Wilhelm Röpke is probably the most unjustly neglected economist and social critic of the twentieth century. Exiled by Hitler's regime, Röpke was a passionate critic of socialism and the welfare state who was nonetheless keenly attuned to the limits of capitalism.

John Zmirak's Wilhelm Röpke, written with the touch of an accomplished writer and journalist, ably demonstrates that Röpke's humane yet sophisticated "Third Way" economics can play a vital role in shaping appropriate policies to reflect the growing communitarian consensus.

Wilhelm Rpke

Swiss Localist, Global EconomistBy John Zmirak

ISI Books

Copyright © 2007 John Zmirak
All right reserved.
ISBN: 978-1-882926-67-1

Chapter One

A MAN FOR THE TWENTY-FIRST CENTURY

Appenzell ber alles?

In the Swiss half-canton of Appenzell Innerrhoden, a tiny republic of dairy farms, creameries, small-sized industry, and rustic churches, each year's spring yields a sea of tiny mountain flowers along the steep roads and in the window boxes of farmhouses, on the tables of well-swept hostels and on the faded wooden altars to the Virgin and Saint Meinrad. The plants are sturdy, inured to thin air and bitter winters, and defiantly diverse in color and shape-one sharp and purple, another roundly red, and then a yellow starburst. You'll see no fields of identical blooms, like the vast sunflower farms that flank the autobahn in Bavaria, or the luxuriant purple iris stands of the Louisiana bayous. You'd be hard-pressed to gather a uniform bouquet from these Swiss gardens, made up of dozens of hardy species, growing together in genial competition as they have for millennia.

Just so, you'd make a poor showing if you tried to shop an ideology in Appenzell. History records no Appenzell-supremacist movements; no mass rallies of uniformed youths in identical haircuts shouting slogans beneath enormous banners proclaiming "Appenzell ber alles"; no secretive terrorist movements for independence; no campaigns to preserve the "purity" of the local "Kultur." Nor is there room for Marx at these inns. The local farmers would rather drive their cows up nearly vertical fields than entail their hard-won property to state or superstate. The one bitter source of conflict in Appenzell's history has been religion, which sparked the devastating Thirty Years' War in neighboring German states. It did not shatter Appenzell; after some serious quarrels over creed, the Protestant and Catholic halves of the canton agreed simply to split. At some places where an agreement could not be reached, the canton lines were drawn (and up to the nineteenth century incessantly redrawn) according to the faith of each family home. When a Catholic obtained a house that had once belonged to Protestants, that little piece of Appenzell Innerrhoden was transferred to Ausserrhoden, and contrariwise if a Protestant gained a formerly Catholic home. The faiths, like species of Alpine flowers, still thrive as cordial, rivalrous neighbors.

Their coexistence is not guaranteed by abstract human rights formulas or transnational institutions-indeed, the wars of religion fought in Switzerland were largely provoked by interfering outside forces with international agendas (such as the Holy Roman Empire, Louis XIV's France, and Metternich's Austria). The finely balanced tolerance and diversity in Appenzell-in Switzerland-does not descend from above, but grows organically from the facts on the ground, from the local institutions that arose to resolve conflict, in ordered liberty, among neighbors thrown together by history and geography.

Each spring, the outburst of mountain blooms greets another hardy perennial-the Landsgemeinde, or communal vote. In what is perhaps the most ancient form of democracy, each year the adult citizens of Appenzell Innerrhoden are invited to gather in the town square to vote by show of hands on new laws, taxes, and terms of office for their local government.

Not all appear, of course. But those who do exercise a privilege their ancestors gained in the thirteenth century (when most of Europe's country folk still labored as serfs): a "sovereign vote." No amendment to the constitution may be made in Switzerland without a referendum; any law may be annulled by popular vote; additions to the constitution typically start with popular initiatives, sparked by ordinary citizens' petitions and ratified by their vote. The federal government and many cantons must submit each proposed new tax to direct vote of the people. In a century where authority has been almost everywhere usurped at one time or another by ideological mass movements, managerial elites, and murderous factions, the quarrelsome but peaceful Swiss have stuck like a bone in the throat of theorists. Each trend that commentators have described as unstoppable has failed to sway these mountainfolk-or their citified cousins in Zrich and Bern. Nationalism, socialism, national socialism, welfare-statism-each has left its high-water mark at the borders of the stubborn, diverse, democratic Swiss.

How fitting it is, then, that Switzerland was the adopted home of Wilhelm Rpke, a German economist and social critic who stood against the tides of his age, profession, and nation. Exiled by Hitler's regime, Rpke spent his career defending tolerance and liberty, and along the way helped lay the groundwork for the postwar German economic miracle.

