Page 58 - The Making of the German Post-war Economy

1.1

THE FREIBURG CIRCLES AND

NEO-LIBERALISM

Neither the command economy nor the free market economy can cope with present demands.
Thus one needs to combine the two systems to a market-conform or indirectly controlled economy. 1
(Adolf Lampe, 1943)

After the collapse of the totalitarian Third Reich with its statist, corporatist
economic policy, economists and academics at the University of Freiburg
im Breisgau in Germany advocated a new liberal economic order. This
‘neo-liberal’ conception encompassing economic-political and socio-
2
philosophical ideas was based on classical liberalism and neo-classical
theory. In contrast to laissez-faire or free market liberalism, however, the
3
neo-liberal concept considered regulatory interference as legitimate
provided it was solely to safeguard the functioning of the market. Thus,
unlike Keynesianism, which required an active governmental economic
policy, neo-liberalism aimed to minimise the influence of the state.
Nevertheless, in view of the situation after the war, the state was expected
to regulate supply and demand in order to create a market economy
without aggravating social distress. On the basis of these considerations,
neo-liberals and the Freiburg scholars became the intellectual precursors
of the emerging Social Market Economy.
In this context, it is important to distinguish between the Freiburg
School and the Freiburg Circles. The prominence of the former, well-
known due to its influential publications on post-war economic policy in
the late 1940s, contrasted with the relatively secret activities and late
publication of the reports of the latter school of economic thought, led to
distinctions becoming blurred and the impact of the Freiburg Circles on
the concrete shaping of post-war economic policy remaining nebulous
even to scholars. Frequently, the two schools of thought were believed to
4
be the same although the first emerged from the latter and among the