From the “sick man” of Europe, as it was called after the Second World War, Germany managed to become the greatest power on the continent. This was due to hard austerity policies that perfectly suited a hard working and rigorous population. In this article I want to analyze if ordoliberalism, the German form of social liberalism that led to the country’s economic miracle in the 1950s, can be the saving solution for a continent in crisis. For a more complete analysis, I studied the subject from an economical, historical, political and social perspective. Following an extensive review of existing literature I have highlighted the doctrinal confrontation between ordoliberalism and keynesianism, brought back in the spotlight by the European sovereign debt crisis.
The German economic elite embrace ordoliberal values, characterized by responsibility and strict monetary rules. In response to the Eurozone crisis, they tried to spread the ordoliberal ideology across Europe. Focused on the supply side of the economy, the followers of ordoliberalism strongly opposed the expansionary fiscal and monetary policy. The power held in Europe allowed Germany to impose its own vision, centered on austerity and price stability. If ordoliberalism worked very well in Germany after the Second World War, not the same happened in the case of the Eurozone’s economy. The rigor and lack of flexibility of German ordoliberalism have only further deepened the crisis and the economic problems of vulnerable countries.
Keywords: ordoliberalism; keynesianism; Eurozone; crisis.
1st Revision: 03/02/2018
- Ropke, W., Two Essays, University Press of America, [Online], 1987, p. 45. Available at: https://mises.org/sites/default/ files/Two%20Essays_Ropke.pdf
- Ropke, W., The Social Crises of Our Time, The University of Chicago Press, Chicago, [Online], 1950, p. 160. Available at: https://mises.org/sites/default/files/The%20Social%20Crisis%20of%200ur%20Time%20%281%29.pdf
- Jung A., Germany in the Era of Hyperinflation, Spiegel Online, [Online], 2009. Available at: http://www.spiegel.de/intemational/germany/miNions-biNions-trillions-germany-in-the-era-of-hyperinflation-a-641758.html,
- Erhard, L., Prosperity Through Competition, Frederick A. Praeger New York, 1958, p. 102. Available at: http: //mises.org/sites/default/files/Prosperity%20Through%20Competition_3.pdf, [Online]
- Keynes, J. M., The raising of prices, [Online], 1933. Available at: http://www.panarchy.org/keynes/depression.html
- Keynes, J. M., The end of laissez-faire, [Online], 1926, p. 4. Available at: https://www.panarchy.org/keynes/laissezfaire.1926.html
- Keynes, J. M., The General Theory of Employment, Interest, and Money, Publica Publishing, Bucharest, 2009, p. 190.
- Keynes, J. M., A Tract on Monetary Reform, Macmillan and Co, [Online], 1924, p. 80. Available at: http://delong.typepad.com/keynes-1923-a-tract-on-monetary-reform.pdf
- World Bank Data, [Online]. Available at: http://data.worldbank.org/
- Feld, L., Schmidt, C., Schnabel, I., Wieland, VOX, Maastricht 2.0: Safeguarding the future of the Eurozone, [Online], 2016. Available at: http://voxeu.org/article/maastricht-20-safeguarding-future-eurozone
- German Council of Economic Experts, German Council of Economic Experts discusses reform needs to make the euro area more stable and proposes sovereign insolvency mechanism. Press Release, [Online], 2015, p. 2, access at: https://www.sachverstaendigenrat- wirtschaft.de/fileadmin/dateiablage/download/pressemitteilungen/gcee_press_release_07_15.pdf
- Council of the European Communities. Commission of the European Communities. Treaty on European Union, [Online], Art. 105, 1992, p. 29. Available at: https://europa.eu/european-union/sites/europaeu/files/docs/body/treaty_on_european_union_en.pdf
- Deutsche Welle, German bank chief trashes Eurobonds, [Online], 2012. Available at: http://www.dw.com/en/german-bank-chief- trashes-eurobonds/a-15977530
- Weidmann, , Aspiration and reality – the situation in the European monetary union, [Online], 2016, p. 3. Available at: http://www.bis.org/review/r160928m.pdf
- OECD Data [Online]. Available at: https://data.oecd.org/trade/current-account-balance.htm
- Schäuble, , We Germans don’t want a German Europe, [Online], 2013. Available at: https://www.theguardian.com/commentisfree/2013/jul/19/we-germans-dont-want-german-europe
- Financial Times – Bofinger P., Here is one export Germany should not be making, [Online], 2016. Available at: https://www.ft.com/content/da5b543c-2bbc-11e6-bf8d-26294ad519fc
- Bofinger, P., German macroeconomics: The long shadow of Walter Eucken, [Online], VOX, 2016. Available at: http://voxeu.org/article/german-macroeconomics-long-shadow-walter-eucken
- Piketty, T., Sachs, J. D., Flassbeck, H., Rodrik, D., Wren-Lewis, S., Austerity Has Failed: An Open Letter From Thomas Piketty to Angela Merkel, [Online], The Nation, 2015. Available at: https://www.thenation.com/article/austerity-has-failed-an-open-letter-from-thomas- piketty-to-angela-merkel/
- Krugman, P., Keynes Was Right, The New York Times, [Online], 2011. Available at: http://www.nytimes.com/ 2011/12/30/opinion/keynes-was-right.html
- BBC News, Obama calls for greater European unity, [Online], 2016. Available at: http://www.bbc.com/news/world-europe- 36132526
- European Central Bank, [Online], Statistics, Key ECB interest rates. Available at: http://www.ecb.europa.eu/ stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html
- Pronobis, M., Is Monetary Policy of ECB the Right Response to the Eurozone Crisis?, [Online], Procedia – Social and Behavioral Sciences, Volume 156, November 2014, pages 398-403, DOI: http://dx.doi.org/10.1016/j.sbspro.2014.11.210