The following is the text of a lecture originally delivered on April 12, 2008 at ISI’s National Leadership Conference held in Indianapolis, Indiana.
Wilhelm Röpke was an unusual free-market economist working in a difficult time. I believe that we should see him, first of all, as a product of 1914, the year which launched what he called “the devastation on so gigantic a scale to which mankind, then having gone mad, dedicated itself.” Mustered to war as a young man, Röpke served in the trenches on the Western Front. He concluded that a civilization “capable of such monstrous depravity must be thoroughly rotten.” Röpke pledged that if he “were to escape from the hell” of the Great War, he would devote his life to “preventing the recurrence of this abomination.” He also resolved that war “was simply the rampant essence of the state,” collectivism run amuck, and he launched his life-long “struggle against economic nationalism . . . , monopolies, heavy industry and large scale farming interests,” all of which he believed had given encouragement to the terrible conflict.
A second starting point for his economic views was Christian. A descendent of German Lutheran pastors, Röpke held to that concept which “makes man the image of God whom it is sinful to use as a means” and who embodies inestimable value as an individual. Noting that the idea of liberty had appeared uniquely in Christian Europe, he concluded “that only a free economy is in accordance with man’s [spiritual] freedom and with the political and social structures . . . that safeguard it.”
The key pillar of that social structure, Röpke maintained, was the natural family. Along with religion and art, he held that the family did not exist for the state, but was “pre-statal, or even supra-statal.” In its essence, family life was “natural and free,” while the “well ordered house” served as the very foundation of civilization. Derived from “monogam[ous] marriage,” he said that the family was “the original and imperishable basis of every higher community.” The “centre of gravity” for planning and living one’s life should be in that “most natural of all communities—the family unit.” The autonomous family also stood first “in opposition to the arbitrary tendencies of the state.” Indeed, the natural family became the touchstone of his quest for a truly Humane Economy.
And yet, despite this strong affirmation of the natural family as critical to free society, Röpke’s analysis also led him to several conundrums or dilemmas surrounding family life. For example, he avoided discussing ways in which certain incentives of a free economy might tend to weaken family bonds. Surprisingly, Röpke was also hostile both to the American “Baby Boom” and to the new suburbs in which the young Boomers lived. He criticized the creation of large families, although these were in practice a common and fairly natural product of happy home life. For related reasons, he frequently fretted about population growth. Meanwhile, he encouraged public policies that actually had pro-natalist, or pro-birth effects. What were the sources of these conflicting views?
The Humane Economy, Family Style
We should start by examining in more detail the family nature of—or the place of the family in—his desired Humane Economy. Emerging from the Great War, Röpke found himself engaged in an intellectual battle on two fronts. As he later reported: “I sided with the socialists in their rejection of capitalism, and with the adherents of capitalism in their rejection of socialism.” By capitalism, as John Zmirak noted, Röpke did not mean the free market. Rather, the term “capitalism” embodied for him “the distorted and soiled form which market economy assumed” in the period between about 1840 and 1940. The liberal quest for economic liberty had gotten off track in this era, he asserted, producing effects that would pave the way to socialist collectivism; specifically:
. . . the increasing mechanization and prolitarization, the agglomeration and centralization, the growing dominance of the bureaucratic machinery over men, monopolization, the destruction of independent livelihoods, . . . and the dissolution of natural ties (the family, the neighborhood, professional solidarity, and others).
The task facing the modern economist, Röpke said, was to eliminate “the sterile alternative” between a return to 19th Century laissez-faire and 20th Century collectivism. The needed “free economic constitution,” as he phrased it, would embrace certain basics: “the market, competition, private initiative, a free price structure and free choice of consumption.” Röpke praised the true market economy as the only system “which releases the full activity of man so natural to him while, at the same time, [curbing] his hidden tigerish tendencies which, unfortunately are no less natural to him.” A system of free economic competition alone could deliver “discipline, hard work, decency, harmony, balance and a just relation between performance and payment.” It was also the only system compatible with protection of the free personality, which offered men and women the liberty to tackle challenges in the domains of culture, the intellect, and religion.
