Walter Eucken (1891 – 1950)

Eucken's father was a laureate Nobel Prize according to literature. Eucken graduated from the University of Bonn. He taught at the universities of Freiburg and Tübengen (Germany). He created and edited the main scientific journal of the neoliberals "ORDO" ("Order"). Eucken's neoliberal theory was called ordo-liberalism. The V. Eucken Institute was created in Freiburg, developing his ideas. Main work: "Fundamentals of National Economy"(1950).

Eucken's system had its own methodological approach and specific subject of study.

As the main research method, Eucken proposed "great antinomy". He himself considered this approach fundamentally new for economic science. However, the explanation proposed by Euken for this method shows that, in essence, this is a fairly traditional approach, representing a synthesis of concrete historical and abstract logical methods.

Similar studies have been found in economics, at least since the time of A. Smith. True, in the 19th century. There was a certain divergence in the use of these methods between different schools of economic knowledge. Neoclassicism and marginalism practically abandoned the concrete historical approach, which became almost the only one for the German historical school.

An attempt to combine the methodological achievements of Austrian and German schools can be recognized as a certain merit of V. Eucken.

Another feature of Eucken's methodology was the use evolutionary method research. It consisted in the fact that both individual economic phenomena and categories, and the whole economic system were considered in movement and development. This approach is also far from new. However, Eucken interpreted the very idea of ​​development quite specifically, viewing it not as a spiral movement, but as a kind of cycle. Moreover, this cycle is carried out not so much under the influence of objective economic laws, but under the influence of changes in social psychology.

The implementation of the movement of society is possible only through the mechanism of free competition. Continuing the classic-neoclassical tradition, Eucken absolutizes the role of competition in the economy, considering it the only positive force of social progress.

Another feature of the methodology of V. Eucken’s theory is the idea of ​​​​the interconnectedness of all economic phenomena and therefore the need for their systematic study. The central category of the entire Eucken system is the concept economic order. “The economic order is a set of forms in which specific management of the everyday economic process was carried out and is being carried out in a certain place and at a certain time,” noted Eucken. From this definition it is easy to deduce that economic order is nothing more than specific form economic management.

IN real story civilizations have existed and exist, a huge variety of different types of economic order. However, among them we can distinguish the main ideal types, which are the subject of economic theory Oyken.

Eucken identified two main ideal types of economic order - free or market economy and a centrally managed farm, or command economy. They differ from each other in the control mechanism. The first is managed in a decentralized manner through the spontaneous mechanism of market forces, and free competition and individual freedom of choice reign in it. The second is characterized by the presence of a single central authority management, which systematically, in the absence of a market, operates with all economic parameters, imposing its will on individuals. Naturally, from a neoclassical position, Eucken extols the first type in every possible way and criticizes the second.

Eucken's economic theory includes a whole series concepts, both traditional for the previous political economy (theories of value, money, income and a number of others), and original in the formulation of the question. Let us dwell on those theories that contained new aspects.

First of all, this is the theory of money. Although, from the point of view of understanding the essence and functions of money, Eucken did not go beyond the traditional quantitative theory, he and his students began to interpret the role of money in economics in a new way for the neoclassical school. Based on the achievements of the opposite Keynesian doctrine, neoliberals began to emphasize the special role of monetary levers in regulating the economy. The reason for cyclical fluctuations and, accordingly, crises is the extremely high sensitivity of prices to changes in the money supply in the economy. Prices, in turn, regulate all macroeconomic proportions, affecting aggregate supply and demand and thereby the volume of real production. The problem is exacerbated by the development of credit, which has become the main means of financing investments. A simple logical idea follows from this: in order to improve the economy, it is necessary (and sufficient) to stabilize the money supply.

In the second half of the 1940s. Money problems were indeed extremely acute in West Germany. After the war, there were actually three different monetary systems. Firstly, these are Reichsmarks, which have hopelessly depreciated and were actually accepted by weight. Secondly, American dollars, which came to the black market from soldiers of the occupation army, but at the same time were in insufficient quantities to fully service trade turnover. And finally, thirdly, barter exchange was widely used. This situation, of course, was disastrous for the normal functioning of the economy.

Under these conditions, a plan for stabilizing the national currency, called Erhard's plan named after a student of Euken L. Erhard, who was the Minister of Finance. In fact, the author of this plan was Colonel of the American occupation army J. Graham (who worked as a professor of economics before the war).

The hard currency plan can be summarized as follows.

