Wilhelm Röpke today

Wilhelm Röpke was born in a small town near Lüneburg in 1899 and, as he liked to tell, spent a happy childhood in this region with villages and small towns, traditional communities of proud craftsmen and farmers.

Connected to Switzerland

After the first world war Röpke sympathised with the idea of socialism. At the age of 24 he became the youngest professor of economy at the time when he was appointed to the university of Jena. Since 1930 he had warned repeatedly against a rising national socialist dictatorship. He spoke his mind blatantly both as a German citizen and as professor of national economics. When the Nazis took power in 1933 he was sent to early retirement for “unnational conduct”. He knew he was in danger when SS-troopers announced they wanted to visit him at his home. He emigrated first to London, where he met with John Maynard Keynes and Friedrich August von Hayek. In 1937 he came to Geneva. Very soon he felt connected to Switzerland since most of his life principles were practiced here. He would stay until his death in 1966. Röpke lectured at the Institut Universitaire de Hautes Etudes Internationales which had been founded by William Rappard in Geneva. Many of his students would proceed to become important figures – such as Gerhard Winterberger, the influential director of the Swiss Trade and Industry Association. Between 1942 and 1945 he wrote his important trilogy “The social crisis of our time”, “A humane economy” and “International order and economic integration”.

A staunch Liberal

Wilhelm Röpke was a true Liberal and has maintained the principles of economic freedom and free trade without unnecessary state intervention in his lectures and writings over many years. He admired the great liberal revolutions of the 18th and 19th centuries which had put an end to absolute monarchist rule and replaced it by constitutional government.
He never doubted the superiority of markets being as free as possible – embedded into a strong and value-oriented civil society. He preferred entrepreneurs leading their own businesses and was sceptical about big corporations. While he conceded that their size could be beneficial in certain respects he was against any legislations in their favour. (p. 88)
Not only did Röpke oppose totalitarian collectivism of national or any other socialist blend he also argued against unnecessary interventions by the state into the markets. During the great economic depression of the 1930ies, doubts had kept growing as to whether liberal market economy should be replaced by some state-directed economy. Already back then some authors called for the state to intervene rigorously in case of difficulties, save big corporations, increase domestic demand by public spending and get a stagnating economy going again that way, organize social justice and many things more. All this was supposed to be directed from top down and financed by debt via the money printing machine. John Maynard Keynes stood for this kind of interventionist policies. Röpke on the other hand viewed the state as some sort of referee who makes sure that all stick to the rules, rather than the steersman who tells players which moves to make, let alone as an active player himself.

Ordo-liberal principles

Those economists who consider themselves market economy supporters usually start with the question: Which legal environment and political landscape is required for a liberal economy to function well and thrive and develop within a good balance of humane society and nature? The core of Röpke´s theory is economic freedom within a liberal society. For him economic freedom – referred to as freedom of trade and craft in Switzerland at his time – was a logical consequence of personal freedom and dignity of a human being according to natural law. This includes a legal framework with principles such as the protection of private property, the freedom of contracts and free trade. Moreover, it entails a policy of stable currencies, decentralised governance, as little interference of the state in economic affairs as possible, moderate taxation, a decent education system, the protection of the weaker members of society, some social redistribution in connection with a safety net. All this was to be embedded into as much self-determination, entrepreneurship, liberal co-operation and self-responsibility as possible. – Such a state, Röpke argued, would correspond to human freedom and dignity much better than any collectivist state, be it a socialist or nationalist one.

Orientation towards values

Wilhelm Röpke as well as other Liberals vigorously opposed all laissez-faire theories, claiming that the free market was able to solve all questions by some inherent mystical automatism. Indeed, every small town market place needs its own rules which need to be respected for it to function.
But for Röpke this includes an orientation towards values – ethics proceeding from the individual human being but embracing all fellow human beings. Seemingly common-place, abstract terms such as “supply and demand” which economists keep talking about reflect the lives of very real and very different people who work, who commit themselves to goals, produce things, offer services, consume etc. A model of society putting the individual into the centre rather than a mass of people, was the foundation of economy according to Röpke. For the same reason Röpke was no friend of models reducing supply and demand to totally quantifiable and measurable entities and reducing human activities to mere utilitarism.
Which values are important for Röpke? He mentions virtues such as diligence, mindfulness, sparingness, punctuality, sense of duty and appropriateness. In another context he adds personal qualities such as courage, honesty and truthfulness – in connection with principles of good business such as “Pacta sunt servanda” (treaties have to be kept) or “the good faith of the consignor”. He also points out that private property and societal responsibility go hand in hand, just like markets need to have a cartel authority securing competition and preventing monopolies.
Röpke keeps stressing that such ethical conditions don’t just develop automatically on their own. Unless the people bring them with them when they go to the market, the market will not produce them alone.

