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Ordoliberalism 1: Beginnings

by afew Fri Mar 9th, 2012 at 04:20:17 AM EST

Monetarism, Austrianism, Austerianism, Austeritarianism, gold-buggery... The terms have not been lacking on this forum to attempt description of the mindset obdurately (and increasingly apparently parochially) shared by a majority of German economists, central bankers, and political personnel. Just recently, the word "ordoliberalism" has made its entry. What follows is an attempt to pull on a few threads and find out more about what ordoliberalism means and where it comes from.

In a paper for the European Council on Foreign Relations, Sebastian Dullien and Ulrike Guérot contend that

...there is more to Germany's distinctive approach to the euro crisis than the much-discussed historical experience of the hyperinflation in the Weimar Republic on the one hand and simple national interest on the other. Rather, there is an ideological edifice behind German economic orthodoxy with which Germany's partners must engage. While a change in the government after the next general election, in 2013, would lead to a change in German economic policy, it is unlikely to dramatically change the country's approach to the euro crisis.

Dullien and Guérot point to the post-WWII economic history of Germany, and to an influential school of economic thought called ordoliberalism:

While ordoliberalism nowadays is no longer an important academic current in Germany, most economists have at some point in their career been influenced by ordoliberalist ideas. Conversely, unlike in other European countries and the United States, there are very few influential Keynesian economists in Germany.

So what kind of liberalism is ordo?

Ordoliberalism

If you're thinking of order, you're not far wrong. The usual explanation for the term is that it comes from a (still existing) economics journal called ORDO. But ordo is Latin for order, and the full title of the journal includes ordnung: Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft. (The journal was first published in 1948, and the term "ordoliberal" first used in 1950.) So the name "ordoliberalism" suggests liberalism with a strong component of order.

What kind of liberalism, what kind of order? Dullien and Guérot say:

The central tenet of ordoliberalism is that governments should regulate markets in such a way that market outcome approximates the theoretical outcome in a perfectly competitive market (in which none of the actors are able to influence the price of goods and services).

These are liberals who believe in the perfectly competitive market, but consider that the state should intervene to regulate and to create institutions that help to bring it into being and maintain it. This is the sense of "order" - an "economic order" in which the market may flourish, or, another term, a carefully-built "competitive order" ruling out monopolistic tendencies and cartels - and:

the economic order is not to be regarded as an isolated system but rather as a part of the overall social system, which comprises the legal order, the societal order as well as the governmental order

(Stefan Kolev, "Hayek as an Ordo-Liberal" (pdf))

Private property is to be defended and expanded. State intervention must be supply-side: that is, regulation and the organisation of institutional support must be in favour of enterprise, production and supply, not consumption and demand.

In terms of the "governmental order", ordoliberalism favours elite decision-making in a system of decentralisation and subsidiarity.

Ordoliberalism - Wikipedia, the free encyclopedia

Ordoliberal theory holds that the state must create a proper legal environment for the economy and maintain a healthy level of competition (rather than just "exchange") through measures that adhere to market principles. This is the foundation of its legitimacy[18] The concern is that, if the state does not take active measures to foster competition, firms with monopoly (or oligopoly) 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. Quoting Stephen Padgett: "A central tenet of ordo-liberalism is a clearly defined division of labor in economic management, with specific responsibilities assigned to particular institutions. Monetary policy should be the responsibility of a central bank committed to monetary stability and low inflation, and insulated from political pressure by independent status. Fiscal policy--balancing tax revenue against government expenditure--is the domain of the government, whilst macro-economic policy is the preserve of employers and trade unions." The state should form an economic order instead of directing economic processes, and three negative examples ordoliberals used to back their theories were Nazism, Keynesianism, and Russian socialism.

These are not classical 19C laissez-faire liberals. They are, and claim to be, neoliberals of a particular kind, who consider that the market will not spontaneously create for itself the optimal conditions for its own efficient functioning: those conditions must be deliberately instituted by the creation of an "economic order".

Neoliberalism

The term "neoliberal" was first used (at least in such a way that it took among those who were happy with it as a label) at the Colloque Walter Lippman in Paris in 1938, by one of the two German economists present, Alexander Rüstow, later to be an influence on the government of West Germany along with the other German present, Wilhelm Röpke.

Colloque Walter Lippmann - Wikipedia, the free encyclopedia

At that meeting the term neoliberalism was coined by Alexander Rüstow referring to the rejection of the (old) laissez-faire liberalism

In a broad sense, ordoliberals were neoliberals in that they were part of the mid-20C neoliberal movement. In a narrower sense, ordoliberalism itself exhibited a more social tendency (Sozialogischer Liberalismus), and a group less in favour of state intervention, who held on to the "neoliberal" tag.

Freiburg

Theoretical ordoliberalism in pre and postwar Germany was mainly associated with the Freiburg School, from the University of Freiburg, where the main ordo-thinkers were economist Walter Eucken and jurist Franz Böhm. They and others developed ordoliberal ideas from 1930 on, in opposition to classical 19C liberalism and to the rise of what they saw as totalitarianism, both communist and fascist. They drew on earlier German institutionalist thinking, of which the best-known representative is Max Weber. They also drew on the German experience of industrial policy under Bismarck:

Those methods subordinated domestic demand to the needs of industrial capital and emphasized the importance of supply-side policies... the introduction of a program of social insurance - and pre-emption of the Social Democratic Party - had been central to Bismarck's strategy for securing social peace within the context of rapid industrialization during the Second Reich... one of the least-understood, but most important, legacies of nineteenth century industrialization in Germany was a system of "organized capitalism" involving big business, the banks, and the state, that still gives all but the largest, transnational German-based firms a distinctive character

(Christopher S. Allen : "Ordo-Liberalism" Trumps Keynesianism: Economic Policy in the Federal Republic of Germany and the EU (pdf), in Bernard Moss, ed., Monetary Union in Crisis: The European Union as a Neo-Liberal Construction (2005))

Austrians in all this?

There was considerable exchange between Austrian and German neoliberals. At the Colloque Walter Lippman in 1938, for instance, Hayek and von Mises were present as were Rüstow and Röpke. Röpke, after socialist beginnings, had been a follower of the Austrian School and of von Mises in particular, and also knew and exchanged work with Hayek, later becoming an active member of the Mont Pelerin Society. Hayek, ("frequently classified as an ordoliberal", Wikipedia), was also on particularly friendly terms with Walter Eucken, and often visited Freiburg (where he returned to teach at the Economics faculty years later). Stefan Kolev places Hayek and Eucken's probable first encounter at

the meeting of the Verein für Socialpolitik in Zurich 1928, since they present papers in the same session on "Credit and Cycles", the memorable session which Mises rounds up with his summary that the Austrian theory of the cycle is the consensus theory of the German-speaking world.

(and later...)

1947, Eucken is the only German scholar living in Germany who is invited and effectively joins the founding meeting of the Mont Pèlerin Society and becomes, in Hayek's words, "the star" of the conference. 1948, Hayek on his turn becomes co-founder of the ORDO yearbook, the ordo-liberal journal still existing today which as late as 1991 writes on its cover: "with the cooperation of Friedrich A. von Hayek". Paradoxically, Eucken dies from a heart attack on a lecture tour to the LSE in March 1950, to which Hayek has invited him.

The four principal centres of neoliberalism, according to Kolev (who writes as a sympathizer), were Vienna, Freiburg, London and Chicago.

This evidence of collaboration and broadly shared thinking apart, "Freiburg School" or "ordoliberalism" and "Austrian School" (in the mid-20C) are not coterminous. Von Mises was certainly far more laissez-faire, and Hayek as a mid-century bridge between the two schools would agree with the ordoliberals' legal approach (markets need laws protecting property, for instance) while not sharing their societal concerns (Hayek was sceptical of the "social market economy"). The ordoliberals drew on an institutionalist tradition, while the Austrians were tending, and would do so increasingly, towards a more radical individualism. Though they agreed on the business cycle and the provision of monetary stability by the independent central bank, ordoliberals' emphasis on the vital roles of the state and even the central bank was greater than that of the Austrians. Where the ordoliberals saw the need for careful organisation of the "competitive order", Hayek increasingly saw natural evolution within a free-market context. The later Hayek was barely ordoliberal at all (though there continue to be, to some extent, theological discussions of this, Kolev for example).

