July 5th 2008

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Articles from this issue:

COVER STORY: The real China the West prefers to ignore

EDITORIAL: Lessons of the equine influenza (EI) inquiry

CANBERRA OBSERVED: Two big unknowns for the Rudd Government

ECONOMIC AFFAIRS: Emissions-trading a "bureaucratic indulgence"

EQUINE INFLUENZA: AQIS responsible for EI outbreak, says report

INTERNATIONAL TRADE: Rudd's scheme for an EU-style Asian community

GLOBAL TERRORISM: Australians supplying arms to Colombian guerrillas

POLITICAL IDEAS: Champion of the humane economy - Wilhelm Röpke

OPINION: Why the Howard Government fell

REPRODUCTIVE HEALTH: Abortion damage to women ignored by inquiry

EUTHANASIA: Doctor-assisted suicide halted... for now

EDUCATION: Environmental jihadists terrorising our children

SCHOOLS: Teaching grammar: the blind leading the blind

AS THE WORLD TURNS: Masculinity under attack / Denying global warming deemed a crime against humanity / Ireland defies European Union

Small business and farmers should make more noise (letter)

Renewable energy? (letter)

BOOKS: THE REVOLUTION: A Manifesto, by Ron Paul

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Champion of the humane economy - Wilhelm Röpke

by Allan Carlson

News Weekly, July 5, 2008
American political commentator Allan Carlson discusses world-renowned German-born economist Wilhelm Röpke's vision of a social order based on the family and on widespread ownership of property.

Wilhelm Röpke held to the Christian concept which "makes man the image of God whom it is sinful to use as a means" and a creature who embodies inestimable value as an individual. Noting that the idea of liberty had appeared uniquely in Christian Europe, he concluded "that only a free economy is in accordance with man's [spiritual] freedom and with the political and social structures... that safeguard it".

The key pillar of that social structure, Röpke maintained, was the natural family. Along with religion and art, he held that the family did not exist for the state, but was "pre-statal, or even supra-statal". In its essence, family life was "natural and free", while the "well-ordered house" served as the very foundation of civilisation.

Derived from "monogamous marriage", the family was "the original and imperishable basis of every higher community". The "centre of gravity" for planning and living one's life should be in that "most natural of all communities — the family unit". The autonomous family also stood first "in opposition to the arbitrary tendencies of the state". Indeed, the natural family became the touchstone of his quest for a truly humane economy.

We should start by examining in more detail the family nature of — or the place of the family in — his desired humane economy. Emerging from World War I, Röpke found himself engaged in an intellectual battle on two fronts. As he later reported: "I sided with the socialists in their rejection of capitalism, and with the adherents of capitalism in their rejection of socialism."

By capitalism, as John Zmirak noted, Röpke did not mean the free market. Rather, the term "capitalism" embodied for him "the distorted and soiled form which market economy assumed" in the period between about 1840 and 1940. The liberal quest for economic liberty had got off track in this era, he asserted, producing effects that would pave the way to socialist collectivism; specifically:

"... the increasing mechanisation and proletarisation, the agglomeration and centralisation, the growing dominance of the bureaucratic machinery over men, monopolisation, the destruction of independent livelihoods... and the dissolution of natural ties (the family, the neighbourhood, professional solidarity, and others)."

The task facing the modern economist, Röpke said, was to eliminate "the sterile alternative" between a return to 19th-century laissez-faire and 20th-century collectivism.

The needed "free economic constitution", as he phrased it, would embrace certain basics: "the market, competition, private initiative, a free price structure and free choice of consumption". Röpke praised the true market economy as the only system "which releases the full activity of man so natural to him while, at the same time, [curbing] his hidden tigerish tendencies which, unfortunately are no less natural to him."

All the same, a market economy was not easy to achieve. As Röpke explained, "It is an artistic construction and an edifice of civilisation which has this in common with political democracy: it demands and presupposes... the most strenuous efforts." Among other needs, the free market required a "high degree of business ethics together with a state ready to protect competition." Looking to the failures of the 19th century, Röpke was relentless in exposing the "sins" of monopoly, including:

"Privileges, exploitation, ... the blocking of capital, the concentration of power, industrial feudalism, the restriction of supply and production, the creation of chronic unemployment, the rise in living costs and the widening of social differences, lack of economic discipline, [and] the transformation of industry into an exclusive club, which refuses to accept any new members."

He favoured legal devices such as America's Sherman Anti-Trust Act designed to protect competition from these disorders.


