It was
not supposed to end this way. In the glory days, when you could get a
house with nothing down and almost nothing to pay, anything seemed
possible. A new car every year? A trip to the sun? College tuition?
Watch the house balloon and let the good times roll. The recipe was
simplicity itself. First you find a physicist to tell you that gravity
has been abolished on Wall Street. Then you hire a banker to slice and
dice your derivatives. Then you promote a political class to bless the
baloney before eating it. Finally, you ask China to underwrite the
debt, happy to own half your house so that you don’t insist that it get
its own house in order. What could go wrong?
No one noticed that when even bankers laugh all the way to the bank,
something must be wrong. No one cared that multiplying derivatives is
the fiscal equivalent of the miracle of the loaves and fishes. No one
doubted the benediction of a political class that had been bought and
paid for many times over.
But now that houses and jobs and pensions have disappeared in a puff of
smoke, we remain oddly amnesiac as to the cause. The Economic Stimulus
plan, the Mortgage Foreclosure Plan, the Bank Rescue Plan, the Debt
Until the Crack of Doom Plan: trust me, says the president, they
promised this was quite safe in the 12-step program. Then the program
director asked me for some more money.
Fecklessness and stupidity are nothing new, but even by American
standards of giantism this latest iteration of boom and bust takes some
beating. Yet none of it need have happened had we listened to Wilhelm
Roepke. Two generations ago, when postwar Germany lay in ruins, Roepke
helped to lay the foundation of its extraordinary renewal. To be sure,
that postwar “miracle” owed something to American generosity, even to
the very statism (in the form of the Marshall Plan) that Roepke
otherwise distrusted. But in the Age of Obama, when all our
calculations have gone cockeyed, an economist who seems to know what
he is doing is worth a second look. Better than that, he knew the
limits of economics itself as the means and measure of human happiness.
Roepke was born in Hanover in 1899 and died in Geneva in 1966. In
between, he fought in World War I, studied and taught economics in
Marburg, Istanbul, and Geneva, befriended Ludwig von Mises and
Friedrich Hayek, helped establish the Mont Pelerin Society, and advised
Konrad Adenauer on social and monetary policy. Such a life mixed the
conventional and the bizarre. No one who had known the world before
1914, he said, could fail to be horrified by how it collapsed. Where
once there was “confident ease, an almost unimaginable freedom and
optimism” now came a World War, crushing inflation, the Great
Depression, an even more terrible war, a mushroom cloud in the east,
Communism on the march. The funeral pyre of Western civilization was
lit by Western man himself.
Initially, Roepke’s inclinations were socialist. If the Great War was
the result of capitalist imperialism, he reckoned, the way to prevent
another war was to embrace a bigger state, more planning, and loftier
ambitions descending from on high. It was the standard dream of the
interwar years. For the New Deal read the Five Year Plan: conceptually
there was little to choose between the two.
But Roepke abandoned the dream faster than most, convinced by Mises’s 1919 book Nation, State and Economy that most statist thinking was simply inept and crass, economically and humanly illiterate. In books such as Economics of the Free Society, The Moral Foundations of Civil Society, and A Humane Economy,
Roepke outlined an alternative vision, attacking the “bloated colossus”
of the state, the “pocket-money” world of welfare, the vanity of the
clipboard crowd telling us what to do. After World War II, when
everyone was a planner of one sort or another—from little Clement
Attlee to ludicrous LBJ—it took courage to go against the crowd. But
Roepke had plenty of courage, and besides, he never much cared for
crowds anyway. Given a choice between conventional wisdom and a village
reputation, he would have taken the village any day.
The
key to Roepke’s thinking is freedom, which he experienced before the
catastrophe of 1914, thought all human beings desired and deserved, and
felt sure could be recovered if certain principles of political economy
were understood by those entrusted with the guardianship of the state.
But his notion of freedom was profoundly communitarian, rooted as it
was in certain moral understandings of man and the good life, of human
beings living together in honorable interdependence, of families being
free because obliged to each other. Roepke was no libertarian any more
than the Adam Smith of The Wealth of Nations and The Theory of Moral Sentiments
was a libertarian. Liberty, both men knew, comes with limits, and it
imposes those limits on itself. Roepke delighted in boundaries—the
fence, the front door—recognizing that they make us free. Without a
playpen there is no play. Without scales and minims there is no music.
Roepke thus understood economics in deeply religious terms, as a kind
of magnificent participation in creation itself:
What I reject in socialism is a philosophy which … places too little
emphasis on man, his nature and his personality. … I see in man the
likeness of God. I am profoundly convinced that it is an appalling sin
to reduce man to a means (even in the name of high-sounding phrases)
and that each man’s soul is something unique, priceless, in comparison
with which all other things are as naught. I am attached to a humanism
which is rooted in these convictions and which regards man as the child
and image of God, but not as God himself, to be idolized by a false and
atheist humanism. These are the reasons why I so greatly distrust all
forms of collectivism.
