Tamara Ortega-Uribe
Department of Politics, University of California, Santa Cruz
Boyeong Kim
Department of Latin American and Latino Studies, University of California, Santa Cruz

Ordoliberalism, like neoliberalism, is a body of thought and a mode of governance. The idea began to germinate with the debates of the Freiburg School founded in the 1930s at the University of Freiburg and further developed through the journal Ordo (the Ordo Yearbook of Economic and Social Order) established in 1948. Although its origin can be traced back to post-WWII Germany as a specific European social market economy (Foucault 1979; Leiva 2021), ordoliberalism is more than a part of the German economic history (Beck and Kotz 2017; Horn 2021; Havertz 2019) that is still being witnessed in the current ordoliberalization of Europe (Biebricher 2019), or even globally, with what Slobodian (2018) has called ordoglobalism. Contemporarily, ordoliberalism has gained attention especially in its relationship with neoliberalism, for similarly going beyond the classical liberalism of the nineteenth century by seeking to create a new institutional framework to make free markets work. Whether it is a variant of neoliberalism (Brown 2019; Biebricher 2019; Slobodian 2018) or not (Jessop 2019), for both bodies of thought it is important that juridico-political institutions create space for the economy. Despite the striking commonalities, mixtures and overlaps between ordoliberalism and neoliberalism addressed in recent works (Slobodian 2018; Biebricher 2019), in this definition we focus on distinctive features of ordoliberalism.

In his 1978-79 lectures at the Collège de France, Foucault identifies two streams of ideas that have provided a basis to contemporary neoliberalism: German ordoliberalism (1948-1962) and the Chicago school of economics (1970s/80s). The question that the liberal thinkers of ordoliberalism (or the Freiburg school) such as W. Eucken, F. Böhm, A. Muller-Armck, and F. von Hayek strived to answer was “how to link together the legitimacy of a state and the freedom of economic partners, while accepting that the second must found the first, or serve as its guarantee” (Foucault 2011, 105). The idea of ordoliberalism diverts from eighteenth century liberalism inasmuch as its main concern has not been about freeing the market but about how the market could be a guiding principle of state and social organization. An important mutation of ordoliberalism from the traditional liberal projects is that while the latter saw that the market principally serves as a space of exchange, ordoliberals has emphasized competition as the essence of the market, which has been a “historical objective of governmental art and not a naturally given” (Foucault 2011, 120). The free market is never something that naturally occurs, ordoliberals argued, rather it has to be actively produced, revealing laissez-faire as nothing but a naïve dream.

Ordoliberalism aims for a strong state based on an ethical and juridical-political order to ensure that competition happens smoothly in a capitalist, free market society. The Freiburg School used the word “ordo” as a reference to medieval theology (Slobodian 2018), in which the idea of “functional and humane order” (Horn 2021) as a mode of social organization was emphasized as more than merely a mode of configuration for market exchange. Thus, the ordoliberal mode of social organization involves ethico-political commitments and a specific legal order (Jessop 2019) that Eucken and Böhm called an “economic constitution” to be the central task of the ordoliberal project (Miettinen 2020). That the economic constitution does not refer to a literal legal document, but a desired legal order (Slobodian 2018), implies a certain image of a moral economy where the legal and ethical rules protect the political order and free competition from unhinged personal interests within market activities (Jessop 2019). To that end, ordoliberalism assumes that the state plays an important role in securing economic order, ensuring the competition of a free-market society and avoiding the possibility that economic forces increase their power in society (Yergin and Stanislaw 1998; Vatiero 2010). Thus, ordoliberals argued that a “strong state, a government with the courage to govern” must be created  (Röpke 1950 as cited in Biebricher 2019, 72).

The epistemological and political drives that were at the center of ordoliberalism are related to historical events alongside the crisis of liberal thought at the beginning of the twentieth century. After examining different political regimes and their economic programs such as Nazism, England’s the Beveridge Plan in the UK, the Soviet Union’s planned economy, and the American New Deal, the liberals of the Freiburg school concluded that state intervention that resulted in destructive effects, while the market economy itself had no intrinsic defects. Therefore, they proposed a reversal: “a state under the supervision of the market rather than a market supervised by the state” (Foucault 2011, 116). The correct form of (strong) state intervention, guided by the market, would be the key to overcoming the crisis of liberalism.

As Foucault (2011) referred to this historical period as a field of adversity that ordoliberals sought to address, Biebricher (2019) similarly contends that ordoliberalism, like neoliberalism, was a reaction to the crisis of liberalism, where the main problem was political rather than economic. The crisis of liberalism during the first half of the twentieth century was related to the fact that individual freedom and the freedom of the market were challenged by state power and economic institutions (Vatiero 2010; Biebricher 2019).

As a result, ordoliberals sought to reduce the political and economic power of states, thus expanding the notion of liberalism, while simultaneously re-embedding the economy in society, and challenging the myth of laissez-faire and market fundamentalism attributed by Polanyi (Slobodian 2018). Ordoliberals believed that liberal economy is not a spontaneous reality or a natural result of laissez-faire; market freedom needs an economic order provided by the state (Horn 2021). In this sense, ordoliberals took a moderate position by rejecting classical laissez-faire liberalism (Boas and Gans-Morse 2009). Indeed, Hayek, who is considered an ordoliberal, referred to laissez-faire as one of the mistakes and aberrations that cause harm to the liberal cause (Biebricher 2019).

While ordoliberals of the Freiburg School tried to redefine economic rationality, the Chicago School’s attempt was more radical: they attempted to exert economic rationality into every inch of human life. The reorganization of society under the principle of “competition” and “entrepreneurship” led to a new governmental mechanism that differed from modern disciplinary power and created a new subject, an ‘entrepreneur of self’ that voluntarily invests themselves, manages their own risks, and internalizes market principles and desires. Some scholars have pointed out that although ordoliberalism is seen with negative connotations related to neoliberalism, ordoliberalism comes in a number of varieties, and it seeks a strong state to contain the power of the market, making a good contrast to the Chicago School of liberalism (Beck and Kotz 2017). Others claim that Eucken’s competitive order is a good way to reach (social) justice (Wörsdörfer 2013). Still others present more complicated pictures. For example, recent work reveals how the ordo-neoliberal version of social market economy carried out in Chile resulted in an interventionist state which watched over the economic order of market competition, and commodified and financialized social rights (Leiva 2021). Hence, concerns about alleged self-regulating markets and new types of political endeavors are notable in current political debates. If the early twentieth century was the end of the liberal era (Slobodian 2018), the twentieth first century could be the beginning of a post ordoliberal/neoliberal era, or as Biebricher (2019) has pointed out, the beginning of an authoritarian liberalism. Regardless, the theory and practice of ordoliberalism remains important in contemporary political economy.

(See Accumulation, Capital, Varieties of Capitalism, Variegated Neoliberalism, Neoliberalism)

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