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An Interview with Werner Bonefeld on ordoliberalism and the EU

by Jack Copley on August 6, 2019

This interview was conducted by the podcast Political Economy for the End Times, which acts as a platform for discussion of the intersecting crises of contemporary capitalism (follow on Twitter here). In this episode, Werner Bonefeld, Professor of Politics at the University of York and a central thinker within the Open Marxist tradition, discusses the theoretical foundations of ordoliberalism and its implications for understanding the European Union and its current turmoil. He is the author of The Strong State and the Free Economy, Critical Theory and the Critique of Political Economy, and co-editor of the SAGE Handbook of Frankfurt School Critical Theory. He was interviewed by Alexis Moraitis, whose research focuses on the political economy of France and the EU.

AM: Neoliberalism has entered the popular lexicon and is often held up as everything that is wrong with modern politics. However, ordoliberalism is much less widely discussed. What is ordoliberalism?

WB: Good question! First of all, it’s liberalism. The prefix ‘ordo’ was only added, as it were, or came to the fore in the 1950s, as a consequence of the name of the journal in which the then ordoliberals wrote. The journal itself, I believe, was also edited – coedited – by Hayek, which gives you a connection to so-called neoliberalism, whatever the distinction and difference between those two might be. Ordoliberalism as such, or as an approach, was first called a new liberalism, and then it was called a neoliberalism, and it was called a neoliberalism by one of its founding thinkers called Alexander Rüstow at the Walter Lippmann colloquium in France whenever it was, was it 1938? And he understood by neoliberalism then, which later became ordoliberalism, an understanding of the state as the indispensable power of a free economy. And he saw the state, or he termed the state, he defined the state basically as Marx had it, or as Weber has it, or everybody else has it, as the concentrated power of society, and he defined that concentrated power as market police.

AB: I find it very interesting that you said ordoliberalism is liberalism … What is the relationship of ordoliberalism to classical liberalism, and particularly Adam Smith and his concept of the ‘invisible hand’?

WB: Every approach, every author worth their name, will live through certain periods and faces certain historical contexts, and [approaches are] thus reformulated, revised, and developed. Nothing stays forever. So Smith wrote whenever he wrote and Smithian classical political economy evolved and was explored by other liberal thinkers within the context of their time. The connection though is a quite strong one, I think. If you look at Adam Smith The Wealth of Nations chapter one, there is the argument about the pin factory, about the division of labour, about the need to increase labour productivity, and he sees that as the foundation of the wealth of nations. And then he says towards the end of chapter one, ‘and there will be opulence’. But opulence, he says, depends upon good government, that’s in chapter one,  good government. So why is good government required as far as Adam Smith is concerned? Good government is required because the individuals are governed by self-love, so if you’re self-loving then you need to be moralised, you need to become a citizen, you need to, as it were, conduct yourself according to the rule of law. And you need to be reminded to use your self-interest not to collude with your competitors, monopolising prices, cartel organisation, monopolies etc. So there should be no collusion to maintain profit rates artificially. And for all of that the state is required. Adam Smith too calls the state ‘market police’ in the lectures on jurisprudence. He argues that every issue concerning the manufacture, exchange, and whatever else trade of the nation is a matter of police, and by police he means market police, or public policy, as the instance of good government that in fact facilitates the wealth of nations in terms of increased labour productivity and increased division of labour.

AB: It appears that ordoliberalism builds upon an existing tradition of liberalism, you mentioned Hayek etc. There is continuity. In light of current proposals to a return to Keynesian principles to solve the current crisis, where would you fit Keynes within this lineage. Is it a challenge to ordoliberalism?

