A Humane Economy

Roepke, Wilhelm, A Humane Economy: The Social Framework of the Free Market, Hardcover: 261 pages, (Wilmington, DE: ISI Books, 3d. ed., 1998), Retail: $24.95, Amazon.com: $16.47.

Review by Ryan Setliff

A Humane Economy: The Social Framework of the Free Market is an insightful look at the social and political framework of the market economy and an intellectual broadside against collectivism and state reckless state intervention in the economy. Economist Wilhelm Röpke was a brilliant German-born economic, social and political thinker, and perhaps my favorite amongst the so called "Austrian school." He devoted much of his scholarly career to combating the intellectual's obsession for collectivism in economic, social, and political theory. Röpke stands apart from his colleagues in that he thinks on a more humane level rejecting crude utilitarian calculations in favor of sound empirical reasoning and moral considerations rooted in culture.

This brilliant German economist of the "Austrian school" stood up to the centralising and dehumanising policies of the Nazis, and later the Soviets. Röpke boldly affirmed that collectivist ideologies lay waste to civil society, thus destroying the intermediary institutions between individual and state. When the omnipotent state acts to supplant the natural civil associations with state institutions that aggrandise state power, it dissolves the moral fabric of communities, saps a nation's economic vitality and usually leads to twin perils of centralisation and atomisation. Furthermore, Röpke was keenly aware of the limitations of the market economy, and was adamant that economic questions cannot be answered in a vacuum devoid of moral considerations. Röpke would attest that mammon is not the measure of all things. In his eyes, the intangibles — that is to say faith, family and tradition — are those things that animate life and give it meaning. Röpke recognised the limitations of the market economy. Röpke insisted, "Economism, materialism, and utilitarianism have in our time merged into a cult of productivity, material expansion, and the standard of living. This cult proves once again the evil nature of the absolute, the unlimited and the excessive" (p. 109). A humane economy was not grounded in progressive notions of unlimited growth, but in a realism that accentuated the recognition of the moral conditions necessary for sustaining a prosperous, free market economy. He observed,

Society as a whole cannot be ruled by the laws of supply and demand, and the state is more than a sort of business company, as has been the conviction of the best conservative opinion since the time of Burke. Individuals who compete on the market and there pursue their own advantage stand all the more in need of the social and moral bonds of community, without which competition degenerates most greviously. As we have said before, the market economy is not everything. It must find its place in a higher order of things which is not ruled by supply and demand, free prices, and competition. It must be firmly contained within an all-embracing order of society in which the imperfections and harshness of economic freedom are corrected by law and in which man is denied conditions of life appropriate to his nature. Man can wholly fulfill his nature only by becoming part of a community and having a sense of solidarity with it. Otherwise he leads a miserable existence and he knows it (p. 91).

Röpke recognised that allocating resources by the free play of supply and demand is the most humane system. As such he was champion of the market economy. Röpke was influential over German economist Ludwig Erhard, who was the architect of the Federal Republic of Germany's postwar economic plan, which emphasized free enterprise while effectively curtailing state economic controls (i.e., central planning, price fixing, rationing, and state-owned enterprises.)

