Ordoliberal theory holds that the
state must create a proper legal environment for the economy and maintain a healthy level of
competition through measures that adhere to
market principles. This is the foundation of its
legitimacy. The concern is that, if the state does not take active measures to foster competition,
firms with
monopoly (or
oligopoly) power will emerge, which will not only
subvert the advantages offered by the
market economy, but also possibly undermine good government, since strong economic power can be transformed into
political power. According to Stephen Padgett, "a central tenet of ordo-liberalism is a clearly defined division of
labor in economic management, with specific responsibilities assigned to particular institutions.
Monetary policy should be the responsibility of a
central bank committed to monetary stability and low
inflation, and insulated from political pressure by independent status.
Fiscal policy—balancing
tax revenue against
government expenditure—is the domain of the government, whilst
macro-economic policy is the preserve of
employers and
trade unions." The state should form an economic order instead of directing economic processes, and three negative examples ordoliberals used to back their theories were
Nazism,
Keynesianism, and
Soviet socialism. It is also seen as a
third way between
collectivism and
laissez-faire liberalism. While the ordoliberal idea of a social market is similar to that of the
third-way social democracy advocated since the 1990s by the likes of the
New Labour government (especially during the
premiership of Tony Blair), there are a few key differences. Whilst they both adhere to the idea of providing a moderate stance between
socialism and
capitalism, the ordoliberal social market model often combines
private enterprise with government
regulation to establish fair
competition (although German network industries are known to have been
deregulated), whereas advocates of the third-way social democracy model have been known to oversee multiple economic
deregulations. The third way
social democracy model has also foreseen a clash of ideas regarding the establishment of the
welfare state, in comparison to the ordoliberal's idea of a
social market model being open to the
benefits of
social welfare. Ordoliberals are also known for pursuing a minimum
configuration of vital resources and
progressive taxation. The ordoliberal emphasis on the
privatization of
public services and other public firms such as
telecommunication services;
Wilhelm Röpke considered ordoliberalism to be "liberal conservatism", against
capitalism in his work ("A
Humane Order of Society", 1944). also criticized
laissez-faire capitalism in his work ("The Failure of Economic Liberalism", 1950). The ordoliberals thus separated themselves from
classical liberals and valued the idea of
social justice. "
Social security and social justice", wrote , "are the greatest concerns of our time". also notes the similarity (beyond just historical contemporaneity) between the Ordo/Freiburg school and the
Frankfurt School of
critical theory, due to their inheritance from . That is, both recognise the "
irrational rationality" of the
capitalist system, but not the "
logic of contradiction" that
Marx posited. Both groups took up the same problem, but in vastly different directions. The political philosophy of Ordoliberals was influenced by
Aristotle, , , , , , and . == Criticism ==