All the same, a market economy was not easy to achieve. As Röpke explained, “it is an artistic construction and an edifice of civilisation which has this in common with political democracy: it demands and presupposes . . . the most strenuous efforts.” Among other needs, the free market required a “high degree of business ethics together with a state ready to protect competition.” Looking to the failures of the 19th Century, Röpke was relentless in exposing the “sins” of monopoly, including:
Privileges, exploitation, . . . the blocking of capital, the concentration of power, industrial feudalism, the restriction of supply and production, the creation of chronic unemployment, the rise in living costs and the widening of social differences, lack of economic discipline, [and] the transformation of industry into an exclusive club, which refuses to accept any new members.
He favored legal devices such as the Sherman Anti-Trust Act found in America to protect competition from these disorders.
Röpke was also an enthusiastic champion of free international commerce. A healthy economy, he insisted, “does not place collectivist shackles on foreign trade.” Efforts to build high tariff walls, he believed, actually “impoverished” small-scale producers. He consistently called for “a liberal and multilateral form of world trade with tolerable tariffs, most-favored-nation clauses, the policy of the open door, the gold standard, and the elimination of closed compulsory [trading] blocks.”
The restoration of private property was also central to Röpke’s vision. The antithesis to socialist or collectivized man was the property holder. Röpke explained that competition was only one of the pillars of a free economy. The other was personal and familial “self-sufficiency.” Accordingly, expansion of the sphere of competition should be balanced by enlarging what he called “the sphere of marketless self-sufficiency.” This meant “the restoration of property for the masses,” a “lengthy and circumspect” program that would discourage the accumulation of big properties, use “progressive death duties” to break up large estates, and redistribute land to propertyless families on favorable terms. As Röpke wrote: “the industrial worker . . . can and ought to become at least the proprietor of his own residence and garden . . . which would provide him with produce from the land.” This alone would render each family “independent of the tricks of the market with its wage and price complexities and its business fluctuations.”
Indeed, Röpke held an almost religious faith in the transformative power of the private garden. As he wrote, the keeping of a family garden “was not only ‘the purest of human pleasures’ but also offers the indispensable natural foundation for family life and the upbringing of children.” In praising the “Magnetism of the Garden,” he told the story of a friend who was showing the family gardens of several workers to a “dogmatic old-time liberal;” some think this was Ludwig von Mises. In any case, Röpke continued: “on seeing these happy people spending their free evenings in their gardens,” the laissez-faire liberal “could think of nothing better than the cool remark this was an irrational form of vegetable production.” Röpke retorted: “He could not get it into his head that it was a very rational form of ‘happiness production’ which surely is what matters most.”
Still, Röpke acknowledged that it was not certain “that people really want to possess property.” Actually, “to hold” land presupposed much more: “frugality, the capacity to weigh up the present and the future, a sense of continuity and preservation, the will to independence, [and] an outstanding family feeling.”
The necessary task, he said, was broader still: a “deproletarization” that would take industrial workers who lacked roots in “home, property, environment, family, and occupation” and transform them into free men. This meant, in Röpke’s mind, “rendering the working and living conditions of the industrial worker as similar to the positive aspects of the life of the peasant as possible.” Beyond his praise for family garden homes, the economist celebrated businesses like Switzerland’s Bally Shoe Company which actively assisted its workers in acquiring houses and land and supported their small agricultural endeavors with ploughing services, fertilizers, locally adapted seeds, and special animal stock. All of these initiatives were designed, Röpke said, “to save [these families] from their proletarian existence.” The result would be the citizen free of the vagaries of the business cycle “who, if necessary can find his lunch in his garden, his supper in the lake, and can earn his potato-supply in the fall by helping his brother clear the land.”
