Updated below
The third installment of the 30 day reading list primarily deals with the issue of private property, a hallmark of a free society. Wilhelm Röpke explains in “Free Economy and Social Order” that a free economy, defined as “the world of prices, of markets, of supply and demand, of competition, of wage rates, of interest rates, of exchange rates, and whatnot,” isn’t sufficient – there must be private property rights.
For this reason, the market economy can’t work in a socialist society where property rights are not well established and respected.
He calls property the “forgotten man” of our time, and indeed it is. What struck me as profound is that this was written ten years before the civil rights act, which in its effort to eliminate racial discrimination also abrogated private property. Businesses were no longer considered private; they became “public places” because they serve the “public.” (See here for a more detailed explanation).
This misunderstanding of property rights has led to such things anti-smoking ordinances and effectively forcing businesses to serve whoever applies, among other injustices.
He denounces Keynesianism for its embrace of shortsighted thinking, writing that “To incur debts becomes a positive virtue; to save, a capital sin. To live beyond one’s means, as individuals and as nations, is the logical consequence.”
This is all part of the “proletarianization,” as he describes it, of society. It’s a move away from a bourgeois social order, which he argues the market economy, and by extension freedom, can only survive when individuals within a society value:
individual responsibility; respect of certain indisputable norms; the individual’s honest and serious struggle to get ahead and develop his faculties; independence anchored in property; responsible planning of one’s own life and that of one’s family; thriftiness; enterprise; assuming well calculated risks; the sense of workmanship; the right relation to nature and the community; the sense of continuity and tradition; the courage to brave the uncertainties of life on one’s own account; the sense of the natural order of things.
And of course we’ve seen how the attitude of borrow and spend plays out with respect to credit bubbles. First there was the tech bubble of the last decade, which burst, as all bubbles eventually do. Following that was the bubble in real estate, which exploded and sent the financial world reeling. As interest have been held so low for so long saving is even less profitable, and individuals are driven into riskier investments to maintain their standard of living or make any return on their money.
Röpke concludes with two anecdotes on money, which he notes is also linked to the issue of respect for private property. The first is about Gambetta, a French Resistance leader in the latter part of the 19th Century. In order to finance an army, he demanded the central bank of France print several million notes. In striking contrast with modern times, the bankers responded with a “flat and indignant refusal.”
If only such wisdom were present with the current batch of central bankers we might not be in such dire straits financially, and we’d no doubt be less inclined to war.
The second story describes how even after the socialist revolt in Paris the gold reserves and printing plates were left untouched, because the sanctity of the value of money was not lost on the revolutionaries. Again, if the public would adopt such an attitude toward money we might be able to restore the value of the currency and finally see some real growth.
Like Hazlitt from the first essay in this series, Röpke argues that curbing the debauching of the money is one of the premier goals of anyone hoping to restore liberty. He writes that “[restoring] the respect and the corresponding discipline in money and credit policy is one of the most important conditions for the durable success of all our efforts to restore and maintain a free economy and, therewith, a free society.”
Update:
Here’s Steve Cronin’s take on Röpke’s piece.
