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The Germans have a name for their unique economic framework: ordoliberalism. - Münchau FT

Its origins are perfectly legitimate – a response of Germany’s liberal elites to the breakdown of liberal democracy in 1933. 

It was born out of the observation that unfettered liberal systems are inherently unstable, and require rules and government intervention to sustain themselves. The job of the government was not to correct market failures but to set and enforce rules.

Today the government is ordoliberal. The opposition is ordoliberal. The universities teach ordoliberal economics. 

Macroeconomics in Germany and elsewhere are tantamount to parallel universes.

German ordoliberals simply refuse to acknowledge the presence of a liquidity trap where the central bank becomes powerless in affecting market interest rates. Ludwig Erhard, Germany’s revered economics minister in the 1950s, once tried to explain the Great Depression in terms of cartels. 

It was an ordoliberal attempt to bring something into their mental framework for which they have no obvious explanations. 

Erhard’s successors repeated the mistake in the eurozone crisis, which they see as a story of fiscal indiscipline.

Ordoliberals have no coherent policy to deal with depressions – once or twice in a century disasters. 

Whenever I ask one of them what one should do in a depression, the answer usually includes some reference to “creative destruction”.

Wolfgang Münchau, FT November 16, 2014

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