The Fundamental Precept for Humane Economics

Those who, like myself, were born a few weeks before the close of the last century can regard themselves as coevals of the twentieth century, although they cannot hope to see its end. Anyone who has, as I have, the somewhat doubtful privilege of having been born a national of one of the great powers and, moreover, of one of the most turbulent powers of this great, tragic continent and who has shared its varied fate throughout the phases of his life may add, like millions of others, that his experience spans a wider range than is normally given to man. A village and small-town childhood which, with its confident ease, its plenty, and its now unimaginable freedom and almost cloudless optimism, was still set in the great century of liberalism that ended in 1914 was followed by a world war, a revolution, and crushing inflation; then came a period of deceptive calm, followed by the Great Depression, with its millions of unemployed; then a new upheaval and an eruption of evil when the very foundations of middle-class society seemed to give way and the pathetic stream of people driven from house and home ushered in the new age of the barbarians; and finally, as the inescapable end to this appalling horror, another and more terrible world war.

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What has been the impact of this experience and of its interpretation on a man like myself? Perhaps the one thing I know most definitely is something negative: I can hardly describe myself as a socialist in any meaningful or commonly accepted sense. It took me a long time to become quite clear on this point, but today it seems to me that this statement, properly understood, is the most clear-cut, firm, and definite part of my beliefs. But this is where the problem begins. Where does a man of my kind take his stand if he is to attack socialism because he believes it to be wrong?

Is the standpoint of liberalism the right one to deliver his attack? In a certain sense, yes, if liberalism is understood as faith in a particular “social technique,” that is, in a particular economic order. If it is liberal to entrust economic order, not to planning, coercion, and penalties, but to the spontaneous and free co-operation of people through the market, price, and competition, and at the same time to regard property as the pillar of this free order, then I speak as a liberal when I reject socialism. The technique of socialism—that is, economic planning, nationalization, the erosion of property, and the cradle-to-the-grave welfare state—has done great harm in our times; on the other hand, we have the irrefutable testimony of the last fifteen years, particularly in Germany, that the opposite-the liberal-technique of the market economy opens the way to wellbeing, freedom, the rule of law, the distribution of power, and international co-operation. These are the facts, and they demand the adoption of a firm position against the socialist and for the liberal kind of economic order.

The history of the last fifteen years, which is that of the failure of the socialist technique all along the line and of the triumph of the market economy, is indeed such as to lend great force to this faith. But, if we think it through, it is much more than simple faith in a social technique inspired by the laws of economics. I have rallied to it not merely because, as an economist, I flatter myself that I have some grasp of the working of prices, interest, costs, and exchange rates. The true reason lies deeper, in those levels where each man’s social philosophy is rooted. And here I am not at all sure that I do not belong to the conservative rather than the liberal camp, in so far as I dissociate myself from certain principles of social philosophy which, over long stretches of the history of thought, rested on common foundations with liberalism and socialism, or at least accompanied them. I have in mind such “isms” as utilitarianism, progressivism, secularism, rationalism, optimism, and what Eric Voegelin aptly calls “immanentism” or “social gnosticism.”

In the last resort, the distinction between socialists and non-socialists is one which divides men who hold basically different views of life and its true meaning and of the nature of man and society. Cardinal Manning’s statement that “all human differences are ultimately religious ones” goes to the core of the matter. The view we take of man’s nature and position in the universe ultimately determines whether we choose man himself or else “society,” the “group,” or the “community” as our standard of reference for social values. Our decision on this point becomes the watershed of our political thinking, even though we may not always be clearly aware of this and may take some time to realize it. This remains true in spite of the fact that in most cases people’s political thinking is by no means in line with their most profound religious and philosophical convictions because intricate economic or other questions mask the conflict. People may be led by Christian and humane convictions to declare themselves in sympathy with socialism and may actually believe that this is the best safeguard of man’s spiritual personality against the encroachments of power, but they fail to see that this means favoring a social and economic order which threatens to destroy their ideal of man and human freedom. There remains the hope that one may be able to make them aware of their error and persuade them by means of irrefutable, or at least reasonable, arguments that their choice in the field of economic and social order may have consequences which are diametrically opposed to their own philosophy.

As far as I myself am concerned, what I reject in socialism is a philosophy which, any “liberal” phraseology it may use notwithstanding, places too little emphasis on man, his nature, and his personality and which, at least in its enthusiasm for anything that may be described as organization, concentration, management, and administrative machinery, makes light of the danger that all this may lead to the sacrifice of freedom in the plain and tragic sense exemplified by the totalitarian state. My picture of man is fashioned by the spiritual heritage of classical and Christian tradition. I see in man the likeness of God; I am profoundly convinced that it is an appalling sin to reduce man to a means (even in the name of high-sounding phrases) and that each man’s soul is something unique, irreplaceable, priceless, in comparison with which all other things are as naught. I am attached to a humanism which is rooted in these convictions and which regards man as the child and image of God, but not as God himself, to be idolized as he is by the hubris of a false and atheist humanism. These, I believe, are the reasons why I so greatly distrust all forms of collectivism.

It is for the same reasons that I champion an economic order ruled by free prices and markets—and also because weighty arguments and compelling evidence show clearly that in our age of highly developed industrial economy, this is the only economic order compatible with human freedom, with a state and society which safeguard freedom, and with the rule of law. For these are the fundamental conditions without which a life possessing meaning and dignity is impossible for men of our religious and philosophical convictions and traditions. We would uphold this economic order even if it imposed upon nations some material sacrifice while socialism held out the certain promise of enhanced well-being. How fortunate for us it is, then, that precisely the opposite is true, as experience must surely have made obvious by now, even to the most stubborn.

Thus we announce the theme which is the red thread running through this book: the vital things are those beyond supply and demand in 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. 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. The liberal economic system releases and utilizes the extraordinary forces inherent in individual self.assertion, whereas the socialist system suppresses them and wears itself out in opposing them. We have—as we shall have occasion later to show in detail—every reason to distrust the moralizing attitudes of those who condemn the free economy because they regard the individual’s attempts to assert and advance himself by productive effort as ethically questionable and prefer an economic system which summons the power of the state against them. We are entitled to set least store by such moralizing attitudes when they are preached by intellectuals who have the open or secret ambition to occupy positions of command in such an economic system but who are not critical enough of themselves to suspect their own, ethically none too edifying, libido dominandi. They want to use the horsewhip to drive the carriage of virtue through impracticable terrain, and they fail to see that it is downright immorality to lead people into temptation by an economic order which forces them to act against their natural instinct of self-assertion and against the commands of reason.

A government which, in peacetime, relies on exchange control, price control, and invidious confiscatory taxation has little, if any, more moral justification on its side than the individual who defends himself against this sort of compulsion by circumventing, or even breaking, the law. It is the precept of ethical and humane behavior, no less than of political wisdom, to adapt economic policy to man, not man to economic policy.

In these considerations lies the essential justification of’ ownership, profit, and competition. But—and we shall come back to this later—they are justifiable only within certain limits, and in remembering this we return to the realm beyond supply and demand. In other words, the market economy is not everything. It must find its place within a higher order of things which is not ruled by supply and demand, free prices, and competition.

Excerpted from Wilhelm Röpke’s book, A Humane Economy, originally published in 1960. Get 30% off this book this month only.