The decline of ordoliberal influence in the Mont Pelerin collective. Röpke’s Occident, the “Hunold Affair” and the rise of the Chicago School
ABSTRACT. A growing body of research is shedding light on the development of the neo-liberal movement from its inception in the 1930s. Far from being a homogeneous set of ideas embodying a minimal state or an anarcho-capitalist caricature, the progression of neo-liberalism – as well as the Mont Pelerin Society which attempted to promote it – was far more complex. The German neo-liberals, or ordoliberals, including the Freiburg School of thinkers, were influential in these early years. This group held generally more interventionist views on economic matters and was closely linked with the West German “social market economy’. One such thinker, Wilhelm Röpke, looked to take a leading role in the neo-liberal attack on collectivism and Keynesianism in the 1940s by launching – unsuccessfully – an international journal, “Occident”. Between then and the early 1960s, when Röpke resigned from the Mont Pelerin Society, the balance of power and ideas shifted amongst neo-liberals. The reasons for this included the rise of Milton Friedman’s Chicago School and the role of Friedrich Hayek, who perversely had to fight what he saw as the wider danger of collectivism by playing down the differences within his Mont Pelerin Society and maintaining the group’s unity.
Neo-liberalism in the 1930s and 1940s was broader, more moderate, and more tolerant of interventionism than its latter version. The ordoliberals and Freiburg School were influential in the early years of the neo-liberal collective, but were subsequently to lose influence. This same period concurrently saw the rise of the Chicago School. The historical development of neo-liberalism from the 1930s is a growing area of research, replacing the more radical framework adopted by critics, and documented by Boas and Gans-Morse – that posited the movement somewhere between the technocratic Chicago School of Milton Friedman and the utopian libertarianism associated with the Austrian School and its acolytes such as Ludwig von Mises and Murray Rothbard. This growing historiography shows how the resurgence in economic liberalism after World War Two is more complex, and represents a greater number of points of view than was previously accepted.
The unity of Hayek’s Mont Pelerin Society is important in this development, as is the portrayal of neo-liberalism as a homogeneous set of ideas, often as a tool of US-led imperialism, “market fundamentalism”, or a conspiracy of financial capital. This paper will show how the efforts of Wilhelm Röpke to found an international journal in the early 1940s demonstrated the broad neo-liberal strategy but also how a more ordoliberal, or to use his term “Third Way”, set of ideas lost influence in the Mont Pelerin Society in the group’s early years. It also shows the rise of Milton Friedman’s Chicago School and how Hayek’s role was vital in the shift of neo-liberal gravity from Europe to the United States. This paper builds on the historical development of neo-liberalism after the War, and in particular examines how German ordoliberalism lost influence in the Mont Pelerin Society between two events – Röpke’s attempts to set up an international journal in the 1940s and his resignation as the Society’s President in 1962.
Boas and Gans-Morse’s 2009 article “Neoliberalism: From New Liberal Philosophy to Anti-Liberal Slogan” illustrates how the term has become increasingly opaque, and achieved negative connotations, over the past twenty years.[1] The article also explores the development from German neo-liberalism to the catch-all term of the 2000s.[2] Alongside this recognition there has developed a growing literature on the broader, and previously less well-understood, neo-liberal movement. Several books explore the origin of neo-liberalism and its variants. Rachel S.Turner’s Neo-Liberal Ideology. History, Concepts and Policies (2008) defines the main schools and how these were responses to situations specific to that region, for instance in Germany as a reaction to the breakdown in the rule of law and the rise of cartels.[3] Philip Mirowski and Dieter Plehwe’s collection The Road From Mont Pelerin. The Making of the Neoliberal Thought Collective (2009) examines these separate positions in more detail, from the German thinkers of the 1930s to the more familiar Chicago School. There is a particular focus on how neo-liberals view state power and democratic processes, as well as a focus on the deliberately collective nature of the Mont Pelerin Society.[4] This article will accept the premise that neo-liberals coalesced into a group after the War around the Mont Pelerin Society, with one caveat, that one of the leading members and drivers of its development – Milton Friedman – did not share this view.