Pablo Martín Méndez
Professor, Ethics and Political Science, Universidad Nacional de Lanús, Argentina
Synopsis: Is the COVID-19 crisis the end of free market capitalism? To answer this question, we don’t necessarily have to look to the future. On the contrary, we could explore the history of the free market ideas.
Keywords: German liberalism, Great Depression, capitalism, SMEs
When we think about contemporary capitalism, we cannot help remembering Francis Fukuyama’s 1992 book The End of History and the Last Man. After the fall of the Berlin Wall, did history end? Obviously, it didn’t. History has continued. This was demonstrated by the September 11 attacks, the global financial crisis of 2008, and now, the COVID-19 pandemic.
Some analysts believe that coronavirus is, in fact, the end of free market capitalism. They argue that the fight against the pandemic demands more active states and less open markets. Maybe! However, free market ideas could survive beyond capitalism. To think about this matter, we don’t necessarily have to look to the future. On the contrary, we could explore the past of market ideas.
The crisis caused by COVID-19 has been compared with the Great Depression of the 1930s. As we know, the Great Depression was countered with different economic and political proposals. One of them was the welfarism promoted by the New Deal in the USA and Western Europe. The other proposal was developed by the Mont Pèlerin Society in 1947, led by Ludwig Mises and Friedrich Hayek. This proposal has been linked with economic liberalism and free market capitalism. However, there were other free market ideas that were manifested during the Great Depression.
During 1930-1940, there were several “Schools”, groups of scholars who tried to find an answer to The Great Depression and its effects. Here not only came into play Mises, Hayek and other economists of the Austrian School, but also a group of German liberals, namely the Freiburg School, Ordoliberalism and the Social Market Economy. Most of the members of this group believed that the Great Depression was not only an economic crisis, but also a crisis of liberalism itself. According to them, liberalism had turned out to be dogmatic, rationalist, and sociologically blind. This may have been the main cause of the crisis of free market capitalism.
Therefore, some German liberals proposed a “third way” between old liberalism and socialism. This third way has been called “sociological liberalism” by contemporary scholars such as Christian Laval, Pierre Dardot and Serge Audier, among others. Maybe we could rediscover this sociological liberalism in some trends that originated in, or were exacerbated by, the COVID-19 crisis.
First, German liberalism is very critical of mass societies. Some scholars such as Alexander Rüstow or Wilhelm Röpke saw the big crowds of people, life in urban centres and industrial work habits as a “pathology” of modern capitalism. In opposition to this pathology, they advocated life in small communities of peasants and artisans. Wilhelm Röpke – who was an influential economist during the reconstruction of Germany after World War II and Professor of International Relations at the Graduate Institute, Geneva between 1937-1966 – said that “the peasant world together with other small sectors of society, represents today a last great island that has not yet been reached by the flood of collectivization, the last great sphere of human life and work which possesses inner stability and value in a vital sense.”
This should not be understood as a romantic view of the world. On the contrary, the idea is to promote decentralized ways of life, production and work over economic planning. Several German liberals thought that small peasants and artisans were the most powerful antidote against dirigisme and the best path to free market competition. In this sense, they envisioned a society of “micro-entrepreneurs” competing with each other. However, entrepreneurs are not individuals in the modern sense of the word, but associations, groups and even families.
For German liberals, small communities could work as protection spaces in times of crisis and uncertainty. In fact, Walter Eucken, a prominent economist of the Freiburg School, pointed out that governments should promote the “self-sufficiency” of workers through home farming. Thus, human beings achieve certain independence from the market and some security in times of economic scarcity. This is not only an anti-welfare state proposal, but also a particular “social policy” which “promotes in an ideal manner the independent development of personality and at the same time the warmth of human fellowship, and thereby counter-balances the industrial and urban aspects of our civilization with tradition and conservatism, economic independence and self-sufficiency.”
German liberalism played an important role not only in the reconstruction of Germany after World War II but also in the development of the European Economic Community and, according to some scholars, in the management of the Eurozone crisis after 2008. Beyond these historical moments, the ideas of German liberalism seem to share the same horizon, especially in the way of sociological liberalism. During 1930-1940, in the middle of the Great Depression, Wilhelm Röpke, Alexander Rustow and other German liberals envisioned the “demassification” and the “deproletarianization” of society as a solution to the crisis of modern capitalism. In this dream society, there would not be urban agglomerations, nor mass production and consumption. There would not be big industries nor a working class. Households would be, at the same time, work places; that is, small enterprises that exchange goods and services with other small enterprises.
Today, in the middle of the COVID-19 crisis, could we be taking a step forward in this direction? Could deproletarianization, exacerbated entrepreneurialism and self-sufficiency be part of our immediate future? Is there something in common between the demassification proposed by German liberals and the social distancing promoted during COVID-19?
Although it is not possible to give definitive answers to these questions, there are some signs that allow us to envision a future like the one envisioned by German liberals. During the COVID-19 pandemic a great number of people are working from home. Home seems to be more and more like a small enterprise that exchanges goods and services with other small enterprises. Of course, this has been possible because of the development of so-called “Platform Capitalism” and, more recently, employment apps. However, it is not only a technological phenomenon, but above all it is a deep change of our ethos.
As some scholars point out, we are developing new work and consumption habits. We are becoming less “workers” in the classical sense of the word, and more entrepreneurs. We are looking for a “lifestyle” in small communities as an alternative to mass consumption. Maybe this is a big change for modern capitalism, but not necessarily for free market ideas.
The history of these ideas shows some political and economic options that could arise in response to the COVID-19 crisis. Is this answer enough? I think that the free market is not the only issue. To end the COVID-19 pandemic, more just and egalitarian societies would be necessary. For this, we need economic rationality and, above all, political imagination.
This article is part of the series Governance, in crisis.
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