They triumphed over the interventionist and collectivist economic policies that had been endemic in Germany since before the First World War.
Since the 18th century, the kaleidoscope of ideas corralled under the banner of “liberalism” has been central to Western politics. Nineteenth-century traditionalist and socialist movements can be understood as reactions to liberalism’s impact upon Europe. In our own time, arguments rage about whether aspirations to liberal order pursued by Democratic and Republican administrations are responsible for America’s present woes.
Such debates often obscure the truth that there have always been competing liberal traditions. One such school is the focus of a new book by the political scientist Kenneth Dyson. In Conservative Liberalism, Ordo-Liberalism, and the State: Disciplining Democracy and the Market, Dyson has produced the most comprehensive English-language study of a group of mostly continental Western European thinkers who exercised considerable influence upon 20th-century European thought and economic policy but who remain relatively unknown in the Anglo-American world.
Conservative liberalism and its correlative in economics, ordo-liberalism, have been extensively studied in German and French publications, often through intellectual biographies like Jean Solchany’s Wilhelm Röpke, l’autre Hayek: Aux origines du néolibéralisme (2015). Dyson, however, has produced a historical analysis that shows how conservative liberalism, despite its internal disagreements, formed an intellectual family which reflects “a measure of internal coherence and distinctive contours, while evolving in ways that lack a single, definitive, and finalized form.”
A Different Type of Liberalism
Dyson’s text draws upon the many books, journal articles, opinion-pieces, and policy-documents penned by economists and other scholars associated with conservative liberalism and ordo-liberalism such as Röpke, Walter Eucken, Alexander Rüstow, Franz Böhm, Luigi Einaudi, and Jacques Rueff but also lesser-known individuals like the Protestant lawyer, theologian, and economist Constantin von Dietze and the French liberal economist and Catholic social thinker Daniel Villey. This has been supplemented by exhaustive archival research on Dyson’s part, including the voluminous private correspondence of many conservative liberals.
On this basis, Dyson illustrates that these thinkers adhered to a set of propositions that, despite affinities with the Austrian school of economics and post-1950s Chicago School libertarianism, marked them out as different from (and often critical of) these expressions of liberalism. Twentieth-century conservative liberalism was especially distinguished by an insistence upon treating the law, the state, the economy, and society as interdependent orders. Focusing on how these interdependencies promoted (or, conversely, undermined) freedom was, they discerned, where the real action was to be found.
This focus reflects the conservative liberals’ background in the fin de siècle European upper-middle class which attached high value to all-around academic excellence. As a matter of course, these individuals spoke and read several modern and classical languages. Dyson also underscores the sheer breadth and depth of their knowledge of multiple fields. Until the early 1920s, economics was generally studied in law faculties in most continental European countries. Ordo-liberals were consequently exposed to disciplines like philosophy, jurisprudence, history, and political science.
Prolonged acquaintance with law helps account for the conservative liberal focus upon the idea of order as they researched economic issues. Ordo-liberals, Dyson stresses, were skeptical of spontaneous order theories. Commitments to laissez-faire, they held, had inhibited an older liberal generation from understanding that market economies needed to be protected not only from those peddling socialist and corporatist schemes, but also from businesses who shielded themselves from market competition by acquiring preferential government treatment at the expense of consumers and taxpayers.
A Child of Crisis
This accent on the state undertaking such a role wasn’t simply a question of addressing ongoing threats to markets. According to Dyson, the minds of conservative liberals were concentrated by the political and economic crises that engulfed Europe following World War I and helped bring Fascist, National Socialist, and Communist parties to power.
One key idea subsequently advanced by conservative liberals was the need for a strong but limited state to 1) establish and defend constitutional and legal institutions that upheld a competitive market order against all comers (especially crony capitalists), and 2) protect democratic political arrangements from demagogues and mass movements. Here they drew upon a long-standing continental European tradition of public law which emphasized the state playing a disinterested role that tempered everyday political pressures.
But conservative liberals were also convinced that the best institutions would not suffice to resist predatory behavior by socialists, corporatists, and crony businessmen if such structures were not animated by moral principles that put some things beyond majority vote and the tyranny of the immediate. As Dyson shows, conservative liberals invested as much energy in trying to persuade their audiences of this imperative as they did in thinking about economics.
