Introduction
Until very recently, ordoliberalism was primarily an artefact for historians of economics. When in 2009 the University of Cologne declared its plan to rededicate its chairs for economic policy to macroeconomics and thus symbolically turned away from its postwar ordoliberal tradition of Alfred Müller-Armack, many saw in this new ‘battle of methods’ (Caspari & Schefold, 2011) the definitive proof that ordoliberalism was academically obsolete and politically irrelevant. The supporters of the university’s plan often argued that hardly anybody beyond Germany was interested any more in this very German ‘exceptionalism’ in economics (e.g. Bachmann & Uhlig, 2009; Kirchgässner, 2009; Ritschl, 2009).
Ten years later, the state of affairs is fundamentally different. Historians of economics are no longer alone in their interest in ordoliberalism, and the burgeoning new literature has been published by the best presses of English-speaking academia, constituting an avalanche of scholarship from disciplines as diverse as macroeconomics, political theory, law, sociology of science, literary studies, or finance (e.g. Beck & Kotz, 2017; Biebricher & Vogelmann, 2017; Blyth, 2013; Bonefeld, 2017; Brunnermeier, James, & Landau, 2016; Commun & Kolev, 2018; Hien & Joerges, 2017; Slobodian, 2018; Zweynert, Kolev, & Goldschmidt, 2016). Most commonly, this interest has been triggered by Germany’s fiscal and monetary policy positions in the eurozone crisis, but many authors take the crisis only as a starting point – and either have a closer look at the history of ordoliberalism, or explore whether its intellectual legacy deserves a conceptual revitalization.
For a historian of economics, this literature presents a number of challenges and raises a set of questions. In this exposition, I will examine the diagnosis of ordoliberalism being a ‘German oddity’ (Beck & Kotz, 2017) or even an ‘irritating German idea’ (Hien & Joerges, 2017). My central claim will be that the emergence of ordoliberal political economy can be much better understood as a variety of neoliberalism in the context of the general crisis of liberalism and western civilization in the 1930s and 1940s, rather than by only focusing on Germany. To begin with, some conceptual clarifications regarding the term ‘neoliberalism’ are necessary (see next section). The ordoliberals will be contextualized as an integral part of the neoliberal network of scholars which formed in Vienna, London, and Chicago during the interwar period (third section). While the German roots of ordoliberalism are undeniable (fourth section), they cannot explain the significant parallels between the political economies in Walter Eucken’s Freiburg and Wilhelm Röpke’s Geneva on the one hand and those in Vienna, London, and Chicago on the other. The Colloque Walter Lippmann in 1938 and the founding meeting of the Mont Pèlerin Society in 1947 show the emerging discourses in the neoliberal ‘thought collective’ (Mirowski & Plehwe, 2009), with Friedrich August von Hayek playing a special role in building bridges between the ordoliberals and the other communities (Köhler & Kolev, 2013), thus contributing to their convergence (see final section).
Making sense of myths: the multiple meanings of neoliberalism
Neoliberalism is a colorful and embattled term, with its connotations passing substantial transformations over the last decades (Boas & Gans-Morse, 2009). At least three separate meanings are discernible. The most recent one emerged during the 1970s and 1980s, identifying neoliberalism with the set of ideas that inspired political leaders like Margaret Thatcher and Ronald Reagan. Unfortunately, this common interpretation is hardly operational. One can even claim that this understanding of neoliberalism has degenerated into a smear word, void of sufficient analytical clarity and all too often used to label – rather than explain – just about any evil in global politico-economic affairs (Hartwich, 2009, pp. 25–30).
The second meaning of neoliberalism is what I call a ‘procedural’ take. Google Ngram searches on ‘neoliberalism’ and ‘neoliberal/neo-liberal’ show usage of the terms as far back as the 19th century. Debates like those in France around 1820 (Horn, 2018) and exchanges like the one between Maffeo Pantaleoni and Charles Gide in the 1890s (Gide, 1898; Pantaleoni, 1898) as to what ‘neo’ could mean – only a reformulation of old doctrines or a genuine reconceptualization of those doctrines – are helpful to understand this ‘procedural’ take. If we broadly subdivide the history of liberalism into n generations of thinkers, we are left with at least n-1 neoliberalisms, i.e. attempts by later generations to restate with better methods and higher clarity what constitutes the core of a social order based on liberty. In such a perspective, David Hume and Adam Smith were neoliberals vis-à-vis John Locke. Furthermore, one generation could challenge different previous generations: for example, John Stuart Mill was a neoliberal both vis-à-vis Locke and vis-à-vis the Hume–Smith generation. Finally, different authors within the same generation could (and very often did) wage battles – frequently in different languages – over their contemporaneous reformulations (Kolev, 2018a, pp. 66–68).
