A Humane Economy

Summary

A Humane Economy is the German economist Wilhelm Röpke's argument that a free market economy depends on moral, social and cultural foundations that the market itself does not create. It was published in German in 1958 as Jenseits von Angebot und Nachfrage, literally 'Beyond Supply and Demand', and in English in 1960 in a translation by Elizabeth Henderson, under the subtitle The Social Framework of the Free Market. Röpke writes as a firm defender of the market against socialism and central planning. Competition and free prices, he argues, are the only system compatible with freedom and with a high standard of living. But the market is only one part of social life, and it uses up moral capital it cannot replace: honesty, self-discipline, respect for law, family loyalty, a sense of proportion and community. These must be supplied by religion, tradition, the family and the many small institutions that lie, as his German title says, beyond supply and demand. A society that forgets this will find its markets degenerating into a struggle of interests. Much of the book is a critique of what Röpke calls mass society. He criticizes the concentration of people in giant cities and giant firms, the 'cult of the colossal', and the loss of rootedness that follows when people no longer own property, work independently or belong to stable communities. He warns against the expanding welfare state, which he believes encourages dependence and centralization, and against chronic inflation, which he regards as a moral as well as an economic danger because it erodes saving and trust. He praises decentralization, small and medium-sized enterprises, family farms, and the independent middle class, and he holds up Switzerland as a model of a decentralized, self-governing society. Röpke's position, sometimes called economic humanism, places him between laissez-faire liberals and collectivists. He was close to the German ordoliberals, who argued that the state must set and enforce a framework of competition, and his ideas helped shape the West German social market economy under Ludwig Erhard. The book has been reissued in English and is read today by economists and social thinkers interested in the moral foundations of markets, including many in the Catholic social tradition.

Plot or Argument

• The market and its limits

  Röpke defends the competitive market as the only economic order compatible with freedom, but argues that it presupposes moral and social conditions it cannot itself produce.

• Mass society

  He criticizes the concentration of population and power, the 'cult of the colossal' and the rootlessness of modern life, and calls for decentralization and the spread of property.

• The welfare state and inflation

  He warns that an expanding welfare state breeds dependence and centralization, and that chronic inflation undermines saving, trust and the moral basis of the market.

• A humane order

  He describes a society of independent property owners, families, small firms and local self-government, held together by religion and tradition, as the proper framework for a free economy.

Characters

• Wilhelm Röpke, author

  German economist in Geneva exile, defender of markets and critic of mass society.

• Ludwig Erhard, contemporary

  West German economics minister whose social market economy Röpke influenced.

• Adam Smith, authority

  Classical economist whose moral philosophy Röpke recalls as a reminder that markets rest on virtue.

Lessons

• Markets and morals

  Röpke argues that markets depend on virtues they do not produce. Students can ask where honesty and trust come from in economic life.

  • What does Röpke mean by the 'moral capital' a market uses?
  • Which institutions in your community supply that capital?

• Scale and community

  Röpke prefers small firms, family farms and local government to giant organizations. The argument invites reflection on size and human flourishing.

  • What does Röpke mean by the 'cult of the colossal'?
  • Are there advantages to size that he underrates?

• Inflation as a moral question

  Röpke treats inflation as a threat to saving, trust and justice, not only as a technical problem.

  • Why does Röpke think inflation harms the thrifty?
  • Who gains and who loses when prices rise steadily?

Context

Röpke wrote during the West German 'economic miracle' of the 1950s, which followed Erhard's currency reform and decontrol of prices in 1948. Western Europe was building welfare states, and the Cold War sharpened the contrast between market and planned economies.

Composition

Röpke wrote the book in Geneva, and the Swiss firm Eugen Rentsch published it in 1958. Elizabeth Henderson's English translation was published by Henry Regnery in Chicago in 1960.

Reception

The book was widely read in German-speaking countries and became a reference point for the social market economy. Its English edition was reissued by ISI Books and has received renewed attention since the 2008 financial crisis from writers on the moral foundations of markets.

Comparisons

• The Road to Serfdom

  Röpke shared Hayek's opposition to central planning and helped found the Mont Pelerin Society with him, but laid more stress on community and the moral framework of markets.