• 1. Old money and deposits are canceled (all depositors, regardless of the size of their deposits, received the same meager payments).
• 2. New money is issued, the quantity of which must strictly correspond to the mass of goods in the country.
• 3. A minimum consumer basket is determined, which includes almost only essential goods. The cost of this basket is determined in new banknotes.
• 4. A specially created central agency buys and sells certificates for goods included in the consumer basket, in such a way that the cost of the entire basket remains unchanged. However, the price ratio within the basket may change.
• 5. This situation is ensured by an extremely simple method: when the price of the basket increases, the state withdraws part of the money from circulation, and when it decreases, it issues additional money supply.

The meaning of such a policy is quite transparent - money supply in the economy it should act as a kind of stabilizer of the entire system. As a result, several positive results are achieved immediately. On the one hand, the bulk of the population receives guaranteed consumption of basic necessities. Their prices are stable, but there is no shortage that occurs when prices are simply frozen. On the other hand, the “floating” of prices within the basket allows the market to fulfill its regulatory function. Thirdly, the total money supply is at a stable level (the bulk of the population consumes only a basket) and thus prevents financial leverage from destroying the economy. In the specific post-war conditions of Germany, the plan worked, and the country, having received stable money, was able to quickly begin to restore the economy.

The concept of wages, called the theory, brought great fame to V. Eucken. wage and price spirals. The meaning of this can be boiled down to the following: when prices rise, under no circumstances should wages be raised, as this will lead to the development of inflation and disastrous destabilization of the entire economic system.

To substantiate this idea, the following logical scheme was proposed. Wages, as payment for labor, are integral part production costs. Workers, seeking to improve their standard of living, are fighting for higher wages. Since the trade union, which is a kind of monopoly in the labor market, is on their side, this struggle, as a rule, turns out to be successful. Entrepreneurs raise wages, but as a result, production costs rise. And production costs, in turn, underlie the price of a product. Thus, an increase in wages inevitably leads to an increase in prices, so real wages do not increase, but only the money supply in the economy increases. The resulting inflation forces workers to again demand higher wages. This inevitably plunges society into a new round of inflationary spiral and leads to the destruction of the economy.

Eucken by no means denied the need to raise the living standards of the poorest social strata, but proposed to achieve this not by pumping money into the economy, but through a more equitable distribution of income in society. A similar goal can be achieved through taxes and the social security system. Can also play a certain role "participation system" when employees of an enterprise receive a certain number of shares in their company and thereby participate in making profits.

In general, Eucken’s theory of wages has been confirmed in the practice of most developed countries of the world and is therefore included in many later economic theories.

Perhaps the theory of social market economy, adopted by many European politicians, brought the greatest fame to V. Eucken.

According to this theory, in post-war Europe a fundamentally new, third type of economic order is gradually emerging, qualitatively different from both the free market economy and the administrative system. Eucken called this third type of economic order economic humanism, or social market economy.

The social market economy is based on the principle of three freedoms– freedom of the market, freedom of competition and freedom from monopoly. In this formulation, the basic concepts are rather vaguely defined and it is not entirely clear how these three components differ from each other. Ensuring the principle of three freedoms is the first main function of the state. For this purpose, an appropriate legislative framework, control over the functioning of which is also an attribute of state policy.

The second function of the state is to carry out active social policy aimed at creating a decent life for all people. Economic humanism must guarantee all members of society social protection– develop systems to combat unemployment, universal healthcare and education. Such problems must be solved through social partnership.

The third function of the state should be limited intervention in the economy. It seems that such a task comes into certain conflict with the principle of three freedoms, but more realistically reflects the reality of modern economic life than the traditional neoclassical denial of any state influence. The main goal of such intervention is to stabilize monetary circulation and, through this, the entire economy.

Eucken proposes two possible types of limited government regulation of the economy. The first one he called conformal interventions. Such an impact can occur in any macroeconomic situation.

Conformal interventions include the following measures.

• 1. Regulation of foreign exchange management by devaluation (lowering the exchange rate to other currencies) or revaluation (increasing the exchange rate) of the currency.
• 2. Establishment of customs protective duties.
• 3. Regulation of working hours.
• 4. Normalization of prices through the development of competition.
• 5. Redistribution of income through the tax system.

It is easy to see that all these measures are applied in almost all countries (although in different forms and scale) and do not restrict market freedom.

In the event of a crisis in the economy, Eucken assumed the use non-conforming interventions, which are emergency measures and are undesirable in a normal situation. These include:

• 1) forced introduction of an exchange rate (including in the form of currency corridors);
• 2) regulation of clearing offsets, which allows reducing the money supply;
• 3) stimulation or freezing of investments;
• 4) freezing or directive regulation of prices (the rate of price growth is set by government agencies);
• 5) wage freeze;
• 6) establishing a minimum wage;
• 7) payment of subsidies to the unemployed and the poor.

Recognizing the possibility of such strong enough

methods of influencing the market, Eucken and his students emphasized their undesirability and limited application in time.