With the Swiss, Rpke found refuge from Nazi persecution; even more, he saw in their society a model of responsive democracy, personal freedom, and broad prosperity-three goods which eluded most of Europe throughout the twentieth century. By examining Rpke's life, work, and vast postwar influence in Europe, I hope to throw some light on the intimate relationship that binds free markets, social order, and the search for the common good.

While there have been excellent reflections on Rpke in broader studies, no book-length examination of his thought has yet appeared in English. I hope the present volume, a modest attempt to fill that gap, will serve to introduce the general reader to the very great pleasure of reading Rpke.

Architect of a Miracle

Born in 1899 in Schwarmstedt, Germany, Wilhelm Rpke would become one of the most distinguished economists of his age. Acknowledged as a worthy peer by such eminents as Ludwig von Mises and Friedrich A. Hayek, Rpke was a key intellectual architect of postwar prosperity in Europe. Ludwig Erhard, economic director in postwar West Germany (and later chancellor of the Federal Republic), unabashedly credited Rpke as the most formative single influence on his policies.

In the ruined Germany of 1948, when expert opinion, the largest German political parties, most of the Allied Occupation officials, and even a majority of Germans called for socialism and the planned economy, Ludwig Erhard rejected the popular wisdom. His administration halted a disastrous postwar inflation and stagnation by issuing in 1948 a new, sound currency-the deutsche mark-and abolishing at one stroke the wage and price controls which had survived the fall of the Third Reich. This launched the West German polity as a federal, free-market democracy. It sparked a rebirth of that shattered nation which astonished the world-and inspired similar reforms in Italy, France, and other countries.

Erhard's economic reforms are now widely acknowledged as masterstrokes-more important to German prosperity than the aid received through the Marshall Plan. In these decisions, Erhard followed the principles that Rpke had explained in major theoretical works and reinforced in a flurry of articles from the late 1920s through the postwar crisis. In the darkest hours of Hitler's war, Erhard worked as an obscure advisor to a cigarette company and schooled himself in market economics by reading Rpke's works. These books, banned by the Gestapo, had to be smuggled in from Switzerland. Speaking in 1967 at a memorial service for Rpke, Erhard summed up what he had gained from his friend and mentor:

Wilhelm Rpke exhausted himself offering-to those trapped in socialist-collectivist thought, to those unable to escape such thought, to all those involved in the constitution or glorification of the totalitarian state, to those who have comfortably excused themselves from responsibility and pangs of conscience-words of transformation, offering them once more firm ground under their feet and an inner faith in the value and blessings of freedom, justice and morality.

And Ludwig von Mises, the grand theoretician of Austrian economics, wrote this at Rpke's death:

For most of what is reasonable and beneficial in present-day Germany's monetary and commercial policy, credit is to be attributed to Rpke's influence. He-and the late Walter Eucken-are rightly thought of as the intellectual authors of Germany's economic resurrection.... [A] fearless man who was never afraid to profess what he considered to be true and right, in the midst of moral and intellectual decay, he was an inflexible harbinger of the return to reason, honesty and sound political practice.

A Renaissance Man

Wilhelm Rpke made it his life's work to help construct and defend the free society, to diagnose the ills of capitalism and suggest concrete solutions. Like a stern country doctor-his father's profession-Rpke was never shy about criticizing the abuses of the body politic which endangered its health and rendered it defenseless against infections from far Right and Left. Rpke was blunt, even caustic, when he wrote about the abuses that had encrusted two centuries of capitalist practice, culminating in the crisis of the Great Depression. He sharply criticized the probusiness parties of Weimar Germany that supposedly stood for economic freedom but relied on the state to impose protectionism and shore up monopolies. These groups, more than anyone else, had given credibility to the Marxist charge that market economics were merely an ideology, a rhetorical construct that served the class interests of the bourgeoisie, which violated its principles the moment they proved inconvenient.

Rpke found common ground both with socialists and libertarians in exposing the inconsistencies of contemporary capitalism. He shared with socialists their outrage at hypocrisy, intellectual subterfuge, and social injustice; along with libertarians he held a deep respect for the wealth-creating free market. But he departed from both in his analysis of where the West had gone astray and what measures must be taken to restore Europe to health. Unlike most free-market advocates, Rpke seconded complaints made by counterrevolutionary thinkers on the Right. He too was appalled at the brutality and suddenness with which old lifestyles and mores had been uprooted through the political and economic revolutions that swept Europe after 1789. Rpke infused his detailed analyses of modernity with a sensitive respect for the values of tradition and religious faith and their critical importance in building social and economic order.

