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Volume 4, Number 1 (Winter 1964)

The Third Road

Economics of the Free Society,
by Wilhelm Roepke.
Chicago: Henry Regnery Company, 1963. 261 pp.

Felix Morley

In this generally wise and always humane study, Professor Roepke unconsciously illustrates the loss of political clarity which came when our socialists captured the term “liberal.” For this book—while anti-socialist—is liberal, rather than conservative, in the classic and etymologically correct sense of that now debased word. Its author does not believe that current economic problems can be solved by a rigidly conceived approach from either “right” or “left.” What he seeks is a “third road,” avoiding not only the pitfalls of governmental direction, but also “the old worn-out road of ‘capitalism.’”

Indeed, the very word “capitalism,” when sparingly used by Professor Roepke, is usually placed in quotes. This is because, he lucidly explains, any economic system above the wholly primitive must of necessity be capitalistic. In Soviet Russia, as much as in the United States, it is imperative to raise and utilize capital for any and every kind of economic undertaking. The issue is not the nature, but the direction of rival capitalistic systems—whether they will operate through a free market by consumer choice, or through a state-controlled market under bureaucratic dictation. “We must choose between price or state command.”

To oppose the latter, however, does not mean that there will be no governmental intervention. “The job cannot be done . . . by a return to simple ‘laissez-faire’ methods.” On the contrary, “the state has a number of important tasks to fulfill,” such as the development of a prudent fiscal policy and the preservation of healthy competition in both domestic and foreign trade. “This framework should be designed so as to reduce to a minimum the numerous imperfections of the market economy.”

It is in this open assertion of the shortcomings of free enterprise, as operated by fallible and selfish men, that Professor Roepke’s book differs essentially from the habitual conservative argument. That is because he is a humanist as well as an economist, at least as deeply concerned with morality as with mechanism. Thus, a chapter on “Markets and Prices” is followed immediately by one on “Rich and Poor.” For his introductory quotation at the commencement of the latter, the author has chosen the sardonic observation of Anatole France in Le Lys Rouge: “The majestic equality of the law, which forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal bread.”

Such a sensitive approach may well offend those economists who feel it “unscientific” to admit to their discipline any consideration of the spiritual as well as the material wants of man. But his liberal slant does not make Roepke’s attack on economic and political dictatorships any the less forthright. The indictment here follows lines too familiar to justify recapitulation. What is distinctive is his conclusion: “Economics does not teach that every intervention of the state is an evil; it teaches only that it is necessary to weigh carefully the facts in the given case . . .”

The balanced consideration carries over into the very interesting section on “The Impact of Keynesianism.” John Maynard Keynes, says Roepke, was “a man who by any standards must be reckoned as one of the leading personages of the first half of the twentieth century.” It was “in tragic opposition to his own intention” that he “must be numbered among the grave-diggers of that very order of liberal democracy to which his innermost allegiance belonged.”

Exploring this anomaly, Roepke finds the explanation to be the lack of spiritual strength in Keynes, making it easy for his brilliant mind to be seduced by “mere logical technique.” Thus, to confront an immediate emergency, he bestowed “the mantle of his authority on the chronic propensity of all governments to inflate.” In a thought-provoking passage, Professor Roepke points to the contrast between Keynes and Adam Smith. By the latter, “economics was viewed as an organic part of the larger whole of the intellectual, moral, and historical life of society; for Keynes, economics was part of a mathematical-mechanical universe.” Unlike some conservative economists, there is no doubt as to which side of the fence Professor Roepke is on.

For him, the “third road” avoids both an acceptance of demonstrable fallacies and an embittered denunciation in the Keynes at Harvard manner. It lies, rather, in a judicious exposition of the place of the economist within the tidal ebb and flow of cultural thought. And this, as opposed to blind adoption or angry opposition, is the essence of the educational process. It is easy to see why Professor Roepke has long been so popular with all who have studied under him at Geneva. One of these former pupils, Professor Patrick M. Boarman of Bucknell University, has made his excellent translation of this book, “in gratitude for the inspiration received from a great teacher and a great economist.”

This is not to say that there is no room for criticism, though some of the shortcomings of the book undoubtedly trace to its complicated background. Originally published in Vienna in 1937, it was suppressed by the Nazis, while a French edition a little later had to be circulated surreptitiously to escape the same fate. After the war, the Swiss editions (of which there have now been nine) achieved popularity throughout western Europe and were unquestionably instrumental in the establishment of a free economy, over the ill-judged opposition of our advisers, in the German Federal Republic. The present American edition has been brought up to date, and a number of local illustrations have been introduced to emphasize applicability.

This should have been done more carefully, or not at all. Most Americans, for instance, will be surprised to learn that “concern for their social position” induces them to travel by Pullman rather than daycoach. This reviewer does so, when he must take the train, because he suffers from arthritis and for no other reason. Another observation which reads strangely to me is “the fact that a slowdown in population increases is eliminating one of the principal causes of the rise of the proletariat.” Any “fact” in that statement is singularly difficult to locate.

Moreover, for one so fair-minded as Professor Roepke, it seems off-key to compare Russian achievements in space with the uselessness of the Egyptian pyramids, unless one is to pass the same comment on our own frantic efforts to shoot the moon. Also out of character is Roepke’s emotional bitterness over exports from the West “to a Communist empire dedicated to its destruction.” He finds it “humiliating” that there are “Western governments so weak as to permit this.”

The argument is curious, coming from one who is generally most circumspect about endorsing governmental control of commerce, and who only a few pages earlier writes: “No country can remain indifferent to the success or failure of the reconstruction of the world economy [italics supplied].” And it seems an illogical argument from one who maintains that without the “isolation” of Communism, no one would seriously consider “the possibility that the Communist Assyrians may one day overtake us.” If that system is so inherently inefficient, how could some small restoration of trade really help it? Would it not rather tend to weaken that Communist grip which Professor Roepke says is strengthened by the Iron Curtain?

It is important to note that these relatively minor criticisms are all prompted by the tour de force which the author has not very successfully attempted. The first, and larger, portion of this book is a straightforward and convincing economics text, handled as concisely as the subject permits. The closing part is a lengthy and somewhat opinionated editorial on “The World Crisis.”

There is nothing accidental about this combination. In his preface to this edition, Professor Roepke explains his dual objective: first, to write a “scrupulously-scientific” description “of the whole of the economic process”; second, to adapt this “to the understanding, interests, and experience of people of average intelligence.”

This is not necessarily an attempt to mix oil and water; but it has involved a shift in presentation which is undeniably disconcerting to the careful reader. It is unfortunate that this and other minor irritations have crept into a book which has so much of permanent value to recommend it.  

Felix Morley is author of Freedom and Federalism, Gumption Island, and The Foreign Policy of the United States, among other books, and at the time of writing had recently edited The Necessary Conditions for a Free Society, published by D. Van Nostrand Company.

Posted: February 12, 2012 in Best of the Bookman.

Real progress consists in the movement of mankind toward the understanding of norms, and toward conformity to norms. Real decadence consists in the movement of mankind away from the understanding of norms, and away from obedience to norms.

Russell Kirk, Enemies of the Permanent Things, 1969

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