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The Political Thought of Neo-Liberalism

Published online by Cambridge University Press:  02 September 2013

Carl J. Friedrich
Carl J. Friedrich
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Harvard University
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American Political Science Review , Volume 49 , Issue 2 , June 1955 , pp. 509 - 525
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Copyright © American Political Science Association 1955

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References

1 See Röpke, Wilhelm, Maas und Mitte (Erlenbach-Zürich, E. Rentsch, 1950), p. 141Google Scholar; and Eucken, Walter, Grundsätze der Wirtschaftspolitik (Bern, A. Francke, 1952), p. 374Google Scholar.

2 The journal of the movement is called Ordo: Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft. Published at Düsseldorf, it has issued six volumes since 1948.

It was Wilhelm Röpke who called himself a Liberal Conservative, in the preface to his Civitas Humana; Grundfragen der Gesellschafts- und Wirtschaftsreform (Erlenbach-Zürich, E. Rentsch, 1944; English tr. by Fox, Cyril S., London, 1948), p. xviiGoogle Scholar. Ordo's Herausgeber were Walter Eucken and Franz Böhm; its Schriftleiter, Fritz W. Meyer and Hans Otto Lenel; the editorial board has included Karl Brandt, Constantin von Dietze, Friedrich A. Hayek, Friedrich A. Lutz, Wilhelm Ropke, and Alexander Rüstow. A number of books have further clarified the neo-liberal position, notably Wirtschaft ohne Wunder (Erlenbach-Zürich, E. Rentsch, 1953)Google Scholar, with contributions from Röpke, Rüstow, Luigi Einaudi, Ludwig Erhard, and others; and Vollbeschäftigung, Inflation, Planwirtschaft (Erlenbach-Zürich, E. Rentsch, 1951)Google Scholar, with contributions from Eucken, Hayek, Röpke, Jacob Viner, and others; the approach in both is predominantly economic. The movement's main positions are described and, to a limited extent, analyzed in Dürr's, Ernst-WolframWesen und Ziele des Ordoliberalismus (Winterthur, Keller, 1954)Google Scholar; it is a balanced portrait, but the emphasis is on economics, with primary attention to Eucken and Röpke. Dürr gives an extensive bibliography—which, however, neglects the relevant literature from English and American political science.

Another significant organization is the “Mount Pelerin Society,” at Chicago, presided over by Hayek, with Frank Knight as secretary. Hayek and some of its other leaders contrast in many ways with the liberalism of the Ordo group. It undertakes a specific defense of capitalism in its Capitalism and the Historians (Chicago, University of Chicago Press, 1954)Google Scholar, edited by Hayek, with contributions from T. S. Ashton, Louis Hacker, Hayek, W. H. Hutt, and Bertrand de Jouvenel—whereas the Ordo liberals, especially Röpke and Rüstow, are distinctly critical of capitalism. Cf. Röpke's, Civitas Humana, p. 27Google Scholar: “We hope it is not necessary to say that we are not intending to hoist the much-tattered flag of ‘Capitalism’ …. Let us remember that ‘capitalism’ is the distorted and soiled form which market economy assumed ….” Capitalism and the Historians tries to show that economic historians have spread a myth about capitalism's being responsible for an alleged deterioration of the position of the working classes—a view which is untenable in light of the more recent work in the field. Rüstow's pointed critique of laissez-faire economics is given in Das Versagen des Wirtschaftsliberalismus als religionsgeschichtliches Problem (New York, Europa Verlag, 1945)Google Scholar.

3 World Liberalism has published four volumes so far. It is edited by J. H. MacCallum-Scott, the International's general secretary.