The third meaning, which will be the central one for this exposition, I call the ‘substantive’ take. It is in line with the common narrative in the history of economics which focuses on the 1930s and here on the Colloque Walter Lippmann in 1938 (Burgin, 2012, pp. 70–86; Goodwin, 2014, pp. 233–260; Plickert, 2008, pp. 93–103; Wegmann, 2002, pp. 101–110). ‘Neoliberal’ in this setting was used to demarcate a substantive difference: the reformist-oriented neoliberals distanced themselves from the ‘paleoliberals’ whom they viewed as insufficiently willing to reconsider the content of 19th-century liberalism, especially the notion of ‘laissez-faire’ (Hennecke, 2000, p. 273). If contrasted to the ‘procedural’ meaning above, the ‘substantive’ definition stands for one particular neoliberalism as formulated during the 1930s and 1940s. This neoliberalism is especially fruitful for historians: the protagonists interacted for decades via publications, correspondence, and live meetings, leaving behind an extensive legacy as to what they envisaged as a liberalism adequate for the 20th century.
Thinking in hubs: Vienna, London, and Chicago as birthplaces of neoliberalism
What is the relationship between neoliberalism and ordoliberalism?
Two very different patterns of connecting these concepts are found in literature. The first constructs a diametric opposition: such comparisons usually use the first meaning of neoliberalism above, claiming that neoliberalism was above all related to the Thatcher–Reagan policy agenda of the 1970s and the 1980s, and/or to the Chicago School of Milton Friedman, while ordoliberalism is portrayed as a phenomenon of German politico-economic thought of the 1930s and the 1940s (Sinn, 2010; Wagenknecht, 2011). This perspective smuggles a normative connotation: here neoliberalism is something destructive, guilty of demolishing the ‘golden age’ of the postwar decades, while ordoliberalism contributed to building that very postwar prosperity by fueling the social market economy in Germany and beyond.
However, if the third meaning of neoliberalism is taken seriously, a very different nexus emerges: here both neoliberalism and ordoliberalism are seen as phenomena of the 1930s and 1940s, and ordoliberalism was an important variety of neoliberalism which emerged along with the other neoliberal varieties. In this interpretation, ordoliberalism was as much a ‘German oddity’ as it was a product of the European and transatlantic attempts to restate what liberalism means for the embattled western civilization of the 20th century. It is this second approach which will be utilized here, for two reasons. First, it avoids the crypto-normativity of juxtaposing ‘bad’ neoliberalism to ‘good’ ordoliberalism and the unnecessary emotionality often involved. Second, this approach allows for a much higher degree of historical precision by analyzing the 1930s and the 1940s as the formative decades of these systems of political economy.
Embedding Freiburg into the tissue of early neoliberalisms is a complex enterprise. Traditionally, three central birthplaces are mentioned along with Freiburg: Vienna, London, and Chicago (Burgin, 2012, pp. 12–54; Hartwell, 1995, pp. 17–20; Plickert, 2008, pp. 54–86; Walpen, 2004, pp. 66–73; Wegmann, 2002, pp. 135–141; White, 2012, pp. 202–230). Apart from these centers, other important groups developed in France and Italy. More recently, a fifth center has been identified in Geneva (Slobodian, 2018), which will also play a role in this analysis.
The concept of ‘schools’ which is often attributed to these centers is useful but must be applied with great care. To legitimately describe a group of scholars as a ‘school,’ three dimensions – substantive, social, and structural – must be critically explored (Blumenthal, 2007, pp. 25–33). Lumping individual theorists together into a ‘school’ box can blur important substantive differences, but also problematically evoke the connotation of the ‘schools’ as hermetically isolated entities. This is particularly problematic in the 1930s, a period of frequent migration and intensified live exchange. Also, a pattern often observable at the time is the ‘core-satellites’ constellation, where single scholars do not tightly belong to a central group but gravitate to it from afar and nevertheless contribute to its evolution. To avoid these ‘schools’-related imprecisions, in the following the centers of neoliberalism will be conceptualized as hubs of scholars who interacted ‘intramurally’ with their local colleagues, but also ‘extramurally’ across the different groups.