To heal the distortions of human life wrought by 19th century laissez-faire capitalism, Röpke even sought to undo—in some degree—the urban-industrial revolution. Writing in The Social Crisis of Our Time, he called for nothing less than the “drastic decentralization of cities and industries, [and] the restoration of some more ‘natural order.’” He labeled the modern big city a “monstrous abnormality,” a “pathological degeneracy” that devitalized human existence, adding: “the pulling down of this product of modern civilisation is one of the most important aims of social reform.” Relative to the decentralization of industry, he urged that “the artisan and the small trader” receive “all the well-planned assistance that is possible.” He also saw promise in the rise of the “tertiary,” or service sector. Moreover, Röpke believed that recent technological advances—electric motors, the internal combustion engine, compact machine tools—these lent new competitive advantages to small enterprises. Anticipating the Prairie Home Companion’s Garrison Keillor (who has said that you buy local products at Ralph’s Pretty Good Grocery in Lake Wobegon instead of at the Mall in St. Cloud, because Ralph is your neighbor), Röpke urged that consumers “should not shrink from the sacrifice of a few cents in order to carry out an economic policy of their own and support [local] artisans to the best of their ability and for the good of the community.”
This process of “deproletarization” also meant restoration of a peasantry: a countryside of small family farms. Röpke called the peasantry “the very cornerstone of every healthy social structure” and “the backbone of a healthy nation.” Sounding here like Thomas Jefferson, or the Southern Agrarians of the 20th century, he continued: “A peasant who is unburdened by debt and has an adequate holding is the freest and most independent man among us.” The peasant household also showed “that a type of family is possible which gives each member a productive function and thus becomes a community for life, solving all problems of education and age groups in a natural manner.” Given these qualities, Röpke held that “a particularly high degree of far-sighted, protective, directive, regulating and balancing intervention [by the state in agriculture] is not only defensible, but even mandatory.” He looked with particular admiration to the relatively advanced peasant farming systems then found in Switzerland, Scandinavia, Holland, Belgium, and France, and he looked with particular hope to the prospects for specialized production in dairy, eggs, meats, fruits and vegetables.
Another component of the Humane Economy would be a limited, but real welfare or social security system. Röpke did condemn the cradle-to-grave approach of Great Britain and Scandinavia, where “a large part of private income is continually being fed into the pumping station of the welfare state and redistributed by the state, with considerable wastage in the process.” He stressed the corrupting effects on the broader economy of this “everything in one pot, everything out of one pot” scheme, including the suppression of capital investment, the loss of individual initiative, and inflation. Moreover, such a system was like “a powerful machine that has neither brakes nor reverse gear,” ever encroaching “upon the area of self-providence and mutual aid” so that “the capacity [and willingness] to provide for oneself and for members of one’s family . . . diminishes.”
All the same, Röpke acknowledged the need for “a certain minimum of compulsory state institutions for social security.” There must “naturally be room,” he said, for public old-age pensions, health and accident insurance, widow’s benefits, and unemployment relief in a “sound . . . system in a free society.” The imperative was to keep the scheme limited, providing only a floor of support. He had special praise for the Swiss and American social security systems, circa 1960, which recognized and defended these necessary limits.
Röpke called his whole program a “Third Way,” one which would reconcile “the immense advantages of the free market economy with the claims of social justice, stability, dispersal of power, [and] fairness.” This program favored “the ownership of small- and medium-sized properties, independent farming, the decentralization of industrial areas, the restoration of the dignity and meaning of work, the reanimation of professional pride and . . . ethics, [and] the promotion of community solidarity.” This Third Way also sought “the organic building-up of society from natural and neighborly communities . . . starting with the family through parish and county to nation.” Alone, this Third Way rendered “possible a healthy family life and a non-artificial manner of bringing up children.” Indeed, “simple, natural happiness” would come from placing humans “in the true community that begins in the family” and exists “in harmony with nature.”