The restoration of private property was also central to Röpke's vision. The antithesis of socialist or collectivised man was the property-holder. Röpke explained that competition was only one of the pillars of a free economy.

The other was personal and familial "self-sufficiency". Accordingly, expansion of the sphere of competition should be balanced by enlarging what he called "the sphere of marketless self-sufficiency". This meant "the restoration of property for the masses", a "lengthy and circumspect" program that would discourage the accumulation of big properties, use "progressive death duties" to break up large estates, and redistribute land to propertyless families on favourable terms.

As Röpke wrote: "The industrial worker... can and ought to become at least the proprietor of his own residence and garden... which would provide him with produce from the land." This alone would render each family "independent of the tricks of the market with its wage and price complexities and its business fluctuations".

The necessary task, he said, was broader still: a "de-proletarisation" that would take industrial workers who lacked roots in "home, property, environment, family and occupation" and transform them into free men.

To heal the distortions of human life wrought by 19th-century laissez-faire capitalism, Röpke even sought to undo — in some degree — the urban-industrial revolution.

Writing in The Social Crisis of Our Time (1942), he called for nothing less than the "drastic decentralisation of cities and industries, [and] the restoration of some more 'natural order'." He labelled the modern big city a "monstrous abnormality", a "pathological degeneracy" that devitalised human existence, adding: "The pulling down of this product of modern civilisation is one of the most important aims of social reform."

Relative to the decentralisation of industry, he urged that "the artisan and the small trader" receive "all the well-planned assistance that is possible".


This process of "de-proletarisation" also meant restoration of a peasantry: a countryside of small family farms. Röpke called the peasantry "the very cornerstone of every healthy social structure" and "the backbone of a healthy nation".

Sounding here like Thomas Jefferson, or the Southern Agrarians of the 20th century, he continued: "A peasant who is unburdened by debt and has an adequate holding is the freest and most independent man among us."

The peasant household also showed "that a type of family is possible which gives each member a productive function and thus becomes a community for life, solving all problems of education and age groups in a natural manner". Given these qualities, Röpke held that "a particularly high degree of far-sighted, protective, directive, regulating and balancing intervention [by the state in agriculture] is not only defensible, but even mandatory".

Another component of the humane economy would be a limited, but real welfare or social security system. Röpke did condemn the cradle-to-grave approach of Great Britain and Scandinavia, where "a large part of private income is continually being fed into the pumping station of the welfare state and redistributed by the state, with considerable wastage in the process".

He stressed the corrupting effects on the broader economy of this "everything in one pot, everything out of one pot" scheme, including the suppression of capital investment, the loss of individual initiative, and inflation. Moreover, such a system was like "a powerful machine that has neither brakes nor reverse gear", ever encroaching "upon the area of self-providence and mutual aid" so that "the capacity [and willingness] to provide for oneself and for members of one's family... diminishes".

All the same, Röpke acknowledged the need for "a certain minimum of compulsory state institutions for social security". There must "naturally be room", he said, for public old-age pensions, health and accident insurance, widow's benefits, and unemployment relief in a "sound... system in a free society". The imperative was to keep the scheme limited, providing only a floor of support, "putting a floor" under the feet of "the weak and helpless" and preventing their fall "into bitter distress and poverty; no less, no more".

Such a system, he insisted, should not drive out other forms of old-age support, including private savings and annuities and the aid provided to ageing parents by grown children.

Röpke called his whole program a "Third Way", one which would reconcile "the immense advantages of the free market economy with the claims of social justice, stability, dispersal of power [and] fairness". This program favoured "the ownership of small- and medium-sized properties, independent farming, the decentralisation of industrial areas, the restoration of the dignity and meaning of work, the reanimation of professional pride and... ethics [and] the promotion of community solidarity".

Costs of family decay

Viewing the Western world in the middle decades of the 20th century, Röpke identified the negative consequences of "spiritual collectivism, proletarisation... and centralisation", the "most serious" of which was "the disintegration of the family".

Usually propertyless and without productive function, the modern family was "degraded to a mere consumers cooperative... often without children... or without the possibility of bestowing on them more than a summary education". Along with this "disruption of the family" went "the loss of a sense of 'generations' [where] the individual loses... his sense of the continuity of time and the relationship of the dead to the living and [of] the living to their successors".

Röpke used to ask: "What happens to man and his soul? What happens to the things which cannot be produced or expressed in monetary terms... but which are the ultimate conditions of man's happiness and of the fullness and dignity of his life?"