[5] Masters of the Universe. Hayek, Friedman, and the Birth of Neoliberal Politics (2012) by Daniel Stedman-Jones dissects the early variant of neo-liberalism in Europe and its transformation once it had crossed the Atlantic. Stedman-Jones identifies two Chicago Schools, an earlier one led by Henry Simons more in the “social” ordoliberal tradition, and the increasingly radical and economics-driven Friedmanite School from 1946.[6] Jamie Peck, in Constructions of Neoliberal Reason (2010) follows several of these arguments, including neo-liberalism’s transatlantic “conversion”, and highlights the manner in which neo-liberalism has adapted or tried to “fix markets” since its inception and has required continuous “reconstruction”.[7] Peck sees neo-liberalism as “regulation-in-denial”.[8] Along with Harvey he views neo-liberals as trying to “retask” the state, and similarly to Boas and Gans-Morse and Stedman-Jones, that ordoliberalism was a moderate version of the movement compared to its successors.[9]
Ben Jackson has also described how many of the early neo-liberals produced literature in the 1930s and 1940s that advocated state regulation to break up large corporations.[10] Indeed Henry Simons wrote in 1934 that “the great enemy of democracy is monopoly, in all its forms”.[11] This was to conflict markedly with later neo-liberal thinking, that privileged the sovereignty of the individual over the wider community. David Harvey’s concept of neo-liberalism’s “long march” perhaps does not adequately capture how certain elements of neo-liberal thought came into focus as time passed.[12] The ideas of German neo-liberalism, as well as its continental counterparts, lost influence during the 1950s as Milton Friedman’s Chicago School came to prominence. Hayek, the Mont Pelerin Society’s pivotal arbiter, aligned himself closer to the Americans during the “Hunold Affair” of the late 1950s and early 1960s. This led to one of the key ordoliberals, Wilhelm Röpke, leaving the Society. It was a result of personality, events and strategy. Hayek combined with the Chicagoans despite criticizing them in private, and turning his back on his long-time friend with whose thinking he had – in many ways – more in common. As founding Mont Pelerin member Bertrand de Jouvenel noted, the group moved from a “free company of people who think together” into “a team of fighters”, and as a result narrowed its horizons, leading the way for its much-maligned “Anglo-American” character.[13]
1930s Neo-liberalism
Following the 1929 Wall Street Crash and subsequent Great Depression, economic liberals swam against the popular tide in the 1930s. Populist politics, totalitarian regimes, protectionism and economic planning all – in their own ways – attempted to attenuate or prevent the excesses of laissez faire. A relatively small group of thinkers and academics in Europe and the United States retained their faith in free markets but virtually all acknowledged that something more than laissez faire was now necessary. Recent literature on neo-liberalism has shown how thinking during the 1930s and 1940s had a number of similarities that have not been considered when trying to paint the movement as one closer to a renewal of laissez faire or “market fundamentalism”.[14] For instance, the position of the Chicago School’s Henry Simons – mentor to Milton Friedman – and the European neo-liberals towards competition and monopoly converge.[15] Both Simons and German thinkers such as Walter Eucken, Franz Böhm, Alexander Rüstow, Alfred Müller-Armack and Wilhelm Röpke identify concentration of power in the form of monopolies and cartels as the key threat to economic and political liberty. Regulation to prevent monopolies and create competition was one objective for these neo-liberals. Even Friedrich Hayek – at the LSE during the 1930s – showed some sympathy for these positions during this time.[16] The necessity for stable monetary conditions was another crucial area for neo-liberals and a number of different ideas were proffered to ensure this – from fiat money manipulation to the gold standard to Hayek’s latter proposal for “choice in currency”.[17] Nevertheless, early neo-liberal thought supported more state intervention in the economy than the perception of the movement connected to the “radical” governments of Margaret Thatcher, Ronald Reagan and others.
The most important group of early neo-liberals coalesced in interwar Germany. Indeed it was here the term neo-liberalism was first coined, by Alexander Rüstow, as well as the principle of “free economy-strong state” that Andrew Gamble later associated with the Thatcher government.[18] In particular the University of Freiburg and the work of Walter Eucken and Franz Böhm, the so-called “Freiburg School”, set out an agenda of using the law to enforce economic competition and preserve freedom, which they saw undermined by political decisions in hoc to vested interests in Weimar Germany.[19] Ordnungspolitik, the principle of order creating the framework for economic liberty, led to these thinkers being dubbed ordoliberals.[20] Others linked with the term included Müller-Armack, Rüstow, Röpke and prominent post-war West German politician Ludwig Erhard.
