The following is excerpted from Wilhelm Röpke's classic bookA Humane Economy.
The questionable things of this world come to grief on their nature, the good ones on their own excesses.
Conservative respect for the past and its preservation are indispensable conditions of a sound society, but to cling exclusively to tradition, history, and established customs is an exaggeration leading to intolerable rigidity. The liberal predilection for movement and progress is an equally indispensable counterweight, but if it sets no limits and recognizes nothing as lasting and worth preserving, it ends in disintegration and destruction. 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 and its extreme form, anarchism. Ownership ends up 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 seed 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. Indeed, its advocates, in so far as they are at all intellectually fastidious, have always recognized that the sphere of the market, of competition, of the system where supply and demand move prices and thereby govem production, may be regarded and defended only as part of a wider general order encompassing ethics, law, the natural conditions of life and happiness, the state, politics, and power. Society as a whole cannot be ruled by the laws of supply and demand, and the state is more than a sort of business company, as has been the conviction of the best conservative opinion since the time of Burke.
Individuals who compete on the market and there pursue their own advantage stand all the more in need of the social and moral bonds of community, without which competition degenerates most grievously. As we have said before, the market economy is not everything. It must find its place in a higher order of things which is not ruled by supply and demand, free prices, and competition. It must be firmly contained within an all-embracing order of society in which the imperfections and harshness of economic freedom are corrected by law and in which man is not denied conditions of life appropriate to his nature. Man can wholly fulfill his nature only by freely becoming part of a community and having a sense of solidarity with it. Otherwise he leads a miserable existence and he knows it.
The truth is that a society may have a market economy and, at one and the same time, perilously unsound foundations and conditions, for which the market economy is not responsible but which its advocates have every reason to improve or wish to see improved so that the market economy will remain politically and socially feasible in the long run. There is no other way of fulfilling our wish to possess both a market economy and a sound society and a nation where people are, for the most part, happy.
Economists have their typical deformation professionelle, their own occupational disease of the mind. Each of us speaks from personal experience when he admits that he does not find it easy to look beyond the circumscribed field of his own discipline and to acknowledge humbly that the sphere of the market, which it is his profession to explore, neither exhausts nor determines society as a whole. The market is only one section of society. It is a very important section, it is true, but still one whose existence is justifiable and possible only because it is part of a larger whole which concerns not economics but philosophy, history, and theology. We may be forgiven for misquoting Lichtenberg and saying: To know economics only is to know not even that. Man, in the words of the Gospel, does not live by bread alone.
Let us beware of that caricature of an economist who, watching people cheerfully disporting themselves in their suburban allotments, thinks he has said everything there is to say when he observes that this is not a rational way of producing vegetables-forgetting that it may be an eminently rational way of producing happiness, which alone matters in the last resort. Adam Smith, whose fame rests not only on his Wealth of Nations but also on his Theory of Moral Sentiments, would have known better.
Wilhelm Röpke (1899-1966) was one of the most influential economists of the twentieth century. A key architect of Germany's post-World War II "economic miracle," he wrote Economics of the Free Society, The Moral Foundation of Civil Society, The Social Crisis of Our Time, and other books.
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