The Costs of Family Decay
Viewing the Western world in the middle decades of the 20th Century, Röpke identified the negative consequences of “spiritual collectivism, proletarization, . . . and centralization,” the “most serious” of which was “the disintegration of the family.” Usually propertyless and without productive function, the modern family was “degraded to a mere consumers cooperative . . . often without children . . . or without the possibility of bestowing on them more than a summary education.” Along with this “disruption of the Family” went “the loss of a sense of ‘generations’ [where] the individual loses . . . his sense of the continuity of time and the relationship of the dead to the living and [of] the living to their successors.” Things were “fundamentally wrong,” Röpke said, in those nations “where the most natural actions of man like . . . caring for his family, saving, creating new things or raising children must be instigated by propaganda . . . [or] moralizing.”
And yet, Röpke’s analysis of and prescription for the social crisis of his age involved troubling paradoxes or dilemmas over the natural family. For example, where his contemporary Joseph Schumpeter and later analysts such as Daniel Bell argued that certain incentives within the market economy tended to weaken family bonds, Röpke seemed unconcerned. Notably, he largely ignored the market’s latent demand for the labor of married women. He did argue that family was “the natural sphere of the woman” and that the decay of autonomous homes made “the female half of society” into real victims, but he apparently did not see this in any way as the result of legitimate market incentives. Instead, Röpke seemed to blame the “bad” capitalism of the 19th century for this result.
It was true, of course, that equity feminism—a common companion to a free labor market—had made little headway into his model domain of mid-20th century Switzerland. Most married women there still were hausfrauen, or housewives; indeed, women did not even gain the vote in that Alpine land until 1971, five years after his death. Röpke simply assumed that the male breadwinner/female homemaker family would prevail in the Humane Economy.
Röpke was also direct witness to the burgeoning American suburbs of the 1940’s and 1950’s, where young adults fled the overcrowded cities to create child-centered homes, each complete with housewife, lawn, and garden. And yet, instead of praising this process as an aspect of decentralization, he condemned these new creations. At the more objective level, he pointed to “the danger that [such] decentralization will become a mere extension of the big city into the country along the main roads.” This would amount “to a mere decentralisation of sleeping quarters whereas the big city would still remain the centre of work, shopping and pleasure.” Meanwhile, he predicted that traffic problems derived from suburbia would grow insoluble, creating a “hell of congestion.”
At a more visceral level, Röpke objected to the superficial charm and hyper-“gregariousness” of the new American suburbs. “Everybody is forever ‘dropping in’ on everybody else,” he complained. “The agglomeration of people [in the suburb] stifles all expression of individuality, any attempt at keeping to oneself; every aspect of life is centrally ruled.” Röpke especially indicted the “pressure . . . to take part in [suburban] communal life, . . . unless [one] wants to be known as a spoilsport.” He concluded that trying “to escape from the giant honeycombs of city dwelling, into the suburbs is to jump from the frying pan into the fire.”
More curiously, this great champion of the “natural family” showed an emotional dislike of human numbers, involving direct and implied condemnation of the large family. In A Humane Economy, for example, Röpke complained about “the visible crowdedness of our existence, which seems to get irresistibly worse every day,” the “masses of people who are all more or less the same,” the “overwhelming quantities of man-made things everywhere, the traces of people,” “this deluge of sheer human quantity,” and the emergence of humankind as the “parasite of the soil.”
Röpke did recognize on occasion the reality of anti-natalist tendencies in modern life. In his 1932 work, What’s Wrong With the World?, he linked the global agricultural depression of the prior decade to “the slowing up of the growth in population.” He acknowledged that birth control “techniques which permit the separation of sexuality and procreation” spread ever more widely. He continued: “Old mores have succumbed to new attitudes until the practice of birth control has become increasingly a simple matter of habit.” Röpke attributed the use of birth control, in part, to “deliberate selfishness” and concluded that “the modern rationalist spirit” could “drag down both the birth rate and the moral health of the nation.” He even acknowledged that “the birth rate . . . can theoretically fall to zero . . . resulting in an absolute diminution of population.”