According to Dyson, many ordo-liberals and conservative liberals turned to Roman law, Kantian philosophy, or natural law theory as potential sources for normative foundations for freedom. The writings of Goethe, Lord Acton, and Tocqueville were also common reference-points. Some, like Rüstow and the liberal and anti-Christian philosopher Louis Rougier, focused on Enlightenment, humanist and classical sources.
But it was religion that featured most prominently in conservative liberal meditations on these issues. Most conservative liberals were strongly religious (one of them, Dietze, even served as President of the Evangelical Church in Germany from 1955 until 1961). They were adamant about the need to associate the market economy with Christian values—often to the point, Dyson notes, of irritating secular-minded liberals.
On one level, this was a strategic matter. Conservative liberals were sufficiently self-aware to know that they were generals without armies. Hence, if their economic principles were to be translated into policy, they required acceptance by the only popular alternative to the left in postwar Western Europe: Christian Democratic parties. But the same conservative liberals also regarded 19th-century liberals’ conceptions of human nature, reason, and liberty itself as inadequate. In private letters, Eucken and Röpke wrote extensively on this topic.
Many conservative liberals consequently sought to connect their economic and legal principles to particular Protestant and Catholic traditions of thought. A Catholic convert, Rueff referred extensively to Aquinas when outlining the moral supports required by what he called the “institutional market.”
This is where the idea of ordo comes into play. For Aquinas, other Catholic scholastics, early Protestant theologians like Philip Melanchthon, and some Stoic philosophers, ordo was a way of describing pre-given fundamental realities created by God which human reason can know and then bring into being through the exercise of wisdom. The ordo concept also underlined the interdependence of things; that while politics, the economy, and law were distinct orders in which different activities occurred, these orders were not self-sufficient. This meant that those who studied, for example, monetary policy could and should think about how this relates to law, and vice-versa.
Conservative liberals embraced ordo theory for five reasons. First, they believed that it was true. Second, they knew that it was taken seriously in those Lutheran and Reformed Christian circles around which German Christian Democracy’s Protestant wing gravitated. Third, the idea resonated with Catholics and thus opened a bridge to a reliably anti-Communist constituency with considerable intellectual and voting weight throughout postwar Europe. It was no coincidence that devout Protestants like Eucken and Böhm gave the title ORDO to the influential journal they founded in 1948. Fourth, ordo reminded conservative liberals to “think in orders” when designing, for instance, fiscal policy to avoid falling into the trap of economism. Lastly, the word itself conveyed notions of moral stability grounded in universal truths to a Europe in cultural and ethical disarray.
Thinkers and Doers
For all their efforts to develop a distinct theory, Dyson shows that conservative liberals were also defined by what they opposed. Apart from being deeply skeptical of the left, they were critical of those described by Dyson as social liberals. Individuals like Keynes were considered problematic because of their propensity to pursue interventionist policies based on perpetual short-termism but also because of their social liberal predilection for subordinating traditional mores to the imperative of self-expression. Nothing could have been more alien to conservative liberal emphases on self-discipline, the cultivation of virtue, and the need to root freedom and justice in objective moral principles.
Conservative liberals also often found themselves at odds with laissez-faire liberals. In the face of multiple crises afflicting the West, they concluded that laissez-faire liberalism had failed. This was exemplified by what they saw as laissez-faire liberalism’s inability to combat crony capitalists. For their part, many followers of the Austrian and Chicago schools were uneasy about the socially conservative and religious leanings of most conservative liberals, and they were downright suspicious of ordo-liberalism’s proactive view of state power. This led to clashes between Eucken and Ludwig von Mises at the second Mont Pelerin Society meeting in 1949, and between Rueff and Mises at a colloquium in Ostend in 1957.
These tensions didn’t inhibit conservative liberals from seeking to shape policy directly. Traditionally, continental European scholars had tended to stay detached from politics. Such, however, was the scale of the German and European catastrophe that conservative liberals decided that they needed to be “actively and ethically engaged” in driving economic policy. The degree to which ordo-liberals sought to influence policymakers was, by Dyson’s account, extraordinary.
