'..fostering societies where people can live more humane lives..'

'..If are we concerned about fostering societies where people can live more humane lives, Röpke's advances in both Austrian economics and his vision of the good society deserve close attention.'

<blockquote>'CRITIQUE OF KEYNES

In the East, collectivism took the form of full-blown socialism. In Germany and Italy, Fascism rose and fell. But the post-war West was not immune to the call of collectivism, and Röpke saw Keynesian economics as paving the way. He argued that the Keynesian program was destructive in both its economic and moral consequences.

In a 1952 critique of the United Nations Report on National and International Measures for Full Employment, Röpke warned that if governments keep interest rates perpetually low, as the "new economics" recommended, chronic inflation is the necessary consequence. Röpke foresaw that a fully implemented "full-employment" policy would result in "stagflation" which the United States experienced in the 1970's.

Additionally, chronic inflation creates political pressure for repressed inflation. Having lived through Germany's hyper-inflation, Röpke feared the consequences of an unrestrained monetary authority. He developed a theory of repressed inflation based on interventionism and the Austrian theory of economic calculation. The government monetary authorities first inflate the money supply and then impose price and other economic controls in order to mitigate the consequent rise in prices. This only makes things worse, for, as the Austrians demonstrated during the socialist calculation debate, market prices are crucial for rational economic planning on the part of entrepreneurs. The result is that official prices do not reflect actual economic values, and the economy is riddled with bottlenecks, sporadic unemployment, and general economic chaos. This repressed inflation was a major feature of post-war European economies.

Röpke viewed inflation as a Keynesian means for transferring wealth. When a central bank inflates the money supply, the new money always enters the economy in the hands of particular individuals. They are the first ones to spend the new money, making their purchases at the original price levels, happy that their wealth has seemingly increased. As the new money works itself through the economy, however, increased demand for goods result in increased prices. Those who receive the new money later or not at all must pay the higher prices and incur a decrease in their real wealth. Explaining this Austrian insight within his moral framework, Röpke argued that this amounts to little more than legalized theft and redistribution.

For Röpke, however, Keynes's positivistic-scientistic method was an even more damaging part of his legacy. In a critique of Keynes, included in the final 1963 edition of his revised text The Economics of a Free Society, Röpke pinpointed one of Keynes's most dangerous ideas. Keynes and his followers saw the economic system as part of a mathematical-mechanical universe, with economic activity being the product of quantifiable aggregates, such as consumption and investment, instead of a result of actions by individuals. Keynes took the human out of "human action" and reduced the economic system to a machine. Man became a mere social unit, merely reacting to changed conditions according to economic instincts.

Keynes's focus on the management of economic aggregates fed the hubris of modern economists by justifying their role as the keepers of the keys to the economic kingdom. Keynesian economists, making Gross National Product their highest end, were advocating an economic variant of scientism. Such economism leads to collectivism, according to Röpke, because it uses government coercion to tax funds from individuals in the name of "growing the economy."

Welfare, Domestic and International

After the war, the United States Congress and the Truman administration passed the Marshall Plan, which pledged the largest ever transfer of foreign aid to help rebuild war-torn Europe, a plan wholly embraced by intellectual and political establishments on both sides of the Atlantic. But Röpke dissented from this conventional view on grounds that European economic recovery would not be brought about by foreign aid but through a restoration of the market economy that had been hampered during the war. The problem of economic disorder, he said, is the result of repressed inflation, a "policy that created chaos in the name of planning, confusion in the name of guidance, retrogression and autarky in the name of progress, and mass poverty in the name of justice." Regardless of U.S. aid, "it will still be up to every beneficiary country in Europe whether or not to avail itself of this unique opportunity for liberating the economy from inflationary controls. Unless this is done, however, it is to be feared that the new American billions will trickle away just as the old ones did."

What's more, he predicted, Marshall Plan aid could have the deleterious effect of forestalling market reform. The aid will not likely be used to make a transition to the market possible, but rather to subsidize and entrench the current system. In the regions of Europe for which the U.S. government is responsible--for example the American-occupied zone of Germany--the U.S. has "for two-and-a-half years applied economic principles that cannot be described otherwise than as collectivist." Röpke reminds his European readers that the American economy itself is in many ways planned, inflationary, and collectivistic. "A whole generation of American economists, after all, has been brought up to think of the permanent inflationary pressure implied in the 'full employment' policy as an ideal and indeed a necessity."

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Monopoly

Röpke was a relentless critic of the tendency towards bigness in economic and political life. And he was one of the earliest modern economists to point out that, like the business cycle, monopoly is not a product of the free market, but a result of government intervention. As early as 1936, he documented that the free market was generating competition, not monopolies. In a later defense of the market economy, Röpke maintained that market capitalism is not bigness per se. Similarly, proper legal institutions are those that foster a truly free market, not "big business" in the name of efficiency. He argued that monopolists were able to maintain their position in the market due to legal privileges, and maintained that government regulation cannot work as a cure for economic concentration. On the contrary, it is the office economy that tends toward concentration. The collectivist economy leads to the politicization of all economic life, resulting in national monopolies and all economic decisions in the hands of central planners.

It is in this context that we must consider Röpke's remarks on the negative consequences of capitalism as it developed historically. Röpke occasionally used strident language to criticize how the rise of capitalism also fed forces of monopoly and urbanization. But these negative consequences are not, however, to be attributed to free-market capitalism, but should be seen instead as a holdover from the feudal system. Economic power was concentrated, not because the free market necessarily led to such concentration, but because pre-liberal property arrangements went largely unchanged after the free-market system developed. Feudal lords enjoyed certain social and legal privileges over the serfs, and these were not abolished with the rise of capitalism.

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Social Theory

During and following World War II, Röpke broadened his research interests beyond economic and political theory and into cultural and even religiously based analytics. His resulting critique of modern society developed out of his conviction that trends in the sciences and politics were undermining and even destroying the idea of the individual soul and replacing it with the concept of mass man. Röpke began to concentrate on this problem with more focus beginning in 1942 with the publication of the book that would later be translated into English as The Social Crisis of Our Time. He sought to trace the evolution of thought and action that led to the crisis of collectivism he saw, and sought to defend freedom in the face of statism of all stripes.

Röpke was also skeptical of the role of economist as social engineer, whether in promoting "efficiency" or "social justice." He followed Mises's method in viewing economic agents as homo agens, humans who act, rather than homo oeconomicus, individuals motivated by purely material motives. "The ordinary man is not such a homo oeconomicus," he writes, "just as he is neither hero or saint. The motives which drive people toward economic success are as varied as the human soul itself." Because life is indeed more than food, and the body more than raiment, one cannot look only to economics to provide a life worth living.

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From his earliest years, Wilhelm Röpke fought collectivist and statist power in every way an intellectual could. His tools included not only economic theory but also a vision of moral goodness rooted in Christian faith. As Hayek said of Röpke: "let me at least emphasize a special gift for which we, his colleagues, admire him particularly--perhaps because it is so rare among scholars: his courage, his moral courage." If are we concerned about fostering societies where people can live more humane lives, Röpke's advances in both Austrian economics and his vision of the good society deserve close attention.'

- Shawn Ritenour, Biography of Wilhelm Röpke (1899-1966): Humane Economist</blockquote>