How do values come into being?

It is especially within small communities such as families, churches, school classes, organisations such as associations, cooperatives, fellowships of friends and comrades etc., where according to Röpke values come into being within civil society. These communities contribute to the formation of true individualities by fostering traditions and a historical conscience.
To make it short: Röpke was a Liberal Conservative who believed in values and kept reiterating that free market economies need to rely on values which in turn need to be maintained by the people. (p. 92) Values are the indispensable pillars to prevent markets from sliding into degeneration.
“Market economy will only prevail if those values, customs and rules are respected which grow beyond ‘supply and demand’.”(Wilhelm Röpke. “The humane society”/Jenseits von Angebot und Nachfrage. 1958)

Where do small communities thrive?

The answer is clear for Röpke: Within decentralised structures of moderate size. Oppression, corruption, arbitrariness and collectivism always start with the decline and destruction of smallish communities. He therefore regarded federalism and regional self-governance as bulwarks for a liberal society – with strong cooperatives, lively activities of people in associations and a strong republican spirit in the citizenry, which doesn’t wait for elites to give directions. Röpke was tireless in his plea to rediscover the “spirit of community” (Alain Laurent, p. 156).
Without any doubt such thoughts were inspired by the example of Switzerland where Röpke has lived for thirty years. He himself had witnessed a decent and constructive culture of discussions and arguments here.
Blueprint for Röpkes structure of ideas: the political culture of Switzerland
Wilhelm Röpke got involved in political debates with numerous articles – mainly with newspaper articles in the “Neuen Zürcher Zeitung”, in newspapers of French speaking Switzerland and in a series called “Schweizerischen Monats­heften”. He also witnessed several peoples’ referendums. Although he never refers to them in his books directly, since he never wrote a book specifically about Switzerland, it is clear, that for a Liberal like Röpke who emphasised the “Spirit of community”, not only self-determination is important but also participation.
Freedom of trade and commerce as basic rights of the individual, and also as foundation of the economic life, have their roots in the cantonal constitutions established in Switzerland in the 19th century. After these ideas had proven valid in municipalities and cantons the concept was adopted to the Federal constitution in 1874. However, it was a unique feature, that the electorate connected economic freedom with direct democracy back then. This means that the people determine the framework and crucial decisions in economic politics themselves to a large extent – proven in many peoples’ referendums over the years. Adding referendums on social, environmental and financial matters to those dealing with pure economic questions (which really belong all together) there have been more than 200 referendums at the federal level to this day, and countless more on the municipal and cantonal levels. The term “social market economy”, coined by Röpke is related to “social Democracy” as it is practiced in Switzerland. – This may well be the reason why Switzerland is the only country in the world to acknowledge economic freedom as a human right or right of liberty. (Kölz 2004, S. 870) Neither the German constitution (Grundgesetz) nor the US constitution go that far.

Röpke today – European Integration, GATT and WTO

The authors of the book “Wilhelm Röpke heute” draw lines of thought towards our own contemporary issues such as European integration, globalisation and the welfare state. Some remarks on that:
Röpke was by no means a radical opponent of European integration. But he was critical and suspicious about all kinds of exaggerated centralization, bureaucratization and monopolization. As Richard Ebeling puts it in his essay “Liberal political economy in a post-totalitarian world” (p. 97): Röpke sympathised with the idea of European integration in general but he insisted that this had to grow from bottom up. Integration would be realized effectively if nations would first liberalise themselves internally and unilaterally and then open themselves up in their own preferred manner. That way supra-European institutions managing or even implementing the integration process from above were unnecessary. Röpke would have viewed the co-operation of the Visegrad-countries Hungary, Poland, the Czech repiublic and Slovenia as natural reactions to the centralists in Brussels. The only possible way in the middle was for him a “Decentrism” in the true sense of the word (Gerd Habermann, p. 87), built on a customised freetrade without central directions or dictates. Röpke would probably advise the EU today to stick to what really works and consider a reduction in-order to create more space for individual countries to develop.
Röpke did actually like the GATT agreement because it was much more flexible and les strict than today’s WTO (which has more or less failed in its exaggerated approach). Developing countries had many opportunities in GATT and exceptions from the rule were possible. Switzerland even succeeded in negotiating an agreement in 1966, which paved the way to the agricultural policies of the 1970ies and 1980ies with several peoples’ referendums. The strict directions of WTO and EU on the other hand put big corporations into an advantage and restrict sovereignty of the nations.

