City and Country: Lessons from European Economic Thought - Critical Essay

American Journal of Economics and Sociology, The,  Jan, 2001  by Jorgen G. Backhaus,  Gerrit Meijer

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IV

Wilhelm Ropke: The City as the Center of Civilization

WILHELM ROPKE (1899-1966) was a very special economist. His program of economic and social policy includes four supplementary groups of measures (Ropke 1946 [1944], pp. 69-87, 97-98, 100; 1943 [1942]):

1. There have to be measures to create and maintain the institutions which make possible an economic order based on competition (Wettbewerbsordnung). This is the policy of economic order (Rabmenpolitik).

2. Furthermore, he wants to interfere in the economic process. This Ropke calls Marktpolitik. Together with the Rahmenpolitik it forms the positive economic policy he advocates. Ropke develops two criteria of rational economic policy, on the basis of which he distinguishes between permissible and non-permissible interventions.

The first criterion is the one of Anpassungsinterventionen (adjustment interventions) versus Erhaltungsinterventionen (status quo interventions). Changes in the data of economic process often bring painful adjustment processes for the subjects involved. The government can respond in three ways: it can do nothing; it can stop the adjustment process; or it can accelerate and soften the adjustment processes. The first reaction means laissez faire. The second leads to Erhaltungsinterventionen (status quo interventions), resisting the dynamic working of price formation. The third point of view leads to adjustment interventions which serve to soften the adjustments and help the weak groups in their struggle for existence. Through that adjustment support the market mechanism's working is not affected. It is precisely the intention to come across with measures which make the adjustment process less painful and quicker. Ropke mentions agriculture, handicraft, the small firms, and the laborers as groups which deserve to be considered for adjustment interventions.

The second criterion is that of compatiblity and non-compatiblity (conforming and non-conforming). With each measure one has to ask oneself whether the instrument used is or is not compatible with the market economy. Compatible instruments do not abolish the working of price formation, but insert as new data in the economic process. On the other hand non-compatible instruments will block the working of price formation.

3. Measures which together form the economic-social structure policy and try to change income and property distribution, size distribution of firms, and distribution of the population over city and country and over agriculture and industry. They concern the social conditions of the market economy. This means promotion of the medium and small firms and property formation (particularly in the form of houses with gardens) in order to fight proletarization and massification (congestion). The policy has to be focused on distribution of industry and deconcentration in industry. In this context Ropke speaks of economic humanism.

4. Finally, a policy has to be pursued which is focused on the creation of a structure of society in which the market economy can prosper. This (the so-called Gesellschaftspolitik) has been strongly neglected by the liberals of the past century. To combat massification (congestion) and proletarianization, stimulation of agriculture and handicraft and distribution of the location of industry are necessary. The measures under (3.) and (4.) are very important, even essential, elements in Ropke's program.