In a 2014 edition of German economics magazine Wirtschaftswoche – devoted to ordoliberalism and the social market economy – Wilhelm Röpke was described as the “most eloquent amongst” the movement’s “intellectual fathers”, and who “wrote a number of brilliant books”.[21] Röpke was born in 1899 and like most of his fellow German neo-liberals, was a veteran of the Great War. Following the War he studied the cartels of the potash mining industry and subsequently took up a professorship at the University of Marburg.[22] These experiences made him a staunch liberal and wary of coercion by those in power. Röpke’s lifelong intellectual themes were how to prevent the formation of vested interests and monopolies.[23] His ideas of a “Third Way”, the prevention of what he dubbed “proletarianization” and the curbing of laissez faire’s excesses – while retaining economic freedom – were consistent with his contemporaries like Eucken and Böhm at Freiburg.[24] Unlike most of the other schools of neo-liberalism, these German ordoliberals viewed markets as a means, as a social instrument.[25] Röpke’s strong religious conviction, which increasingly influenced his work in later years, has meant he has been associated by some writers with the “fusionism” of economic liberalism and social conservatism, typical of the Republican Party in the US since the 1960s.[26] This, however, does not take into account the amount of interventionism he believed possible in the economy, or what Röpke dubbed “market compatible” and “incompatible” interventions.[27] He was also close to Friedrich Hayek, and this relationship would be a crucial one in determining the early direction of the Mont Pelerin Society.
Röpke, unlike most other German neo-liberals, openly opposed the Nazis before and after they came to power. Prior to the 1930 election he wrote a pamphlet that stated “No one who votes for the National Socialists on September 14 should be able to say he did not know what might come of it” and shortly after Hitler was made Chancellor in 1933 made a speech criticising the new government.[28] Seeing that the writing was on the wall Röpke fled to Istanbul, and then to Geneva in 1937. During his exile Röpke remained in contact with Hayek, who was at the LSE in London, and both attended the precursor to the Mont Pelerin Society – the 1938 “Colloque Walter Lippmann” in Paris. United by their opposition to Keynes and collectivism, as well as a commitment to stable monetary conditions, some writers have nevertheless identified a split within neo-liberal circles over levels of intervention in this initial meeting.[29] Röpke’s proximity to Hayek made him well-placed – and by association German ordoliberalism – to influence the direction of the neo-liberal movement. Geography, however, was to frustrate Röpke. During the 1930s and the years of war Hayek enjoyed the relative sanctuary of Britain and latterly worked on his influential polemic The Road to Serfdom. Röpke, by contrast, was forced from Germany to Turkey and then Switzerland. He complained about being prevented from attending conferences because of his “unbiased” nationality during the war and being harassed, dubbed a “neo-Nazi” and having his house requisitioned by the British occupiers after 1945.[30] Nicholls has written that Ropke’s “detached position outside Germany” created a “melancholy and even slightly embittered cast of mind”, despite still acting as an inspiration for German liberals.[31] Nevertheless, both Röpke and Hayek sought out strategies to battle the tide of collectivism and spread their liberal ideas.