4 Mention should be made of the present President of Italy, Professor Luigi Einaudi; for an introduction to his ideas, see “Economia di concorrenza e capitalismo storico lo terza via fra i secoli XVIII e XIX,” in Rivista di Storia Economica, Vol. 7, p. 49, 1942)Google Scholar. See also his Lezioni di politico sociale (Torino, G. Einaudi, 1949)Google Scholar, Lezioni di politica economica (Torino, G. Einaudi, 1944)Google Scholar, and his vigorous espousal of European unity, La Guerra e l'Unità Europea (Milano, Comunità, 1948)Google Scholar. Other neo-liberals in Italy are Carlo Antoni and Bresciani-Turoni. Among Swiss writers, beside Röpke, W. E. Rappard and Max Silberschmitt are important for political thought and history; among French writers are Raymond Aron, Louis Baudin, Bertrand de Jouvenel, Louis Rougier, and Jacques Rueff. Lippmann's, WalterThe Good Society (Boston, Little Brown, 1937)Google Scholar is very highly regarded by the whole neo-liberal movement, while De Tocqueville is a kind of patron saint.

5 Note, however, the German concern for Rechtsstaat, which Hayek deals with in “Entstehung und Verfall des Rechtsstaatsideals,” Wirtschaft ohne Wunder, p. 33Google Scholar—an able general analysis, although based on rather inadequate acquaintance with the literature in the field.

6 A fairly sound and detailed assessment of Erhard and his policy appeared in Fortune for April-May, 1954. His views are mostly contained in his speeches, but see “Die deutsche Wirtschaftspolitik im Blickfeld Europäischer Politik,” Wirtschaft ohne Wunder, p. 128Google Scholar. The term “soziale Marktwirtschaft,” however, was coined by ProfessorMüller-Armack, Alfred, the imaginative author of Genealogie der Wirtschaftsstile, 3rd ed. (Stuttgart, Kohlhammer, 1944)Google Scholar and other works.

7 See Eucken, Walter, Die Grundlaqen der Nationalökonomie, 6th ed. (Berlin, Springer, 1939), pp. 196 ff.Google Scholar, where the problem of economic power is analyzed; also his “Die Wettbewerbsordnung und ihre Verwirklichung,” Ordo, Vol. 2, p. 1Google Scholar; Röpke, , Die Gesellschaftskrisis der Gegenwart (Erlenbach-Zürich, E. Rentsch, 1942Google Scholar; translated by the Jacobsohns, as The Social Crisis of Our Time, London, 1950)Google Scholar, Part 1, Ch. 3, and elsewhere; Böhm, Franz, Die Aufgaben der freien Marktwirtschaft (München, Isar Verlag, 1951)Google Scholar.

8 Böhm, Franz, Wirtschaftsordnung und Staatsverfassung (Tübingen, J. C. B. Mohr. 1950), p. 69Google Scholar. See also Röpke, , Civitas Humana, p. 85Google Scholar. This thought was clearly developed by Stammler, Rudolf, especially in his Wirtschaft und Becht, (Leipzig, Veit, 1896), pp. 34f.Google Scholar, and in his Die Lehre von dem Richtigen Recht (Berlin, J. Guttentag, 1902)Google Scholar, tr. by Husik, Isaac as The Theory of Justice (New York, Macmillan, 1925), pp. 184ffGoogle Scholar. But the Neo-liberals do not refer to him often and his works are not mentioned in their bibliographies.

9 Böhm, p. 49. The same point is made very effectively by Rüstow, , “Wirtschaftsform und Staatsform,” in Magna Charta der Sozialen Marktschaft (Heidelberg-Ziegehausen, Vita Verlag, 1951)Google Scholar. Cf. also Röpke, , Civitas Humana, p. 85Google Scholar.

10 See Hobhouse, Leonard T., Liberalism (New York, Holt, 1911)Google Scholar, and John Stuart Mill's classics On Liberty and Utilitarianism as well as Representative Government; an interesting recent re-evaluation of these writers is that of Plamenatz, John, The English Utilitarians (Oxford, Blackwell, 1949)Google Scholar, Ch. 8; Plamenatz manages to distill the essence of Mill's liberalism—which is there in spite of all the contradictions and inconsistencies. Against Nietzsche's mocking remark that Mill appeared as such a mountain because he stood in such a complete plain, it suggests the elevation of the liberal foundation which Nietzsche could not see.