Vienna deserves the first and the most detailed portrayal: this city was the birthplace of one of the oldest still existing traditions in modern economics, spanning over 150 years. Between the 1880s and the 1930s, ‘school’ is appropriate here, as the geographic focus enabled not only substantive, but also social and structural proximity. The political economy of the different Viennese generations emerged within a series of debates. The founder, Carl Menger, innovated not only in economic methodology by famously initiating the ‘battle of methods’ (Louzek, 2011): while his subjective value theory (Menger, 1871) was not new within the German tradition, his focus on the consumer as the center of gravity for the entire market system – later to be called ‘consumer sovereignty’ (Hutt, 1936) – constituted an important reformulation of the role of the individual in society. Still, Menger insisted that markets did not evolve in a vacuum of ‘laissez-faire’ – rather, he underscored the importance of institutions as a framework for the market (Menger, 1891), among others the state as an indispensable provider of public goods like social security (Dekker & Kolev, 2016). The next generations developed the Mengerian impulse toward a full-fledged system. Eugen von Böhm-Bawerk and Friedrich von Wieser deepened the Viennese understanding of interest, capital, cost, and production theory. Moreover, both were political economists in a twofold meaning: they were active administrators of their Empire, but also embedded their technical economics into a broader theory of social order. Their final pieces addressed the phenomenon of power in its multiple repercussions for economy and society (Böhm-Bawerk, 1914; Wieser 1926). Menger, Böhm-Bawerk, and Wieser can thus be seen as neoliberals according the ‘procedural’ definition covered in the second section of this chapter.
The first Austrian neoliberals in line with the ‘substantive’ definition covered in the second section were Ludwig von Mises and Friedrich August von Hayek, since they were key figures in the neoliberalism debates of the 1930s and 1940s. Earlier they participated in a series of other debates which were formative for their political economies, most notably the Socialist Calculation Debates and the debates on business cycle policy during the Great Depression (Boettke, 2000; Levy & Peart, 2008; Magliulo, 2016). Just as their teachers, Mises and Hayek took active part in the Viennese debates of the day, most of which took place in the overlapping Vienna Circles across disciplines and ideological lines (Dekker, 2016, pp. 27–45). Starting in 1920, both engaged in a decades-long discussion with proponents of central planning: first during the 1920s with the Austro-Marxists, later during the 1930s and 1940s within Anglo-Saxon academia. These debates sharpened their understanding of the functioning of markets as platforms of mutually beneficial exchange, and – expanding on the Smithian concept of ‘division of labour’ – of ‘division of knowledge’ (Hayek, 1945; Mises, 1920). The debates during the Great Depression, famously with Keynes but also within the German-speaking world, focused on the macroeconomic relevance of distortions of the market mechanism (Hayek, 1931; Mises, 1912).
London is not usually attributed the label ‘school,’ although the London School of Economics and Political Science served as a platform to develop not only substantive, but also social and structural ties (Boettke, 2018, pp. 124–126). That LSE would become a neoliberal bulwark is both substantively and lingually paradoxical. Substantively, because the institution was founded in 1895 by the Fabian Society, an organization dedicated toward piecemeal social change in line with continental social democracy (Dahrendorf, 1995, pp. 3–47). Lingually, because the Fabian agenda was close (but not quite identical) to the so-called new liberalism of Thomas H. Green, Leonard T. Hobhouse, and John A. Hobson, a variety of what would today be called social liberalism (Simhony & Weinstein, 2001). This ‘new liberalism’ – as personified by LSE’s fourth director William Beveridge and his agenda for an encompassing welfare state – clashed in the 1930s and 1940s frequently with Hayek’s neoliberalism (Hayek, 1994, pp. 72–76).
Edwin Cannan initiated LSE’s neoliberal transformation. Famous in history of economics for his 1904 edition of Smith’s Wealth of Nations, Cannan led LSE away from its Fabian agenda. From 1929 onward it was Lionel Robbins, a student of Cannan, who largely shaped the faculty and the spirit of LSE economics (Howson, 2011, pp. 166–205; Robbins, 1971, pp. 120–122). Robbins is often described as a ‘continental economist’ influenced by a series of non-British European economists – most importantly for this analysis, by the Austrian School as embodied in Mises’s Viennese P...