In the 1940s Röpke wanted to organise a quarterly liberal international journal, Occident, while Hayek pursued the Paris Colloque format and an “academy” of intellectual discussion.[32] It appeared that Röpke’s idea might take shape first. By 1945 he had assembled a preliminary editorial board and attracted the interest of some Swiss financiers, including businessman Albert Hunold.[33] Röpke outlined his objectives for Occident, that it “must appeal to the upper intellectual class” and “thus obviates vulgarisation and all concessions to the tastes of the multitude”, “it is not intended, therefore, to exercise direct influence on the masses”.[34] In this respect he outlined the strategy that Hayek would pursue with the Mont Pelerin Society, attempting to influence those close to power, rather than grass-roots public opinion. Röpke’s journal, however, failed to get off the ground. The German refused to compromise over the role of his financial backers. Röpke wanted full editorial control and to deny Hunold the rights of ownership the Swiss businessman desired.[35] Unable to find the necessary money, the temperamental and apparently intransigent Röpke gave up on his Occident idea in the summer of 1946.[36]
The neo-liberal flame then passed to the more astute and strategically minded Friedrich Hayek. The Austrian drew directly on Röpke’s plan for Occident but in the format of a conference.[37] Hayek retained Röpke’s principles: that liberalism needed a truly radical revision, that a collective should be a grand coalition of individuals that shared broad principles, and a faith in the potential for abstract intellectual discourse to inspire political change.[38] In the 1940s these principles could seemingly be as broad as an antipathy towards the thinking of Keynes and the fashion for central planning. Hunold had invited Hayek to speak in Zurich in late 1945 to a group of Swiss businessmen and financiers about his proposed conference.[39] Hayek, however, dismissed Röpke’s editorial concerns and persuaded Hunold to redirect the 20,000 Swiss francs earmarked for Occident, to Hayek’s proposed conference.[40] As a result the Mont Pelerin Society met for the first time in April 1947 and Hayek assumed leadership of the neo-liberal movement. Despite its statement at the first meeting declaring there was no collective view and that no one voice represented it, Hartwell has written that Hayek was nevertheless linked indissolubly with the Society.[41] James Buchanan, the “Public Choice” theorist and Mont Pelerin member, said that Hayek “dominated the group”, was “treated with respect that approached awe” and was accorded “too much deference”.[42]
Hayek’s sympathies and positions were important to the direction taken by the Mont Pelerin Society. Röpke represented thinking consistently more interventionist and ordoliberal than Hayek and the latter’s associated “Austrian School”.[43] Nevertheless, the two were closer in the 1940s than later readings of neo-liberalism suppose and Hayek was always more moderate than the subsequent cliché of a “market fundamentalist”.[44] The German neo-liberals, including the Freiburg School and Röpke, proposed familiar neo-liberal models of monetary control by an independent central bank, as well a number of state functions such as anti-trust and competition enforcement embedded in law. In addition to his ordoliberal focus on the curtailment of concentration of power, Röpke identified the need to prevent “proletarianization”, and therefore the class resentment that had led to social upheaval and revolution earlier in the century. This theme resonated with conservative ideas like property-owning democracy. Röpke’s 1946 work The German Question has been compared with Hayek’s The Road to Serfdom in its impact, albeit almost exclusively in the German-speaking world.[45] Röpke himself believed his thinking represented a “Third Way” between laissez-faire and planning.[46]
In the early years of the Mont Pelerin Society, German neo-liberals were unique in their proximity to policy-making, and were closely associated with the German economic “miracle”. Röpke had published a number of influential works in the 1940s while Alfred Müller-Armack talked about a “social market economy” in an article in 1946. Both outlined the ordoliberal themes developed before the war, of free markets with provision for ensuring competition, social welfare and the importance of “moral principles”. The term “social market economy” was to become synonymous with West German economic policies. Meanwhile in the British and American zones of occupation, Ludwig Erhard was put in charge of overseeing currency reform and his advisors included Eucken, Böhm and Müller-Armack.[47] In June 1948 Erhard helped introduce the Deutsche Mark and lifted a number of price controls, which was seen by many as the start of Germany’s post-war revival. This step was eulogised in Milton Friedman’s 1970s speeches as an example of “shock therapy”.[48] The initial success of Erhard’s currency reform was also a Western propaganda success in the Cold War.
