Ordoliberalism, Ideology and the Euro Crisis

_ Malte Dold, Assistant Professor, Pomona College; Tim Krieger, Professor, Wilfried Guth Endowment for Regulatory and Competition Policy, Albert Ludwigs University. Freiburg, 12 March 2021. Tanslated by Yuri Kofner from Oekonomenstimme (ETH Zurich).*Published for debate.

Ordoliberals have missed developing their ideology in such a way that it remains academically and politically alive and identifiable. This article discusses the controversial role of ordoliberalism during the euro crisis and advocates modern ordoliberalism and a humane regulatory policy.

A ghost looms in Europe – the ghost of … Ordoliberalism? For a long time, German economics of order was seen as an obsolete model: too little theory, too little empiricism, no international connectivity. Above all, no one seemed interested in ordoliberal proposals for rule-based reform of the euro area. Against this background, it seems surprising that for some years now, outside of economics and predominantly outside of Germany, considerable specialist literature has emerged that claims to have identified ordoliberalism as the main culprit for the delayed solution to the euro zone crisis. Instead of solidarity, the ordoliberals preached austerity and German politics followed them by preventing Eurobonds and implementing austerity measures in Europe, among other things.

These different perspectives on the role of ordoliberalism in Europe and especially in the euro zone crisis have recently attracted increasing academic attention. In our current article “The ideological use and abuse of Freiburg’s ordoliberalism”, we contribute to this research debate by asking the question of how the “Freiburg School” – the best-known representative of ordoliberal thought – could become an object of an ideologically motivated discourse. We argue that certain developments within this theory school caused this distorted discourse. At the same time, we put up for debate the thesis that ordoliberalism, if it recalls its normative core and thus – in a positive sense – assumes a recognizable ideological position, will make an attractive offer to the citizens on the market of ideas for shaping Europe can.

Ordoliberalism: “overused and undertheorized”

Economists usually have little to say on the subject of ideology: Most believe in the scientism of their subject and the possibility of positive economics. Meanwhile, your critics assume that economics is an ideological application of market liberalism or even market radicalism. Against this background, irreconcilable debates that hardly help scientifically can come as no surprise. Ideologies should be presented much more pragmatically as selective representations of a complex world. Economists see good scientific work as being achieved when plausible generalizations in theory can be empirically supported by robust data. But even in this case there is scope for interpretations that are supported by the ideas of the individual scientific schools of thought with “their” texts, theories and arguments and thus create identity. This ideological view is not bad per se, but it has consequences: In order to achieve political impact, the ideologies compete with one another in order to win over outsiders for their position. It is at this point that all too often the argument over arguments turns into a “battle for ideas”.

Ordoliberalism is in such a struggle for ideas today as it has transformed over time from an active research program to an “attitude”. Often set pieces from the writings of the ordoliberal masterminds are combined with useful personal interpretations. So you can easily adopt ordoliberalism from the left to traditionally liberal to conservative, but you can also construct almost any criticism of it. The ordoliberals are not to blame for this development, because they missed the opportunity to develop their field in such a way that it remains academically and politically lively and identifiable. Today ordoliberalism is “overused and undertheorized”.

During the Eurozone crisis, Germany’s politics, business and science used many unfortunate images to clarify their positions, and they were all too happy to label them with the label “Ordnungspolitik”: the thrifty Swabian housewife was contrasted with the lazy southern Europeans who were there in the Want to let Club Med go well at Germany’s expense. Even the critics were not squeamish when they spoke of ordoarithmetic, ordoliberal iron cages and quirky German economists in the parallel universe or even assumed that the German economics of order was responsible for jihadist terrorism in France.

