The Third Way: Wilhelm Röpke’s Vision of Social Order

by Ralph E. Ancil

More and more people no longer know what it means to put first things first and to think in terms of the principles involved. Consequently, only very few still have a real philosophy which separates the essential from the accidental and which puts everything in its place. We lost sight of the real ends while becoming entangled in the means.--Wilhelm Röpke

Wilhelm Röpke is well known in conservative circles for his work on the extra-economic foundations of the free market. But more broadly Röpke was concerned with the overall social malaise of the modern age, a concern triggered by his experience of the first World War and its aftermath in Germany. He became alarmed at the disintegration of important relationships, of those ways of life and institutions that are vital to the survival of Western civilization, if it is not to succumb to collectivism, socialism, and totalitarianism. He thought of the West as suffering from a marasmus of the body, a weakening due to self-consumption. In short, he believed that the West was squandering its spiritual inheritance.

The Economics of Prudence: Roepke, Ricardo, and Free Trade

by Ralph E. Ancil

Prolonged, widespread joblessness, collapsing real estate markets, and lower economic growth are a few of the many headline issues about the economy.  Recommendations range from more stimulus to denying unemployment benefits but there is little in these discussions that convinces us policymakers know what they are talking about and there is much that is misleading, relying on slogans instead of sound thinking.   In this latter group can be found the use of the expression “free trade” as opposed to “protectionism” especially in talks about the problem of outsourcing.   But ideologically-driven discussions misunderstand – or deliberately misrepresent –  economic theory on this matter and result in bad public policy.  

 It is one of the signal contributions of German economist Wilhelm Roepke that he distinguished in his work between the principle of a free market and the various historical forms it has taken.  This distinction allowed him to reform market policy without maintaining the abuses of capitalism on the one hand or falling into the pit of socialism on the other. This sensitivity to distinctions serves us well in the case of the free trade argument.  Roepke himself would have been among the first to insist on a correct understanding of the meaning of the principle involved.

Mainstream economic theory has traditionally relied on the principle first articulated by David Ricardo in the early 19th century England.  Ricardo’s famous example to illustrate this was trade between two countries: Portugal producing wine and England producing linen.  The free trade argument concludes that nations jointly maximize their levels of consumption to their mutual benefit when firms within the nations are allowed to engage in trade  unhindered by arbitrary interventions by government especially those intended to shield some industries from foreign competition.  Hindering such trade through the imposition of tariffs or quotas is called protectionism.  His principle and approach have been the basis for subsequent expansion and development of the  free trade idea, and are still taught in principles textbooks.