Notice that easily missed word: he distrusted all forms of
collectivism. Roepke was an equal opportunity individualist. He feared
the tendency even of capitalism to instrumentalize human beings, to
turn the “market” or the “state” or “the forces of history” into things
in themselves, crushing the very freedom it claims to admire. The
market is made for man, not man for the market.
Freedom, then—rightly understood as obligation—is at the core of
Roepke’s thought. But why should freedom work and socialism fail?
Because it understands man not as an embodied appetite but as a soul.
Our deepest need is not for things but for each other. He wanted a
society in which
…
wealth would be widely dispersed: people’s lives would have solid
foundations; genuine communities, from the family upward, would form a
background of moral support for the individual; there would be
counterweights to competition and the mechanical operation of prices;
people would have roots and not be adrift in life without an anchor;
there would be a broad belt of an independent middle class, a healthy
balance between town and country, industry and agriculture.
An Aristotelian preference for balance and variety, a Burkean delight
in the little platoons, a Chestertonian love of the local and the
down-to-earth—that was Roepke.
This is all very well, you might say, but where are the economics?
Actually, Roepke’s technical work on credit, monopoly, the business
cycle, interest rates, inflation, employment, and the gold standard was
of a very high order. He could wield graphs with the best of them. He
did more than complain about Keynes: he out-argued him. To be sure, he
insisted on the complexity of his subject because he understood the
complexity of the world it sought to explain, parting company with his
Austrian colleagues when he thought they overstated the scientific side
of economics. “A very inefficient way of producing vegetables,” Mises
famously remarked to him as the two men walked by some allotments after
the war. Perhaps, Roepke memorably replied, “but a very efficient way
of producing human happiness.”
That was his answer to economics as mere technique, as applied science.
Even Madame Obama, digging for victory in the White House garden, seems
to intuit the wisdom. There she is, a peasant in Prada, urging us
onward to spinach Nirvana. Good for her, but even better were she and
her husband to understand the point. Roepke might have helped them. The
significance of that famous exchange with Mises is that Roepke was
epistemologically modest, knowing that the most rational thing about
rationality is that it knows its own limits. When even sensible
economists forget they are dealing with human beings, we should forget
them.
That insight is at the core of his economics. Roepke was appalled by
the sheer vastness of the modern state, its absurd omnicompetence, its
unerring ability to do badly what it shouldn’t be doing at all. He
offered, instead, the more modest proposal that self-reliance —“the
individual taking care of himself and his family”—was the foundation
upon which all economics and politics should be built.
We need to recover an intelligent and unapologetic localism, the kind
of wisdom that sees the value of having local banks locally owned and
locally answerable to local people. (Now there’s an idea that might
have saved us some trouble.) We need to find again “the virtues of
diligence, alertness, sense of duty, reliability, and reasonableness.”
Modern economic activity, Roepke proposed, “can only thrive where
whoever says ‘tomorrow’ means tomorrow and not some undefined time in
the future.” He believed, in other words, in telling the truth. What a
strangely old-fashioned idea. I wonder if it will ever catch on.
For that, surely, is the real “credit crisis,” the crisis in
credibility that has shaken our world to its core. Truth from our
political masters, from our bankers, from our brokers: have you heard
much of it lately? Instead, we have had only lies—that too much
borrowing requires even more borrowing; that some banks are too big to
fail; that we have a moral duty to subsidize the feckless; that a
bigger state means a better life. Any society that lies to itself so
systematically and so seductively is doomed to fail. That failure, dear
reader, is all around you.
The good news is that it could be worse. The bad news is that it will
be worse. Of all the mischiefs that arise from financial prodigality,
Gladstone wrote over a century ago, none is more dangerous than the
fact that “they creep onwards with a noiseless and a stealthy step…
they commonly remain unseen and unfelt until they have reached a
magnitude absolutely overwhelming.” There is our story in a nutshell.
And how do we propose to resolve our current mischief? With even more
financial prodigality, with one last bender to bring us to our senses.
Sound money? I like the sound of that, says our clownish commander in
chief. Let’s print lots and lots of it.
Gladstone died the year before Roepke was born. A way of life died a
few years later. Roepke’s world collapsed in August 1914. Our world
collapsed in September 2008. Both, we can now see, were doomed long
before they fell. Out of the ruins what shall we build? Another Tower
of Babel, another building too big to fail? Perhaps, if we are wise, we
might try smallness for a change. Happiness happens that way. 
__________________________________________
Dermot
Quinn is professor of history at Seton Hall University and a fellow of
the James Madison Program at Princeton University.