Euro crisis: National self-interests more decisive than ideological convictions

Because everyone’s worldview was in the foreground, the result was a mutual swinging up of each other without entering into real debates. This is also surprising because there are numerous understandable explanations for the euro zone crisis and its slow solution. At the center of these explanations is mostly a rather banal national pragmatism, which is a trademark of democratic states. It is always about winning majorities for political measures today and for the continued existence of one’s own government tomorrow. While in the south of Europe, the center of the crisis, for obvious reasons, there were no majorities for drastic structural reforms, further north no one wanted to make overly generous promises to support the south because this would have been unpopular with their own clientele.

Such a situation invites politicians to wait and see whether the other side takes the first step. In the north, for example, they waited for the south to take reform steps, and there, in turn, they first demanded “solidarity” from the north. The wait had two consequences. On the one hand, the economic costs increased for all those involved, on the other hand, this also shifted the negotiating strength to the disadvantage of the South, which had the bigger economic problems and could less and less afford to wait. Anyone who was not at least considered a systemic risk, such as the large Italian economy, ultimately had little choice but to implement painful measures. It is no wonder that Greece was particularly affected.

One may complain about the low level of solidarity within Europe, yes, the hard-heartedness of some potential donor countries such as Germany, but there is little to suggest that this is specifically due to ordoliberalism. If you take a closer look at the German position, you can see that – in complete contrast to the demands of many ordoliberals – German politics very quickly accepted the politicization of the ECB’s monetary policy. One reason for this was certainly that one absolutely wanted to avoid a transfer union, the dysfunctionality and potential for political conflict of which one knew from the state financial equalization. The German electorate would hardly have been able to mediate financial equalization at the European level.

Ultimately, this shows the banality of the politically everyday. If it were different, one would have to assume that, for example, France, if it had been in the same political and economic situation as Germany, would have had to pursue a completely different policy with a clearer communitisation of debts. Of course, this cannot be ruled out, but in light of the explanatory power of national self-interests it does not appear very likely. The narrative that a German order economy shaped by Protestant ethics has been carried over to all of Europe seems constructed against this background. Nonetheless, specialist articles with titles such as “The German Rescue of the Eurozone: How Germany is Getting the Europe it Always Wanted” will continue to be published.

For a humane regulatory policy

This raises the urgent question of how the economics of order intends to deal with this – undoubtedly partly self-inflicted – situation. Correcting the distorted interpretations is certainly a first step, as is the critical analysis of one’s own inadequacies, for example with regard to the occasionally weak theoretical foundation on macroeconomic issues and the hiding of distribution issues. In our contribution we go further and plead for a revival of the ordoliberal “ideology”. We want to understand the term ideology explicitly in such a way that order economics is again aware of its normative roots and also represents them as an offer on the market for (economic) political ideas.

Order economics has always been based on a normative commitment to liberal values and a moral and not just economic justification for free, open and competitive markets. We see the normativity of ordoliberalism as an argumentative advantage in current debates in and around Europe: every political measure that is to be introduced requires the democratic support of the citizens of Europe. This support is not only given on the basis of pure economic efficiency thinking, but also depends fundamentally on moral arguments for how we as a community of Europeans want to live together.

Our paper (Dold and Krieger, in press) shows the dimensions in which order economists have to think if they strive for a “modern ordoliberalism” that can win broader approval from the people. To this end, he must place the ideal of citizen sovereignty more closely next to that of consumer sovereignty, he must actively demand and institutionalize the political participation of all – poor and rich – and he must take on the socio-economic divide in society. To do this, he must prevent the concentration of political and economic power in order to create competition and participation for the benefit of the citizens. It is – in the sense of Walter Eucken – a matter of convincing people that ordoliberalism not only strives for a “functioning”, but also a “humane order” of the economy and society.

Literature

Dold, Malte; Krieger, Tim (Hrsg.) (2019). Ordoliberalism and European Economic Policy: Between Realpolitik and Economic Utopia. Routledge.

Dold, Malte; Krieger, Tim (im Druck). The Ideological Use and Abuse of Freiburg’s Ordoliberalism. Public Choice (open access).

Source: https://www.oekonomenstimme.org

*Translated and republished without prior written consent. For educational purposes only.

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