This said, the two neoliberal schools followed roughly parallel trajectories, at closer than shouting distance, during the 1930s, '40s, and '50s. The Mont Pelerin Society provided a nexus for discussion and organisation until around 1960.

Where were the Nazis?

The Nazis were as anti-liberal as they were anti-communist. The liberals assembled at the Colloque Walter Lippman in 1938 saw themselves as raising the banner of freedom in the midst of overwhelming collectivism and totalitarianism, Soviet, Nazi, and fascist. Hayek and von Mises were no longer in Anschluss Austria (Hayek was teaching in London, Mises in Geneva), while the two Germans Röpke and Rüstow had been forced to leave Germany in 1933, and had both taken refuge in teaching positions at the University of Istanbul. Eucken and Böhm were not in exile, though Böhm was under a teaching ban and both, through WWII, were anti-Nazis associated with Dietrich Bonhoeffer's Confessing Church.

The fact that the main neoliberals (ordoliberals to be) were disassociated with Nazism was a facilitating factor in their postwar integration into the new federal republic's economic policy-making.

Next part: What happened to ordoliberalism

Display:
Ordoliberalism 1: Beginnings | 112 comments (112 topical, 0 editorial, 0 hidden)
Re: Ordoliberalism 1: Beginnings (4.00 / 7)
There are some online sources, but few and far between. I have read snippets in a number of Google Books, that I've reworked into my comments here and there. The books in question are academic and buying them is out of my star...
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Mar 8th, 2012 at 03:45:06 PM EST
Keynes (none / 0)
I don't suppose Keynesians were very welcome in 1930s Germany. But Post-War - why weren't they? Because one might assume that the facilitation of the neoliberals could apply to Keynesians too - especially with the apparent success of such economic policies elsewhere in the W*st - until the 70s.

You can't be me, I'm taken
by Sven Triloqvist on Thu Mar 8th, 2012 at 04:11:31 PM EST
Re: Keynes (4.00 / 3)
A question to be looked into in Part Two.

But essentially, ordolibs ran the economic policy of the gubmint from the start-up of the Marshall Plan, and the result was the so-called "economic miracle" that cemented the success of their ideas. Meanwhile, Keynesian ideas were only supported by the trades unions.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Mar 8th, 2012 at 04:28:11 PM EST
[ Parent ]
Re: Keynes (4.00 / 7)
Given that the Marshall Plan itself represented a triumph of Keynesianism it seems ironic that the chief beneficiaries rejected the basis of their own success.  Kind of like US Republican dominated conservative states which are the chief beneficiaries of federal transfers and which are most hostile to the Federal Government and the spending which most directly benefits them.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Mar 8th, 2012 at 05:05:11 PM EST
[ Parent ]
Re: Keynes (4.00 / 6)
That is basically Yanis Varoufakis' reading of the roots of the current crisis in the political economy of the second half of the 20th century. You can find it in his Modern Political Economy, the lighter Global Minotaur and his blog What is a Surplus Recycling Mechanism? An idea going back to Bretton Woods
I claimed that Mrs Merkel is right on almost everything except that she seems unaware of the fact that her own wishes will only come true if our currency union is equipped with something that I called a Surplus Recycling Mechanism (SRM). What is an SRM? And why am I saying that it is sine qua non in a currency union?The answers lie in the debates that took place during the Bretton Woods conference. The very debates which led, eventually, to the establishment of what I refer to as the postwar Global Plan. In summary, from the late 1940s to 1971, the United States actively played the role of SRM, recycling wilfully its own surpluses to Europe and Japan. No market mechanism could do this. It was a mechanism that was run, administered and finetuned constantly by skilled officials. Of course, by the 1960s it run out of steam, as the USA turned into a deficit country. From that moment onwards the Global Plan`s days were numbered. And when it crashed on 15th August 1971, the era of the Global Minotaur began, giving rise to another type of SRM.
Varoufakis argues that American Keynesian technocrats (the "new Dealers") devised and ran a Global Plan of which the German Economic Miracle was an intended consequence. This narrative, of course, runs entirely contrary to the current German Creation Myth of Trümmerfrauen and Erhard-Adenauer.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 06:46:45 AM EST
[ Parent ]
Re: Keynes (4.00 / 5)
This narrative, of course, runs entirely contrary to the current German Creation Myth of Trümmerfrauen and Erhard-Adenauer and is also extremely uncomfortable for anti-Atlanticists like myself, and contrary to the EU's own Creation Myth of Monnet-Schuman.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 06:49:08 AM EST
[ Parent ]
Re: Keynes (4.00 / 5)
Well, the American concern was building a machine to fight Communism. They did both good and bad things in pursuit of that.
by Colman (colman at eurotrib.com) on Fri Mar 9th, 2012 at 07:10:48 AM EST
[ Parent ]
Re: Keynes (none / 1)
One American concern (that of the Cold Warriors). The other American concern (that of the New Dealers) was to prevent a repeat of the Great Depression.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 07:53:36 AM EST
[ Parent ]
Re: Keynes (4.00 / 2)
And until sometime in the mid-sixties to early seventies the New Dealers ran global economic policy while the cold warriors were more involved in military aspects such as the Berlin Airlift, Cuban Missile Crisis, the Vietnam War, etc. The Kennedy and Johnson Administrations had representatives of both schools, e.g. J.K. Gailbraith and Walter Heller as New Dealers and Dean Rusk along with most of the generals as Cold Warriors. The Cold Warriors needs broke the New Dealer's bank when LBJ opted for "guns AND butter". Such a policy could have worked much better had not the dollar become the world's reserve currency.

Simultaneously, there were both Cold Warriors and New Dealers in Congress. Cold Warriors were probably more bi-partisan, with southern Democrats and figures like Henry (Scoop) Jackson, the senator from Boeing, and Stuart Symington, the Sen. from McDonald Aircraft, while New Dealers were more closely identified with the Democrats. The mainstream of the Republican Party was institutionally hostile to the New Deal, as it formed the Democratic power base - the "tax, tax -- spend, spend" policy with popular programs exemplified by Social Security and then Medicare, but also the TVA, REA, etc.

The more elite, 'country club' Republicans tended to be socially moderate and identified with political figures such as Nelson Rockefeller and the now extinct breed of 'liberal Republicans' such as Sen. Jacob K. Javits. David Rockefeller was a major link to the neocons. He got his PhD from Chicago - his dissertation was "Unused Resources and Economic Waste". (It was a different world.) The Rockefellers nurtured notable Cold Warrior Henry Kissenger and may have contributed to the Mont Pelerin Society, (MFM would likely know).

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Mar 9th, 2012 at 01:08:29 PM EST
[ Parent ]
Re: Keynes (4.00 / 2)
Isn't that bit artificial, this distinction? I always understand cold war liberalism as a combination of New Deal and cold war. Jackson, to discuss the obvious example was both a new dealer and a cold warrior.
by IM on Sun Mar 11th, 2012 at 07:24:36 AM EST
[ Parent ]
Re: Keynes (none / 1)
To me it is classification by career interest path. Jackson was first elected to  Congress in 1940 and was consistently involved in defense issues. Symington entered the Truman Administration in 1945 from the position of presidency of Emerson Electric Company, which he had transformed during WW II into the largest manufacturer of aircraft gun turrets, to take a position as chairman of the Surplus Property Board (1945), administrator of the Property Administration (1945-1946) and Assistant Secretary of War for Air (1946-1947). (Information for both from Wiki.) Both put the interests of the MIC at the top of their priorities and neither were even in national politics during the formulation the New Deal or particularly associated with or defenders of New Deal economic policies.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Mar 11th, 2012 at 10:42:23 AM EST
[ Parent ]
Re: Keynes (4.00 / 2)
The Cold War is not particularly associated with FDR, and, in fact, many Republicans faulted him for 'giving away the farm' to Stalin at Yalta, (as if Central Europe was his gift to bestow.) It is much more associated with Harry Truman, during whose presidency the doctrine of containment was developed. However, both Jackson and, especially, Symington were opponents of Joe McCarthy's red baiting and 'investigative' methods. But that was more repelling a partisan attack than any expression of leftist sympathies.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Mar 11th, 2012 at 10:50:07 AM EST
[ Parent ]
Re: Keynes (none / 1)
To understand your distinction: Truman: New Dealer or Cold Warrior?