In 1949 Germany held federal elections. Shortly before the Christian Democratic Union (CDU) and its Bavarian sister party the Christian Social Union (CSU) had accepted the concept of “social market economy” onto its platform. The leader of the CDU, Konrad Adenauer, was elected Chancellor and made Erhard his economics minister. Most of the ordoliberals were not far away. Alfred Müller-Armack served as state secretary in Erhard’s ministry while Franz Böhm was a prominent member of the Bundestag.[49] Röpke was on Erhard’s currency reform council in 1947 and 1948, and was asked by Chancellor Adenauer to write a defense of his government’s economic policies in the 1950s.[50] The CDU under Adenauer and Erhard led the Federal Republic of Germany from 1949 until 1966. During this time the country, in stark comparison with communist East Germany, saw rapid economic growth. This was termed the Wirtschaftswunder, or economic miracle. In 1959 the main opposition party on the left, the Social Democratic Party (SPD), broadly accepted the tenets of the social market economy at its conference in Bad Godesberg. Even in 2014 the main German political party leaders declared some level of commitment to the concept of a social market economy.[51]
The ordoliberals were prominent in the early years of the Mont Pelerin Society. At the first meeting, in a discussion about “competitive order” ordoliberal and architect of the social market economy in West Germany, Walter Eucken, clashed over intervention with the more classically liberal Ludwig von Mises. The two represented the opposing wings of the neo-liberal movement and Hayek attempted to bridge the divide, stating “that we shall strongly disagree on these topics, the more the better”.[52] Mises famously stormed out of a session in 1949 declaring his colleagues “socialists”, and later described the “ordo-interventionists” as not much better than “totalitarian socialists”.[53] Hayek more diplomatically described the “Ordo circle” as a “restraining liberalism”.[54] The ordoliberals were similarly scathing in private and dubbed more classical liberal thinkers such as Ludwig von Mises “paleoliberals”.[55] In one correspondence between Rüstow – who had coined the term neo-liberalism in 1938 – and Röpke the former wrote that Hayek “and his master Mises deserved to be put in spirits and placed in a museum as one of the last surviving specimen of the extinct species of liberals which caused the current catastrophe.”[56]
As we have already seen the ordoliberals were initially close to power in West Germany. Finance Minister Ludwig Erhard identified himself with German neo-liberalism and was a Mont Pelerin member. The initial meetings represent this influential, if not dominant, position. At the second meeting in Switzerland in 1949 Röpke spoke about “The Proletarianised Society”, in 1953 Erhard and Muller-Armack gave a talk titled “The Recovery of Germany”, and Erhard, Böhm and Rüstow all spoke at the seventh meeting in 1956.[57] Within the broader neo-liberal movement, however, this was to represent the high point for German ordoliberalism. A journal representing this group of thinkers was also set up, in 1948, by Eucken and Böhm, called ORDO.[58] Wilhelm Röpke served as a founding member of the journal’s advisory board, which also included Hayek, and although it went on to exert influence ORDO failed to have the methodological breadth or cosmopolitan reach that Röpke had hoped for with Occident.[59]
The Rise of the Chicago School
During the 1950s and early 1960s a number of events took place that changed the direction of the neo-liberal movement, as embodied by the Mont Pelerin Society. Firstly, there was the rise to prominence of the Chicago School under Milton Friedman’s leadership. Second was the shift in position of the Chicagoans – on issues such as monopoly – from a more moderate and interventionist ordoliberal approach, to an increasingly radical pro-market one. Third, there was the “Hunold Affair” in the late 1950s and early 1960s that saw a successful coup by the Americans in the Mont Pelerin Society and led to the diminishing influence of Europeans like Röpke. Lastly, Hayek made a number of strategic moves that meant he sided with the Anglo-Saxon neo-liberals – despite his personal reservations with their economics – and also purged the Society of its original Swiss benefactor. This all meant that the neo-liberal movement lost some of its original breadth, and was an important step towards its modern – and much vilified – version.