From his perch at Geneva’s Graduate School of International Studies, Röpke corresponded extensively with German Chancellor Konrad Adenauer and Christian Democrat thinkers like Luigi Sturzo in Italy as he prodded them toward more market-friendly positions. In France, Rueff waged a one-man campaign to persuade ministers passing through the revolving door of governments of the tottering Fourth Republic of the necessity to reform the country’s finances. Eventually, he provided Charles de Gaulle with the liberalization program which saved France from fiscal and monetary collapse in 1958.
Conservative liberal efforts at persuasion also involved working with journalists, civil servants, central bankers, and churchmen who wielded political influence. Many conservative liberals served as formal and informal advisors to governments in West Germany, Austria, France, Belgium, Italy, and the Netherlands. Some held high office. Einaudi, for example, served as Governor of the Bank of Italy, Minister of Finance, Deputy Prime Minister, and President of Italy. Böhm was elected to the German parliament, while Rueff became a judge on the European Court of Justice. Others focused on identifying like-minded individuals who they thought would go far, and taught their proteges to do the same. One of Eucken’s students, for example, was Josef Höffner, a Catholic priest and ordo-liberal friendly economist who later became the Cardinal-Archbishop of Cologne. Of Höffner’s own students, the most successful career-wise was Hans Tietmeyer. A conservative Catholic and ordo-liberal in his economics, Tietmeyer’s career reached its pinnacle when he became head of Germany’s powerful central bank in 1993.
Mistakes and Lessons
These strategies assumed that relatively homogenous elites would remain in charge of European governments and could successfully master economic crises if they had the fortitude to stick to fundamental principles and listened to the right people. From the 1960s onwards, changes swept across the West which threw this starting-point into question.
Culturally-speaking, the transformations that weakened the political and intellectual clout of conservative liberals included the spread of mass media and celebrity culture; the relentless shift of universities in leftward and hyper-specialized directions; the 1968 student uprisings; the self-destruction of Christian churches in parts of Western Europe; and the eclipse of classically-oriented education. In economic circles, the mathematization of postwar mainstream economics and the subsequent concentration on quantitative methods, the ascendency of neo-Keynesian ideas among European economists and finance ministries, and the increasing use of the efficient markets hypothesis by American free market economists combined to marginalize ordo-liberals and their stress on rules, law, and institutions. Overshadowing all this was the growing disinclination of European politicians to make hard economic choices as support for once-dominant political groups fragmented and parties increasingly resorted to using public spending to secure the backing of voters.
This context sets the stage for Dyson’s overall assessment of conservative liberalism and ordo-liberalism. That they constitute a broadly coherent tradition of liberalism, Dyson believes, is not in doubt. There’s also little question that they enjoyed some policy successes for two decades after 1945 at the national and European level.
Nevertheless, Dyson suggests that conservative liberalism’s effectiveness faded over time. The absence of their own mass constituency meant that conservative liberals were left high and dry when Christian Democrat parties edged leftwards and began losing support in the 1970s. Conservative liberal views of authority and their associated emphasis upon traditional norms as an indispensable precondition for freedom were also increasingly at odds with the liberationist mindset of European boomers.
In the realm of economic policy, ordo-liberals were never able to overcome competing pressures from dirigistes and those pushing corporatist positions. While managing to exercise significant influence in key institutions like the German Bundesbank, the German economics and finance ministries, and (for a while) the European Central Bank, ordo-liberals never made decisive and lasting institutional breakthroughs elsewhere. A weak presence in the universities and fading influence in quality newspapers likewise limited the ordo-liberal capacity to build up infrastructure and patronage in the world of ideas.
Yet as the case for markets falters badly throughout the West today, contemporary advocates of markets would do well to investigate the conservative liberal and ordo-liberal tradition. As Dyson stresses, those working in this tradition declined to succumb to deterministic accounts of history and economic development. Moreover, by focusing upon how to sustain markets over the long term, they drew attention to the need for serious discussion of the ethical foundations required by free economies, and refused to detach reason from questions of moral judgment. They consequently didn’t hesitate to connect the principles and institutions underpinning market economies to the West’s civilizational foundations. In an age characterized by economic populism, historical forgetfulness, and ever-increasing trends to short-termism, these are surely paths worth contemplating today.