Also: Johnson: great Society or Vietnam?

I tend to hew to the traditional version of cold war liberalism as a fusion.

by IM on Sun Mar 11th, 2012 at 11:46:12 AM EST
[ Parent ]
Re: Keynes (4.00 / 5)
It's ok to be anti-Atlanticist in the post 1970's era.  Prior to that US support had more to do with European re-construction (both political and economic) than we might like to admit. After that the European political/economic elites created by US hegemony tried desperately to cling on to US support (and ideological capture) for all they were worth, despite the fact that the US was no longer a net positive influence on EU development.

The Vietnam, Afghan, and Iraqi wars; wholesale political/economic interference in Latin America; support for apartheid and oppressive regimes everywhere; the increasingly baleful influence of US led militarisation and arms dealing; the corporate takeover let by US global corporates - all point to an empire in decline and a justifiable reassertion of European "independence" contra the Antlanticist's 'Western Alliance'.

Such a pity EU leaders aren't up to the task of formulating an alternative global leadership role: one which prioritises respect for human rights, corporate regulation, environmental sustainability and peaceful methods of conflict resolution.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Mar 9th, 2012 at 07:36:49 AM EST
[ Parent ]
Re: Keynes (none / 1)
Such a pity EU leaders aren't up to the task of formulating an alternative global leadership role

There.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 09:16:56 AM EST
[ Parent ]
Re: SRM Surplus Recycling Mechanism (none / 1)
When the government diverts profit from the greedy and plows it back into the real economy (as distinguished from the Greed Economy), it's recycling the surplus. Varoufakis gets it.

Align culture with our nature. Ot else!
by ormondotvos (ormond.otvosnospamgmialcon) on Sun Mar 11th, 2012 at 03:20:10 AM EST
[ Parent ]
Re: Keynes (4.00 / 7)
It's pretty much standard operating procedure.

Look at how the Irish economic miracle was interpreted - and for the moment let's stick to the real part of the Celtic Tiger as opposed to the property speculation fuelled bubble that followed.

You had a country that, like the other PIGS but for different reasons,  had been desperately underdeveloped until EU membership. The EU pumped in lots and lots of funds to develop infrastructure, there were favorable demographics and industries changed in the way that Ireland's geographic position wasn't as much a disadvantage as it had been with heavy industry. Oh, and the tax system was greatly improved, with both the elimination  of penal marginal rates on normal incomes and hugely improved enforcement.

The result was a massive growth spurt. This was the whole point of the EU structural funds: to make the less developed regions capable of buying BMWs and Champagne.

This success was claimed by the neo-liberals on the basis that it was tax reform and labour flexibility that caused the boom. This is how it always works with the religious. Bad things are due to sin, good things are due to virtue. If bad things happen, there must be sin and if good things happen there must be virtue. Ireland's economy was growing, therefore it was a paragon of virtue. When it collapsed - largely due to trying to follow the path of "virtue" - it was due to sin.

The problem with people who have philosophies about economics is that they interpret events in light of those philosophies. If things are good then their solution must have been applied. The German economy did well, so  it must have been following the precepts of their philosophy.

by Colman (colman at eurotrib.com) on Fri Mar 9th, 2012 at 07:09:26 AM EST
[ Parent ]
Re: Keynes (none / 1)
We've analysed Irish labour flexibility when French labour rigidity was being blamed for all sorts of things.

Ireland was much more like France than the US, strangely enough.

by Colman (colman at eurotrib.com) on Fri Mar 9th, 2012 at 07:12:06 AM EST
[ Parent ]
Re: Keynes (4.00 / 4)
Given that Ireland has had  centrally negotiated national pay agreements since 1987 it is difficult to see how the neo-liberal "labour flexibility" argument ever stuck.  What can be more anti-free market that the Government, Trade Unions, Employers, and the Voluntary/Community sectors sitting down to agree wage/tax/social benefit rates for a period of 25 years?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Mar 9th, 2012 at 07:48:09 AM EST
[ Parent ]
Re: Keynes (4.00 / 3)
It doesn't matter. None of that was ever examined any more than the connection between human sacrifice and the end of the winter was ever questioned by the ancients. The winter ended, so the sacrifice worked. Ireland was successful, therefore the labour was flexible.
by Colman (colman at eurotrib.com) on Fri Mar 9th, 2012 at 07:53:10 AM EST
[ Parent ]
Re: Keynes (none / 0)
A bit ironic as Nazi Germany ran a successful (military) Keynesian policy.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Mar 8th, 2012 at 06:08:27 PM EST
[ Parent ]
Re: Keynes (none / 1)
Perhaps it's understandable that the Germans after WWII did not wish to replicate anything the Nazis had done.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 9th, 2012 at 01:09:21 AM EST
[ Parent ]
Re: Keynes (4.00 / 2)
Searching old ET threads for references to Hjalmar Schacht:

  • Ascent of Money comment thread on Nazi monetary policy.
  • How to Make an American Job Before It's Too Late: Andy Grove comment thread, on Keynesianism (with an interesting subthread on to what extent the 1930s were Keynesian or have been called so after the fact - given the timing of Keynes' writings). Which resonates from the following quote from the present diary placing Keynesianism among the 1930's ideological responses to the Great Depression and German Ordoliberalism as an attempt to chart a different course post-WWII
    The state should form an economic order instead of directing economic processes, and three negative examples ordoliberals used to back their theories were Nazism, Keynesianism, and Russian socialism.

  • Salon thread, February 23 2012
  • LQD: USA and European Left - fond of "humanitarian" interventionism comment thread, on hyperinflation in the 1920s.


There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 04:38:18 AM EST
[ Parent ]
Re: Keynes (none / 0)
The German government of 1948/49 was hardly in a position to borrow money for a Keynesian policy.
by oliver on Fri Mar 9th, 2012 at 06:54:51 AM EST
[ Parent ]
1948/9 (none / 0)
As late as 1949 Germany was still being subjected to Morgenthau-plan deindustrialization.
In 1949 West German Chancellor Konrad Adenauer wrote to the Allies requesting that the policy of industrial dismantling end, citing the inherent contradiction between encouraging industrial growth and removing factories and also the unpopularity of the policy.


There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 07:01:07 AM EST
[ Parent ]
Re: Keynes (4.00 / 3)
The German government of 1948/49 was hardly in a position to borrow money for a Keynesian policy.

Governments don't borrow money. They print it. (1948/9 predates the effective start of the Bretton Woods system.)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 9th, 2012 at 07:30:16 AM EST
[ Parent ]
Re: Keynes (none / 0)
Given the German experience of hyperiflation and the belief that it helped lead to the rise of Nazism, it is hardly surprising that "printing money" wasn't a popular policy prescription either...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Mar 9th, 2012 at 07:52:46 AM EST
[ Parent ]
Re: Keynes (none / 0)
I'm pretty sure that particular bit of historical revisionism is a later invention, given that the actual rise of the Nazis was living memory for the survivors at the time.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 9th, 2012 at 11:43:01 AM EST
[ Parent ]
Re: Keynes (4.00 / 2)
Probably, but there must have been a hell of a lot of rationalization going on both during and after the Nazi era. What lives in memory doesn't always bear much resemblance to what happened.
by Colman (colman at eurotrib.com) on Fri Mar 9th, 2012 at 11:47:55 AM EST
[ Parent ]
Re: Keynes (4.00 / 4)
The actual rise of the Nazis was within very living memory - but so too was the hyperinflation. The belief in a causal relationship was not necessary at the time for the postwar Germans to shun both Nazi policies and monetary instability.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 9th, 2012 at 12:01:06 PM EST
[ Parent ]
rationalisation, taboo topics, and so (4.00 / 12)
The class that lost most of their savings in the inflation (note that it is called that and not "hyperinflation" by most Germans) is the same that later overwhelmingly voted Nazi. This same class then lost the rest of their savings in the 1948 Währungsreform.

Although dogma says that the introduction of the D-Mark was an unmitigated success story, this is another case of "What lives in memory doesn't always bear much resemblance to what happened."

