Page 75 - The Making of the German Post-war Economy

48 THE MAKING OF THE GERMAN POST-WAR ECONOMY

‘Social Humanism’ or ‘Social Irenics’ – the notion ‘irenics’ is derived from
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the Greek word ειρηνη (eirēnē) which means being conducive to or
working toward peace, moderation or conciliation – to overcome existing
differences in society. Therefore, the Social Market Economy as an
extension of neo-liberal thought was not a defined economic order but a
holistic conception pursuing a complete humanistic societal order as a
synthesis of seemingly conflicting objectives, namely economic freedom
and social security. This socio-economic imperative actively managed by a
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strong state – in contrast to the ordo-liberal minimal state solely
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safeguarding the economic order – is often labelled by the ambiguous
but historical term ‘Der Dritte Weg’ (Third Way).
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The concept of the Social Market Economy received fundamental
impulses from reflection and critique of historical economic and social
orders, namely Smithian laissez-faire liberalism on the one hand and
Marxian socialism on the other. Furthermore, various ‘Third Way’
conceptions prepared the ground for the socio-economic concept. Already
in the late nineteenth century, the Kathedersozialisten (Catheder Socialists),
engaged in social reforms in the Verein für Socialpolitik, turned away from
pure liberalism to demand a purposive state policy designed to regulate
economic life and advocated a middle course between anarchic
individualism, traditionalistic corporatism and bureaucratic etatism. In
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the early twentieth century, the Frankfurt sociologist and economist Franz
Oppenheimer postulated a so-called ‘Liberal Socialism’, i.e. socialism
achieved via liberalism, as the pursuit of a societal order, in which
economic self-interest preserves its power and persists in free
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competition. This desirable order of freedom and equality was labelled
by a later programmatic publication entitled Weder so - noch so. Der dritte
Weg.
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This position was widely shared by Oppenheimer’s doctoral student and
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friend, Ludwig Erhard; although the latter displaced adjective and
subject by promoting a ‘Social Liberalism’ and never liked the expression
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‘Third Way’. In his opinion the term was tainted, reminding him too
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much about ideas of a mixed economy, somewhere between a market
economy and central planning. He vehemently and consistently argued
against the view that models were converging. Further, in contrast to
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Müller-Armack who emphasised the social aspect, for Erhard the Social
Market Economy was always first and foremost a market economic
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system. By proclaiming ‘the freer an economy is, the more social it is,’
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Ludwig Erhard was rather inclined to Walter Eucken’s ordo-liberal
competitive market order. Although he even considered himself an
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ordo-liberal, Erhard based his economic conception neither on Eucken
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nor on Müller-Armack. In fact, his doctoral supervisor Franz