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Good Fences and Free Markets
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May 08, 2002, 05:00 AM
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If you read nothing but the  Wall Street Journal, you might think that partisans of the free market all favored open borders. Happily, things are more complicated than that.

The pro-business publicists of the Wall Street Journal, The Economist, and other business publications are less principled but more influential than the followers of Ludwig von Mises who have moved to a position which they candidly call "anarcho-capitalism". These pro-business publicists favor open borders because of cheap labor—and for a deeper, more insidious reason. Having rightly rejected socialism, with its injection of politics into economics, they now seek to completely commercialize and commoditize politics. What else does it mean to call oneself "socially liberal and fiscally conservative" but that one rejects any non-economic incentives in public life?

National cohesiveness, cultural continuity, regional diversity—all values once cherished by conservatives—such publicists typically dismiss with slogans and political swearwords such as "xenophobia." (Notice the reception of Pat Buchanan`s brilliant new book by supposedly conservative journals.) There`s no real reason to group these pro-business flacks on the Right, since they share virtually nothing with the heritage of Western civilization. Their ideology, created for export during the Cold War as a mirror-image competitor to international Communism, deserves to be set off in a corner by itself, marked "Globalism." [Vdare.com note: Or Goldbergism!]

But there`s a worthy school of free-market thought that defends the existence of the nation-state, that regards a strong, ethically-bound, limited government as the necessary basis for market freedom and prosperity, that recognizes non-economic civilizational and even religious factors are essential to the survival of free markets and personal liberty.

This economic philosophy developed in Germany rather than Austria. It is known as "Ordo liberalism" or "neo-liberalism." Its proponents include Walter Eucken, Alexander Rüstow, Franz Böhm, Ludwig Erhard, and Wilhelm Röpke. The name Ordo derives from the group`s journal, which emphasized the critical role of social and political order as the basis for liberty—the classical conservative position that underlies the American Founding.

Less well-known in America than anti-state libertarianism, less fashionable than Globalism [Goldbergism!], Ordo liberalism nevertheless has much to recommend it. For one thing, it was the intellectual underpinning of the European economic "miracle" after World War II. The arguments of these thinkers, especially Röpke, inspired statesmen like Konrad Adenauer and Ludwig Erhard to convince a battered, ideologically compromised continent to walk away from socialism and planning.

Wilhelm Röpke, the most comprehensive and influential thinker of the Ordo school, was also one of the very first professors fired by the Nazis for his ideas. Having spent much of the 1920s fighting fascism—using his modest professor`s salary to print up anti-Nazi campaign leaflets which he handed out personally at the polls—Röpke would make no compromise with the victorious National Socialists. He went into exile in Turkey and, finally, in Switzerland.

From Switzerland Röpke penned fervent defenses of individual liberties and the market economy. He turned aside from his important work on technical economics—he`d decoded the business cycle before Keynes—to examine the cultural problems that arose with the modernization and industrialization of life in the West. In his most important works, The Social Crisis Of Our Time and

The Moral Foundations Of Civil Society, Röpke analyzed in detail the origin of free societies and economies, finding again and again that it is institutions, rather than ideologies, that make the difference between ordered liberty and tyranny, or chaos.

Röpke followed Montesquieu in believing that specific historic institutions for the exercise of political and economic power by local governments and private individuals permitted individual freedom to arise in the first place—and were the best guarantee of freedom`s survival.

The prime example of such an institution that Röpke liked to cite was the Landesgemeinde, the gathering of all voting citizens in the smaller Swiss Cantons, at which laws are hashed out by the "whole" of the citizenry—or at any rate, all those who cared to participate. This thoroughly Teutonic, localist institution had served to preserve an intimate fondness for democracy, liberalism, and decentralism in Switzerland, despite a flood of Anschluss propaganda flowing from Hitler`s Germany.

As I`ve argued elsewhere, such institutions are much more fragile than ideological formulations. They are easily undermined, if not destroyed outright, by mass immigration – above all from countries that lack localist and democratic institutions. The rise of bureaucratic centralism in America under the New Deal was made possible by a largely immigrant Democratic coalition (which included my own family).

For Röpke, true patriotism must be compatible with the liberty of regions (such as the Swiss Cantons whose example had so influenced his intellectual development):

"This program of the decentralization of power derives from a deep insight into the nature of man, confirmed in the course of thousands of years, which teaches us that there is no concentration of power which is not abused. We know that every accumulation deserves to be regarded with extreme distrust and considered as a menace. This political wisdom applies to conditions inside a country, but also to the relations between one state and another." (International Order and Economic Integration, p. 23)

Röpke argued resolutely in favor of free trade, internationalism, and a cosmopolitanization of culture, deploring to the end of his life the ultra-nationalism, which had driven him from Germany. Because he was opposed to protectionism and purely materialist motivations for public policy, Röpke rejected the rationale that labor unions used to offer for limiting immigration as a form of "labor protectionism."