EFTA as an Alternative

 Samuel Gregg from the US comments: “Röpke had a clear vision about an alternative model to the EU: the European Freetrade Association (EFTA), whichh had been established in 1960 to counter the EEC. The EFTA not only focused on securing freetrade between its members and non-European states, it also refrained from building a huge bureaucratic apparatus or any attempts to implement social-democratic policies on their members.” (p. 143) Freetrade yes – Röpkes believed – but maintaining democratic structures and national features. The EFTA never employed more than 200 people – including those years when it had a lot more members. Today about 100 employees are left in Geneva. In Brussels there are about EU 75,000 employees. The UK (which is about to leave the EU) did not join the EEC in 1957 and was a founding member of the EFTA in 1960 – together with Austria, Sweden, Denmark and Norway, Portugal, Liechtenstein and Switzerland. The UK joined the EU only in 1972 – apparently pressured by the US as declassified documents suggest (see dodis.ch/30116). Today the Brits remember that there is an alternative to the increasingly centralistic EU.

Separation of economy and politics

As Richard Ebeling (USA) outlines in his article (p. 114), Röpke argued for a peace and economic order in Europa which separates economy and politics. In Switzerland the team of Bundesrat Schaffner had followed this road when they negotiated the great freetrade agreement of the EFTA countries with the EEC in the 1960ies. They were successful. The treaty was approved by more than 70% in the peoples’ referendum of 1972 and it has stood the test of time, was amended and expanded several times and remains valid to this day. It would have been possible to expand it even further. However, this did not happen because the Federal government chose to adopt the strategic goal of joining the EU even 10 years after the peoples’ referendum of 1992 had declined the notion of Switzerland joining the EEC. This was meant to be achieved by signing “Bilateral agreements”. This is a major difference to the 1972 freetrade agreement.
Presumably Röpke would have been no friend of a framework agreement either, which would bind Switzerland stronger to the EU with the mechanism to develop into some “closer Union”. The former chairman of the German Social democratic party Martin Schulz for-instance declared that the “United States of Europe” should be established by 2025. Wilhelm Röpke would probably suggest to the EU to become smaller to a state which is compatible with a free Europe.

Burning issues

Another project implemented from top down by Brussels in-order to bind politically different countries closer together is the across-border electric power market liberalisation. It hardly works at all. Brussles wants Switzerland to join. Röpke would hardly recommend this, since such a centralist scheme again benefits big corporations the most, while more than 600 small and medium power plants often based on water power deliver sustainable energy to regional households and factories at low costs in Switzerland to this day.
Röpke supported a social safety net but not the welfare state which weakens self-responsibility, cooperation, the militia system and mutual support within communities and smaller municipalities. Erich Weede (Germany) points to the side-effects of the welfare state in his contribution “The current crisis of today’s welfare state” (p. 119). “Many people in the poorest parts of Europe or the neighbouring Mediterranean countries know that invading the welfare systems of Germany or other European countries gets them more money than what they ever earn by hard work at home.” (p. 126) Mobility with both Immigration an emigration is part and parcel of a liberal state under the rule of law. But if Röpke is right this does not mean that a sovereign state should not govern migration according to its needs.

Mont Pèlerin Society

Immediately after the end of the second world war the leading Liberals of their time such as Wilhelm Röpke, Alexander Rüstow, Walter Euken, Ludwig von Mises, Friedrich August von Hayek, Milton Friedman and others met at Lake Geneva and founded the Mont Pèlerin Society – with the aim and intention to renew liberalism. They coined the term Neoliberalism. But tensions between the various economists and thinkers would erupt soon. Wilhelm Röpke was mainly concerned with the moral societal and cultural preconditions of a successful liberalism. Hayek on the other hand, while calling legal frameworks and ordo-political principles “indispensable” in his main book “Freedom and the Economic System” (1960), put more emphasis on Self-determination and the so-called “Forces of spontaneous order” rather than the “Spirit of community” (Alain Laurent, p. 156).
In the best interpretation of this term, which is often used in a derogatory and pejorative sense, Alain Laurent (Paris) called Röpke the “most Neo-Liberal of them all” in his article “Röpke, Mises and Hayek – an appraisal” (p. 160).
Röpke stepped back prematurely from the chair as president of the Mont Pèlerin Society in 1962 and left the society. Mainly Hayek, Mises and Friedman would shape it in the years to come.     •

Sources:
Bessard, Pierre (Ed.). “Wilhelm Röpke heute. Zur Aktualität des grossen liberalen Ökonomen und Publizisten.” Liberales Institut Zurich, Zurich 2017 (The book can be ordered there)
Kölz, Alfred. Neuere Schweizerische Verfassungsgeschichte I. Ihre Grundlinien vom Ende der alten Eidgenossenschaft bis 1848. Berne 1992 (list of references included)
Kölz, Alfred. Neuere Schweizerische Verfassungsgeschichte II. Ihre Grundlinien in Bund und Kantonen seit 1848. Berne 2004 (list of references included)
Sprecher, Thomas. Schweizer Monat 1921–2012, Zurich 2013