John Zmirak, in William Ropke: Swiss Localist, Global Economist ( Wilmington : ISI Books, 2001), introduces readers to one of the finest (if largely unknown to Americans) economists of the 20th century, “a key intellectual architect of postwar prosperity in Europe ” (p. 5). Following WWII Germany lay prostrate, devastated by the war. The Allies, ironically, initially imposed the same economic agenda favored by Hitler: full employment; price controls; inflation. Ludwig Erhard persuaded U.S. General Lucius Clay, the only Allied occupation leader who favored free markets, to help him restore a free-market economy in West Germany . Far more important than the Marshall Plan, funneling American dollars into a ravaged Europe , Erhard’s economic reforms freed his country from the legacies of the Third Reich and the temptations to seek socialistic solutions. He was mentally prepared for the task because, during the war, “Erhard worked as an obscure advisor to a cigarette company and schooled himself in market economics by reading Ropke’s works. These books, banned by the Gestapo, had to be smuggled in from Switzerland ” (p. 6). Labeling his agenda “social market economy,” he (advising Konrad Adenauer and the Christian Democrats) helped orchestrate the “German miracle” that so quickly restored West Germany to economic health.
In Ropke’s writings, Erhard saw a way out of the totalitarian structures of socialism–be it Hitler’s National Socialism or Stalin’s Soviet Communism. Both systems, Ropke insisted, “rested their platforms on implicitly or explicit economic arguments, especially promises of increased prosperity, more fairly distributed throughout the population. It is no accident that each movement claimed the title ‘socialist'” (p. 50). And he also discerned that all forms of socialism are deeply immoral, for they “‘give too little to man, his freedom, and his personality; and too much to society'” (p. 56). Ropke’s works brought readers like Erhard “words of transformation, offering them once more firm ground under their feet and an inner faith in the value and blessings of freedom, justice and morality'” (p. 6).
Born in 1899 in Schwarmstedt, Germany, he grew up relishing the colorful, productive, soul-satisfying generosity of village life, lingering memories of which helped shape his economic thought. He served with distinction as a soldier in WWI, following which he studied at three universities, earning his doctorate in 1921. After a brief stint working for the Weimar Republic, “In 1924 Ropke was appointed extraordinarius (professor) at the University of Jena, making him the youngest professor in the German-speaking world” (p. 30). Successive academic appointments led him to Graz, Marburg, and Frankfurt, where he openly opposed both socialists and nationalists. When Adolph Hitler came to power, most academics–Heidegger, Bultmann, et al.–maneuvered to keep their positions. But not Ropke! “At Frankfurt that day in February 1933, he rose to deliver a wry, acid account of the Nazi movement as ‘a mass revolt against reason, freedom, humanity, and against the written and unwritten millennial rules that enable a highly differentiated human community to exist without degrading individuals into slaves of the state'” (p. 35-36). He denounced being “‘lukewarm, lazy, and cowardly in the hour of utmost danger, with having been an obfuscated worshipper of the childish twaddle of the day!'” (p. 38).
Predictably, the Nazis moved against Ropke. Within months he lost his tenured position. Fleeing for his life, he sought shelter first in Holland and then in Turkey, where he taught for four years in Istanbul. In 1937 he moved to the Graduate Institute of International Studies in Geneva, Switzerland, where he remained for nearly 30 years. He found among the Swiss not only political refuge but a model for healthy economics. The “founding fathers” of the United States, such as John Adams and Benjamin Franklin, had openly admired “the Helvetic Republic” as an example of “limited government and political liberty” (p. 16). Then, when the Swiss set forth a new constitution in 1848, they turned to the Constitution of the United States as their model.
Consequently, since localism has suffered setbacks in America–as is evident in the courts’ disdain for the ninth and tenth amendments–the Swiss now enjoy “a system that is still more successfully decentralized than any on earth” (p. 17). Swiss citizens and cantons–not the federal government–exercise real power in the nation. This allows intermediate institutions–families, churches, social groups– considerable influence in shaping and maintaining society. It also assures low taxes. Such localized power centers provide buffers against both the harsher edges of the free-market economy and the voracious, totalitarian hunger of highly centralized states.
