German Ordoliberalism as Agenda Setter for the Euro Crisis: Myth Trumps Reality

Abstract:

German political leaders have extolled the advantages of the rule-based ordoliberal doctrine as a panacea for the Eurozone countries to regain competitiveness. This legalistic doctrine has been used by the German Bundesbank as an important agenda setter to prevent alternative ideas from challenging the austerity discourse in the Eurozone. A closer look across German economic history tells a different story. At no time did perfect market competition work in practice as the ordoliberal doctrine postulates. In fact, it was the London Debt Agreement of 1953 with the Marshall Plan, and the combination of Ordnungspolitik with a more ethical and publicly provided social policy (what has become known as the Soziale Marktwirtschaft) which account for the German Wirtschaftswunder. But rather than rejecting Ordnungspolitik on the grounds that it is ‘a dangerous idea’, we should focus on institutional reforms based on an ethical and socially oriented economic model for the European Union (EU). In fact, this is what Germany has done since the 1950s, with the scales tipping sometimes in the direction of strengthening the ordoliberal side of competition policy, and at others shifting to more inclusive social measures. The question is whether Germany's ‘real’ economic history can provide a more realistic model for a sustainable social EU.