Varieties of Postwar Settlements: Germany in Comparative Perspective

In the analysis of the current situation in Europe, the terms ‘Social Market Economy’ and ‘Ordo-liberalism’, which are of German origin, have been attracting attention. The Article 3, Paragraph 3 of the Treaty on European Union states “highly competitive social market economy” is one of the purposes of the EU. In order to criticize austerity orientation of the European Central Bank and Germany, many books and articles have been put a special focus on Ordo-Liberalism which has underlain postwar German political-economy (Hien and Joerges 2017). In this perspective, Germany is regarded as a ‘leader’ or a ’hegemon’. In fact, it has been commonplace for years to treat Germany as a paradigmatic example in comparison with the United States and Japan. The ‘Variety of Capitalism’ paradigm, originated by Hall and Soskice (2000), counterposes ‘Liberal Market Economy’ (LME) such as the United States against ‘Coordinated Market Economy’ (CMME), which is based on the Germany model of political economy. However, it is not appropriate to regard Germany as exemplary, at least until the 1960s. In a classic treatise on comparative capitalism, Shonfield (1965), it was shown that many countries in Europe had introduced "planning" with France as the most prominent example. In his analysis, there are two exceptions. One is the United States. The other is West Germany, whose chapter is entitled "Market Ideology", where the impact of the “planning” idea was lacking. As of the mid-1960s, Germany was a unique country characterized by a lack of economic planning. This divergence illuminates a subtle, but important differences between Germany and its Corporatist neighbours. This paper traces the origin of this divergence back to the formative years of the post-war political economies. Specifically, this paper traces the trajectory of the social democratic reform project of ‘Economic Democracy’. By examining how the ‘Economic Democracy’ project had failed, this paper clarifies what postwar German political economy is ‘not’ and thereby stresses its uniqueness among postwar European societies. Through examination of published and unpublished historical sources of the German Social Democrats and the Trade Unions in the German (AdsD) and the Dutch (IISH) archives and thereby contrasting the findings with the Dutch and the Austrian cases, the paper highlights the following points. First, there were three main strategies for non-laissez-faire reconstruction, namely, statist planning, macro-corporatist concertation and meso-corporatist co-determination. Second, in forging post-war compromise, the labour in each country had prioritised and deliberately chosen one strategy. Third, the choices were influenced by historical contingencies, although the result is structurally conditioned. Finally, these contingent choices were institutionalised and constituted a pillar of post-war political economies. As an implication, this paper suggests that current discord over the German “Ordo-liberal” economicy policy has its roots in the difference in postwar settlements. As Ordo-liberalism denies governments’ guiding role through economic planning and intervention in economic processes, such rigid position is naturally disputed because such a view has not been in the mainstream of postwar Europe.