Living amongst the Swiss, Ropke saw how efficiently–and how justly–their system worked. It was, he concluded, in Zmirak’s words, “no accident that the Swiss enjoy the highest standard of living, per capita, in the world; it is the concrete fruit of localism, liberalism, and direct economy” (p. 21). So he made it the model for his proposals for the rest of Europe. “Put briefly, Ropke centered his economics in the dignity of the human person, who lives not alone but as part of a family and a community; who thrives or suffers according to the health of those institutions; and who regulates his own economic activity according to financial and personal incentives that he–and not the State–is best equipped to interpret. Ropke further held that economic incentives are most efficiently conveyed through the price system, while non-economic goods are best preserved through private associations such as the extended family, the village, and the church” (p. 53).
Seeking to chart a course between ruthless free enterprise capitalism and brutal state-run socialism, Ropke proposed a “third way” requiring “‘the powerful influences of religion, morality, and law'” to sustain it (p. 82). Entrepreneurs, vital to an efficient economic system, must be restrained lest they trample the weak. Bureaucrats, necessary for any government, must be restrained lest they bloat themselves at the public trough. Ropke especially feared the growth of the welfare state in Europe and America, seeing it as a democratically established dictatorial system. The “‘formidable problem of our times is the leviathan of omnipotent government,'” he said (p. 157). The very “national socialism” the Allies fought to destroy in Germany silently slipped into the “welfare” systems they devised to “help” people at home. Doing so, however innocently they lost the very thing folks most need: freedom!
Ropke insisted that bigness–whether corporate or governmental–all concentrations of inordinate power must be resisted. “‘Away from centralization in every connection, from accumulations of property and power which corrupt the one and proletarianise the other, from the soullessness and lack of dignity of labour through mechanised production and towards decentralisation in the widest and most comprehensive sense of the word; to the restoration of property; to shifting of the social centre of gravity from above downwards; to the organic building-up of society starting with the family through parish and county to the nation; to a corrective for exaggerations in organization, in specialisation, and in division of labour (with at least a minimum of self-maintenance from one’s own soil); to the bringing back of all dimensions and proportions from the colossal to the humanly reasonable; . . . .'” (p. 175).
To explore Ropke’s own writings, the most accessible is a recent reprint of his 1960 treatise, A Humane Economy: The Social Framework of the Free Market (Wilmington: ISI Books, 1998). Such an economy, writes Dermot Quinn, “is only, in the end, a shadowy reflection of the divine one” (p. xviii). He begins by declaring that “the technique of socialism–that is, economic planning, nationalization, the erosion of property, and the cradle-to-grave welfare state–has done great harm in our times; on the other hand, we have irrefutable testimony of the last fifteen years, particularly in Germany, that the opposite–the liberal–technique of the market economy opens the way to well-being, freedom, the rule of law, the distribution of power, and international co-operation” (p. 3). Collectivism denies personal freedom, crushes the very image of God wherein we are created. (Ignorantly, naively, tragically, Christians supporting socialistic economics have embraced a movement intent on destroying the verities of their faith.)
Ropke, however, envisions man as defined by the Christian tradition. Consequently, the truly important “things are those beyond supply and demand and the world of property. It is they which give meaning, dignity, and inner richness to life, those purposes and values which belong to the realm of ethics in the widest sense.” Man does not live by bread alone! And yet, importantly, “There is a profound ethical reason why an economy governed by free prices, free markets, and free competition implies health and plenty while the socialist economy means sickness, disorder, and lower productivity” (pp. 5-6). Freedom’s our birthright! When it’s respected and protected, a “humane economy” results.