Because of his intellectual openness, Rpke's work eludes easy categorization and repays careful reading and rereading by students of history, economics, and culture, regardless of where their intellectual sympathies may lie. Rpke was a master of many languages and vernaculars; well-versed in technical economics, romantic poetry, classical literature, and the history of science, he has aptly been called a Renaissance man. While signs of this learning bejewel his books-including lengthy Latin and French quotes given in the old style, untranslated-they never seem pretentious. His broad, humane erudition-which Rpke reveals incidentally, while simply trying to make a point-may well have saved him from the intellectual extremes to which so many of his fellow social reformers fell prey. It also partly explains the breadth of his influence among educated Europeans like Ludwig Erhard.

One of the first writers exiled by the Nazis for his ideas, Rpke subsequently worked in Turkey and Switzerland, writing books that helped preserve the spark of free thought in Germany and throughout occupied Europe. After the war, Rpke was one of the founding thinkers of the newly created Christian Democratic movement, the strongest European voice for resistance to the next totalitarian menace, the expansionist Soviet Union. While remaining a strong advocate of the free market, Rpke was also a keen critic of its abuses and an advocate for minimalist, effective intervention by the state to preserve vital social goods neglected by markets. Indeed, it was Rpke who first coined the (later much-abused) term "the Third Way" to denote a market-friendly, socially responsible economic policy-one aimed at encouraging the widespread ownership of property, capital, real estate, and small businesses throughout the population.

Appalled by all forms of monopoly, Rpke considered the economic power of colossal corporations almost as dangerous as the political might of collectivist governments. Always a cosmopolitan, Rpke favored untrammeled free trade, regional liberties, and respect for traditional peoples and ways of life. (For instance, he was an outspoken advocate of allowing Japan to retain her monarchy after the Second World War.) Ever a foe of nationalism, Rpke pointed to the eighteenth century as the zenith of European civilization-before ideas were branded by their country of origin and yoked to the service of intolerant nation-states.

On the other hand, suspicious as any Swiss peasant of imperial governments, Rpke opposed attempts to abolish borders and concentrate power in the hands of transnational bureaucracies. Just as the market economy had been built by small businessmen, farmers, inventors, and entrepreneurs-at the expense of monopolists, mercantilist kings, and rationalist philosophes-so Rpke saw international order and liberty as arising from free regions federated within nation-states, whose relations must be governed by written or unwritten standards of international law and enforced by a balance of power.

In light of the tragic failure of the post-Versailles commissions appointed to protect ethnic minorities in Europe, Rpke saw extra-governmental institutions (such as churches and civic and social organizations, often maintained by local elites) as the best defenders of human dignity against oppression by intolerant majorities. In this as in many other questions, he was inspired by the example near at hand-the healthy diversity and peculiarity of Switzerland, whose liberties had grown not from international guarantees or utopian schemes, but from concrete institutions, alliances of convenience, and ancient privileges fiercely guarded by peasant militias over centuries.

Instead of a multinational currency administered by a central authority (like today's Euro), Rpke favored a worldwide gold standard that offered a single touchstone of value for many currencies-and wrested the critical power over the money supply from the hands of politicians and financial elites, leaving it to move spontaneously with the billions of daily decisions made by free men and women in free markets.

Rpke was a successful popularizer, making clear the workings of the market economy in writings aimed at the educated layman. His works went through many editions, and were swiftly translated into French, English, Hungarian, even Japanese. American editions of his major works have remained in print for decades, and several neglected titles have been or soon will be reprinted in English. Unlike some other free-market advocates, Rpke understood that economics had been irreversibly politicized; there was no going back to the old, nineteenth-century view that had placed the function of a nation's productive capacities entirely beyond the reach of popular sovereignty. The growth of mass democracy, the mobilization of millions of men of every social class during the First World War, rising nationalist sentiment and class mistrust-all these currents had joined to overwhelm the levee behind which classical liberals had hoped to protect economic life from the turbulence of politics. No longer would it be enough to convince the economics professors, the King's ministers, and the responsible classes of the virtues of a free market.

The Liberal Tradition

Rpke began his academic career with very definite views about the tradition in European intellectual history with which he identified. Like many who rejected fascism and statist socialism, Rpke considered himself a good liberal. Sadly, this term had become so broad even by the 1930s that when used without qualification it conveyed very little. Indeed, "liberal" is currently used to describe thinkers as disparate as Montesquieu, Rousseau, Lord Acton, Herbert Spencer, Francis Fukuyama, Christopher Lasch, and John Rawls.

Rpke employed the word "liberal" in a very different, and considerably more specific, sense. In the Continental parlance of his day, "liberalism" could be taken in at least two ways: (1) as referring to the general movement away from feudal institutions and toward greater social mobility and personal freedom; (2) as pointing to the particular form which that movement took in the nineteenth century-specifically, the advocacy of laissez-faire capitalism, a radically individualist view of the social order, and a government whose role was to serve as a "night-watchman," deputized to defend property rights and national borders and to do little else.

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