This Währungsreform, which deliberately left most of the means of production intact, was the reason for the only political strike Germany has seen after 1945. The general strike "Never again Krupp!" The strikers demanded that large industry, especially the armament industry, share some of the burden. These corporations were needed for the cold war and the much hated re-militarisation, of course. So the strike was banned in the French zone, and very much restricted in the British and American ones. Adenauer asked (and received) some help against German workers from his new friends: tanks in the streets.

Participation in that general strike was 70%.

by Katrin on Fri Mar 9th, 2012 at 12:18:09 PM EST
[ Parent ]
Re: rationalisation, taboo topics, and so (none / 0)
Thanks. Not too surprising that this subject was not covered too well in US Academia or what passes for 'the quality press, of the '60s and 70s, or since, for that matter.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Mar 10th, 2012 at 01:18:14 AM EST
[ Parent ]
Re: Keynes (none / 0)
At that point price controls and inflation had effectively reduced the economy to barter. Printing money wasn't an option either.
by oliver on Fri Mar 9th, 2012 at 08:14:56 AM EST
[ Parent ]
Re: Keynes (4.00 / 5)
But they did print money, not only for the governments needs, but also to hand out.

Deutsche Mark - Wikipedia, the free encyclopedia

The Deutsche Mark was introduced on Sunday, June 20, 1948 by Ludwig Erhard. The old Reichsmark and Rentenmark were exchanged for the new currency at a rate of DM 1 = RM 1 for the essential currency such as wages, payment of rents etc., and DM 1 = RM 10 for the remainder in private non-bank credit balance, with half frozen. Large amounts were exchanged for RM 10 to 65 pfennigs. In addition, each person received a per capita allowance of DM 60 in two parts, the first being DM 40 and the second DM 20.[4]

And it was very succesfull.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Mar 9th, 2012 at 08:49:16 AM EST
[ Parent ]
Re: Keynes (none / 0)
Yes, it was successful. But it was deflationary. And a transfer from savers to workers and stockholders. Or the important point was the end of price controls.
by oliver on Tue Mar 13th, 2012 at 03:32:29 AM EST
[ Parent ]
Re: Keynes (none / 0)
But it was deflationary.

You mean inflationary.

And a transfer from savers to workers and stockholders.

That is a feature, not a bug. Savers serve no economic function, and as such there is no economic justification for remunerating savings. They are also typically not poor, and as such there is no social justification for remunerating savings.

Workers and stockholders, by contrast, serve economic functions, and as such need to be remunerated if they are to dependably continue to serve those functions.

Or the important point was the end of price controls.

Judging by the experience of other countries, as well as the historical experience with Brünning's defense of the gold standard... No.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 10:41:07 AM EST
[ Parent ]
Re: Keynes (none / 0)
Savers do save a very important economic role: supplying companies with external capital (ie loans).

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Mar 13th, 2012 at 11:08:07 AM EST
[ Parent ]
Re: Keynes (none / 0)
Under a legal tender system, they do not. Loans are created ex nihilo by any bank or other duly authorised proxy for the state, in response to demand.

Under a system lacking legal tender, they do not do so either. There, loans are created ex nihilo by any sufficiently credible and Serious entity, in response to demand.

Savings is the incidental consequence of this process, in that the money ends up somewhere between the time it is created and the time it is repaid.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 11:17:26 AM EST
[ Parent ]
Re: Keynes (none / 0)
You know, I'd still like to see a nice simple diagram of exactly what the fuck happens when a bank creates a loan.

I understand that the central bank, the lending bank, and the lender are all involved, and there may also be cross-lending between banks.

But even if the money appears ex nihilo, there must - presumably - still be some limits on how much money a bank can magic out of thin air.

And so far as I understand it, loan defaults are still counted against profits. So the loaned money isn't quite imaginary - default has consequences for the perceived credit-worthiness of the bank itself.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 13th, 2012 at 11:48:09 AM EST
[ Parent ]
Re: Keynes (none / 0)
But even if the money appears ex nihilo, there must - presumably - still be some limits on how much money a bank can magic out of thin air.

Yes, creating money ex nihilo makes you vulnerable to a run. But if the loan gets repaid before people do a run on you, you're home free.

Extend and pretend, con art...

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Carrie (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 12:21:35 PM EST
[ Parent ]
Re: Keynes (4.00 / 3)
The loaned money is not imaginary at all, but it is created ex-nihilo.

When a bank B loans money to A, it credits the loan amount to A's current account. This creates two credit relations, two assets and two liabilities.

A now has a demand deposit at B, which means B must deliver on demand cash in the amount of the loan should A so request. This is an asset for A and a liability for B. Normally, A doesn't withdraw the loan as cash, but uses B's payment system. If A only pays other customers with accounts at B, and these customers also don't withdraw their cash, B never actually has to produce the cash it now owes its customers. If A or any of its business relations withdraw cash or bank at another bank B', B needs to produce the cash which may put B in a liquidity pinch since B created the demand deposit out of thin air.

A now owes B the loan interest and principal repayments, which is a dated asset (collection of dated assets) for B and a dated liability for A. When B finds itself in a liquidity pinch as in the previous paragraph, it can always go tot the Central Bank and repo the asset (the loan) for cash at a "haircut" and for an interest fee, in exchange for "high powered money" created ex nihilo by the central bank. Ordinarily, even if the haircut and fee are steep, this is sufficient to get B out of its liquidity pinch. If the liquidity pinch involves payments to other banks, just "high powered" annotations on accounting ledgers at the Central Bank may suffice. If it's cash withdrawals, the Central Bank may need to actually send physical paper bills to B in an armored van. It may even need to print more bills.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Carrie (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 12:31:34 PM EST
[ Parent ]
Re: Keynes (4.00 / 3)
If (big if) I have understood it correctly:
  1. Bank creates loan and sets an interest rate
  2. Bank uses loan as collateral to borrow from central bank for central bank interest rate
  3. The difference between the interest rate and the central bank interest rate is positive as long as the debtor pays, but if the debtor defaults it becomes negative. Positive or negative, the difference ends up as a net income or a net cost with the bank.

Then the bank is run as any old company with yearly income - yearly cost = profits/losses. They can't use their power to create loans to fund themselves, unless they are allowed to create scam companies to pull scams through.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Mar 13th, 2012 at 01:06:11 PM EST
[ Parent ]
Re: Keynes (none / 0)
Okay - but presumably the Central Bank part comes first, because the CB may not necessarily take the loan as collateral.

So there's already an agreement in place with the CB that says 'You may loan a sum of X'?

And if this is the model, what is Quantitative Easing for?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 13th, 2012 at 02:13:16 PM EST
[ Parent ]
Re: Keynes (4.00 / 3)
No, if the Central Bank thinks that your asset is 'acceptable collateral' then it goes. But that's after the fact.

Also, normally banks don't like to get liquidity from the central bank, they prefer to borrow (and repo) from each other.

If the interbank markets doesn't tke your asset and the Central Bank thinks it's crap, and you're in a liquidity pinch, it's time for receivership.

Quantitative Easing is for when the interbank market breaks down and the only way to avoid having to put all the banks into receivership is to massively lower collateral requirements and remove all volume limits on central bank lending.


There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Carrie (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 02:22:41 PM EST
[ Parent ]
Re: Keynes (none / 0)
So there's an agreement with other banks about the amount of possible lending?

Or do banks just lend and hope they can finance the lending with collateral later?

And presumably inter-bank lending is at LIBOR?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 13th, 2012 at 02:25:55 PM EST
[ Parent ]
Re: Keynes (4.00 / 4)
No, banks decide whether to lend to each other or not and at what rate based on their respective estimates of creditworthiness and liquidity.

Interbank lending can be either uncollateralised (at LIBOR) or collateralised (repo).

The uncollateralised interbank market at longer maturities than overnight has fallen and can't get up. Even the overnight market is broken. The trend is for full collateralisation. Apparently even the interbank repo market is broken, as documented by Izabella Kaminska of FT Alphaville.

Hence, LTRO.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Carrie (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 02:31:57 PM EST
[ Parent ]
Re: Keynes (none / 1)
Migeru:
Also, normally banks don't like to get liquidity from the central bank, they prefer to borrow (and repo) from each other.

