To gain a proper appreciation of the free market and its benefits, we need to also become aware of its weaknesses.
I have written previously at Learn Liberty about how 20th-century economist Wilhelm Röpke argued that while the free market has the capacity to encourage morality, other institutions—like families and churches — are a more reliable source of social morality. In this post, we will focus on another of Röpke’s arguments where he defended the free market but took a very different approach than that of many other free market economists.
Röpke on the Need for a Robust Moral Culture
Röpke’s study of culture made him, like Adam Smith before him, believe that a free market is a moral good that can bring about great wealth and material well-being. But at the same time, he argued that it is not a perfect economic system, and it has the capacity to stultify those virtues that are necessary for its own perpetuation.
As a result, he concluded that the free market must at all times be augmented by virtue that comes primarily from outside of the marketplace, from institutions such as families, churches, and local communities. He reasoned that the market, dealing as it does primarily with trade in goods and services, tends to train people to be concerned solely with material improvement.Of course, if people have the opportunity to improve their lives, they will pursue that opportunity. In his book, A Humane Economy: The Social Framework of the Free Market, Röpke expressed concern that repetitive pursuit of material well-being and “the habit of constantly thinking about money and what it can buy” tends to stultify concern for higher things such as freedom, justice, love, beauty, truth, and so on.
Far from making people virtuous, then, the free market in the absence of a preexisting social order can habituate people to a stunted view of life that appeals only to our necessary, but lower-order, need for material well-being.
In brief, the free market is a positive good that also has a corresponding danger: the tendency to teach people that material well-being is the point of their existence.
More importantly, Röpke noted in The Humane Economy that a people concerned chiefly with material well-being would suffer from “a misjudgment of the true scale of vital values, a degradation of man not tolerable for long” because it would soon end in the loss of liberty.
Indeed, one might ask how a people could desire liberty if by its own description it is not desiring liberty but instead material comfort.
The danger: such a morally degraded free market society in which people concern themselves chiefly with making (and spending) money is not fundamentally distinct from a collectivist economy in which achieving a certain standard of living becomes the sole motivation of most people.
Röpke’s Ideas and the History of Economic Thought
At this point, no doubt, some of my fellow free market-defending readers will be not just a little skeptical of Röpke’s arguments. It may therefore be worth reminding the reader that Röpke was a fierce defender of the free market. According to John Zmirak, his pro-market writings were smuggled into Nazi Germany and read by Ludwig Erhard and others who led the German economic recovery after World War II. Samuel Gregg notes that Friedrich Hayek praised his writings, even though the two economists had significant differences.
In brief, Röpke was no socialist, and he despised Keynesian thought, referring to Keynes as “one of the great ruiners of history — like Rousseau or Marx,” in The Humane Economy. He was not only an economist, but also a kind of sociologist who was deeply interested in the cultural context in which markets operate.
Röpke’s position may appear more plausible if one considers a similar argument made by another defender of the free society — Alexis de Tocqueville. He was no friend of socialism, but he did observe the persistent commercial activity of Americans in the early nineteenth century in his work, Democracy in America. Tocqueville feared that this habitual pursuit of material improvement would train people to love material comfort so much that they could be willing to trade large portions of their political liberty and civil rights to a state strong enough to plausibly promise material comfort.
This was arguably realized to some extent in the next century in what Tocqueville called “soft despotism.” He therefore believed it necessary that the great benefits of modern commerce be maintained not only through free legal institutions but especially through a robust moral culture that helps a people to maintain moderation and restraint in the midst of material pursuits.
In brief, Röpke thought that the free market was a positive good — the only economic system that respects the dignity, worth, and freedom of the individual, and the only one that could lead to economic well-being.Yet he also noted that it was a positive good that, like all social arrangements, was not perfect. Indeed, one could even argue that those who think that market societies cannot, out of a growing desire for material security, transition into welfare statism haven’t been paying attention.
A robust defense of the great blessing of the free market requires an accurate assessment of dangers that threaten it — even if some of those dangers come from the free market itself.