Intellectual history

A History of Green Ordoliberalism

By Isabel Oakes

By Isabel Oakes

In the last book before his sudden death, the politician Herman Scheer, a driving force behind the Energiewende, the enduring renewable energy transition in Germany, called for a ‘timely ordoliberal framework for a socially acceptable power supply.’ A decade earlier, in 2000, Scheer played an instrumental role in implementing the German feed-in electricity tariff, a scheme that offers homeowners and businesses above market prices and long-term contracts for providing renewable energy to the electricity grid. This spurred renewable energy investment and opened the energy market to small renewable energy producers. In breaking up concentrations of market power and  employing government regulation, commentators noted the ordoliberal nature of the feed-in tariff, especially when compared to more market-fundamental schemes such as emissions trading. Alongside this, initiatives, projects, and think tanks dedicated to realizing an ‘eco-social market economy’ in the German-speaking world emerged. An example is the non-partisan think tank, Forum Ökologisch-Soziale Marktwirtschaft (A forum for an ecological-social market economy), founded in 1994, which advocates for sustainable reform in finance as well as an ecologically and economically sound future. Outside of Germany, scholars from Poland and Canada have also turned to ordoliberalism as a framework for global sustainable development.

The engagement between ordoliberalism and climate politics has led many to question what exactly an ‘ordoliberal approach’ entails and whether market-based approaches can genuinely solve environmental issues. Exploring the history of green ordoliberalism, and the extent to which early ordoliberals engaged with environmental questions from the 1930s onwards, can help answer these questions. As pointed out by the environmental historian Frank Uekotter; ‘In order to fully understand the social, political, economic and ecological context of contemporary environmental problems we need to be conscious of their histories.’

The intellectual seeds of ordoliberalism were sown at the University of Freiburg during the 1930s and 1940s when economists and lawyers, drawing heavily from the fields of politics, sociology, and religion, came together to develop a new and more contextually informed economic liberalism. The key architects were the prominent economist Walter Eucken (1891-1950), Alexander Rüstow (1885-1963), a former socialist who coined the term ‘neoliberalism’ and Wilhelm Röpke (1899-1966), a nominee for the Nobel Prize in Literature. Politicians such as Alfred Müller-Armack (1901-1978) and the former chancellor of West Germany, Ludwig Erhard (1897-1977), were also adherents. They envisioned a completely competitive market order guided by state regulation embedded in a legal and social framework. In other words, as succinctly summarized by renewable energy journalist Craig Morris ‘if the market is a football game, then ordoliberals want referees. The refs may sometimes make bad calls, but the game is fairer with them than without.’ The referees here are the government and legislature. This framework is said to have guided post-war economic restructuring in Germany and established the foundation for the ‘social market economy’, which is still considered to be the model for German economic decision making today.

The early ordoliberals were alive before the climate crisis and modern notions of renewable energy, nevertheless, issues such as water and air pollution were recognized as early as the late nineteenth century. Cultural critics, or Kulturkritiker, in Germany linked these issues to the industrial revolution and urbanization, an observation the ordoliberals shared as well. Beyond this, the ordoliberals also harbored concerns about resource depletion and the concentration of resources in urban centers. These fears were rooted in late eighteenth-century romanticism, which partially sprung out of fears surrounding the disharmony between humans and nature and the increasingly uncertain visions of a highly technological future society. Rüstow observed how the romanticism of the eighteenth century, which opposed the ‘attitude of dominion vis-à-vis nature,’ had been overthrown by the ‘enlightened absolutism and despotism’ of the late nineteenth century, with its ‘systematic mastery and exploitation of nature by man for the increase of his power, his welfare and his enjoyment.’ Rather than incorporating oneself into nature and subjecting oneself to her laws, the modern individual sought to ‘become her monarch and autocrat.’ Rüstow warned that the consequences of this would be dire; ‘the revenge of nature on man’ in which he predicted a future where waterfalls would fall silent, streams would dry out, and landscapes would consist purely of man-made artefacts.