Do bank 2 then turn around and borrow (from bank 3 or central bank) against the loan they just put up for bank 1?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Mar 13th, 2012 at 03:58:34 PM EST
[ Parent ]
Re: Keynes (none / 0)
They normally sell some asset of unimpeachable value (such as government bonds) to the central bank in exchange for CB reserves.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 04:25:46 PM EST
[ Parent ]
Re: Keynes (4.00 / 2)
Okay - but presumably the Central Bank part comes first, because the CB may not necessarily take the loan as collateral.

The central bank will have a standing policy specifying what collateral is acceptable at what haircuts.

In most jurisdictions, however, the central bank enforces its policy rate by intervening in the interbank market. As long as the interbank market remains liquid and the lending bank remains a member in good standing, it can always obtain funds with no questions asked. And since the central bank targets an interbank rate, it must inject or withdraw money from the interbank market as required to maintain that rate, with no say over how those funds are used.

When the interbank market breaks down, as it has for the past several years, the central bank will then run around in circles for a bit until it starts using the discount window the way that has been outlined above.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 02:56:09 PM EST
[ Parent ]
Re: Keynes (none / 1)
1) Bank creates loan and sets an interest rate
2)Bank uses loan as collateral to borrow from central bank for central bank interest rate
3) The difference between the interest rate and the central bank interest rate is positive as long as the debtor pays, but if the debtor defaults it becomes negative. Positive or negative, the difference ends up as a net income or a net cost with the bank.

Then the bank is run as any old company with yearly income - yearly cost = profits/losses.


Yes. This.

They can't use their power to create loans to fund themselves,

True, but not for the reason you surmise. The reason they cannot use their power to create loans to fund themselves is that their income comes from the difference between the CB rate and the rate someone else pays them on their loan. If "someone else" is themselves, they no more make money than does the merchant who partakes of his own product.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 02:51:40 PM EST
[ Parent ]
Re: Keynes (4.00 / 2)
You know, I'd still like to see a nice simple diagram of exactly what the fuck happens when a bank creates a loan.

The bank adds the loan to its assets, and some amount of deposits to its liabilities. It then obtains some central bank reserves, because it is required to, either from the interbank market or directly from the central bank.

But even if the money appears ex nihilo, there must - presumably - still be some limits on how much money a bank can magic out of thin air.

Yes. Most jurisdictions enforce capital adequacy ratios on their banks, which means that the bank must have a certain amount of equity to sponsor a loan. And equity is something the bank cannot simply magic forth out of thin air.

In jurisdictions where such requirements do not exist or cannot be enforced, the bank's ability to magic forth money is limited only by its perceived credibility. Which is why this sort of private monetary system is exquisitely vulnerable to a self-fulfilling loss of confidence.

And so far as I understand it, loan defaults are still counted against profits. So the loaned money isn't quite imaginary - default has consequences for the perceived credit-worthiness of the bank itself.

Yes. If you take the deposit the bank made when it gave you the loan and pay it to me, then the bank owes me the deposit. If you then fail to pay the loan, the bank still owes me the deposit, but has no offsetting asset (because a loan that is not performing is worthless). This impacts the bank's equity, which, as noted, it cannot simply magic forth as needed.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 02:45:36 PM EST
[ Parent ]
Re: Keynes (none / 0)
I'd still like to see a nice simple diagram of exactly what the fuck happens when a bank creates a loan..

I guess this happens (100 000 euros from computer keyboard) in bank's account:

PER credit 100 000 AN deposit 100 000

by kjr63 on Wed Mar 14th, 2012 at 08:56:33 PM EST
[ Parent ]
Re: Keynes (none / 0)
And what about say, corporate bonds?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Mar 13th, 2012 at 12:15:53 PM EST
[ Parent ]
Re: Keynes (none / 0)
They are created by the issuer.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 12:20:30 PM EST
[ Parent ]
Re: Keynes (none / 0)
And someone - a saver - needs to buy them.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Mar 13th, 2012 at 12:28:31 PM EST
[ Parent ]
Re: Keynes (none / 0)
The saver is not required. Corporate bonds can be bought by a banking house rather than a retail saver, and that banking house can either (under a legal tender system) rediscount the bond with its central bank or, which comes to the same thing in the final analysis, in the interbank market, or it can create the loan out of whole cloth (in a private money printing system).

At no point in this process is savings required.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 02:39:01 PM EST
[ Parent ]
Re: Keynes (none / 0)
I'm not entirely sure what you are saying here... but if you ban certain groups (like ordinary savers) from owning say corporate bonds, demand for corporate bonds should fall, and hence interest rates on said bonds should increase, which is unlikely to be a good thing for business.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Mar 13th, 2012 at 06:02:53 PM EST
[ Parent ]
Re: Keynes (none / 0)
Sure, but not the point. The point is that in extremis, you do not require savers at all for corporate bonds.

As it happens, corporate bonds are best viewed as a mixture of debt and preferred equity, with the equity share being equal to the prudential equity that a bank would be required to set aside were it to discount the bond. This equity part does serve an economic function - it cushions the discount window from losses on the bonds - and so should be remunerated. But the bulk of the bond's face value is merely credit, something that can be created at will and in any socially desirable amount.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 07:03:26 PM EST
[ Parent ]
Re: Keynes (none / 0)
And whom would you entrust this immense power?

merely credit, something that can be created at will and in any socially desirable amount.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 13th, 2012 at 07:05:57 PM EST
[ Parent ]
Re: Keynes (none / 1)
Under contemporary institutional arrangements, that power is vested in the central bank.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Mar 14th, 2012 at 03:11:33 AM EST
[ Parent ]
Re: Keynes (none / 0)
And how is that working out for you...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Mar 14th, 2012 at 10:41:07 AM EST
[ Parent ]
Re: Keynes (none / 0)
It works perfectly well as long as you keep right-wing hacks away from the levers of government.

That right-wing hacks break an industrial system is not an indictment of the industrial system, it is an indictment of right-wing hacks.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Mar 18th, 2012 at 08:14:41 AM EST
[ Parent ]
Re: Keynes (none / 0)
"It works perfectly well as long as you keep right-wing hacks away from the levers of government."

And how is that working out for you.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 20th, 2012 at 11:32:23 AM EST
[ Parent ]
*shrug* (none / 0)
No society can survive thirty consecutive years of right-wing hacks in power. That it cannot survive thirty years of right-wing hackery is therefore not an indictment of an economic model.

But I'm a big fan of democracy, and right-wing quackery is popular.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Mar 22nd, 2012 at 03:53:00 AM EST
[ Parent ]
Re: Keynes (none / 1)
That is a feature, not a bug. Savers serve no economic function, and as such there is no economic justification for remunerating savings. They are also typically not poor, and as such there is no social justification for remunerating savings

But politically they are influential and they never ever forget.

by Katrin on Tue Mar 13th, 2012 at 03:49:11 PM EST
[ Parent ]
Savers who forget... (none / 0)
Seems like they DO forget...

Align culture with our nature. Ot else!
by ormondotvos (ormond.otvosnospamgmialcon) on Tue Mar 13th, 2012 at 09:28:17 PM EST
[ Parent ]
Re: Keynes (4.00 / 4)
Yeah, it was "price controls and inflation" that had reduced the German economy to barter in 1948/9. Obviously.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 9th, 2012 at 11:46:27 AM EST
[ Parent ]
Re: Keynes (4.00 / 5)
It was the Morgenthau Plan, which prohibited a relaunch of the economy, dismantling industry and the banking system, that caused economic disruption and hardship.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 9th, 2012 at 12:09:59 PM EST
[ Parent ]
Re: Keynes (4.00 / 4)
What a charming little interlude that was:


US troops and their families were also under orders to destroy their own excess food rather than letting German families have access to it.
by Colman (colman at eurotrib.com) on Fri Mar 9th, 2012 at 12:15:04 PM EST
[ Parent ]
Re: Keynes (none / 0)
Yes. The Wikipedia page you link to is quite a complete one.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 9th, 2012 at 12:45:03 PM EST
[ Parent ]
Re: Keynes (4.00 / 4)
From the wiki article:
In his 1950 book Decision in Germany, (General Lucius Du Bignon) Clay wrote, "It seemed obvious to us even then that Germany would starve unless it could produce for export and that immediate steps would have to be taken to revive industrial production".[50] Lewis Douglas, chief adviser to General Lucius Clay, U.S. High Commissioner, denounced JCS Directive 1067 saying, "This thing was assembled by economic idiots. It makes no sense to forbid the most skilled workers in Europe from producing as much as they can in a continent that is desperately short of everything" [51] Douglas went to Washington in the hopes of having the directive revised but was unable to do so. (Empahsis added.)

