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February 1976

A Humane Economy: The Social Framework of the Free Market

“This is Röpke at his best…His attack on social rationalism, whether of the Left or the Right, is as devastating as it is Witty.”

As I write this, they’re strip-mining Death Valley. A firm finds it has the legal right and profits from it. As I write this, commercial fishermen are killing dolphins to catch tuna at a lower cost. As I finished the last sentence I was interrupted: a telephone solicitor telling me of a “super-low demonstration price” just for me.

As I write this, there he on my table a dozen exhortations to expand my credit and let me spend money I have not earned; and as I write this, capitalists are growing wealthy selling trade goods to the Communist empire.

Is there anything more dull than a young convert to libertarianism? Yes, of course: three of them. At a recent science fiction convention a team of the creatures went from party to party, engaging loudly in their favorite—indeed their only—topic of conversation. Having disrupted a panel discussion of spacecraft—they wanted to prove that the ships would be free only if the radar operator had the right to sell his equipment and exchange jobs with the agronomist—they proceded to the parties. Before the night was over the hosts at the various room parties had all retreated to a private suite to escape from their own rooms.

What has this to do with Röpke’s A Humane Economy? At least this: Röpke understands that there is more to life than commercialism; that Burke was not blathering when he spoke of the unbought grace of life; that friendships are not mere commercial propositions of mutual exploitation; that “scientific” attempts to reduce all human intercourse to a series of profit-making transactions are precarious when they’re not silly; that there is a realm of life above and beyond the marketplace, and unless that realm is given its proper due, the market economy is doomed.

Röpke repeats with Burke that the State is more than a sort of business company, and with Ortega that mass anything, including commercialism gone riot, is dangerous to humane life.

The rights of the community are no less imperative than those of the individual, but exaggeration of the rights of the community in the form of collectivism is just as dangerous as exaggerated individualism in its extreme form, anarchism. Ownership ends in plutocracy, authority in bondage and despotism, democracy in arbitrariness and demagogy. Whatever political tendencies or currents we choose as examples, it will be found that they always sow the seeds of their own destruction when they lose their sense of proportion and overstep their limits. In this field, suicide is the normal cause of death.

The market economy is no exception to the rule.

This is Röpke at his best. For me there has never been a more powerful defense of economic liberty than A Humane Economy precisely because Röpke understands its limits. His attack on social rationalism, whether of the Left or the Right, is as devastating as it is Witty.

Of course, A Humane Economy is a book about economics; and, of course, most of it is devoted to a defense of liberty. These are not times in which the chief danger is from mindless libertarianism; the real threat to liberty comes from the collectivists, and it is for them that Röpke reserves his heavy artillery. He leaves Keynes in ruins. The acknowledged theorist behind Ludwig Erhardt’s “economic miracle” in Germany, Röpke knew as early as 1945 that inflation was the chief enemy of both economic and political liberty, and his analyses and predictions are terrifying when read in 1975. The welfare state, he says, cannot exist without loosing the black spider of inflation; and how right he has proved!

Now it is evident that the slogan “freedom from want” is not meant as an appeal for more self-providence, for saving and insurance. It was not understood in this domestic sense of good husbandry either by Roosevelt or the masses. What is implied is extraneous relief, not voluntary but compulsory, and on a large scale. But in that case all that “freedom from want” implies is that some people consume without producing while others produce and are forced by the state to forego consumption of their own production. That is the sober and elementary fact.

And from that fact Röpke deduced a number of conclusions congenial to the libertarian philosophy, but withal he has not lost his reason.

We cannot, nowadays, do without a certain minimum of compulsory state institutions for social security. Public old-age pensions, health insurance, accident insurance, widows’ benefits, unemployment relief—there must naturally be room for all these in our concept of a sound social system in a free society, however little enthusiasm we may feel for them. It is not their principle which is in question, but their extent, organization, and spirit.

And thus is Röpke condemned; when I read that passage to libertarian students the “young fogies” shouted that Röpke is nothing but a collectivist after all. he understands nothing of the world of rigid and uncompromising devotion to praxeology. He is not even a practical man. So said undergraduates of the economist whose theories rebuilt Germany, and they wondered why their audience went off in hiding to have a drink.