Freedom, however, has been an endangered fugitive in the 20th century. “In all fields, mass and concentration are the mark of modern society; they smother the area of individual responsibility, life, and thought and give the strongest impulse to collective thought and feeling. The small circles–from the family on up–with their human warmth and natural solidarity, are giving way before mass and concentration, before the amorphous conglomeration of people in huge cities and industrial centers, before rootlessness and mass organization, before the anonymous bureaucracy of giant concerns and, eventually, of government itself, which holds this crumbling society together through the coercive machinery of the welfare state, the police, and the tax screw. This is what was ailing modern society even before the Second World War, and since then the illness has become more acute and quite unmistakable” (p. 7).
The totalitarian sickness of mass democracy remains rooted in the Jacobean ideology spawned by radicals like Robespierre in the French Revolution. It is, above all, religious in nature. In his earlier writings Ropke dealt almost singularly with economics. By 1960, in A Humane Economy, he decided to clarify his deepest convictions: “the ultimate source of our civilization’s disease is the spiritual and religious crisis which has overtaken all of us and which each must master for himself. Above all, man is Homo religiosus, and yet we have, for the past century, made the desperate attempt to get along without God, and in the place of God we have set up the cult of man, his profane or even ungodly science and art, his technical achievements, and his State” (p. 8). All our technical grandeur, without God, cannot but destroy us.
Replacing God, the collectivist State is now our gravest enemy, “the most immediate and tangible threat” we face (p. 33). In 1787 Goethe prophetically said: “I must say, I believe that humanism will eventually prevail; but I am afraid that at the same time the world will become a huge hospital, with everyone nursing his neighbor” (pp. 163-64). Whereas classic liberalism defends human freedom, seeking to maximize individual liberty, Jacobins stress human equality and try to redistribute the world’s wealth. Accordingly, “The state and the concentration of its power, exemplified in the predominance of the budget, have become a cancerous growth gnawing at the freedom and order of society and economy. Surely, no one has any illusions about what it means when the modern state increasingly–and most eagerly before elections, when the voter’s favor is at stake–assumes the task of handing out security, welfare, and assistance to all and sundry, favoring now this and now that group, and when people of all classes and at all levels, not excluding entrepreneurs, get into the habit of looking on the state as a kind of human Providence” (p. 33).
In a lengthy chapter entitled “Welfare State and Chronic Inflation,” Ropke addresses two closely linked and equally destructive aspects of the post-WWII era. Voters in a democracy easily succumb to the allure of free social services and cheap money, so they periodically indulge in a legalized “robbery by the ballot.” “It cannot be repeated too often that what is given to the one must be taken from the others, and whenever we say that the state is to help us, we are laying a claim to somebody else’s money, his earnings or his savings” (p. 174). Though disguised by adroit politicians as “compassion,” the driving passion of the masses is envy, the desire to bring down those who prosper and distribute their wealth. “It is,” he says, “a state which deprives people of the right to dispose freely of their income by taking it away from them in taxes and which, by compensation, and after deduction of the extraordinarily high administrative costs of the system, takes over the responsibility for the satisfaction of the more essential needs, either wholly (as in the case of education or medical care) or in part (as in the case of subsidized housing or food). What people eventually retain from their income is pocket money, to be spent on television or football pools” (p. 158).
To resist such statism, Ropke continually praises sound currency and private property, essentials for a free society. A free market economy requires “the institution of private ownership, in the true sense of legally safeguarded freedom to dispose of one’s own property, including freedom of testation” (p. 94). Inflation, encouraged by economists like John Maynard Keynes and implemented by politicians like Franklin D. Roosevelt, eats away at the innards of a good society. A certain euphoria always surrounds inflation, but generally “things happen just as they are described in the second part of Faust in the famous paper-money scene: ‘You can’t imagine how it pleased the people.’ But that is precisely the dangerous seduction of inflation: it begins with the sweet drops and ends with the bitter” (p. 195). And, equally important, free folks need houses, lands, savings accounts–resources sustaining their independence from the state. Unfortunately, John Locke’s firm conviction– that we are by nature entitled to life, liberty, and property–no longer stands. Private property has increasingly been subjected too state control.