This was a US reprise of Clemenceau's 'pound of flesh' policy. Hardly the last time an important document affecting the lives of people in other countries has been 'assembled by economic idiots'. The current plans for Greece and the rest of the periphery spring to mind. Seeing this, I might suppose that it is not just a remembrance of the devastation of the Versailles Treaty provisions alone that is being visited upon Greece by Germany, but also the devastation of the Morgenthau Plan. Of course this will be denied and would be difficult to prove, but it would not be the first or last time that one people has done unto another what has previously be done unto them. Israel and Palestine spring to mind. But the result is that the Greek people, who were victimized by right wing Anglo anti-communist phobia after WW II are to have another round of devastation visited upon them, perhaps as a half century old echo of the resolution of WW II in Germany, in which they had no part. For sure Roosevelt was no Wilson.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Mar 10th, 2012 at 02:05:46 AM EST
[ Parent ]
Re: Keynes (4.00 / 3)
The better I know humanity the more I love my dog. --- Diogenes

I am not a dog person.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Carrie (migeru at eurotrib dot com) on Sat Mar 10th, 2012 at 02:12:55 AM EST
[ Parent ]
Re: Keynes (none / 0)
Bretton Woods didn't get going until 1959 in any case.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 09:15:06 AM EST
[ Parent ]
Re: Keynes (4.00 / 2)
If the Marshall-plan wasn't borrowing on a massive scale what was it?

But more generally, that opens a good question . How did the ordoliberals did deal with the existence of the Marshall-Plan?

by IM on Sun Mar 11th, 2012 at 08:13:17 AM EST
[ Parent ]
Re: Keynes (none / 0)
Borrowing by who, from who?

Borrowing by the recipients, from the US government? Yes. Borrowing by the US government? No.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Mar 11th, 2012 at 08:22:18 AM EST
[ Parent ]
Re: Keynes (none / 1)
For god's sake we are talking about the government here. Of course they borrowed from the US government. Or at least that was the initial plan, before most of it was transfered into a grant.
by IM on Sun Mar 11th, 2012 at 08:28:13 AM EST
[ Parent ]
Re: Keynes (none / 0)
Good point. That's why Germany has mostly dirt roads while the rest of the world has limited-access highways.....
by gk (gk (gk quattro due due sette @gmail.com)) on Fri Mar 9th, 2012 at 05:02:53 PM EST
[ Parent ]
Re: Keynes (4.00 / 2)
Is that an allusion to the old "at least Hitler built the Autobahn" thing?

The first bit of Autobahn was completed in 1932. The Nazis, who had fought against all policies we would now call "Keynesian" couldn't stop the few projects that were already in planning or under construction, but it wasn't their projects.

Actually all economic policies that are attributed to the Nazi era were in reality invented by Woytinsky or by Friedländer-Prechtl.

by Katrin on Fri Mar 9th, 2012 at 05:41:32 PM EST
[ Parent ]
Re: Keynes (4.00 / 4)
Actually, the first one was probably Milan to Varese (built under Mussolini....) While the Nazis didn't start their construction, I thought that they (under Fritz Todt) enthusiastically took over the project - most of the highways were constructed during that period.

But the main point is that arguments that because the Nazis were for/against something we should be against/for it were made, but always rather selectively. For a recent example, see the attacks in Parliament on Gysi for his reference to Versailles, as though attacking the Versailles treaty ties you to the Nazis. I can certainly see how Keynes could be attacked in this way (and Keynes' preface for the German edition of the General Theory wouldn't have helped, if any of them had been aware of it)

by gk (gk (gk quattro due due sette @gmail.com)) on Sat Mar 10th, 2012 at 10:37:20 AM EST
[ Parent ]
Re: Keynes (none / 0)
It wasn't successful in the opinion of the ordoliberals. They developed much of their theory in opposition to the economic policies of the national socialists. Perhaps more the central planning elements though.
by IM on Sun Mar 11th, 2012 at 07:30:28 AM EST
[ Parent ]
Re: Keynes (none / 0)
What do you mean by "economic policies of the national socialists"? There was no such thing. There were some projects started before the nazis, and then there was a typical war economy.
by Katrin on Sun Mar 11th, 2012 at 07:39:01 AM EST
[ Parent ]
Re: Keynes (none / 1)
Come on. Of course where were economic policies. Price and wage controls. A four year plan. Forcing employers and employed in a organization. neo-guilds of everything. The policies of Schacht: barter trade with abroad, fiscal/monetary stimulus at home.

Now if you want to argue that there wasn't a system or any dogma, I concur. But if you look at the New Deal, it was a bundle of barely co-ordinated, sometimes contradictory policies too.

by IM on Sun Mar 11th, 2012 at 08:00:13 AM EST
[ Parent ]
Re: Keynes (none / 0)
There were economic policies, but these weren't specifically nazi. The "four year plan" wasn't really implemented, it just existed for ideology's sake. Everything else you list is standard war economy.

Part of this policy was to keep private consumation low, so it is false to call it Keynesian, btw.

by Katrin on Sun Mar 11th, 2012 at 10:31:23 AM EST
[ Parent ]
Re: Keynes (none / 1)
But that is another question. I haven't said anything about specifically nazi. The policies I mentioned were the policies, unsystematic as they were and you can't just subsume everything under standard war economics. There were and are no standard war economics anyway. And I didn't say anything about Keynesianism. Not that it matters: Who consumes is pretty unimportant anyway.

And you can hardly press the tendency the national socialist tendency too from a guild for everything under war economics.

by IM on Sun Mar 11th, 2012 at 10:43:29 AM EST
[ Parent ]
Re: Keynes (4.00 / 3)
Immediately after the war, the Germans weren't driving their own bus.  When they took the wheel, it was Konrad Adenauer who was driving, who didn't have a Keynesian bone in his body.  Ordoliberalism, on the other hand, was a very good match for his Neo-Thomist Catholicism.  And if you want to get down to it, the structure of the EU in general is something the curia of Leo XIII would be fairly comfortable with.
by rifek on Fri Mar 9th, 2012 at 03:03:46 PM EST
[ Parent ]
Re: Keynes (none / 0)
Ordoliberal = Christan Democrat?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Mar 10th, 2012 at 02:07:59 AM EST
[ Parent ]
Re: Keynes (none / 1)
The Christian Democrats adopted ordoliberalism.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Mar 10th, 2012 at 02:11:19 AM EST
[ Parent ]
Re: Keynes (4.00 / 6)
The post war CDU was a fusion party of the enter-right. The core was the old catholic party, therefore catholic social thinking. But they also swooped up the stream of german right wingers called right-liberals or conservative-liberals. If Adenauer was a representative of the old centrum, Erhard was a representative of the other wing.

There were actually a lot of clashes between the ordoliberal Erhard and the then strong (catholic) union wing of the CDU in the fifties and sixties.  

by IM on Sun Mar 11th, 2012 at 08:10:26 AM EST
[ Parent ]
Re: Keynes (4.00 / 2)
Indeed. To be mentioned in the second part of this diary.

Catholic social thinking fitted with the sozial liberalismus side of ordoliberalism. Erhard was far more laissez-faire.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun Mar 11th, 2012 at 10:48:48 AM EST
[ Parent ]
Re: Keynes (4.00 / 5)
In principle, in Europe, Christian Democrats = Catholic Social Teaching, which is not incompatible with Ordoliberalism. Both are Conservative reactions to Socialism.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Sat Mar 10th, 2012 at 02:21:41 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 6)
European Tribune - Ordoliberalism 1: Beginnings
Rather, there is an ideological edifice behind German economic orthodoxy with which Germany's partners must engage.

I'm not sure how (your excellent) discussion of Ordoliberalism helps Germany's partners engage with German economic orthodoxy.  I get that German orthodoxy - with a central role for the state - has been very different to US/UK/Austrian orthodoxy - which glorifies unregulated markets and regards the state as part of the problem and not part of the solution (Reagan).

