The following comments were originally given as a lecture on April 12 at the Intercollegiate Studies Institute’s 2008 National Leadership Conference held in Indianapolis, Indiana.

Two Greek words define my topic: nostos and oikos. The first—from which we have ‘nostalgia’—denotes return to the home, and it is the great theme of Homer’s Odyssey. The second—from which we have ‘economy’—denotes the home itself, conceived as a place of settlement, to be defended against marauders and also opened to friends and guests. The most basic social needs and sentiments are summoned by these words, and if we are now living in conditions of hyper-mobility, in which no one is settled deeply enough or for long enough to enjoy the sense of home, then it is not surprising that we are also living in a condition of intense nostalgia. We are constantly seeking for the place of rest, the refuge from change and stress and fleetingness, the condition in which we will be ‘restored to ourselves.’ Some seek this place in the past, believing that we must return to a simpler and more tranquil way of doing things. Others seek it in the future, believing that the stress of competition and mobility is something to be ‘overcome.’ Few if any find the place of refuge in the present.

When Wilhelm Röpke set out to write his defence of the ‘humane economy’ he had fallen under the spell of the Austrian school—of Mises and Hayek especially—whose defence of the market against state planning and socialist distribution had taken on a new credibility in the light of the tyranny and economic disorder of the Bolshevik experiment. At the same time Röpke was aware that markets are not enough. They do not guarantee the goal of economic activity, which is the oikos, the place of settlement and security where people are at home with each other and at peace with their neighbours. The market mechanism may not be sufficient for social order, but it is necessary, for all the reasons spelled out by the Austrians. Only in a market economy can prices serve as a guide to the scarcity of goods, or wages a guide to the supply of labour. Only in a market economy can individuals plan their own budgets and make rational choices for the deployment of their assets, their labour and their bargaining skills. The argument developed by Mises in his critique of socialism was, Röpke thought, demonstrative. The centrally planned economy destroyed the information on which rational economic decisions depend. This information is available in the form of prices and contracts in a free economy; but it is irretrievably dispersed by the attempt to dictate all economic factors from on high.

I don’t think that anyone who has followed the careful arguments of Mises and Hayek would doubt the point. Nor was it a point that Röpke wished to labour. Röpke’s interest was in the oikos, which he believed to be threatened from above by the state—something that he had seen at first hand with his experiences of the Nazis—and also threatened from below, by the anarchy of unbridled self-interest.

It is fairly normal, nowadays, for left-liberal thinkers to pay lip-service to the Hayekian theory of the market. Yes, they will say; the market is necessary as a transmitter of economic signals. And yes, without markets economies have no ready way to regain equilibrium in the wake of a disturbance. But markets have no respect for social order; they neither generate nor perpetuate the sense of community on which we all depend. They depend upon and encourage both self-interest and competition, and regard nothing as sacred, nothing as beyond the reach of buying and selling. Is it surprising, therefore, if capitalist societies today are witnessing social breakdown on a hitherto unimaginable scale, as the pursuit of self-interest drives all concern for the community from the thoughts and emotions of consumers? Isn’t the ‘consumer society’ precisely what we must expect, from a philosophy which makes ‘consumer sovereignty’ into the first principle of economic life?

Röpke would have endorsed some of that. But he was determined not to draw the conclusion that left-liberal thinkers draw, namely that we need to control the market through the state. Powers exercised by the state, he believed, inevitably end up in the hands of unanswerable bureaucrats, and can also never be recaptured by society, whatever the extent of their abuse. If the market needs to be constrained for the common good, then the constraint must come from below, not from above. It must be a social constraint, rather than a political constraint. And thus was born the idea of a ‘social market’ economy—an idea which was to influence German ministers of finance throughout the period of reconstruction following the end of the Second World War. Röpke, who had fled from Nazi Germany to Switzerland, believed that he had found a model for the social market, in the Swiss forms of local democracy. He was also (although of Protestant background) strongly influenced by the social teachings of the Roman Catholic Church, and in particular by the doctrine of ‘subsidiarity’ expounded in the encyclical Quadragesimo anno, which Pope Pius XI issued in 1931. Pius intended this as a description of the Church’s own organisation, through the episcopate, according to which decisions are always taken at the ‘subsidiary’ level—the lowest level compatible with unified government. But he also implied that economic and political life might be similarly organized, so that power was always passed up from the bottom and never imposed from above.