The Social Crisis of Our Time

by Wilhelm Röpke, Russell Kirk (Foreword by)

Roepke's The Social Crisis of Our Time is a series of blasts against the "malformations" of economics: the Nazi and Communist forms of collectivism both come in for severe criticism. Roepke shows the process by which the Western liberal tradition itself makes possible these rebellions against open economic systems. The drive toward social welfare, full employment policies, and the state management of fiscal fluctuations all lead away from free societies no less than market economies.

Genres: Economics, Politics, Nonfiction

296 pages, Paperback

First published January 1, 1942

About the author

Wilhelm Röpke (October 10, 1899 – February 12, 1966) was Professor of Economics, first in Jena, then in Graz, Marburg, Istanbul, and finally Geneva, Switzerland, and one of the spiritual fathers of the social market economy, theorising and collaborating to organise the post-World War II economic re-awakening of the war-wrecked German economy, deploying a program sometimes referred to as the sociological neoliberalism (compared to ordoliberalism, a more sociologically inclined variant of German neoliberalism).[1]

With Alfred Müller-Armack and Alexander Rüstow (sociological neoliberalism) and Walter Eucken and Franz Böhm (ordoliberalism) he elucidated the ideas, which then were introduced formally by Germany's post-World War II Minister for Economics Ludwig Erhard, operating under Konrad Adenauer's Chancellorship.[1] Röpke and his colleagues' economic influence therefore is considered largely responsible for enabling Germany's post-World War II Economic "Miracle." Röpke was also an historian.

Reviews

[Drew Norwood · Rating 5 out of 5]

This book has aged well. Though written in Switzerland in the 1940s, its main outline is just as relevant to the social crisis facing the United States in the 21st Century. As an economist, Ropke seems to have been interested primarily in two things: (1) giving careful attention to the structures needed to support a free market and a free society, and (2) fighting collectivism in all its forms. Both of these areas deserve our attention today. In considering these focal points, Ropke developed what he labeled the “Third Way”, an “economic humanism” that sought to avoid the shortcomings of pure capitalism on the one hand and collectivism on the other. To be clear, as Russel Kirk as helpfully pointed out: “Ropke’s ‘third way’ is not ‘gas and water socialism’ or consumer cooperatives or a managed economy. Instead it is economic activity humanized by being related to moral and intellectual ends; humanized by being reduced to the human scale.”

The book is divided into two parts: (1) diagnosing the disease and (2) providing the remedies. Ropke diagnosed his society with “pathological aberrations” that he arranged into “two groups according to their causes and their symptoms: the spiritual and ethical group, and the political, social, and economic (sociological) group.” These symptoms all come from a common societal disease which he calls “collectivism”. “The political and the economic structure of collectivism are merely two aspects of one and the same thing; they both are the ultimate result and the most radical manifestation of that spiritual collectivization, aggolmeration, mechanization, atomization and proletarization which have become the curse of the Western world.” (95). Side-effects include “disintegration of the family” (15) and proletarization (characterized by “economic and social dependence” where “giant enterprises and concentrations of property have made a large part of the population dependent, urbanized cogs in the industrial-commercial hierarchy, recipients of wages and salaries” (14)). Looking around us, we see things have only gotten worse since Ropke’s time.

Ropke was an Austrian economist and a proponent of free markets, but he was not afraid “to realize the responsibility a misdirected capitalism bears for the sickness of our society.” (18). Misdirected being the key word. All economic policy must take into account the framework in which it exists and the goals to which it points. Capitalism never lives in a vacuum but everywhere is found in a certain social setting. Moreover, it’s never adopted as an end in itself but is meant to serve a certain end. As to the framework, Ropke points out that there are good social and political frameworks where capitalism flourishes but there are also bad settings where capitalism withers (generally in the form of collectivism). The good social setting corresponds to a sound political and moral framework. (181). Capitalism quickly becomes misguided when it neglects the strong moral and political framework that it requires. On the other end, the goals must not be merely wealth and higher GDP, but human happiness, community, fraternity, and charity. In losing sight of these goals, greed and materialism predominate and economic relationships become strained.