Prior to his death Henry Simons had been the major figure at the Chicago School of Economics, and had a similar stance towards competition as German neo-liberals like Eucken, Böhm and Röpke. Friedman was to become the leader of the department from 1946, which Stedman-Jones has dubbed the “second” Chicago School, and also included George Stigler, Aaron Director and Gary Becker.[60] During the 1950s the positions of the School underwent a metamorphosis, in part due to long running projects, such as the “Free Market Study Group” and the “Anti-Trust Project”.[61] This altered the Chicagoan perception of monopoly and competition. With Stigler at the forefront, Chicagoans came to believe that monopolies were sustained by government but that also large companies could replicate the competition function.[62] Friedman, who in 1951 appeared to still be Simons’ protégé, later relaxed his attitude towards any imposition of competition, stating that in most markets there existed “giants and pygmies side by side” and that there was a tendency to “overemphasise monopoly”.[63] In addition, the kind of “social” proposals made by the early neo-liberals were slowly eroded.[64] This may have been because of the changing realities of Western societies as the memory of the desperation of the 1930s and 1940s began to fade. Stedman-Jones believes business activism against the New Deal, as well as the Cold War, were important in “radicalising” neo-liberalism.[65] Friedman explained the shift by saying Simons was willing to entertain a relatively active role for the state because he wrote “at a time when government was small by today’s (1962’s) standards.”[66]
Hayek, however, was the key to the direction of the Mont Pelerin Society. During the 1950s and 1960s he sought to retain the unity of the collective, remove disruptive elements and steer the group towards its most effective course. Having initially accepted some role for his chief financial backer, Albert Hunold, Hayek became increasingly concerned over the Society’s secretary’s behaviour. Hunold was hungry for change and agitated for a higher profile for the Society, while Hayek preferred to be above the fray and detached from everyday political concerns.[67] Hunold created ill-will at the meetings in Princeton in 1958 and Oxford the following year and wanted to publish a Mont Pelerin Society Quarterly, against Hayek’s wishes.[68] As its members tried to remove Hunold, Wilhelm Röpke – contrary to their 1946 quarrel – proved to be his prime supporter, believing the Society owed a debt to the Swiss for his initial financial support.[69] As Europeans such as Röpke and Böhm lined up behind Hunold, the main opposition came from Friedman and Stigler, with Hayek inevitably acting as arbitrator.[70] Ludwig Erhard also tried to intervene and diffuse the impasse.[71] Friedman acted with “extraordinary intensity” over the matter against the “reactionary” Hunold and “agrarian” Röpke and strongly supported Hayek against the pair.[72] The Chicago economist had not, in fact, attended a Mont Pelerin meeting for ten years after its founding conference and believed the format was far more useful for Europeans than in the US where there were far more “partisans of free markets and free enterprise than in most other countries”.[73] When he became Mont Pelerin President in 1971, Friedman tried to unsuccessfully “terminate” the group, writing in his memoirs that he had “concluded Hayek’s original objectives had been achieved and that the society had become too large and unwieldy”.[74] Therefore despite the centrality of the Mont Pelerin Society to historians of the neo-liberal movement, key members like Friedman did not necessarily share this viewpoint at the time. Yet Friedman was to have a key influence on the direction of the more abstract “movement”, as well as the composition of the Mont Pelerin Society.
After George Stigler threatened to resign and following a tumultuous meeting in Turin in 1961, Hunold and Röpke stepped down. The latter noted “a split between America and Europe within our own Society” while founder member Bertrand de Jouvenel lamented the Society’s new direction.[75] As Burgin has written, this period marked a narrowing of the Mont Pelerin Society’s horizons.[76] Jouvenel, who resigned in 1960, said that the Society’s members had moved to the opinion that the State can do no right, and private enterprise could do no wrong.[77]
For Hayek, however, the unity of his Society was vital and his actions over the Hunold Affair concealed his differences with the Chicagoans. He later admitted that he avoided criticism of what he considered Milton Friedman’s macroeconomic “nonsense” for the sake of Mont Pelerin unity.[78] Articulating his position vis-à-vis the use of the state compared to Friedman, Hayek once commented “Milton’s monetarism and Keynesianism have more in common with each other than I have with either.”[79] In order to combat what he saw as the rise in collectivism, Hayek perversely attempted to maintain the collective nature of his Society by playing down its ideological splits. The Austrian was conscious not to allow the group to splinter into Hayekian and Friedmanite wings. This may have encouraged critics to view neo-liberalism as a homogeneous set of ideas and its protagonists in broad agreement.[80]
We have already seen how on several issues European thinkers differed in their approach. Some recent writers on neo-liberal history, however, suggest that “ordoliberalism is substantially less different from other streams of neoliberal thought than many have thought”, due to a “limited, primarily economic understanding of freedom” and a “strong authoritarian element, which is displayed in a fundamental skepticism toward democracy”.[81] Even more recent contributors to the German-language ORDO journal have indeed expressed dissatisfaction that “democracy can impede economic processes”.[82] Nevertheless there were a number of marked differences between the groups and actors involved in the Mont Pelerin collective. Consider the Austrian and Chicagoan views on monetary control, and the associated use of the state, or the view of Austrians, Chicagoans and ordoliberals towards monopoly and competition, as well as the role of law in a market economy. The neo-liberal movement was a collection of individuals with different opinions who were affected in various ways by the events of the time. The breadth of views in the Mont Pelerin Society diminished after the resignations of Hunold and Röpke in 1962. Concurrently the significance of German ordoliberalism also declined in the neo-liberal movement as a whole. The failure of Röpke to launch Occident in the 1940s, and the move by Friedman and Stigler to shift the focus of the Mont Pelerin Society from Europe to the United States during the Hunold Affair, played a part in this transition. The latter event was also the first time in which Friedman had brought his influence to bear over his neo-liberal contemporaries. Hayek’s allegiance, above all, was critical in this shift, as well as his political acumen in knowing when to compromise, and when to assert his authority in the campaign to win the battle of ideas against collectivism and Keynesianism.
