Ordoliberalism and Ostpolitik

At a recent discussion with Simon Tilford of the Centre for European Reform about my new book, The Paradox of German Power, I was asked about the role of ordoliberalism in Germany’s response to the euro crisis. A couple of years ago, my colleagues Sebastian Dullien and Ulrike Guérot wrote an excellent brief for ECFR in which they argued that ordoliberalism – an economic theory that goes back to the so-called Freiburg School in the 1930s but is little known outside Germany – cast a “long shadow” over current German economic thinking. I think they’re right, but I wasn’t really able to give a good answer about exactly what role ordoliberalism plays in the German economic policy process. The more I thought about it after the discussion, however, the more it struck me that there is a parallel with the role of Ostpolitik in the German foreign policy process.

The argument of many critics of Germany’s response to the euro crisis – of which Simon is one of the most eloquent and persuasive – is that it is pursuing a bad policy based on misguided economics. “They don’t get it”, I’ve heard lots of Anglo-Saxon economists say in exasperation in the last few years. (One also often hears people say that part of the people is the dominance of lawyers rather than economists in the German finance ministry.) Where I differ is that I see Germany’s response to the euro crisis – and in particular its inability to “lead” in the way Simon and other critics of Germany want it to – as a function of the limits of its geo-economic power in Europe. As in the nineteenth century after unification, it is too small and weak to be a European hegemon; rather, I argue in the book, it has returned to the position of “semi-hegemony” in Europe it had between 1871 and 1945, except in geo-economic form.

In that context, maybe the question is as much about how ordoliberalism is used as how it influences policy. In particular, I wonder whether ordoliberalism is actually used as a theoretical gloss for policies that are driven by other factors. If one looks at German policymaking since the euro crisis, it can be seen as driven by hard interests as well as by ideology or psychology. For example, Germany’s insistence on asymmetric adjustment in the eurozone can been seen as driven by its own economic interests and in particular those of its exporters. Similarly, Germany’s hawkishness on inflation – often seen as informed by the memory of hyperinflation – can be seen as driven by a fear of undermining the competitiveness of German exporters and devaluing German savings. In other words, it may be that ordoliberalism does not just inform the thinking of German policymakers; they also instrumentalise it.

This is strikingly similar to the role that it seems to me Ostpolitik plays in German foreign policy. I have argued elsewhere that – at least until the Ukraine crisis – the German foreign policy establishment used the rhetoric of Ostpolitik to justify a policy of “Wandel durch Handel”, or change through trade, which was something quite different from the original policy. Whether or not increasing economic interdependence turns authoritarian powers into democracies and “responsible stakeholders”, it has little to with the original aims of Ostpolitik, which was not meant to transform the Soviet Union – “I didn’t go to Moscow to make democrats of the communists,” Egon Bahr told me. Nevertheless, German policymakers continued to invoke the memory of Ostpolitik to pursue economic objectives and in particular the interests of German exporters.

Just as Ostpolitik is perceived in Germany as a distinctively German contribution to peace and the end of the Cold War, so ordoliberalism is perceived to have laid the foundations for the social market economy and the Wirtschaftswunder, or economic miracle, of the 1950s. Because Ostpolitik and ordoliberalism resonate so positively and powerfully, there is a tendency to invoke them to win support for new policies – even where those policies have little to do with the one being invoked. Ostpolitik was conceived during the Cold War in order to reunify Germany through a series of small steps; it is of little help in dealing with authoritarian powers in a post-Cold War world. Similarly, ordoliberalism was conceived as a way for a nation state to avoid the economic failures of both laissez faire and Nazism; it is of little help in making a single currency area sustainable.

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6 thoughts on “Ordoliberalism and Ostpolitik

  1. What I don’t understand is how an Ostpolitik of SPD politicians seeking rapprochement with communism to ease West/East German ties morphed into the Russlandversteher of excusing or appeasing oligarch gangster capitalism?

    • Good question! Ostpolitk evolved – there was a first and a second phase in the 1970s and 1980s. Mary Elise Sarotte’s book on this is good.

  2. An excellent piece, as all the articles by Hans Kundnani. ‘They don’t get it’, is the criticism of the Americans and British (especially economists) of the German position. One also could say: the British don’t get the Germans.

    But am I wrong in thinking that the Germans know very well that in the end they will be outvoted by the rest of their European partners (France and the rest of Southern Europe) in euromatters? This could explain that the Germans stick to their guns (ordoliberalism and a hard currency) as long as it is possible.

  3. Excellent Piece! ..just one question: Kissinger (as you mention in your piece in foreign affairs magazine) was -say- somehow concerned with the Ostpolitik. However, he and Nixon did in fact turn east as well (to both China and Soviet Union). Do you see Kissinger/Nixon’s policies as a reaction to the perceived consequences of Ostpolitik?

  4. Pingback: Neoliberalism and ordoliberalism | Hans Kundnani

  5. Pingback: Germany’s new foreign policy role: How is it doing? | International Relations Blog

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