Despite believing in the potential benefits of technological innovation, the ordoliberals knew the Earth harbored finite resources that were being violently exploited. Röpke explored how Europe was witnessing a gradual deterioration of soil quality and a change of climate owing to excessive use of artificial fertilizers, recognizing that ‘the location and the fertility of the soil are immutable data of nature; and that even tools and machinery cannot be increased in quantity according to our good pleasure’. He explored the effects that this exploitation of resources, coupled with the destruction of future productive potential due to soil erosion, would have in the face of a rapidly increasing population. Therefore, Malthusian fears of overpopulation were at the root of these environmental concerns.

Malthus’ theory of population, introduced to the world in the first edition of his ‘An Essay on the Principle of Population,’ published in 1798, rested on the assumption that, if left unchecked, population would grow exponentially, especially if the means of subsistence increased. Despite over 200 years having passed, Malthusian fears remain as relevant as ever. As articulated by Garret Hardin, one of Malthus’ most prominent disciples of the twentieth century; ‘in the 20th century Malthus has, so to speak, been buried every year by his commentators – only to be dug up again the following year.’ The post-war baby boom, globalization and growing economic and societal interconnectedness instilled fears of a shrinking Earth in which there were too few resources to satisfy too many people. These fears were increasingly securitized in the 1960s, epitomized in publications such as Paul Ehrlich’s ‘The Population Bomb’ and Kenneth Boulding’s ‘The Economics of the Coming Spaceship Earth’ in which he presented the Earth as a spaceship with limited reserves of resources that were rapidly running out.

The ordoliberals invoked such language as early as the 1930s and directly engaged with Malthus’ work and the debates he introduced into society. In ‘Economics of the Free Society,’ Röpke discredited ‘prophetic’ Malthusianism, which he described as the belief that population growth is subject to an unyielding natural law. He engaged instead with what he termed ‘analytic’ Malthusianism, which concerns moral questions surrounding population growth. In an article published in 1929, Röpke hinted that the real issue lay in the fact that poorer sections of society were reproducing at a much higher rate than those who were more well off.[1] The eugenicist and elitist undertones of this will be addressed later on. Over thirty years later, in 1963, Rüstow gave a speech to the German Horticultural Society at the scenic Lake Constance in South Germany in which he spoke with admiration of the conservation movement in America. However, like Röpke, he stated that the efforts of such conservation movements were a mere drop in the ocean regarding the collective action needed to mitigate the detrimental effects of overpopulation.

The link between over-population and environmental degradation appears obvious, however, as environmental literature from the 1970s onwards shows, focusing on the general issue of overpopulation diverts attention away from the West’s overwhelming responsibility for resource depletion and environmental pollution. The West’s economic success is entrenched in centuries of environmentally exploitative practices. Furthermore, as the Club of Rome report on the ‘Limits to Growth’ first pointed out in 1972, our current economic system, predicated on exponential exploitative economic growth, can be placed at the root of our environmental crisis. Recent data has shown that ‘the wealthiest 1% of the world’s population were responsible for the emission of more than twice as much carbon dioxide as the poorer half of the world from 1990 to 2015.’ The burden of our environmental catastrophe can therefore not be distributed evenly across the population and seeking measures to limit population growth would not necessarily have widespread environmental benefits.

Furthermore, the interrelatedness of the Malthusian, neo-Malthusian and environmental conservation movements of the twentieth century had dubious undertones. Individuals with eugenicist, elitist and racist beliefs often utilized environmental issues to justify the promotion of population control, predicting ‘race suicide on the cultural level and an environmental wasteland on the other.’ A prominent example can be found in the Nazi ‘blood and soil’ rhetoric which promoted the idea that German land was bound to German blood and used environmental arguments to justify racists, eugenicists, and genocidal practices. However, the Nazi’s true dedication to preserving the environment has been hotly debated, and the wide sweeping environmental damage caused throughout their time in power seems to indicate otherwise. Nevertheless, contemporary right-wing movements have reinvigorated Nazi ‘blood and soil’ rhetoric, making the recent resurgence of eco-fascism as alarming as ever. 