The Ordoliberal Legacy
The resurgence in liberal thought, from the 1960s, became more closely linked with the work of Milton Friedman – in particular his ideas on monetarism – and in a less clearly defined way that of Friedrich Hayek. Friedman used West German prosperity in selective ways, but nevertheless it fitted into his wider narrative that promoted deregulation and free markets. He lauded Ludwig Erhard’s 1948 currency reforms as the precursor to an economic miracle and used the country as a successful example of “shock therapy”. Even in his controversial relationship with Chilean dictator Augusto Pinochet the ordoliberals were invoked. Friedman wrote to Pinochet stressing the importance of implementing a “social market economy”.[83] Yet clearly Friedman’s ideas put less emphasis on the social element of the German model. Whereas monetarism can be linked with the Freiburg School, other ordoliberal ideas such as legally enforcing competition, preventing monopoly, social protection, and limiting “proletarianization”, was not included in the Chicago School programme. Indeed, Friedman’s proposals on monopoly and regulation began to look quite different. Others in the Mont Pelerin collective drifted towards libertarian positions and hostility towards government that was incompatible with ordoliberalism. As a result, ordoliberal ideas never gained significant ground or influence in the English-speaking world. By the time British politicians like Margaret Thatcher and Geoffrey Howe took office in 1979, apparently with a “neo-liberal” agenda, the likes of Eucken, Rüstow and Röpke were footnotes in little-known history books. Conservatives of a free market persuasion, such as Nigel Lawson, preferred to conflate the ideas of Hayek and Friedman with British historical figures like David Hume and Adam Smith.[84]
In Britain, however, there were some links with the German principle of social market economy in the post-war era. Britain’s economic performance lagged behind its Western European counterparts, particularly Germany. It was this period in the 1960s and 1970s when British politicians began to seek alternatives to post-war orthodoxy and unsurprisingly some investigated the German model. The UK government commissioned a number of reports that compared the West German and British economies. In one from the early 1970s author, and liberal, Alan Peacock admiringly compared the British unemployment figure of 2.5% with that in West Germany of less than 1%.[85] Others examined the remarkably tranquil industrial relations in the country, a product of the consensual approach of German “works-councils”. Sir Keith Joseph founded the CPS in 1974 with Margaret Thatcher to study the social market economy, in particular its labour relations, and at one point planned to call the think-tank the “Ludwig Erhard Foundation”.[86] In addition, during his “conversion” to economic liberalism during this period Joseph sought out the work of Wilhelm Röpke.[87] Even Labour politicians took an interest in the social market economy, particularly the concessions the SPD had made in its Godesberg Programme. Some were to join the Social Democratic Party (SDP) in 1981 as Labour under Michael Foot seemed intent on drifting ever further to the left. Yet all this was to yield scant results. These British politicians were not converted to the ideas of ordoliberalism. Historians of neo-liberalism have noted the “puzzling” nature of the German social market economy in having had such “little impact on the policy makers of other Western economies”.[88] The eventual influence exerted by liberal ideas on Margaret Thatcher was probably more due to the applied work of Milton Friedman, with a little Hayek – and their interpretation by British thinkers like Alan Walters – than anything else. As has been documented, this was all then shaped by traditional Tory “Statecraft”.[89] Therefore despite some British politicians showing interest in the West German social market economic model, and to a less extent ordoliberal ideas, this had little impact on the UK apart from a committed policy towards monetary restraint under the Thatcher government and less clearly in the regulative framework set up alongside some privatisations.