WB: Yeah, I suppose it is a challenge. There is no doubt about that. It is a different conception of how, as it were, to sustain an economy on an upward spiral. The difference, I suppose, between neoliberalism or ordoliberalism, on the one, and Keynes, on the other, might be best amplified by looking at Schumpeter’s creative destruct and Keynes’ idea of good government as an interventionist government which supports the economy through the artificial creation of demand. I think it’s important to see all of this in the context of the late 1920s, early 1930s, when the world was disappearing, particularly for the Austrians and for the Germans. There’s the revolution of 1918. The old aristocratic organisation of the state is gone. There is mass democracy – mass democracy seemingly unfettered by the liberal principle. At least that was their critique … There is the crash of 1929. There is the inability to sustain liberal economy. Mass unemployment. Huge challenges. And then depression in the early 1930s. What do you do? How do you react? What do you save? What are the means of saving the system that you aspire to? Given Bolshevism in the East which for many people at the time, rightly or wrongly, looked like a just alternative. There was the New Deal which Hayek also decries in the Road to Serfdom, and then there is Hitlerism and Mussolini, and then there is later on in the 1930s the Civil War in Spain. So these are turbulent times, no? The blowback to the crash in 1929 was quite dramatic. So what do you do? What as a liberal do you stand for? What is important, what is essential, what are the purposes, and who is doing what, what are the means, what are the ends? And if you put all of these thinkers – Schumpeter, Keynes – into the same bracket there, you see that they all respond to the crisis of liberal economy, they all try to come up with ways to save liberal economy for its own sake. The means of change are entirety different, but the purposes or the ends of these interventions are the same, namely to safeguard liberal economy.

AM: Is therefore then ordoliberalism just one variety of capitalist management – is it just one way to govern capitalism? Or is there something fundamental to it, about the role of the state in a market society?

WB: Let me summarise for you pages twenty to thirty in Freidman’s Capitalism and Freedom. He says clearly the state is a requirement, it’s indispensable. We liberals require the state, the existence of the state. It is required – there is a need for a state to set down the rules of the game and to enforce the rules of the game, to facilitate competition, and to change the rules of the game. We liberals therefore require the state as the institution of the rules of the game, as the institution of the enforcement of the rules of the game, as the institution that punishes those who do not abide by the rules of the game, and as the institution to facilitate competitiveness and to facilitate the open and the free society. Freidman almost seems to argue that the state is required as a planner for competition, and planner for competition is a phrase that Hayek himself alludes to in the Road to Serfdom.  

AM: Mario Draghi in a speech in 2013 made a claim that the monetary constitution of the European Central Bank (ECB) is firmly grounded in the principles of ordoliberalism. Is that an adequate characterisation? Is the EU an ordoliberal project?

WB: Whether the ECB is firmly based on ordoliberal principles is a matter for discussion. Eucken for example rejected central bank independence because he thought that a central bank could never be as depoliticised as monetary policy has to be. It is still influenced by political decision makers and can therefore be politicised. He advocated a system of competitive currencies where the state has no handle on it, in fact the value of these currencies is merely market based. So, much more stringent, as it were, much stronger, much more market-based approach to monetary policy and the management of currencies. Others say, yeah the ECB is based on ordoliberal principles because of its independence, its distinctions, its narrow organisation, its statutory requirements, and all of what it does is in fact replacing in institutional form within a regional framework what used to be done by the Gold Standard in the 1920s in particular. And the ECB is seen as the institution that replaces, as it were, the management of labour markets through the Gold Standard and it does so as an independent institution of central banking for a regional block.

AM: We can see that there are certain ordoliberal principles underpinning the European Monetary Union. Can we say that the whole European Union project is underpinned by ordoliberal principles? Or is it that aspect of European integration – the monetary side?

WB: I’m not so sure it is right to say it is underpinned by ordoliberal principles. I think ordoliberalism articulates certain principles and these principles are the principles of a capitalist economy. There is no theory really that says that fiscal policy should be profligate. Keynesianism argues for countercyclical spending, but it doesn’t say that fiscal policy should be deficit-ridden just because it can be done, there are certain principles there. There is no economic theory that says that monetary policy should not be sound but unsound, as it were. There is no economic policy which says that labour markets can be unproductive, that labour can be unprofitable. There is no such thing really. What ordoliberalism does is to highlight the requirement for such a system to operate. And it highlights the requirements as requirements of an economy that is governed by an executive state, by a strong state, by a principled state, by a state that is able to gain and maintain its independence from society and, as such an independent force, govern society according to the rule of law.