• The Wealth of Nations

  Smith's market economy, set within his moral philosophy of sympathy and virtue, is the classical model for Röpke's humane economy.

• Rerum Novarum

  Leo XIII's defense of property, the family and intermediate associations against both socialism and unrestrained capitalism closely parallels Röpke's position.

• Centesimus Annus

  John Paul II's endorsement of a market economy set within a strong juridical and moral framework echoes Röpke's central thesis.

• Democracy in America

  Tocqueville's praise of local self-government and voluntary associations anticipates Röpke's case for decentralization.

• The General Theory of Employment, Interest and Money

  Röpke criticized Keynesian demand management as encouraging inflation and centralization, the dangers his book warns against.

• The Protestant Ethic and the Spirit of Capitalism

  Weber's study of the religious roots of economic discipline supports Röpke's claim that markets depend on moral attitudes formed outside them.

• Socialism: An Economic and Sociological Analysis

  Röpke said that Mises's critique of socialism helped turn him away from collectivism, though he later stressed moral foundations Mises treated less fully.

Quotes

For Students

A reading companion for classical Christian high school students. See the student guide.

Reading Guide

Watch for

• The difference between the market itself and the framework around it.
• Röpke's criticism of size and concentration.
• His arguments about the welfare state and inflation.
• The role he gives to religion, family and tradition.

Key terms and names

Social market economy

The postwar West German model combining free markets with a legal framework and social protections.

Ordoliberalism

A German school holding that the state must set and enforce rules that keep markets competitive.

Mass society

Röpke's term for a society of uprooted individuals concentrated in large cities and organizations.

Decentralization

The spreading of power, property and decision-making among many small units.

Inflation

A general rise in prices that reduces the value of money.

Seminar Questions

1. Comprehension What does Röpke's German title, 'Beyond Supply and Demand', refer to?
2. Comprehension Why does Röpke admire Switzerland?
3. Interpretation Why does Röpke think a free market can undermine its own foundations?
4. Interpretation How does Röpke's view differ from that of a pure laissez-faire liberal?
5. Big Question Does a free economy require a shared morality?
6. Big Question Is there a right size for businesses and communities?

Faith Connections

• Micah 4:4 (Scripture)

  'They shall sit every man under his vine and under his fig tree': the prophet's picture of secure, independent households matches Röpke's ideal of widely spread property.

• Pius XI, Quadragesimo Anno (Great Conversation)

  The 1931 encyclical's principle of subsidiarity, that larger bodies should not absorb what smaller ones can do, is close to Röpke's case for decentralization.

Logic and Rhetoric

Central argument: A free market is the best economic order, but it depends on moral and social conditions that it consumes and cannot produce; therefore a free society must deliberately protect the family, property, community and religion that lie beyond supply and demand.

Rhetorical device: via media (middle way). Röpke repeatedly positions himself between laissez-faire and collectivism, criticizing each from the standpoint of the other's strengths.

Debate: Resolved: A free market economy depends on moral foundations it cannot create for itself.

Writing Prompts

Essay: Explain what Röpke means by the framework of the market and why he thinks it is threatened.

Comparison with Rerum Novarum: Compare Röpke's view of property and community with Leo XIII's in Rerum Novarum. Where do they agree, and what does each emphasize?

Creative Prompts

• Essay

  Röpke says the market depends on virtues it does not create. Identify one such virtue and explain where it comes from and why the market needs it.

• Classroom

  Map your town's economy: list large and small businesses, farms and institutions, and discuss whether Röpke would see it as humane.

• Dialogue

  Write a conversation between Röpke and Friedman about whether the market needs a moral framework supplied from outside it.

Further Reading

• The Social Crisis of Our Time, Wilhelm Röpke

• Rerum Novarum, Leo XIII

• The Humane Economist: A Wilhelm Röpke Reader, Daniel J. Hugger (ed.)

• Wilhelm Röpke (1899–1966): A Liberal Political Economist and Conservative Social Philosopher, Patricia Commun and Stefan Kolev (eds.)