To the convinced social rationalist of the right, the sort of civilizational monster who intrudes on another’s hospitality and launches into a lecture on how friendship is no more than a form of profit-making, Röpke will have little appeal; but for conservatives, as opposed to libertarians, Röpke is medicine badly needed. He defends the market economy, and he deals with the selfishness of bourgeois society.

Heine wrote,

Prodigious sins I’d rather see, 
And crimes of blood, enormous grand, 
Than virtue, self-content and fat, 
Morality with cash in hand,

and Röpke responds, “Who does not know such moments of despair in the face of Philistine self-satisfaction and ungenerousness?” He knows what the romantics feel when confronted with the smug face of Harry Babbitt, and he gives comfort. The marketplace and its Philistine “boosters,” says Röpke, are vital to any kind of life of freedom. And though one may not like them, they produce an ethical climate that

is lukewarm, without passions, without enthusisam, but also without “Prodigious sins” and “crimes of blood”; it is a climate which, while not particularly nourishing for the soul, at least does not poison it… it is a climate favorable for a certain atmosphere of minimal consideration and for the elementary justice of a certain correspondence of give and take and most favorable, whatever one may say, for the development of productive energy. That this energy is applied not to the construction of pyramids and sumptuous palaces but to the continual improvement of the well-being of the masses, and that this happens because of all-powerful forces proper to the structure and ethical character of our free economic order is perhaps tha greatest of assets in its overall balance sheet.

A free economy, Röpke demonstrates, is not a mere frill; it is an absolutely essential part of any free society. Without property and ownership the tendency is always toward statism and reduction of freedom. We cannot live without economic freedom—a proposition that hardly startles readers of Libertarian Review.

But his most important message is that the market economy is not everything: “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.” It is his recognition of the limits of economics that should make him valuable to libertarians—at least to libertarians who want to hold a dialogue with conservatives.

Item: “We do not have to be told that advertising fulfills indispensable functions. But only the blind could fail to notice that commercialism, that is, the luxuriance of the market and its principles, causes the beauty of the landscape and the harmony of cities to be sacrificed to advertising. The reason that the danger is so great is that although money can be made from advertising, it cannot be made from resistance to advertising’s excesses and perversions. Thousands get hard cash out of advertising, but the unsaleable beauty and harmony of a country give to all a sense of well-being that cannot be measured by the market.”

Item: “The warmest supporter of installment buying will not deny that it is in danger of excess and degeneration. The asymmetry is due to the fact that the impulses originating in the market work to the benefit of consumer credit because the interests of those who want to sell their wares are joined by the special interests of the finance institutes making money out of the installment-plan sales. But no money is to be made by organizing cash purchases… .”

Item: “Money can be made only by expanding East-West trade, not by restricting it. We have a paradoxical situation: on the one side, Moscow is anxious to make good the deficiencies of the Communist economic system by getting supplies of the most wanted goods from the market economies of the free world while, at the same time, plotting those economies’ destruction; on the other side, Moscow has no stauncher allies in these designs than the Western businessmen… who would be the first to be eliminated if Communism were to win… .

“The fact that the wind of private business interests fills the sails of the Western business world’s eagerness to expand East-West trade is no proof that it has political reason on its side—and political reason must, here, have the last word.”

It is a trite saying that the battle against communism takes place in the hearts and minds of men, but it is no less true for being trite. My experience with Röpke’s value in that battle came with his much earlier work, The Social Crisis of Our Time, of which A Humane Economy is an updating and expansion; and I can say from that experience that Röpke’s view of a humane civilization is a far more reliable weapon for winning converts to the cause of freedom than ever were smug analyses of friendship as “praxeological exploitations.”

In conclusion I can do no better than quote a puff from the jacket of the Regnery edition of Röpke’s book. Harry Gideonse, then president of Brooklyn College, said, “No single individual in this generation has done more to clarify the basic requirements of a free society or to expose the sophomoric fallacies inherent in exclusive pursuit of one social value at the expense of all others.” And ’tis true, ’tis true! Reviewed by Jerry Pournelle / Economics—Political Philosophy / Regnery, 1971 / $2.95