11 It should be noted that writers such as Hayek and Ludwig von Mises, while obviously sharing a substantial number of the negative positions of this group—for example, the rejection of all forms of socialism and planning—take a more traditional view, and are therefore referred to by the neo-liberals as “palaeo-liberals”—old timers who do not recognize the lessons of Communism and Fascism. Likewise the thought of Joseph Schumpeter, especially as expressed in Capitalism, Socialism, and Democracy (New York, Harper, 1942)Google Scholar, must not be confused with this neo-liberalism; his defeatism in the face of the socialist movement issued politically in a sort of tired Austrian despair that opens the door to reactionary political movements.

12 See Hegel's, Philosophy of Law and Right, pars. 257 ff.Google Scholar, and the comment by Weil, Erich, Hegel et l'État (Paris, Vrin, 1950), p. 43Google Scholar.

13 “Freie Wirtschaft—Starker Staat—Die Staatspolitischen Voraussetzungen des wirtschaftlichen Liberalismus,” Schriften des Vereins fur Sozialpolitik, Vol. 187 (1932)Google Scholar. See also Röpke's, remarks against a pluralistic conception, Civitas Humana, especially p. 27Google Scholar.

14 “Constitution of Germany,” in my edition of The Philosophy of Hegel (New York, Modern Library, 1953), pp. 535–36Google Scholar; see also my introduction, p. xxiii.

15 The quotation from Benjamin Constant is given by Röpke, in his Civitas Humana, p. 28Google Scholar. Incidentally, Hegel's political philosophy owes much to Constant; in the view of Georg Lasson, Hegel began the reading of Constant as a youth in Bern, gave attention to him to the end of his life, and owes to him a good part of his monarchical liberalism. See Lasson's “Einleitung” to Hegel's, Schriften zur Politik und Rechtsphilosophie (Leipzig, F. Meiner, 1913), p. xiGoogle Scholar. The propensity toward constitutional monarchy of the older sort is strikingly illustrated in Röpke's, Die Deutsche Frage (Erlenbach-Zürich, E. Rentsch, 1945)Google Scholar, in which he recommends this form as a solution for the problem of how to reconstitute the Rechtstaat.

16 “Ortsbestimmung der Gegenwart,” a radio lecture given by Rüstow on Oct. 26, 1952, which was printed in the Berner Bund for Jan. 23, 1953. See also his lecture, “Der Mensch in der Wirtschaft: Umrisse einer Vitalpolitik,” which he gave on June 24, 1952, before the Wirtschaftsverband der deutschen Kautschukindustrie.

17 Substantial elements of the Christian Democratic Union, for whom Ludwig Erhard is the spokesman, belong to this trend of Catholic thought.

18 Rüstow, in the first lecture listed in note 16.

19 Ibid.

20 We might recall in this connection Aristotle's description of happiness in the Nicomachean Ethics, I, 8Google Scholar, which stresses that beside virtue and an activity of the soul, there is required for genuine well-being a complete life, including external goods of every description.

21 R#ustow, Alexander, Ortsbestimmung der Gegenwart, Vols. 1 and 2 (Erlenbach-Zürich, E. Rentsch, 1952)Google Scholar. The third volume is to be published in 1955. Reference to Rüstow's major work will be made in parentheses in the text—Roman numerals giving the volume, Arabic ones the page.

22 Note, for example, the title, The Ruling Class, used for an English translation (New York, 1939)Google Scholar for Gaetano Mosca's Elementi di Scienza Politica, which might just as well have been translated “The Governing Elite.”

23 Talcott Parsons, in rendering Herrschaft in the introduction to his translation of Max Weber's Wirtschaft und Gesellschaft, employs the expression “imperative control”: see Max Weber: The Theory of Social and Economic Organization, translated by Henderson, A. M. and Parsons, (London, Oxford, 1947), esp. p. 152Google Scholar. Max Weber is important in Rüstow's thought.

24 Nonetheless, the complete lack of reference to Von Gierke's thought is rather startling, since he developed the concepts and gave them their significant content. The indebtedness of Max Weber to Von Gierke has never been properly appreciated—part of a general failure to recognize Weber's juristic background, so strikingly seen in his insistence upon abstract definitions.

