Neoliberalism, Ordoliberalism and the Future of Economic Governance

Ernst-Ulrich Petersmann, Neoliberalism, Ordoliberalism and the Future of Economic Governance, Journal of International Economic Law, Volume 26, Issue 4, December 2023, Pages 836–842, https://doi.org/10.1093/jiel/jgad020

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At the 1938 Walter Lippmann conference in Paris, the economist Walter Rüstow used the term ‘neoliberalism’ for exploring the normative foundations of a humane, liberal economic order avoiding the past governance failures of laissez-faire liberalism, the ‘social disembedding’ and poverty in Germany during the 1920s and the great depression of the 1930s, mutually harmful protectionism (like the 1930 US Smoot-Hawley Tariff Act), and totalitarian central planning in communist and socialist countries. In 1944, during World War II, the later Nobel Prize laureate Friedrich Hayek emphasized that the future civilization of Europe will largely be decided by what will happen in Germany after the war. The ‘Freiburg School of ordoliberalism’, with which Hayek cooperated in diverse ways (e.g. as co-editor of the Ordo Yearbook since 1948 and as professor of economics at the University of Freiburg from 1962 to 1969), inspired not only the institutionalization of Germany’s post-1945 ‘social market economy’, but also the ‘constitutionalizing’ of the European Union’s ‘competitive social market economy’ (as prescribed in Article 3 of the 2007 Lisbon Treaty). Ordoliberal methodologies can, likewise, inspire a humane rebuilding of the world trading and investment systems if it should ever be possible to reform the current dictatorships suppressing human rights (e.g. in China, Iran, Russia, and other authoritarian UN member states) and neoliberal nationalism (as illustrated by the ‘Brexit’ and by US protectionism disrupting multilateral trade law). The Oxford Handbook of Ordoliberalism 1 explains why general statements about ‘the ordoliberals’ are misleading; why European ordoliberalism prioritizes values and decision-making procedures different from American neoliberalism; and why the ordoliberal research program remains an unfinished task, especially at our time when authoritarian ‘subordination-orders’ (based on ‘discretionary rule of persons’ rather than ‘rule-of-law’) undermine market- and rules-based ‘coordination-orders’. As explained by Victor Vanberg in chapter 14, by perceiving economic regulation as part of a much broader moral, social, and political project, ordoliberals continue the classical political economy research initiated by Adam Smith by exploring—from a reasonable citizen perspective—the legal-institutional framework for market economies reconciling the individual pursuit of self-interests with the common citizen interests in public goods and social justice.