Ordoliberalism
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Contributions to liberal theory |
According to ordoliberalism, the state must create a proper legal environment for the economy and to maintain a healthy level of competition through measures that adhere to market principles. 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 democracy itself, since strong economic power can be transformed into political power. Quoting 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."
Ordoliberalism was developed in the 1930s-1950s by German economists such as Wilhelm Röpke (who spent the Nazi period in exile) to create the German social market economy.