25 Maitland suggested that “fellowship” would be the most appropriate English rendering for Genossenschaft—for which the natural antithesis would be “lordship.” Johannes Althusius, upon whose thought Gierke built his own, coined the phrase consociatio symbiotica to describe the organic and interdependent relationship. The terminological problem is highly complex. See Pollock, and Maitland, , History of English Law, 2 vols. (Cambridge, University Press, 1895)Google Scholar; also Maitland, , Political Theories of the Middle Ages (Cambridge, University Press, 1900)Google Scholar.

26 Parsons, p. 153, speaks of an “imperatively coordinated group,” in rendering Max Weber's Herrschaftsverband.

27 There is no indication that the thought of these neo-liberals has profited from the path-finding work of Commons, John R., especially his Legal Foundations of Capitalism (New York, Macmillan, 1932)Google Scholar, in which the legal institutions of the market are fully explored.

28 This school is radically diffusionist in outlook and insists upon the interpenetration of all cultural processes and phenomena. See Schmidt, Wilhelm and Koppers, W., Völker und Kulturen (Regensburg, Habbel, 1924), Vol. 1Google Scholar, and Schmidt's, Rassen und Völker in Vorgeschichte und Geschichte des Abendlandes, 3 vols. (Lucerne, Stocker, 1946–1949)Google Scholar. See also Schmidt, Wilhelm, The Culture Historical Method of Ethnology, tr. Sieber, (New York, Fortuny's, 1939)Google Scholar, a translation of his Handbuch der Methode des Kulturhistorischen Ethnologie, with an introduction by Clyde Kluckhohn, who acknowledges his debt to Schmidt. Rüstow wrote (I, 286) that when he first encountered Schmidt's ideas they acted as a “revelation concerning universal history.”

29 Rüstow employs Max Weber's expression Idealtypus—though like Weber he leaves it unclear as to what is to be understood by it, or why his particular design should be considered “ideal.” A searching critique of the methodological problems raised by the “ideal type” still remains to be written. Eucken, Wilhelm, Die Grundlagen der Nationalökonomie, pp. 41, 162, and 268Google Scholar, develops a suggestive distinction between Ideal- and Realtypen, according to which “capitalism” would be a “real type,” while ideal types are not images of reality: they are constructs which are used as measuring rods. Eucken points out that the concept of. an “ideal type” was derived by Weber from Georg Jellinek's Allgemeine Staatslehre. The concept has a long history; it is discussed, for example, by John Stuart Mill in his Logic, Book 6, Ch. 9, par. 3. Cf. von Schelting's, Alexander discussion in Max Webers Wissenschaftslehre (Tübingen, J. C. B. Mohr, 1934), p. 319Google Scholar, and Talcott Parsons' attempt to clarify the problem in The Structure of Social Action (New York, McGraw-Hill, 1937), p. 601Google Scholar. The ill effects of Weber's use of the notion of ideal type are illustrated in his discussion of bureaucracy; see my paper in Reader in Bureaucracy, ed. Merton, (Glencoe, Free Press, 1952.)Google Scholar

30 Gumplowicz, Ludwig, Der Rassenkampf (Innsbruck, Wagner'sche University (1909)Google Scholar; Oppenheimer, Franz, Der Staat, Vol. 2 of his System der Soziologie (Jena, Fischer, 1926)Google Scholar; and the work of Lester F. Ward. Cf. also Alfred Vierkandt's Gesellschaftslehre; Kern, Fritz, Die Anfänge der Weltgeschichte (Bern, Francke, 1953)Google Scholar; and Weber, Alfred, Kulturgeschichte als Kultursoziologie 2nd ed. (München, Piper, 1935)Google Scholar. But see my Constitutional Government and Democracy, 3rd ed. (Boston, Ginn, 1950), p. 22Google Scholar.

31 Rüstow notes that this “law” was clearly stated by Adolphe Coste, a 19th century French sociologist, who described it in his Principes d'une sociologie objective (Paris, Alcan, 1899), pp. 154–56Google Scholar.