Conclusion
Notwithstanding German neo-liberals believing their ideas went into decline after Erhard’s retirement there is evidence to show ordoliberalism has had a significant impact on the economic policy making of Germany, before and after unification.[90] Ordoliberal principles, such as those concerning competition policies, may have also influenced post-war European treaties while Angela Merkel has openly expressed her admiration for ordoliberal thinkers such as Walter Eucken.[91] At a memorial service for Wilhelm Röpke in 1967, Ludwig Erhard said that the former’s books, illegally obtained during Nazi rule, were “absorbed as the desert drinks life-giving water”.[92] Yet the international impact of the kind of ordoliberalism or social market economy advocated by the likes of Röpke, Eucken, Böhm and Erhard was far less pronounced. From the early 1960s the direction of the Mont Pelerin Society, and by association the neo-liberal collective – was guided more by the technocratic policies and work of the Chicago School and to a lesser extent the more libertarian Austrian School. Hayek’s role and allegiance was crucial in the progression of the Society. Therefore ordoliberalism, or the ideas of European neo-liberalism, became lost in comparison with the “Anglo-Saxon” reading of twentieth century economic liberalism. The one obvious exception to this was monetary restraint, although neo-liberals often did not agree on how to achieve this aim. As work on neo-liberalism mushroomed during the 1990s and 2000s, often linked with the study of governments such as those of Margaret Thatcher and Ronald Reagan and labels such as globalization, market fundamentalism and the Washington Consensus, the origin of the term and the role German ordoliberals played was – for the most part – absent and or at least less clearly understood. The events within the neo-liberal collective between the 1940s and early 1960s, that saw Wilhelm Röpke fail in his attempt to launch Occident and who ultimately became a casualty to the politics of the group was one reason – albeit one amongst a number of historical forces – that hastened the decline of the influence of the German ordoliberals.
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[2] Three examples include Richard Falk, “The global setting”, The Iraq War and Democratic Politics, ed. Alex Danchev and John MacMillan, (London: Routledge, 2005), 27, the interchangeable use of neoliberalism and neoconservatism, David Held and Anthony McGrew, Globalization/Anti-Globalization, (Cambridge: Polity Press, 2003), 100, and the very broad and ill-defined use, Polly Toynbee, “To condemn those who pay so little is not job snobbery”, The Guardian, 20 April 2012, 35.
[3] Rachel S. Turner, Neo-Liberal Ideology. History, Concepts and Policies (Edinburgh: Edinburgh University Press, 2008), 4, 219.
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[44] Hayek’s later work, The Constitution of Liberty, has a focus on the law that is somewhat ordoliberal in its emphasis.
[45] Gregg, Wilhelm, 8.
[46] Wilhelm Röpke, The Social Crisis of Our Time (London: William Hodge & Co, 1950, first published in 1941, translated from the German by Annette and Peter Schiffer Jacobsohn), 173.
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[51] Wirtschaftswoche, 1 March 2014
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[56] Hartwich, Genesis, p. 24. See also Philip Plickert, Wandlungen des Neoliberalismus – Eine Studie zur Entwicklung und Ausstrahlung der ‘Mont Pelerin Society’ (Stuttgart, 2008, 87-106), 105
[57] COCKETT/1/4, notes from the first session of the Mont Pelerin Society, 1 April, 1947.
[58] Burgin, The Great Persuasion, 85.
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[91] Peter Coy, “Will Merkel Act, or Won’t She?”, Bloomberg Businessweek magazine, 30 November 2011, [http://www.businessweek.com/magazine/will-angela-merkel-act-or-wont-she-11302011.html#p2], accessed 7 February 2014, Wernhard Möschel, “The Proper Scope of Government Viewed from an Ordoliberal Perspective: The Example of Competition Policy”, Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift für die gesamte Staatswissenschaft, 157:1, (2001): 3-13, 3.
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Ordoliberalism and the Austrian School 
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