In finding answers, Röpke was — and is — correct in trying to rehabilitate social life by returning human beings to decentralised, autonomous, self-sufficient, functional homes, where education and real work would be reintegrated into the daily flow of family living.

Toward this end, he correctly saw mid-20th-century Switzerland to be a model state. "As the common enterprise of freedom-loving peasants and burghers," he wrote, "it has offered the world a living example of the harmonious integration of [rural] and city culture."

He described a real village of about 3,000 people with nearby farmsteads in the Bern Mittelrand, a place which combined artisan shops, small factories, a brewery, a dairy for cheese, a "highly tasteful" book store, and "a great collection of obviously thriving crafts and craftsmen".

He added "that the whole place is remarkable for its cleanliness and sense of beauty; its inhabitants dwell in houses which anyone might envy; each garden is lovingly and expertly tended; [and] antiquity is protected.... This village is our ideal translated into a highly concrete reality".

Röpke's analysis also points toward ways to achieve this ideal in our new century.

His goal of "genuine decentralisation" through "the creation of fresh small centres in lieu of the big city" anticipates the New Urbanism of our day, where attention to the physical settings of real neighbourhoods combines with a reattachment of work and retail sites to family residences.

Röpke's reminder that certain technological innovations may support the broad dispersal of productive work gains new importance in the age of the home computer and the extraordinary economic democracy of the internet.

Indeed, he had challenged technologists "to serve decentralisation instead of centralisation, rendering possible the greatest possible number of independent existences and giving back to human beings as producers and workers a state of affairs which would make them happy and satisfy their more elementary and most legitimate instincts".

Röpke's attention to "tertiary production", or the service sector, as a growing sphere for human labour again enhances the prospects for small and medium businesses which might support household independence.

Civilisational crisis

These are the areas where Röpke succeeded as both analyst and prophet. He was also prophetic in seeing that the civilisational crisis of the Christian West deriving from "a cultural retreat, ... a squandering of our inheritance" linked to "a continuous process of secularisation."

He wrote that the core of "the malady from which our civilisation suffers lies in the individual soul", adding that this disease would also only be "overcome within the individual soul".

Here, too, we can safely conclude that Wilhelm Röpke was altogether correct.

— Allan C. Carlson, secretary-general of the World Family Congress, will be special guest speaker at the Australian Family Association's national conference in Perth, October 18-19. This article is a shortened version of a lecture he originally delivered on April 12, 2008, at the Intercollegiate Studies Institute (ISI)'s national leadership conference held in Indianapolis, Indiana. The full version was published in: First Principles (ISI), June 9, 2008. URL: http://www.firstprinciplesjournal.com/print.aspx?article=792&loc=b&type=cbtp


Fierce foe of both state socialism and uncontrolled capitalism

Wilhelm Röpke (1899-1966) was one of the giants of 20th century economics and a courageous defender of the free society. In 1933, after Hitler came to power, Röpke publicly denounced the Nazis' political program. This ended his academic life in Germany and forced him into exile until after World War II.

Something of a paradox, Röpke was a descendent of German Lutheran pastors, but greatly admired Catholic social teaching (he was quoted approvingly in B.A. Santamaria's 1945 book, The Earth — Our Mother: A Study of the Future of Australian Agriculture).

Röpke once declared: "It is the precept of ethical and humane behaviour, no less than of political wisdom, to adapt economic policy to man, not man to economic policy." He was a fierce foe of both state socialism and uncontrolled capitalism. He advocated a market-friendly but socially responsible free enterprise economy based on widespread ownership of property and economic enterprises.

After World War II, he returned from exile to his native Germany, and become economic adviser to Chancellor Konrad Adenauer's Christian Democrat government. He is credited with being a key architect of West Germany's miraculous postwar economic recovery which saw the country become the economic locomotive of Western Europe.

In 1960, he succeeded F.A. Hayek as president of the free market Mont Pelerin Society, but continued to warn against unregulated capitalism's destructive tendencies.

— John Ballantyne

The following two books are available from News Weekly books:
A HUMANE ECONOMY: The Social Framework of the Free Market
by Wilhelm Röpke
(Wilmington, Delaware: ISI Books)
Hardback: 326 pages
Rec. price: AUD$49.90
WILHELM RÖPKE: Swiss Localist, Global Economist
by John Zmirak
(Wilmington, Delaware: ISI Books)
Paperback: 241 pages
Rec. price: AUD$29.90


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