AB: Many in the nationalist camp, and also on the left, argue that the EU is a threat to national sovereignty. Do you agree with claims that the increasing power of the European Commission or the ECB leads to a retreat of the state? Does the EU as a project involved the shrinking of state power?

WB: First a remark – a personal statement of my own politics. I am an internationalist, and if the EU undermines nationalism then I would be very much in favour of its operation. Secondly, I don’t think that the EU, in fact, forces the European nation states into retreat, in as much as the European Union monetary policy included or monetary union included is nothing without the power of the nation state. It is in fact through the nation states that the monetary union has any relevance and is made viable. The monetary union does not enforce itself – it is enforced by the nation states who act as executive states of the bond that unites them, and the bond that unites them is monetary union. In fact, I would argue that monetary union allows the state an independence from mass democratic aspirations and demands and pressures, and allows them more strongly to govern over them in order for the market media of European law, European money, European markets to become viable as a consequence through their policies. So, in fact, what the nation state does –  the government of the nation state – what they do is to imbue, to endow the monetary union with a consciousness and a will. Without them the monetary union would be nothing.

AM: It appears that, in a sense, the EU can help promote policies that states would pursue anyway to govern capitalism, but they cannot because of domestic political pressures. There is a sort of depoliticisation at work. Is this relationship between member states and the EU always a harmonious one? I want to refer more precisely to the case of Syriza in Greece, which was a party that was elected on a radical platform, anti-austerity platform, and it was ultimately forced, allegedly, by the European authorities to pursue  radical restructuring and austerity programme. So my question is, is there always harmony between the EU, the EMU, and member states?

WB: No, clearly there is not always harmony. And you don’t need the Greek case – you can look at the competing designs and proposals for monetary union by the Germans and the French, and there is not harmony. What the EU, however, does is to provide a table, and what pitted them against each other in war in the past is now negotiated between government leaders, and decisions are taken where the various interests converge, regardless of who is the powerful nation and who is not the powerful nation. The asymmetry of power between let’s say the French, the Germans, and the Greek state is clearly in evidence. But nevertheless they sit around the table and decide on the next step in conditions which in the past related or referred or led to war and bloodshed in the centre of Europe. 

AM: Some say that the EU is facing its largest challenge to date – that it has a real existential anxiety. Would you say that the EU project is in crisis? And, if yes, what would that tell us about the ordoliberal principles that underpin it? Do they fail to uphold the order that they seek to impose?

WB: I think the management of the Eurozone crisis was most effective – unfortunately, one might wish to add. Even the Greek Syriza government now is a champion of austerity and has, in terms of the contract that they signed with the European Union, been rather successful. Syriza I suppose has been one of the most successful austerity parties and governments in the context of Europe. It’s quite an amazing development, from anti-austerity protests to the enforcement of austerity in such an effective manner. Whether the EU is in an existential crisis or not, I don’t know. I mean, I’ve been through various histories of existential crises of the EU – nothing much seems to happen as a consequence. In fact, it progresses through crisis, and crisis is a means for its further development. The populist nationalists in Europe, of course, are a major force now and are contenders at least for the time being. What they propose, the leftists as well, the anti-imperialist left, is the return to the nation state, to a sort of democracy of the nation, a national democracy, or a nationalist democracy. What the argument forgets is that each of these democracies is viable only if it is able to compete on world market level, at world market prices, if its labour, as it were, can compete with Chinese labour, if that is a way of summarising this particular point. What the EU establishes is an institution and institutional pressure to enhance labour productivity in its various territorialised labour markets. To render them, as it were, capable of modernisation, innovation, increased labour productivity, increased division of labour – to go back to chapter one of Adam Smith – to make them viable as world market contenders. And, in fact, the integration of the respective working classes in Europe depends on the profitability or the profitable exploitation of its labour to meet world market standards. And the EU is the institution and is the means towards that end. Given that we are dealing with a capitalist society, that a capitalist society organises itself in that way – i.e. institutional means towards the ends of world market viable labour markets – is not really a surprise. And criticising that seems to be entirely misunderstanding what capitalism is about.    