32 See, for example, Baudin, Louis, Die Theorie der Eliten (Sonderdruck, Monatshefte, 1953)Google Scholar.

33 But this belief is not fortified by adequate consideration of the problems which mass society and mass man present. In The New Belief in the Common Man (Boston, Little Brown, 1942Google Scholar, later republished with a prologue and epilogue as The New Image of the Common Man (Boston, Beacon 1951)Google Scholar, I tried to suggest the lines which such a restatement might take—by the projection of human potentialities as the image of a “communal man” (Gemeinschaftsmensch). The issue goes back to the problems of Greek politics: when Aristotle says that man is a being living in a polis, he is essentially asserting this need for community. The dangers of total absorption as exemplified in the political philosophy of Plato have recently been increasingly recognized, although the attack is overdone in such writings as Popper's, KarlThe Open Society and Its Enemies (London, Routledge, 1945), Vol. 1Google Scholar. What is needed is a balanced concept of man's individual and communal needs and potentialities, and this the Ordo liberals are trying to achieve. See Röpke's two works cited in notes 1 and 2; also Kluckhohn, Clyde, The Mirror for Man (New York, Whittlesey House, 1949)Google Scholar.

34 The treatment of these “tendencies” is on the whole rather sketchy, based as it is largely upon the analysis offered by Max Weber. Very little attention is given to the recent extensive American literature on the subject of bureaucratization. For the topic of Rechtstaat, which is crucial for Rüstow's thesis, not a single reference is given; all the English and American writings on the rule of law and of constitutionalism seem to count for nothing. Of course they are not based upon the idea that conquest and dominance are so important for the development of the “state,” nor would they agree with Rüstow's view of feudalism, which neglects the feudal origins of Western, and more particularly British, constitutionalism. On the Rechtstaat, see Hayek's article cited in note 5.

35 Thus Rüstow would have the bureaucracy the main factor in the process of crystallizing a “public” and a “general” interest: “By way of the professional officialdom with its division of labor … there occurred for the first time an ever-clearer disentangling and separating of the two interests (the private and the public), with the general interest concentrated … in the hands of the professional civil service” (I, 244). In the light of English parliamentary history, this view is a difficult one for Englishmen and Americans to accept.

36 The “estates” (Stände) occupy in Hegel's thought the place which in Rüstow is taken by the “interests” and the parties which pluralistically represent them and thus threaten “to devour the state.” [For Hegel, see Philosophy of Right and Law, pars. 50–256, 301–315.] See my edition of Hegel's Philosophy of History, pp. 229, 308, and the comment in the introduction.

37 Rüstow observes that it is therefore essential to explore the conditions and limits of such healthy bureaucracy, but seems to be unaware that a great deal of work has been done in England and America on precisely this problem. With Cole, Taylor, I published Responsible Bureaucracy: A Study of the Swiss Civil Service (Cambridge, 1932)Google Scholar, and followed this with a study entitled Responsible Government Service (New York, 1935)Google Scholar, which dealt with the United States. See also the bibliography for Chapter 19 of my Constitutional Government and Democracy and the more recent study of Hyneman, Charles S., Bureaucracy in a Democracy (New York, 1950)Google Scholar.

38 Wilhelm Röpke also stressed the need for combating “proletarianization,” “congestion,” and the trend toward excessive size in general; see his Civitas Humana, Chs. 6–9, and The Social Crisis of Our Time, pp. 199–223. There are obvious links to the American trend exemplified by Mr.Brandeis', JusticeThe Curse of Bigness (New York, 1934)Google Scholar, and Arnold's, ThurmanThe Folklore of Capitalism (New Haven, 1937)Google Scholar. For a sharply contrasting view, see Ashton, T. S., “Treatment of Capitalism by Historians,” in Capitalism-and the Historians, p. 33Google Scholar.

39 In the United States and elsewhere, the problem of the closely-knit neighborhood has received increasing attention. Modern architecture recognizes the need for planning community centers and the like. In Italy a keen appreciation of the issue has led to the organizing of the Community movement, with a journal, Rivista del Movimento Comunità, now in its 8th year, directed by A. Olivetti. The movement is European in scope; it finds expression in the Conseil des Communs d'Europe, composed of national associations in most of the members of the Council of Europe. It is rightly based upon the notion that only strong local communities can ensure the development of genuine democracy.