To counteract “misguided capitalism” and to promote a more humane capitalism, Ropke takes a step back and examines the framework in more detail. The market economy rests on the two pillars of economic freedom and competition. But these two pillars do not come naturally. “The market economy as an economic system which depends on the confidence and the enterprise of the individual and on his readiness to save and to take risks, cannot be maintained without certain protective measures and legal principles which offer security and protection to the individual not only in the face of encroachments of other individuals, but also against the arbitrary interference of the state, and which add up to what we call the constitutional state.” (95).

The main question then becomes: how do we preserve and support a solid foundation for a free market? That is what he answers in Part II, titled “Actions”. In promoting the Third Way, Ropke provided several key proposals:

(1) Buy local. “Let us then, at least to some extent, return to the old easy-going spirit by assigning less importance to money matters, which is possible by increasing the sector of simple economic relations (self-sufficiency and local selling and buying) at the expense of the sector of anonymous competition, and we shall have taken the first step towards reconstruction.” (133). And again: “Those consumers who can at all afford it should not shrink from the sacrifice of a few cents in order to carry out an economic policy of their own and support artisans to the best of their ability for the good of the community, but they must fund in the artisan himself a willing partner to this scheme, ready to give his best. We should be unwilling to make awards for incompetence and indolence.” (217).

(2) Restore honor to business. “[I]is necessary also in order to keep competition itself untainted because it cannot function unless it is based on certain definite norms: General honesty and loyalty in business, adherence to the rules of the game, making excellence of workmanship a point of honor, and a certain professional pride which seems it humiliating to defraud, bribe or to misuse political power for one’s own selfish purposes. It should in fact be the rule that everyone who does not adhere to the strict code of business ethics…should be socially ostracized as violating the dictates of decency, and in worst cases as a cheat, as a fraudulent bankrupt, as someone engaging in a ‘dishonest’ profession.” (133-134)

(3) Promote and Practice “Peasant Agriculture”. “Peasant agriculture” is sustainable, small-scale family farming. “A return to economically balanced forms of life and production which are natural and satisfying to men.” (201). “Peasant agriculture alone” is the “backbone of a healthy nation.” (202). Ropke sounds very Jeffersonian here. “It is an essential characteristic of peasant agriculture that the size of each farm does not exceed the working capacity of one family together with those who have become members of it and a few additional and often temporary agricultural laborers” (202). “The peasant holding is the scene of life and work, of production and consumption, it provides shelter and working quarters, brings men and nature together, affords satisfying and purposeful activity and immediate enjoyment of its fruits, promotes in an ideal manner the independent development of personality and at the same time the warmth of human fellowship, and thereby counter-balances the industrial and urban aspects of our civilization with tradition and conservatism, economic independence and self-sufficiency, many-sided activity and development, proximity to nature, moderation and tranquility, a natural and full existence near the source of life, and a humble integration into the chain of birth and death.” (202-03). An increase self-sufficiency is an expansion of the “marketless economy”. But it must be noted that such a shift must take place not by “economic compulsion” but as “a natural consequence of changes in the internal economic structure (by enlarging the sphere of self-sufficiency and perfecting the economic equilibrium of the peasant farms).” (212)

(4) De-proletarize modern workplaces. Measures should be taken to divest the proletarian of his “[c]hief material characteristic, viz., his unpropertied state, he must be given the chance of attaining thy degree of relative independence and security, that awareness of kinship and tradition which only property can give.” (221). This may take the form of an ownership interest in the enterprise or it may take the form of investing in the worker’s family life. Ropke cites Bally Shoe Company as an example for his place and time. Bally Shoe Company was a Swiss shoe manufacturer that assisted its workers “in acquiring a house and adequate garden plots by negotiating the purchase of land for them, advising them on building and finance matters and affording them financial aid” (219), among other similar benefits.

(5) Prohibit and/or Regulate Monopolies. Monopolies are “a falsification of the market economy.” (228). Some argue that monopolies lower prices and are therefore beneficial, but this misses the point. For example, “[m]onopolistic concentration of the press may make the newspaper much cheaper, but what do we read there?” (229). To combat monopolies, there is no easy solution, but possibilities include reforming or abandoning corporate charters and patents. In creating patents and corporate entities, the state has primed the pump for collectivism. Another possible remedy is found in anti-trust legislation. Anti-trust laws should be adopted and vigorously enforced.