However, his more usual message was a condemnation of those economists who defended population growth as a good. Röpke denounced the “blindness,” the “criminal optimism,” and the “strange mixture of statistics and lullabies” which overlooked the dangers of expanding human numbers. He denied the “bold theory” that it was population growth “which imparts dynamism to the industrial counties.” He mocked the argument that “the more cradles there are in use, the greater is the demand for goods, the higher is the investment, . . . the more vigorous is the boom.” He labeled it “a degradation of man and of the great mystery of creation to turn conception and birth” into vehicles for economic expansion. Röpke considered the formation of a large family to be an irresponsible act. He pointed to the Baby Boom in America, fueled by an average family size of about four children, as particularly “new and disturbing.” He concluded: “Every thinking person must . . . admit that, sooner or later, it will become necessary to restrain such population increases. . . . So why not sooner than later?”
How might we explain these views? To begin with, Röpke advanced the unusual argument that the processes of industrialization, centralization, and proletarization were in fact the consequence of too many children. During the 19th century, he explained, birth rates in Europe had remained high while death rates fell, producing “the swamping effect of the incredible increase of population.” Röpke noted that each new generation is like a horde of little barbarians. If parents could not tame them, disaster resulted; adding:
Now since this increase in population took place largely in circumstances and among classes in which this taming, i.e., cultural assimilation was less and less successful, we have been obliged in effect to experience a barbarian invasion out of the lap of our own nation.
This flooding of the earth with a “mass” was “bound to stamp its mass character” on the whole civilization. It had produced an “orgy of technology,” “mammoth industries,” “bloated big cities,” a “materialist and rationalist life without tradition,” “the undermining of everything permanent and rooted,” and “the subjugation of the whole globe by a mechanical, positivist civilization.” Röpke asserted that it would be impossible to build a humane economy “when the industrial nations of the West are improvidently taking a new demographic upsurge for granted.”
Second, he embraced an analytical Malthusianism premised on the calculation of an optimum population for each nation. While the Reverend T. R. Malthus had failed as immediate prophet, Röpke said, the Anglican priest had correctly asked why every economic gain achieved by “the labors and ingenuity of the existing population” should be immediately “claimed by millions of new individuals instead of serving to increase the well-being of those now on earth.”
And third, like many other mid-century analysts, Röpke grew mesmerized by population growth projections which counted 300 billion inhabitants on the Earth by the year 2300. In such an anthill existence, he asked, what would happen to those “unbought graces of life”: “nature, privacy, beauty, dignity, birds and woods and fields and flowers, repose and true leisure.”
Röpke insisted that “a stabilisation of population” was “an indispensable prerequisite of the restoration to health of our society.” Yet he was vague in explaining how to reach this goal. In one passage, he suggested that the three-child family would allow for “a healthy and normal family life” while “in no way” opposing “the stabilisation of population.” In another place, though, he implied that “overpopulation” in Europe would require a two- or even one-child family system to restore economic equilibrium.
In retrospect, we can see that Röpke greatly over-estimated the procreative potential of late 20th century western peoples. The surge in numbers during the 19th century was over by 1920. Indeed, fertility had been falling throughout Europe, North America, and Australia-New Zealand since at least 1880; and in France and the United States, since 1820. Post-World War II “baby booms” were fragile events, the products of unique social forces that would not last. Post-family attitudes, closely linked to a strange combination of democratic socialism with secular individualism, eventually carried the day. As would be clear by the year 2000, below-replacement fertility and depopulation represented the real Western future.
In his public advocacy, Röpke posed still other dilemmas regarding the natural family. For example, his plan to resettle industrial families in semi-rural homes, complete with a vegetable garden and simple animal husbandry, ran counter to his demographic goals. As he was well aware, such an existence would give “the family with many children those conditions which transform a heavy burden to be endured . . . into something natural, stimulating and immediately worthwhile.” As an economist, Röpke should have realized that this would in turn create incentives for more children, for larger families. Put another way, his goal of fertility limitation would have been best achieved by leaving families in large cities where children became ever more costly luxuries.
