Apostle of a Humane Economy: Remembering Wilhelm Ropke

Article excerpt

Wilhelm Ropke entered my life, with immense effect, more than fifty years ago. That was a time in which the political and intellectual climate was rather different from today. The world was just beginning to rise from the ashes of the greatest war, World War II. Socialism was everywhere in the ascendant. The Soviet colossus bestrode half the planet. China was soon to become a monolithic Communist state. And the United States stood virtually alone, if we except Switzerland, as guardian of the market economy. Who could then have foreseen that in the year 2000 the Soviet empire would be no more, that a united Germany would have arisen like a phoenix to become the economic powerhouse of Europe, that "socialism" and "planned economy" would become derisory, even pejorative terms (except maybe in Cuba), and that expressions such as "social market economy," "third way," and "a humane economy would become the fashionable slogans of the moment?

Ropke in China?

Consider the case of China. Who could have imagined that China, of all places, the mysterious, impenetrable, isolated land of a billion people, tyrannized for forty-five years by the monstrous Mao Tse-tung--that China would go capitalist, or at least partway capitalist? So what did Wilhelm Ropke have to do with these momentous happenings, with those in China in particular? A great deal, albeit the connection is circuitous and may not involve his having a major direct influence.

Chinese interested in market economy as part of unique institutional framework.

Two years ago, my wife Shane, a native Shanghaiese, and I, an American professor emeritus of economics, spent a month traveling through central China. Among the highlights of the trip was a three-day visit to a Chinese university, where, at the invitation of the university's president, I lectured on market economics. His very first comment to me was startling: "There are two things," he opined, "that account for America's great success: first, democracy, and second, high technology." Equally eye-opening were my exchanges with senior and junior faculty members. One heard nothing of Marxism-Leninism or of central planning, but many references to and searching questions about the price system, profits, incentives, and entrepreneurship, especially as they function in the United States. These faculty members expressed particular interest in the differences they claimed to see in the approaches of Western economists to economic analysis: on the one hand, the school that emphasizes abstract theorizing and mathemati cal model-building, that is, a preoccupation with the market economy viewed as a self-contained machine; and the other approach, which they felt to be less influential in the West, and in which they were greatly interested, which stresses the role of the unique institutional framework--of cultural traditions, of historical forces, of government itself--within which each national economy is embedded.

I found these insights to be quite astonishing since the model of a socio-economic system that emphasizes the primacy of the institutional framework--viz., the decisive influence of tradition, of law, of culture in the broadest sense, of philosophy even, and the subsidiary, if still crucial role of the market per se--was precisely the design Wilhelm Ropke had spent a lifetime devising, refining and elucidating. So I was not totally unprepared, I think, though I did experience a small shock of recognition, when after one of my lectures to a large group of undergraduates, a student came up to show me proudly a very dog-eared, very battered copy of Ropke's Economics of the Free Society. [1]

Whether any other students beyond this one had ever heard of Ropke, I was unable to find out. But I felt nevertheless emboldened in a subsequent lecture to pass along to these students some of the Ropkean wisdom I had myself received so long ago. While emphasizing the awesome power of a market economy to generate wealth, which the Chinese are happily discovering, I reminded my audience of the limits of the market, of its inability, for example, to address collective needs, such as that for national defense, or for a clean environment, or for a financial system which is proof against the ravages of inflation. …