In all of these proposals, the main goal is to create or maintain the framework in which a free market can function properly as a means to promote our full humanity. To let Ropke speak for himself: “a free market and performance competition do not just occur—as the laissez-faire philosophers of historical liberalism have asserted—because the state remains completely passive; they are by no means the surprisingly positive product of a negative economic policy. They are, rather, extremely fragile artificial products which depend on many other circumstances and presuppose not only a high degree of business ethics but also a state constantly concerned to maintain the freedom of the market and of competition in its legislation, administration, law courts, financial policy and spiritual and moral leadership, by creating the necessary framework of laws and institutions, by laying down the rules for competition and watching over their observance with relentless but just severity. In economic life, too, the saying holds good that liberty without restraint is license, and if we desire a free market the framework of conditions, rules and institutions must be all the stronger and more inflexible.” (227-228).

There is a lot to consider here. I’m not certain about all of his proposals but the book seems to capture the heart of our social crisis too. Ropke urges us to strive for more than a laissez-faire economic policy. He advocates tending the foundations on which the market economy rest. His call us to build strong moral, political, and social institutions in which a market economy can thrive. Elsewise, we will march further down the road of collectivism.

[Nathan Albright · Rating 5 out of 5]

In times of crisis like our own, it is a useful thing for us to ponder the relationship between our own crisis and those crises that have come before. By understanding the past and the recognition of the problems of the past by wise people who have come before us, we can avoid having to re-invent the wheel or depend on our own limited personal insight by recognizing that the problems we face have antecedents and that people were shrewd enough to recognize what was going on beforehand and help us to see what needs to be done if we wish to avoid the same disasters that have come upon us before. So is the case with this book, as the author wrote this book in the period of World War II and was gratified to find it translated into English where it has reached a larger audience than it had before. The author recognizes the continual temptation that people have in viewing a false dilemma between a harsh “rational” capitalism and a totally ineffective collectivism while neglecting the via media that allows for the avoidance of these extremes to those who are savvy enough to recognize it.

This book is about 250 pages long and is divided into two parts and six chapters dealing with the crisis of the Depression-era world. The author begins with an introduction that encourages the third way between a godless supposed rationalism and a spiritual collectivization that has impoverished the world. After that the author discuses an interpretation of the crisis of his time and an inventory of what is going on (I), with chapters on the seed and harvest of the past two centuries since the Enlightenment (1), including the revolutions of those times, the aberrations of rationalism and liberalism, and the cult of the colossus in business, a discussion of political and economic systems including democratic liberalism and the collectivist state (2), and a discussion of the splendor and misery of capitalism and of the failures of socialism (3). After that the author discusses what action is to be taken (II), including chapters on various aberrations and blind alleys (1), including social welfare, socialism, and other forms of loose thinking, some basic questions of reform and the moral and political and economic prerequisites of it (2), as well as some avenues of approach and examples including peasants, artisans and small traders, the deproletarization and decentralization of industry, and the search for a just international order (3).

In a way that the author could not have predicted, this book serves as a reminder to the crisis of our own time, as the author’s discussion of the problems that faced Depression and World War II era Europe are precisely the same sort of problems that contemporary America has to wrestle with. Are liberal regimes capable of handling the anarchy of our times or are they destined to fall prey to collectivist political and economic structures that will destroy the well-being of the people even as they mouth pious platitudes of good intentions? This is by no means an obvious question, as the author correctly recognizes that there are conflicts of interest in the economic systems and that for the well-being of a nation to endure, it must have a political and economic system that avoids the cult of the colossal and provides an opportunity for free peasants and petit bourgeoisie to thrive. Not all people are fond of such classes on whom the economic well-being of nations relies, but the author’s experience with the Swiss certainly helped him to recognize the value of smaller peoples in the world whom the larger systems of power have tended to overlook at the peril of the world as a whole.

[Caroline · Rating 5 out of 5]

obsessed. Röpke makes a careful argument in favor of true liberalism and democracy against true collectivism, guarding against imprecise definitions of both so as to clarify the essential aspects. he argues that the form which democracy has taken with corporatism and vested interests (he argues this is the vestiges of feudalism ?!) has led to “spiritual collectivism,” atomization, and centralization, and in order to reinvigorate society and avert the lure of socialism an attention to the non-material benefits of the market system is necessary (private property, freedom, self-sufficiency).

[Mike Murray · Rating 4 out of 5]

long, long notes on paper