’s weakened health leading to his passing away in February 1966.

Even though not as prominent in today’s policy debates in Germany as authors like Eucken or Keynes, Röpke is frequently present in the official addresses of Chancellor Merkel or of finance minister Wolfgang Schäuble. In 2007, the Wilhelm Röpke Institute was established in Erfurt, close to Röpke’s first professorship at Jena. Also, Röpke has been more widely received and discussed than Eucken in some other European countries (especially Switzerland and Italy) as well as in conservative circles in the United States (Commun and Kolev 2018).

The Political Economist Is More Than Just an Economist

Röpke’s impulses to the research program of the incipient neoliberal movement in the 1930s and 1940s are seminal – and often overlooked today. Despite their worsening relationship in the late 1950s amid the tensions in the Mont Pèlerin Society, Hayek acknowledged how Röpke had realized “early, probably earlier than most of our contemporaries, that an economist who is only an economist cannot be a good economist” (Hayek 1959, p. 26). And this is indeed characteristic for Röpke’s oeuvre: in line with Eucken’s concept of the “interdependence of orders,” Röpke conceived a theory of the economy as an entity deeply embedded in and interrelated with adjacent social orders (Kolev 2013, pp. 121–136, 2015, pp. 424–427). Two issues are of paramount importance for his specific take on ordoliberal political economy: first his overarching concern with the stability of the economic order as embedded in society, and second his particular attention to what one would call today “informal institutions” – the particular cultural perquisites and preconditions which to Röpke were more important for enabling stability than the formal legal rules framing the economy (Zweynert 2013, pp. 116–120). His focus on these two domains, stability and informal institutions, provides a valuable complement to the ordoliberal research program of the Freiburg School, and these domains also offer a helpful structure for continuing this exposition.

Stability Is Not to Be Taken for Granted: On the Fragility of the Spontaneous Order

Following up on Hayek’s assessment above, Röpke can often be seen as prescient – both in his conceptual apparatus and his theoretical arguments. For example, he used the term “spontaneous order” as a description for the market in 1937, years before it explicitly found its key place in Hayek’s terminology (Röpke 1963, p. 4). However, Röpke was also early to express serious concerns about the fragility of this order and to found his political economy on the issues of stability. The initiation was the Great Depression when he conceptualized, within the Austrian Business Cycle Theory, a phase of “secondary depression” during a slump of the economy: here, the useful effects of the “primary depression” with its merits in purifying the economy of the malinvestments of the boom are depleted – and the dangerous aspects of the depression start spreading, as its deflation becomes omnipresent (James 1986, pp. 329–342; Kolev 2013, pp. 178–183). The main danger here according to Röpke is not an economic one, rather it is rooted in the interdependence of the economic and the political order: The popular sentiments of unstoppable downward dynamics can in his analysis delegitimize not only the market economy as an economic order but also democracy as a political order and the free order of society as a whole (Röpke 1932, 1936, pp. 129–132). It was because of this notion of interdependence that Röpke, in contrast to his Austrian friends (Haberler 2000), pleaded in the early 1930s for active policy responses to stop the disintegration of the political order due to illiberal extremisms of various kinds. Again, Hayek later acknowledged publicly the correctness of Röpke’s broad perspective at this key juncture and also confessed his own narrowness in judging the harm of deflation only on purely economic criteria (Magliulo 2016).

In the decades to follow, Röpke expanded comprehensively on this early intuition of the crucial importance of stability in a system of interdependent social orders. In his trilogy published in German during the war (Röpke 1948, 1950, 1959), he searched for a diagnosis of the multiple crises of his age, for a therapy for them in Europe, and also for a solution set for the pressing issues in the international economic relations (Sally 1998, pp. 133–147). He explored a specific normative vision of the market within society, later to be called a “humane economy” in the English title of his probably most well-known book today (Röpke 1960), a vision to be depicted below. In the course of these endeavors, he left technical economics aside and moved increasingly into the domain of social philosophy, a parallel evolution observable in many of his age peers (Blümle and Goldschmidt 2006).

Informal Institutions, Not the Legal Framework Are the Key to Long-Term Stability

While the ordoliberalism of the Freiburg School focuses on the order-generating properties of the formal rules framing the economic process, the specifically Röpkean agenda within the “order in liberty” program of ordoliberalism is differently nuanced. Without disregarding the crucial role of formal legal institutions as a necessary condition for a stable system of social orders, Röpke’s political economy did not perceive them as a sufficient condition. Rather, in an implicit division of labor with his Freiburg colleagues, Röpke underscored in his writings the essentiality of what he called the “anthropological and sociological” preconditions or prerequisites of a stable social order with a high degree of social cohesion (Röpke 1950, pp. 191–194, 1960, pp. 74–89). These cultural preconditions are partially ideal (called above “anthropological”) and relate to necessary values within the intellectual heritage of Christianity, and partially they also have a material side (called above “sociological”) and depict the necessary social structures within which a “humane economy” is possible (Röpke 1960, pp. 222–235). Here an interesting contrast to Hayek can be drawn: while Hayek is primarily concerned with the threat which the logic of the small group can inflict on the mechanisms of the extended order of society, Röpke worries most about the opposite, i.e., about the threats stemming from “enmassment” where the logic of anonymous society uproots the individuals from the contexts of their traditional small communities and their particularly reliable social cohesion (Kolev 2016, pp. 16–20). Correspondingly, retaining and conserving these small contexts both in terms of economy and of society is the central goal of his “humane economy,” thus preventing the individuals from falling prey to ideational vacuum or to unnatural social structures – and as the market tends to use up the resources of its stabilizing pillars, these are to be permanently checked and, if necessary, stabilized anew by the state and other players in civil society (Röpke 1942, pp. 67–71).

This Röpkean plea for specific informal institutions to guarantee stability has often been criticized as romantic, naively conservative, or even “retro-utopian” (Solchany 2015, pp. 484–501). While these critiques for Röpke’s therapies do not fully lack justification, Röpke’s diagnosis regarding the fragility inherent in “spontaneous orders” can claim validity until today, in the global economic order and, most recently, also in the political order of Western societies. It will be intriguing to observe to what extent the age of digitalization with platforms like social media can partially bring back to relevance the logic of small groups and the stabilizing statics which Röpke expected from these groups, in this way possibly providing an antidote to the “too much” of dynamics which discontented fractions of Western societies attest to the processes of globalization.

Cross-References

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Authors and Affiliations

  1. 1.Wilhelm Röpke Institute, Erfurt and University of Applied Sciences ZwickauZwickauGermany