Though a staunch anti-Nazi, Röpke’s later work brings to light his underlying racist motives, as can be observed in his 1964 essay ‘South Africa: An Attempt at a Positive Appraisal’ where he came to the defense of apartheid. In an earlier essay, he observed with disdain how the West and its organizations, such as the UN, were being polluted by non-European culture and identity. This movement cast a shadow over most genuine efforts to protect the environment, and it is important to note that most ordoliberals did not espouse racist rhetoric. Most ordoliberals appeared to harbor genuine environmental fears of overpopulation and resource depletion. Rüstow, for example, focused on the link between overpopulation and overconsumption, an issue that is still very much in focus today. Furthermore, Walter Eucken’s daughter claimed that her father accounted for environmental issues in his economic theory.

How genuine were these early ordoliberal environmental warnings? Were they used to justify other motives? After all, ordoliberalism was, and still is, a market-based ideology that places the primacy of the market over most other things, including environmental concerns. Ordoliberals certainly valued the aesthetic merits of the environment and recognized the environmental consequences of urbanization, industrialization, and mass consumption. This may allow for a more environmentally friendly economic theory than demand-focused Keynesianism or fanatic free-marketeers, but could it truly enable a fundamental shift in thinking and market structure necessary to impede the environmental crisis?

It is important to note that most early ordoliberals passed away before the true urgency of the climate crisis became apparent, with one exception; Alfred Müller-Armack, who lived well into the 1970s. Müller-Armack, the intellectual father of the ‘social market economy,’ wrote about the need to tackle environmental issues, stating that; ‘economic growth leads to increased environmental pollution, the depletion of raw material reserves and energy sources and explosive population growth.’ Furthermore, in later writings on the social market economy he implored that the ‘social’ element of the social market economy included environmental protection. Yet, in his 1973 article ‘Der Humane Gehalt der Sozialen Marktwirtschaft’ (The humane content of the social market economy), he deemed the calls for complete economic restructuring to prevent climate change, as suggested in the Club of Rome report on the ‘Limits to Growth,’ ‘wrong and utopic.’ In advocating for limitation and restraint and a complete overhaul of our current way of life, the report clearly went too far for Müller-Armack. Though sympathetic to the environmental cause and, at times, more environmentally engaged than their fellow economists, ordoliberals were not strictly committed to finding solutions to environmental issues. Today, this still appears to be the case, with economics professor Daniela Gabor recently describing green ordoliberalism as a soothing ‘status-quo’ in which ‘decarbonization doesn’t have to come at the cost of prosperity or existing institutional arrangements.’  Rather than calling for a true environmental transformation, green ordoliberalism seeks to reconcile perceived environmentalism with the market mechanism. Therefore, the commitment to the environmental crisis appears somewhat hypocritical since issues are pointed out but not dealt with in their entirety. True change cannot happen until environmental concerns are placed at the very core of our economic, political, and social systems.

[1] Friedrich List-Gesellschaft. On the debate in Bückeburg on October 26th to 28th, 1929 on capital formation and tax systems – The influence of socio-economic factors (income level and income stratification) on capital formation. Wilhelm Röpke Archive, University of Cologne, Germany.

Isabel Oakes is a PhD candidate in the Faculty of History at the University of Oxford. Her research focuses on the ways in which ordoliberal thought engaged with concepts of nature and the environment and the ways in which this influenced environmental policy making in Germany in the twentieth century. She has published articles on the intellectual history of ordoliberalism and the ways in which ordoliberal competition theory can address market power in the digital age. She has also worked in the private sector, primarily analyzing ESG ratings for publicly listed companies in the DACH region.

Edited by Tom Furse

Featured Image: From the European Economic and Social Committee.

Leave a Reply