AM: Speaking about this existential anxiety, that might or might not be there, the fact is that the desirability of the EU is questioned not only by the usual Eurosceptic suspects, the nationalist right, but also by the left. Recently we have heard calls for a Lexit, that is, a leftist social progressive exit from the EU. So, I would rephrase the question, is another Europe possible, as some European progressives suggest? Or is the EU bound to be ordoliberal? Can it be reformed – can it be more Keynesian, for instance?

WB: The critique of the leftists, as it were, on Europe amounts to me to a great lament, but, in fact, not to a conceptualisation of the dynamic of capitalist wealth, class relationships, and world market pressures. Moralising doesn’t really help, lamenting doesn’t really help, doesn’t allow you to see what you need to see. Whether the European Union can transform itself from a institution where the regulative forces of the market – law, money and market competition – are enshrined within a politically-constituted entity that is capable of Keynes policy, we need to see. It is clearly possible. Whether or not it is desirable for those who wish to organise their labour markets to meet world market standards of competitiveness is another matter.

AM: The EU, and we could even say the World Trade Organisation, can serve as depoliticisation mechanisms, to circumvent issues of needs and popular legitimacy. But at the same time, these organisations, and we can see it quite clearly in the EU, have become the object of popular anger, and maybe to an extent they have become repoliticised. Does this suggest that ordoliberalism has a legitimacy problem? That it cannot banish legitimacy crises, and they are bound to be reproduced again and again?

WB: Yeah, sure, but legitimacy crisis are not, as it were, connected or tied to ordoliberalism or ordoliberal government, whatever that in fact amounts to. Legitimacy crises are a recurrent problem of capitalist organisation, throughout the last century and before, I guess. That’s why we had revolts, insurrections, revolutions, change of regime, etc. These are outcomes, to a great extent, of the lack of legitimacy of the existing institutions and organisations of domination and rule. The question really is if you look at the various capitalisms – fascism, republicanism, liberal democracy, Keynesianism, New Deal – if you see that as a change in appearance, as it were, what persists in this disappearance of one regime into another? And what persists is a certain dynamic of wealth and the requirements of that wealth, which is, in fact, the dispossessed labourer.

AM: But it seems like Keynesianism offers certain palliative measures to at least curb the excesses of capitalism, of free markets. There is this palliative notion in Keynesianism – it can palliate, somehow, social antagonism. What does ordoliberalism suggest to deal with such legitimacy crises. What does it offer on the table to avoid revolt?

WB: One could say that in the history of Keynesianism, there is the recognition that the workers of a society should be treated well so that there can be good workers and they can be retained as such. Ordoliberalism doesn’t really deal with the question of legitimacy, as such. It deals with it by the side entry, as it were. First of all, it is clear in its understanding of society that there needs to be a means of ideological coherence, ideological integration, and for the founding ordoliberal thinkers, that was first the nation, then it became religion in the 1950s, particularly Catholicism, a sort of ideological cement, that is very important for them. Legitimacy was for ordoliberalism a result of functioning markets, of greater affluence. So if everything is done according to their principles, if coming back to Adam Smith, the first chapter of The Wealth of Nations, if opulence really occurs, if the trickle-down effect really manifests itself. That was the way in which the system itself is going to be legitimised according to the ordoliberals.

Jack Copley
Jack Copley is an Early Career Fellow at the Institute of Advanced Study, University of Warwick. His research focuses on British political economy, financialisation, the capitalist state, and Marxist value theory. He has published in the British Journal of Politics and International Relations, New Political Economy, and Environment and Planning C. He is also co-founder of the podcast Political Economy for the End Times.

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