However the EU has been built on social market and institutionalist principles which have far more in common with German ordoliberalism than with US/UK free market liberalism and individualism (literally free of state interference) - and this perhaps best explains persistent UK hostility to EU membership.

But how does this explain the distainful German attitude to peripheral EU states which have very much bought into social market and EU institutionalist ideas?  Now it is Germany which is most opposed to EU/State interventions to create a functioning market of equal players rather than a German led oligopoly: It is Germany which is most opposed to an EU regulation of the structural imbalances which have plagued the Eurozone since its inception.

Arguably, it is Germany's (and the EU's) abandonment of ordoliberalism's central focus on the role of the state in regulating the market and their embrace of free market liberalism which has exacerbated structural imbalances and rendered the Eurozone fundamentally unstable. Maybe it is Germany itself which needs to re-connect with some of the precepts of one of its own founding philosophies...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Mar 8th, 2012 at 05:01:37 PM EST
Re: Ordoliberalism 1: Beginnings (4.00 / 5)
Above I attempt to document and describe, not respond to Dullien and Guérot. There are two more diaries to come, on the application and development of ordolib ideas in Germany since 1948, and on the Bundesbank.

Whether or not it is possible (or desirable) to engage with this corpus of thought remains a question.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 9th, 2012 at 01:18:00 AM EST
[ Parent ]
Material for the Bundesbank diary (4.00 / 3)
From the comment thread on ECB to force Default? in talos' Merkel's Racist Lies diary.

Also, from Willem Buiter's What's left of central bank independence? (May 5, 2009)

The modern independent central bank was born in New Zealand in 1989. It had a short life.  The onset of the financial crisis of the north Atlantic region in August 2007 signalled the beginning of the end.  Today, only the ECB still has a significant degree of operational independence left, and it will have to give that up if it is to be effective in the current phase of the crisis. In other words, the ECB is the last central bank to understand that, if it is to play a significant financial stability role, it cannot retain the degree of operational independence it was granted in the Treaty over monetary policy in the pursuit of price stability.

Inflation targeting was invented around the same time and central bank independence, and also in New Zealand, with the Reserve Bank of New Zealand Act of March 1989 and the first Policy Targets Agreement (PTA) in March 1990.  The Reserve Bank of New Zealand Act 1989 specifies that the primary function of the Reserve Bank shall be to deliver "stability in the general level of prices."

...

A case can be made for the Deutsche Bundesbank, established in 1957 as the sole successor to the two-tier central bank system which comprised the Bank deutscher Länder and the Land Central Banks of the Federal Republic of Germany, as the first modern independent central bank, but the de-facto independence of the Bundesbank was a product of Germany's unique historical circumstances - notably the hyperinflation of the Weimar Republic's hyperinflation during 1923 and the limited legitimacy of the other state institutions following the Nazi era and World War II.  I therefore consider the Bundesbank to have been a pre-modern independent central bank.



There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 06:19:25 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 4)
They are also nationalists and xenophobes. Either the drunken Irish and greasy Greeks can't be trusted to do it right or the success of others makes their tribe less relatively virtuous.

Also, don't forget that the current leadership have been busy skewing Germany's economy in favour of the finance industry - who have been hoovering up the profits from the suppression of wages - for a long time. They're only ordoliberals  when it suits them, as is ever the way.

by Colman (colman at eurotrib.com) on Fri Mar 9th, 2012 at 07:57:53 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 4)
While I've never heard the phrase "ordoliberalism" uttered in Swedish debate, a lot of what's written in this diary reminds me of Sweden. For example
one of the least-understood, but most important, legacies of nineteenth century industrialization in Germany Sweden was a system of "organized capitalism" involving big business, the banks, and the state, that still gives all but the largest, transnational GermanSweden-based firms a distinctive character

And this basically sounds like a direct description of Sweden after the 90's crisis:

"A central tenet of ordo-liberalism is a clearly defined division of labor in economic management, with specific responsibilities assigned to particular institutions. Monetary policy should be the responsibility of a central bank committed to monetary stability and low inflation, and insulated from political pressure by independent status. Fiscal policy--balancing tax revenue against government expenditure--is the domain of the government, whilst macro-economic policy is the preserve of employers and trade unions." The state should form an economic order instead of directing economic processes,

It's really startling exactly how things are organized around here.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Mar 8th, 2012 at 06:05:42 PM EST
Re: Ordoliberalism 1: Beginnings (4.00 / 8)
While I think that it's important to understand what's unique about German economic thought in the current crisis, I'm no sure that you aren't following a blind lead here.

I'd suggest that we can point to three ideal types of economic order, depending on the relationship of state, society, and market.

Roughly, neo-liberals believe in the absence of any constraints on the operation of the market.  Market makes state and society.  Reading through Hayek, you can see a shift between his writing in the 1940s in the Road to Serfdom, and his later 1960s era Constitution of Liberty.  In the former he was supportive of national healthcare, specifically the NHS, and public education as acceptable compromises.  By the 1960s he had turned against these. This is all a very Anglo way to view the world.

At the other extreme is the French model in which the State is key.  Things are neither left to the market, nor are handled by other private actors. The state regulates the market to protect society. There's a strong tendency to technocracy here.  Consider the role of the grand ecole.  Ultimately it's the state that keeps the show running.

The German model, which I could see as being described as ordoliberalism, is distinct from both.  Both state and market are embedded in a social morass.  It's the social market economy.  It's defies being crammed into either the neo-liberal of dirigiste model. Consider how wages are set in large parts of Germany.  There are collective agreements reached by organized labor and employer's associations that are basically blessed by the state. European integration actually undermines this, because it has treated these sorts of agreements as restraints on trade.  The only wage agreements enforceable under European law are state minimum wages.  In social market economies, the state is able to stand at a distance and allow organized interests to set wage rates sector by sector.

To review,  neo-liberals argue against state intervention.  Dirigistes argue for it.  And the Germans (e.g. ordo-liberals) say let this is a matter for organized labor and capital to sort out on their own.

The Germans aren't neo-liberals, however they also have a strong preference for organized interests in society to deal with market failures rather than the state.  Whether there's a solution that accords with that preference in the current bet crisis is a question that I'm not sure anyone know the answer to.  Thus, the existential angst.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Thu Mar 8th, 2012 at 06:56:09 PM EST
Re: Ordoliberalism 1: Beginnings (4.00 / 5)
ManfromMiddletown:
I'm no sure that you aren't following a blind lead here.

That rather depends on what "lead" you think I'm following and why. As I've said to Frank above, I'm attempting to describe, not plead for "engagement" as Dullien and Guérot suggest - I don't know if "engagement" is even possible.

Your discussion of neoliberalism is fine - I assumed some of it in the section on the ordolibs and the Austrians, where I suggested Hayek's later development took him away from ordoliberalism towards a more Chicagoan view.

ManfromMiddletown:

The Germans aren't neo-liberals, however they also have a strong preference for organized interests in society to deal with market failures rather than the state.

You're jumping ahead to now - I was describing ordoliberalism in the mid-20C as it was about to step into practical application. Theoretically, it was more prescriptive than you suggest. Considerable state intervention was in their opinion necessary to institutionalize the "organized interests" you mention. Germans today may take that institutionalization for granted (or choose to weaken it...). But this is a matter for further diaries and discussion.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 9th, 2012 at 01:48:08 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 7)
That rather depends on what "lead" you think I'm following and why.

The concern that I have here is that you are falling back on the very Anglo distinction between state and market, i.e. should we have a state set minimum wage, when the distinction between market and society, i.e. should sectoral agreements fix a minimum wage or is that an intrusion, as arguably the more important distinction.

You're jumping ahead to now - I was describing ordoliberalism in the mid-20C as it was about to step into practical application. Theoretically, it was more prescriptive than you suggest. Considerable state intervention was in their opinion necessary to institutionalize the "organized interests" you mention. Germans today may take that institutionalization for granted (or choose to weaken it...). But this is a matter for further diaries and discussion.

Well, something I've come around to over the past few years is the recognition that there is much greater continuity between pre and post occupation Germany in terms of economic institutions than is often thought.  Yes, the German state played a key role, preserving the artisinal sector facilitated the developed of collective skills training, but this is the German Empire we are talking about.  Well over 100 years ago.

