Magazine article The American Conservative

Too Small to Fail: The William Roepke Solution to Our Economic Woes

Magazine article The American Conservative

Too Small to Fail: The William Roepke Solution to Our Economic Woes

Article excerpt

IT WAS NOT SUPPOSED TO end this way. In the glory days, when you could get a house with nothing down and almost nothing to pay, anything seemed possible. A new car every year? A trip to the sun? College tuition? Watch the house balloon and let the good times roll. The recipe was simplicity itself. First you find a physicist to tell you that gravity has been abolished on Wall Street. Then you hire a banker to slice and dice your derivatives. Then you promote a political class to bless the baloney before eating it. Finally, you ask China to underwrite the debt, happy to own half your house so that you don't insist that it get its own house in order. What could go wrong?

No one noticed that when even bankers laugh all the way to the bank, something must be wrong. No one cared that multiplying derivatives is the fiscal equivalent of the miracle of the loaves and fishes. No one doubted the benediction of a political class that had been bought and paid for many times over.

But now that houses and jobs and pensions have disappeared in a puff of smoke, we remain oddly amnesiac as to the cause. The Economic Stimulus plan, the Mortgage Foreclosure Plan, the Bank Rescue Plan, the Debt Until the Crack of Doom Plan: trust me, says the president, they promised this was quite safe in the 12-step program. Then the program director asked me for some more money.

Fecklessness and stupidity are nothing new, but even by American standards of giantism this latest iteration of boom and bust takes some beating. Yet none of it need have happened had we listened to Wilhelm Roepke. Two generations ago, when postwar Germany lay in ruins, Roepke helped to lay the foundation of its extraordinary renewal. To be sure, that postwar "miracle" owed something to American generosity, even to the very statism (in the form of the Marshall Plan) that Roepke otherwise distrusted. But in the Age of Obama, when all our calculations have gone cock-eyed, an economist who seems to know what he is doing is worth a second look. Better than that, he knew the limits of economics itself as the means and measure of human happiness.

Roepke was born in Hanover in 1899 and died in Geneva in 1966. In between, he fought in World War I, studied and taught economics in Marburg, Istanbul, and Geneva, befriended Ludwig von Mises and Friedrich Hayek, helped establish the Mont Pelerin Society, and advised Konrad Adenauer on social and monetary policy. Such a life mixed the conventional and the bizarre. No one who had known the world before 1914, he said, could fail to be horrified by how it collapsed. Where once there was "confident ease, an almost unimaginable freedom and optimism" now came a World War, crushing inflation, the Great Depression, an even more terrible war, a mushroom cloud in the east, Communism on the march. The funeral pyre of Western civilization was lit by Western man himself.

Initially, Roepke's inclinations were socialist. If the Great War was the result of capitalist imperialism, he reckoned, the way to prevent another war was to embrace a bigger state, more planning, and loftier ambitions descending from on high. It was the standard dream of the interwar years. For the New Deal read the Five Year Plan: conceptually there was little to choose between the two.

But Roepke abandoned the dream faster than most, convinced by Mises's 1919 book Nation, State and Economy that most statist thinking was simply inept and crass, economically and humanly illiterate. In books such as Economics of the Free Society, The Moral Foundations of Civil Society, and A Humane Economy, Roepke outlined an alternative vision, attacking the "bloated colossus" of the state, the "pocket-money" world of welfare, the vanity of the clipboard crowd telling us what to do. After World War II, when everyone was a planner of one sort or another--from little Clement Attlee to ludicrous LBJ--it took courage to go against the crowd. But Roepke had plenty of courage, and besides, he never much cared for crowds anyway. …

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