A similar contradiction emerged in his advocacy regarding social security. As noted earlier, Röpke urged creation of a limited system of public pensions, “putting a floor” under the feet of “the weak and helpless” and preventing their fall “into bitter distress and poverty; no less, no more.” Such a system, he insisted, should not drive out other forms of old-age support, including private savings and annuities and the aid provided to aging parents by grown children.
Röpke was right in seeing such a system as possible and socially constructive. Ironically, though, new research shows that moderate-sized public pensions such as found in the United States during the 1950’s actually have a positive effect on fertility: that is, they encourage larger families. Indeed, it appears that the pre-1965 American system of limited state pensions was a contributing factor to the Baby Boom.
Conversely, it has been fairly clear since the late 1930’s that large, publicly-funded pensions discourage fertility and larger families. Explained briefly, such a system socializes the “insurance value” of children, so punishing parents who raise the young while rewarding their “free-riding,” childless neighbors. Once again, if a decline in fertility was his primary goal, Röpke should have encouraged ever larger state pensions.
Röpke as Successful Prophet
Fortunately, though, Röpke’s priority lay elsewhere. While raising the matter in the context of the population question, he had a larger purpose in asking:
[W]hat happens to man and his soul? What happens to the things which cannot be produced or expressed in monetary terms . . . but which are the ultimate conditions of man’s happiness and of the fullness and dignity of his life?
In finding answers, Röpke was—and is—correct in trying to rehabilitate social life by returning human beings to decentralized, autonomous, self-sufficient, functional homes, where education and real work would be reintegrated into the daily flow of family living. Toward this end, he correctly saw mid-20th Century Switzerland to be a model state. “As the common enterprise of freedom-loving peasants and burghers,” he wrote, “it has offered the world a living example of the harmonious integration of [rural] and city culture.” He described a real village of about 3000 people with nearby farmsteads in the Bern Mittelrand, a place which combined artisan shops, small factories, a brewery, a dairy for cheese, a “highly tasteful” book store, and “a great collection of obviously thriving crafts and craftsmen.” He added “that the whole place is remarkable for its cleanliness and sense of beauty; its inhabitants dwell in houses which anyone might envy; each garden is lovingly and expertly tended; [and] antiquity is protected. . . . This village is our ideal translated into a highly concrete reality.”
Röpke’s analysis also points toward ways to achieve this ideal in our new century.
His goal of “genuine decentralization” through “the creation of fresh small centres in lieu of the big city” anticipates the New Urbanism of our day, where attention to the physical settings of real neighborhoods combines with a reattachment of work and retail sites to family residences.
Röpke’s reminder that certain technological innovations may support the broad dispersal of productive work gains new importance in the age of the home computer and the extraordinary economic democracy of the internet. Indeed, the German-Swiss economist had challenged technologists “to serve decentralisation instead of centralisation, rendering possible the greatest possible number of independent existences and giving back to human beings as producers and workers a state of affairs which would make them happy and satisfy their more elementary and most legitimate instincts.”
Röpke’s attention to “tertiary production,” or the service sector, as a growing sphere for human labor again enhances the prospects for small and medium businesses which might support household independence.
And Röpke’s insights regarding the competitive advantages held by small family farms in the production of specialty crops gains new relevance in the age of organics. Indeed, here in America at least, the last decade has witnessed an explosive growth in farmers’ markets, community supported agriculture, and independent organic farms, with farm income soaring. As the editor of Small Farmers’ Journal recently declared, “There has never been a better time to be a farmer.”
These are the areas where Röpke succeeded as both analyst and prophet. He was also prophetic in seeing that the civilizational crisis of the Christian West deriving from “a cultural retreat, . . . a squandering of our inheritance” linked to “a continuous process of secularization.” He wrote that the core of “the malady from which our civilization suffers lies in the individual soul,” adding that this disease would also only be “overcome within the individual soul.” Here, too, we can safely conclude that Wilhelm Röpke was altogether correct.