The purpose of this essay is to engage in an exploration of a distinctive intellectual strand of liberal economic thinking known as ordoliberalism, a pragmatic liberal doctrine that has been instrumental in the crafting of a unique European model of Competition law. Recent years however have eroded the influence and strength of the German political economic thinking amongst European academics and policymakers who have made the ideational leap from Freiburg to Chicago. Indeed Europe has bought into the Chicagoan dogma of laissez-faire and micrcoeconometrics signalling the birth of ever closer unity between the US and Europe.
This essay is a prologue to a forthcoming paper that will analyse in great detail the ‘modernisation’ agenda of European Competition law, the shift in ideology behind the movement and the implications for the future enforcement of EU Competition law. Above all this monograph shall seek to promote the utility of ordoliberal writings and raise awareness of ordoliberalism as an endangered species amongst economic thinkers and policymakers in Europe.
This paper will be divided into three main sections.
1. Ordoliberalism: What is it and who are they?
2. Article 102: The last bastion of ordoliberal thinking?
3. Turn Europe’s eyes from Chicago to Freiburg.
1. Ordoliberalism: What is it and who are they?
Ordoliberalism developed as a result of a ‘spontaneous intellectual combustion’ (Gerber, 1994, pp.29) following the interaction of economist Walter Eucken (1891 - 1950) and two jurists, Franz Böhm (1895 - 1977) and Hans Großmann-Doerth (1894 - 1944).These scholars emanating and disseminating ideas from the University of Freiburg in southwest Germany were shaped by the 14 calamitous years of the Weimar Republic which were succeeded by the ratification of the Ermächtigungsgesetz and the emergence of a heavily concentrated and cartelised economy that facilitated the rise of National Socialism, faschism and Nazi totalitarianism. Intense distrust of private economic power and an overbearing state, the very phenomenon that facilitated the rise of Hitler, have resultantly long been the phantasms that have shaped ordoliberal writing. Indeed Lemke (undated, pp.3) has pertinently observed that the Third Reich was the result of an ‘absence of liberalism’, explaining deftly why Ordoliberals reject central planning and embrace liberal economic thinking so strongly. Moreover Nils Goldschmidt (2007) captured the enormity of these events by noting that ‘Foucault points out that… ‘Nazism was, to a certain extent, the political and epistemic road to Damascus for the Freiburg School.’ ’ It is little wonder that economic liberalism has long been the ‘guiding star’ (Ahlborn and Grave, 2006, pp.210) of ordoliberalism.
Carl J. Friedrich (1955, pp.509) is right to remark that ordoliberalism ‘is similar to traditional liberalism in a number of basic positions’. Indeed ordoliberalism like other intellectual strands of liberalism embraces private property rights, freedom of contract, stable monetary policy, fiscal conservatism and above all the market economy as the guarantor of a prosperous, free and equitable society.
However whilst ordoliberals espouse the market as the most efficient medium for the allocation of scarce resources, Freiburg scholars only exhibit broad parallels with other liberal economic thinkers such as von Mises, Hayek, Friedman, Stigler etc. Indeed the received wisdom in modern academic literature that ordoliberalism is very much a close cousin of neoliberalism is a chronic fallacy. Whilst the broad brush strokes of neoliberalism and ordoliberalism exhibit similar ardour for the market, seemingly subtle asymmetries of detail stand as incorrigible divergences in ratio. Angela Wigger (2008, pp.70) has rightly remarked that ‘Walter Eucken vehemently refused to be called a neoliberal’ and ostensibly Hayek and Eucken were ‘antagonistic colleagues’ (2008, pp.71).
In stark contrast to neoclassical liberalism, the competitive market economy for ordoliberals was not a ‘natural economic rationality’ (Lemke, undated, pp.3). On the contrary as Terry Flew (2010, pp.22) observed it was an ‘artefact of policy’. In other words it is a market dynamic that is guided by a politically independent competition authority acting as the visible hand of the market working to ensure that the economic actors abide by the spielregeln (rules of the game). This ratio of the ordoliberals is vastly at odds with Hayek’s conception of the catallaxy, the spontaneous order of competition. For Eucken, neoclassical economists had ‘lost touch’ (Gerber, 1994, pp.33) with social and political reality and had become detached from classical economists such as Adam Smith who saw the market as being constituted by norms. Nevertheless ordoliberalism, quite at odds with the Misean or Hayekian prescriptions of free unfettered markets was equally at variance with academics on the left of the ideological spectrum who advocated Keynesian prescriptions of central planning. It was the ordoliberals first hand experience of Nazi Germeny that encouraged them to sail a Sonderweg between socialism and laissez-faire, between excessive private and public power.
Victor Vanberg (1998) aptly observed that Ordoliberals do not seek to ‘intervene in market processes’ but rather they seek to ‘institutionally frame market processes’. This is the very essence of ordoliberalism as in an attempt to frame market processes ordoliberals advocate a wirtschaftverfassung (economic constitution), the keystone of ordnungstheorie, ordnungspolitik and the leitmotiv of ordoliberal writings that institutions and rules matter. Quite appropriately Carter Dougherty (2009) noted that these rules and regulations can ‘help the free market produce results close to its theoretical potential.’
Indeed Eucken et al. advocate a verkehrswirtschaft (transaction economy) that is constituted and framed by rules as opposed to a zentralverwaltungswirtschaft (centrally administered economy). The founding premise is for the state to play a strong role by setting out the spielregeln, the framework of rules by which market actors operate and the state can intervene as opposed to discretionary intervention. Ordoliberals sought both to curtail the remit of powerful private economic actors and a powerful state. It is through their first hand experience of National Socialism that ordoliberals sought to achieve a funktionsfähige und menschenwürdige Ordnung (functional and humane order) through ordnungspolitik which led Eucken to promote the policy of denken in ordnugen (thinking in orders); the political, social and economic rationality that defined Walter Eucken and which would ensure the ordnung der wirtschaft und gesellschaft (order of the economy and society).
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