40 Rüstow's judgment of Hegel is unduly harsh: he does not seem to be aware of the extent to which his own work is in the Hegelian tradition (the same is true of a number of other German writers of this general type, notably Alfred Weber). He has in common with Hegel the emphasis upon a constitutionally limited and legally defined freedom, and an enthusiasm for the Greeks, more especially the Athenians. They also share quite a few other general judgments—for example, the notion that conquest and all that goes with it are forces for a basically necessary and intrinsically desirable evolution.

41 These phrases are strongly reminiscent of Hegel's enthusiasm, indeed almost a vindication of Hegel's exclamation: “Greece, oh my Greece, you will yet be resurrected!” (See my introduction to The Philosophy of Hegel, p. xvii). Yet Rüstow, unlike Hegel, does not fully appreciate the significance of slavery as a limiting aspect of Greek notions of freedom; indeed he makes every effort to minimize its significance, likening it to domestic service in the West. See II, 41, where the problem is discussed in the context of a critique of Jakob Burckhardt's Grieschische Kulturgeschichte. Rüstow rejects Burckhardt's bitterly critical view of the polis: in my view, Burckhardt has the better of the argument.

42 Cited in my edition of The Philosophy of Hegel, p. 87. Hegel's notion that absolute truth is revealed in the Christian message was and is so unacceptable to many of his intellectual followers that this crucial aspect of his philosophy of history is often overlooked, and his viewpoint is given an immanentist and secular turn.

43 There is a related point of divergence between the neo-liberals and earlier thought on the subject of the Reformation. Rüstow and others see the Reformation aa primarily anti-liberal and anti-democratic: with Engels and his latter-day followers, he stresses Luther's turning against the peasants in 1525, without giving adequate weight to other aspects of Luther's writings, or to the peasants' own very dubious case. Regarding this problem see my Inevitable Peace (Cambridge, Mass., Harvard University, 1948)Google Scholar, Ch. 4, entitled “Peace and Natural Law: The Christian Tradition”; see also Lilje's, Bishop HannsLuther: Anbruch und Krise der Neuzeit (Nurnberg, Laetare, 1952)Google Scholar. For Rüstow's views see II, Ch. 20, especially p. 288. Rüstow feels that his view of Luther is “historical” and that his condemnation is an inevitable consequence of the value decisions upon which his work is based. One may question both propositions.

44 It will be observed that this viewpoint is conventional in England and America, except for the stress on the French Revolution. The peculiar importance for the whole trend of the stress on law has been made the key to his analysis by Frederick M. Watkins —himself a conservative liberal—in The Political Tradition of the West (Cambridge, Mass., 1948)Google Scholar. Watkins, of course, emphasizes the growth of constitutionalism as represented by British and American thought, which Rüstow recognizes without adequately stressing the central importance of the concept of the constitution. See my Constitutional Government and Democracy, Ch. 1.

45 Eucken's interesting effort at analysis in terms of both real types and ideal types (see note 29) has much to recommend it, but is not followed to any extent by Rüstow, Röpke, Böhm, or any other writers. Rüstow has criticized Eucken's position in a paper entitled “Der Idealtypus oder die Gestalt als Norm,” in Studium Generale, Vol. 6 (1952)Google Scholar.

46 de Ruggiero, Guido, The History of European Liberalism (London, 1927)Google Scholar, wisely made Hegel a central focus of his analysis of the German liberal tradition, but failed to develop adequately its inherent dangers.

47 See Rüstow's, Zwischen Kapitalismus und Kommunismus (Godesberg, Küpper, 1949)Google Scholar. Likewise rejected by these liberals is the democratic quietism which accepts the pluralism of competing interests and pressure groups as somehow issuing in a parallelogram of forces from which the public interest emerges in adequate doses. In lieu of the many familiar political items cited in my Constitutional Government and Democracy, I may mention only Galbraith's, Kenneth imaginative American Capitalism: The Concept of Countervailing Power (Boston, Houghton Mifflin, 1952)Google Scholar. Precisely this notion of the counterweight is found in Röpke.

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