Nevertheless, Röpke understood the social side-effects of large-scale demographic change. He rejected libertarian calls for open borders. Since markets are neither sovereign nor supreme, but instead depend for their freedom on the stable liberty of the societies which host them, Röpke never promoted policies that would threaten those societies simply for the sake of economic efficiency. Röpke propounded the position which John O` Sullivan lucidly defends: that limits must be put on the free movement of peoples, but those peoples should be able to send their labor abroad through international free trade. In fact, Röpke argued, free trade ought to make mass immigration, with its attendant political and social disruptions, entirely unnecessary.

Röpke was deeply suspicious of attempts to create supranational bodies, particularly those such as the infant EEC, which seemed likely simply to proliferate bureaucracy, protectionism, and regulation on a grander scale:

"Europe, rightly understood, cannot be primarily defined as a vast machine designed for maximum production, and the goal of integration cannot be determined by the output of automobiles or cement. What holds Europe together in the widest sense is something of a spiritual nature: the common patrimony of Humanism and Christianity. Nothing can be more ludicrous than the belief that this bond can be replaced by the bureaucracy of the European Commission and high authorities, by planners, economocrats and technical visionaries. The danger, however, is very real that the true order of values and aims may be reversed and that economic integration may be carried through in such a way that it endangers the real meaning of Europe. (Modern Age, Summer 1964, p. 234.)

Röpke thought it impossible to bridge the gaps of understanding dividing European peoples with centralized economic integration. He pointed out that even within existing nation-states, such as Germany and Switzerland, internal economic barriers such as tolls and customs duties had never been dismantled except as a result of a pre-existing moral and intellectual union among those regions.

Likewise, he argued, the German Zollverein, or customs union, which predated the unification of German territories under Prussian leadership, was only made possible by centuries of common culture, the long experience of the Holy Roman Empire, and the spiritual unity forged by the struggle against Napoleon.

Röpke called attempts to forge a common state from the many nations of Europe "spiritually empty." He pointed to the danger of a "Jacobiniacal, Saint-Simonian Europe, which might steamroll out of existence everything that is individual in the realm of political, cultural and social order."

Unlike many free-market advocates, Röpke also was sympathetic to the "numbers" argument against mass immigration. Throughout his work, he showed concern for the dangers to human society and the earth`s environment posed by rapid growth and urban sprawl—fueled, he believed, by rapid population expansion. Röpke looked skeptically at the ideologies of unlimited growth that were popular among anticommunist libertarians even in his time. While respecting the moral objections raised by the Catholic Church (and others) to artificial contraception, he warned repeatedly that unbounded population growth would worsen and make irreversible the urbanization, centralization and alienation from nature that had marked the Industrial Revolution and that had vitiated attempts to preserve older, economically less "efficient" institutions—the extended family, the small farm, and the one-income household.

To support an ever-growing human population, Röpke argued in Economics of the Free Society (1937), nations must continually expand their economic efficiency—primarily by increasing specialization and the division of labor. Yet it was precisely these (immensely fruitful) developments, he asserted, which had robbed human life of so much of its traditional savor.

Unlike most current commentary on population issues, which divides between alarmist extremism and unbridled natalism, Röpke`s position shows nuance and complexity. It is worth quoting from him at greater length:

"This tremendous and historically unique increase of population during the last hundred years [1844-1944] has surely been no blessing, and a stabilization of population will sooner or later not only be necessary but will represent an indispensable prerequisite of the restoration to health of our society from the evil effects of congestion. In recognizing this one must not be misled by that fact that the present decrease in the birthrate is doubtless a particularly striking symptom of the present spiritual, moral and social crisis both in its causes and motives. One has only to reflect that this decrease in the birth rate is, as is well known, taking place very unevenly in the various classes, and that the number of three children is wholly sufficient for a healthy and normal family life and in no way opposes the stabilization of the population." (The Moral Foundations of Civil Society, p. 136).

Röpke could not have foreseen the virtual collapse of birthrates throughout Europe, which has driven many to call for mass immigration to augment the native workforce and provide tax revenues to support millions of elderly retirees with few progeny. Given his deep reverence for tradition and cultural continuity, it is easy to tell what Röpke would have thought of replacing the entire population of Europe with foreign economic refugees. Citing Edmund Burke, and anticipating Pat Buchanan, Röpke liked to warn that "those who never reflect on their ancestors will pay small heed to their descendants."

Dr. Zmirak is author of Wilhelm Röpke: Swiss Localist, Global Economist. He writes frequently on economics, politics, popular culture and theology.

May 08, 2002