Röpke possessed a remarkable sense of prudence and conservative sobriety in his thinking as it relates to the political economy. He rejected the idea of making economists into social engineers whether in the interests of "efficiency" or "social justice." And amongst his "Austrian" colleagues like F.A. Hayek and Ludwig von Mises, he brought economics to a more humane level, rejecting crude utilitarian logic in favor of more sound empirical reasoning to defend the market economy. Furthermore, he refrains from the market idolatry that is so common to libertarian apologists for the free-market these days. Libertarians frequently espouse an ideology that can be summed up as "everything in the market, nothing outside the market." (This, of course, turns Mussolini's statist mantra on its nose.) Röpke recognised something that libertarians miss with their penchant for crude utilitarian calculations and their amoral neutrality that often makes being an avowed "libertarian" indistinguishable from being a "libertine." Many libertarians content themselves writing diatribes defending the "robber barrons" of the yesteryears while praising the colossal. In their efforts to defend any and everything related to the private sector, these reductionists forget that the apparently sporadic interventions of the state often come at the behest of Big Business. Many capitalists content themselves with cozy public-private partnerships that translate to steady, predictable profits and a regulated environment that drowns small business competition. Big Business typically possesses a considerable advantage over their smaller competitors, because they can absorb the regulatory costs much easier and they can influence the regulators and regulations. Röpke in contrast scorned the "cult of the colossal" not in demagogic rhetoric, but in the rhetoric of an economist. He likewise sees Big Business as a concomitant pillar of Big Government and its regulatory state. Röpke possessed some peculiarities in his lexicon that set in him apart from his colleagues, but his motive for such peculiarities was principled. Röpke rejected characterising socialism as a "planned economy" and he recognised that the market economy facilitated economic activity "planned" by entrepreneurs as opposed to state planners. He preferred the delineation of "market economy" to "capitalism" since what often passed for capitalism in the early twentieth century was a large interventionist welfare state in a cozy lockstep relationship with big business monopolists. This was state corporatism not capitalism. Moreover, "capitalism" was, of course, coined by its chief critic Karl Marx and while the term captures the importance of capital to the market economy, it remains rather sterile and ideological. What is more, "capitalism" typically delineates a materialistic consumerist ideology or images of big business rather than a social framework based on the market economy.

Unlike libertarians and some classical economists who too often dwell in the realm of abstract theory, Röpke possessed a gritty realism. First, he intuitively recognised that there is interplay between between political and economic processes, and rejected attempts by economists to conceive of economic questions and answers solely in the realm of abstract theory devoid of cultural, political, psychological and social considerations. Second, he recognised the intrinsic value of state intervention in prosecuting acts of force and fraud, enforcing contracts and upholding private property rights. Abusus non tollit usum (Wrong use does not preclude proper use). As an economist, he could offer prescriptive wisdom on the proper and limited role of the state in the economy while elaborating upon the ruinous consequences of imprudent state interventions such as price-fixing, inflation, production quotas, monopolies, cartels, over-taxation and over-regulation. Röpke essentially favored economic laissez-faire overseen by a night-watchmen state that exercised profound restraint in its interventionism least it hinder or even cripple a nation's potential for prosperity. Underlying Röpke's humane economy is the idea that a market economy needs a prudent civil framework, widespread distribution of property, a strong entrepreneurial middle class and emphasis on parochial traditionalism. Anyway, Röpke itinerates the need for sound monetary and fiscal policy on the part of the state. He holds that the gold standard is the only real safeguard against the vicious boom-and-bust cycles of modern capitalist society. Röpke recognised that a market economy flourishes when tradition and community guard against the centralising depredations of both Big Business and Big Government. Hence, his commitment to the principle of subsidiarity, which in Europe today seems to survive only in that beautiful alpine island of parochialism, namely Switzerland. Though, Switzerland may be losing its vitality as it is straddled by the colossal and cosmopolitan EU super-state as if it is ready to be consumed.

In The Humane Economy, Röpke surmised that:

The market economy, and with social and political freedom, can thrive only as part and under the protection of a bourgeois system. This implies the existence of a society in which certain fundamentals are respected and color the whole network of social relationships: individual effort and responsibility, absolute norms and values, independence based on ownership, prudence and daring, calculating and saving, responsibility for planning one's own life, proper coherence with the community, family feeling, a sense of tradition and the succession of generations combined with an open-minded view of the present and the future, proper tension between individual and community, firm moral discipline, respect for the value of money, the courage to grapple on one's own with life and its uncertainties, a sense of the natural order of things, and a firm scale of values.

To answer those who might sneer at this, Röpke nimbly replies, "Whoever turns his nose up at these things... suspects them of being 'reactionary'... may in all seriousness be asked what ideals he intends to defend against Communism without having to borrow from it."

While much of Röpke's ideas are remarkably original, his economic and cultural criticism finds a close parallel in the conservative sociologist Robert Nisbet, Anglo-Catholic distributists like G.K. Chesterton and Hillare Belloc, and the Southern agrarians like John Crowe Ransom, Allen Tate, and Donald Davidson.