Though Ropke mastered the arcane and technical details of his discipline, he insisted that economics is fundamentally a “moral” rather than a “natural” science. In A Humane Economy one encounters a morally committed Christian economist who provides us with one of the finest books I’ve read on this subject.
Soon after fleeing Germany, while teaching in Turkey, Ropke published, shortly before the Nazis marched into Vienna in 1937, Economics of the Free Society (Grove City, PA: Libertarian Press, Inc., 1994). One finds herein a marvelous introduction to the discipline of economics–readable and understandable without compromising its scholarly integrity. One learns about the importance of the monetary system, the division of labor, marginal utility, etc. Ropke knows how to use illustrations and simplify theoretical abstractions. He also defends the classical, liberal, free market economy. Amazingly enough, the apparent anarchy of the bewilderingly complex free market produces order. Unlike the “commanded order” of socialist systems, the “spontaneous order” of the free market provides the very best economy known to man. Importantly, however, “He who chooses the market economy must, however, also choose: free formation of prices, competition, risk of loss and chance for gain, individual responsibility, free enterprise, private property” (p. 268).
He explains, for example, why money–serving as a medium of exchange, a common denominator–is a positive good. Money enables the free market to thrive, makes possible the credit system, savings and investment, efficiently enabling the distribution of goods. “It is, as Dostoievsky once expressed it, ‘coined freedom'” (p. 88). Consequently, debasing the currency, indulging in inflation, deeply harms the economy–and ultimately persons. Sound money (preferably tied to the gold standard, Ropke insists) truly blesses mankind. Reams of learned articles have sought to escape the fact, but “for thousands of years men have continued to regard gold as the commodity of highest and surest worth and as the most secure anchor of wealth. One may protest this as often as one likes–the fact remains” (p. 107).
He also helps one understand the rich and the poor. And understanding is truly needed in an area routinely distorted by demagogues of various sorts. Railing against the rich on behalf of the poor gains considerable currency for public figures. “But instead of trying to acquire the facile reputation of a ‘social-minded’ man by vague demands for a ‘just wage,’ by railing against ‘interest slavery’ and ‘profiteering,’ by emotional outpourings over ‘gluttonous landlords,’ and real estate ‘speculators,’ and instead of shoving aside a ‘liberalistic’ the objections of those who understand something of these matters, one would serve his country better by applying himself to an unprejudiced study of the complex interrelationships of the economy” (p. 195). Would that professors and preachers and politicians learned something before pontificating on economic injustices!
The free market, basic to a healthy economy, rightly functions only within a deeply moral society. Healthy markets “cannot function unless there is general acceptance of such norms of conduct as willingness to abide by the rules of the game and to respect the rights of others, to maintain professional integrity and professional pride, and to avoid deceit, corruption, and the manipulation of the powers of the state for personal and selfish ends. The big question of our time is whether we have been so heedless and unsparing in the use of our moral reserves that it is no longer possible to renew these vital props of our economic system and whether it is yet possible to discover new sources of moral strength” (p. 27).
Summing up his case, Ropke says that his “‘third road’ of economic policy is, above all a road of moderation and proportion. It is incumbent upon us to make use of every available means to free our society from its intoxication with big numbers, from the cult of the colossal, from centralization, from hyper-organization and standardization, from the he pseudo-ideal of the ‘bigger and better,’ from the worship of the mass man and from addiction to the gigantic. We must lead it back to a natural, human, spontaneous balanced, and diversified existence” (p. 271). Sadly enough, amidst incessant progress man “forgot man himself: forgot his soul, his instincts, his nerves and organs” (p. 271). What Ropke proposed, in 1937, was that we take the road “favoring of the ownership of small and medium-sized properties, independent farming, the decentralization of industrial areas, the restoration of the dignity and meaning of work, the reanimation of professional pride and professional ethics, and the promotion of communal solidarity” (p. 271).
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