In modern Germany the question has been whether to make the investments that keep what makes Germany unique, i.e. skills training, collective R&D, etc, running, or allow a drift to the market. Undoubtedly, there's been a drift.  This is the context of global neo-liberalism, the US and UK attempting to impose its received economic understandings on the rest of the world.   However, it's the persistence of German uniqueness that had facilitated quick recovery in the current crisis.

I'll be interested to see where you head with this ordo series, but my concern is reading too much forward about German political economy from the connection of Erhard with the Mont Pelerins.  Monetary orthodoxy?  Yes.  Blind embrace of the free market? No.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Mar 9th, 2012 at 12:29:10 PM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 2)
But in the present context, the similarity between the Hayekians and the ordoliberals - a hardline hard-money stance - is noteworthy, because it is the most important obstacle to reality-based economic policy in Europe.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Mar 9th, 2012 at 12:50:15 PM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 2)
ManfromMiddletown:
there is much greater continuity between pre and post occupation Germany in terms of economic institutions than is often thought.

Yes, if one considers that the postwar Germans looked back over the Third Reich and the Weimar Republic as anomalous periods that no one wanted to prolong or reproduce. Which led to the Second Reich, Bismarck, and industrial and social policies that appeared sound.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 9th, 2012 at 12:56:28 PM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 3)
But is wasn't 100 years ago in 1948. Rather thirty. And in one aspect ordoliberaslism did break with the past: private cartels were entirely legal in the empire, encouraged in the weimar republic, mandatory during national socialism.

ordo liberalism thought the state necessary to enforce competition.

In e. g. labour relationship, the ordo liberals wanted to return to the status quo of the empire, because they thought the sate dieciding labour conflicts, like frequently in the weimar republic, wrong. Did, if you look closer at german labour law only happen partially.

by IM on Sun Mar 11th, 2012 at 07:46:05 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (none / 0)
"Consider the role of the grand ecole.  Ultimately it's the state that keeps the show running."

Uh? You do realise that the vast majority of "Grandes Ecoles" graduates spend their entire career in the private sector, don't you?

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri Mar 9th, 2012 at 05:15:40 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (none / 0)
Yes, but the State keeps the show running.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Fri Mar 9th, 2012 at 05:27:38 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 3)
I'm not sure if this is sarcasm or not.  But I would point to the practice of pantouflage as a practical matter.

Globally, the post Cold War maximum of American economic and military power drove a shift towards the market in most countries.

In France that has meant a shift away from dirigisme.  But in Germany, that meant pressure to dismantle the system sectoral agreements between organized labor and employer's associations, and all that. The destination point is the same but the departure points differs.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Mar 9th, 2012 at 12:38:52 PM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 5)
The dead horse on the table in 'market economies' is the extent to which the state actively manages the private sector, and the private sector manages the state.

It's a different kind of management to dirigisme, but it's management nonetheless. At the very least it takes the form of tax concession, and in its most extreme form it tends to obvious preferential treatment for certain supposedly private enterprises.

Examples are numerous.

What makes 'French' management different is the implication that state management attempts to limit the political power of the private sector. So it's perfectly possible for private sector employees to be working in ways that benefit the state.

Neo-liberal orthodoxy attempts to destroy limits on the political power of the private sector. In fact it works towards destroying the power of democratically elected and publicly accountable institutions instead.

The central issue is democracy, not money, and not the somewhat imaginary distinction between public and private economies.

It's really about who makes the decisions, and who benefits from those decisions.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Mar 9th, 2012 at 01:27:52 PM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (none / 1)
When the effective capture of governments by corporate business interests is acknowledged much of existing political ideology rather obviously turns to mush - or worse.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Mar 11th, 2012 at 11:03:25 AM EST
[ Parent ]
Excellent Diary n/t (4.00 / 7)


Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Mar 9th, 2012 at 06:30:23 AM EST
And discussion! n/t (4.00 / 3)


Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Mar 9th, 2012 at 08:08:34 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (none / 1)
Don't know if it will be relevant, but just saw this:

From Dictatorship to Democracy: The Role Ex-Nazis Played in Early West Germany - SPIEGEL ONLINE - News - International

After World War II, West Germany rapidly made the transition from murderous dictatorship to model democracy. Or did it? New documents reveal just how many officials from the Nazi regime found new jobs in Bonn. A surprising number were chosen for senior government positions.


Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri Mar 9th, 2012 at 06:28:27 PM EST
Re: Ordoliberalism 1: Beginnings (none / 1)
From this link by ASKOD:
But six decades after the Nuremberg Trials against the leaders of the Nazi regime, a new attempt -- the first official one, at that -- to come to terms with postwar Germany's Nazi past is now underway. Now everything has to come out. Throughout the former West Germany, investigations are digging deep, extending all the way down to the foundations, seeking to answer a fundamental question: Just how brown -- the color most associated with the Nazis -- were the first years of postwar West Germany?

The government's 85-page response to the Left Party's inquiry about old Nazis in the halls of power is nothing more than an interim summary of research being undertaken in the archives of many ministries and federal agencies. As part of the effort, historians are reviewing enormous stacks of personnel files on behalf of the government.

No one has ever dug this deeply. The highly controversial study on Nazi involvement at the Foreign Ministry, marketed last year as a bestseller, was only the beginning. Historians are now studying old files at the Finance Ministry, in the judiciary and the Economics Ministry and, in particular, in the police and intelligence services. How many Nazis took part in the rebuilding of the government after World War II? How much influence did the surviving supporters of the Nazi dictatorship have on the establishment and operation of Germany's first functioning democracy?


Good on The Left Party. They had been through this sort of thing to some extent after the fall of the Berlin Wall and the reunification. Context is important but so are the basic facts.

My guess is that some of the deepest influences by surviving supporters had strong economic bases in Nazi Germany and that actions and inactions by, primarily, US policy for the occupation had a significant effect and that behind some of these were efforts by some very wealthy US individuals and corporations that had extensive ties to German industry before the rise of the Nazis all the way through WW II and continuing to this day: Brown Brothers Harriman Bank, Cromwell & Sullivan law firm, DuPont, Ford, Rockefeller, IBM, etc.


"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Mar 10th, 2012 at 10:49:46 AM EST
[ Parent ]
Re: Ordoliberalism 1: Beginnings (4.00 / 3)
Monetarism, Austrianism, Austerianism, Austeritarianism, gold-buggery... The terms have not been lacking on this forum to attempt description of the mindset obdurately (and increasingly apparently parochially) shared by a majority of German economists, central bankers, and political personnel. Just recently, the word "ordoliberalism" has made its entry.

May I suggest the view that there is all of that, i.e. mindsets are more heterogeneous even if all wrong and combining into some form of group-think? Furthermore, whatever the ideological blinders and/or ideological footing for the empty rhetoric of German policymakers, the actual effect of EU auseritarianism is classic neoliberal reform, in the modern sense of "neoliberal" (social cutbacks, reduction of social and labour rights, deregulation, fire-sale privatisation, and suppression of democracy to get all of these).

These are not classical 19C laissez-faire liberals. They are, and claim to be, neoliberals of a particular kind, who consider that the market will not spontaneously create for itself the optimal conditions for its own efficient functioning: those conditions must be deliberately instituted by the creation of an "economic order".

Here it matters what that economic order was supposed to be protected against. There is a Walter Eucken quote (which came up in a 2008 TV grilling of a present-day leading neoliberal, someone Merkel forced from the CDU, Friedrich Merz, which I wrote about here):

"The problem is not the abuse of economic power, the problem is economic power."

Even after all the scandals of the Global Financial Crisis, there is still zero debate on this among Germany's present-day elites. We have the funny situation that this ordoliberal idea of eliminating overbearing economic power (by splitting up companies that are too big) is now only championed by the Left Party, as for example in the speech I translated in Gysi on the EU "rescue package" for Greece.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Mar 11th, 2012 at 09:06:12 AM EST
Re: Ordoliberalism 1: Beginnings (4.00 / 2)
Thank you. Very interesting. "Ordoliberalism" does not look to me at all neo-classism. More like "institutionalism," the german-american industrial capitalism.
by kjr63 on Sun Mar 11th, 2012 at 10:10:57 AM EST
Ordoliberalism 1: Beginnings | 112 comments (112 topical, 0 editorial, 0 hidden)


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