The theory of the social market economy reflected the significant changes that took place in the economic and social life of the developed capitalist countries of the world in the post-war period, and became the theoretical and ideological basis for many center-left political movements. At the same time, it quite clearly exposed the crisis of traditional neoclassics, because it was forced to adopt a number of provisions of the competitive Keynesian theory.

• Quote By: Goleva L. West German neoliberalism. M., 1971. P. 56.

Walter Eucken(German Walter Eucken; January 17, 1891, Jena - March 20, 1950, London) - German economist, representative of the Freiburg school of neoliberalism. Publisher of the ORDO yearbook.

Biography

Son of Nobel Prize-winning philosopher Rudolf Christophe Euken. He studied economics, history and philosophy at the universities of Kiel, Jena and Bonn. In 1913 he defended doctoral dissertation at the University of Bonn. During the First World War he served as an officer on the Western and Eastern fronts.

In 1921 he successfully completed the habilitation procedure for his doctorate at the University of Berlin, where he studied for the next four years. teaching activities, in parallel from 1921 to 1924 he served as deputy commercial director of the Imperial Union of Textile Industry. He taught in Tübingen (from 1925) and Freiburg (1927-1950).

Since 1948 member of the scientific council Economic Administration Bisonia, then the German Federal Ministry of Economics.

The Walter Eucken Institute (Freiburg) is studying the creativity and development of the ideas of Walter Eucken.

Bibliography

• Oyken V. Fundamentals of national economy. - M.: Economics, 1996. - 351 p. - ISBN 5-282-01849-7 (Die Grundlagen der Nationalkonomie, 1940);
• Eyken V. Basic principles economic policy. - M.: Progress, 1995. - 496 p. - ISBN 5-01-004045-X (Grundstze der Wirtschaftspolitik, 1952).

• Böhm F., Eucken V, Grossman-Dert G. Our task (ordo-manifesto) // Social market economy: concept, practical experience and prospects for application in Russia, ed. R. M. Nureyeva. - M.: Publishing house of the State University-Higher School of Economics, 2007.
• Eyken V. Structural changes in the state and the crisis of capitalism // Theory of economic order. Freiburg School and German neoliberalism. Ed. V. P. Gutnik. - M.: Economics, 2002.

At one time, the economic views of Walter Eucken (1891-1950) were viewed primarily from a critical perspective. Commentators reproached him for reducing all types of economic forms to only two economic systems: a free market economy and a centrally managed economy. The provision about two “ideal types of economy” was interpreted as a scheme that simplifies economic reality.

Meanwhile, Eucken’s doctrine of two types of economy is not a scheme into which all existing economic systems are fitted, but rather a methodological principle, an analysis tool. The criterion is the difference in the methods of regulating economic activity (directly by its participants or centrally, “from above”) and in the decision makers.

The two types of economy are not two methods of production, but different methods of organization, differing in the methods of coordinating economic plans and decisions.

Eucken was an opponent of schemes and abstract categories. He did not want to get into disputes over “capitalism” and “socialism,” concepts that have ideological overtones. Eucken sought to turn political economy to the facts of everyday life, not to discuss “highly complex issues, leaving serious specific problems out of his sight” 11.

Change and diversity are the hallmarks of any economic reality. To get out of the chaos of “monstrous historical diversity,” Eucken suggests using the methods of scientific morphology, according to which “historical diversity was formed as a result of the mixing of relatively few pure forms” 12. To determine each of these pure forms, it is necessary “to get to those sources where all economic phenomena originate: to economic plans. At the same time, it turns out that their implementation depends on the forms in which they are implemented.

farming is carried out, and the study of economic plans makes it possible to accurately determine the forms.”

Economic activity, as the German economist explains, can be regulated by the plans of one planner or administrative apparatus. This is a form of centrally managed economy. Another form is a market economy, in which numerous individual economies (enterprises and households) independently develop plans and enter into economic relations with each other, and their activities are coordinated by the market. 13 They enter into relations with each other various forms in accordance with market forms (see Appendix 1).

Eucken compares morphology to the alphabet: letters are used to form words. The real economy is a mixture of different forms; The uniqueness of an economy lies not in its specific form, but in the way in which the combination of pure forms of economic activity is carried out and in the predominant role played by some of them.

The main problems put forward by Eucken are set out in two works: “Fundamentals of the National Economy” (1940) and “Basic Principles of Economic Policy” (1950). 7The first work sets out the main provisions of his theory, called the theory of economic order. The economic order exists alongside the legal and political orders. Economic order is the real forms in which the activities of firms, organizations, and individual participants take place.

The second work examines the “politics of order,” the policy of regulating the economic process. The broadest field of activity for economic policy is the “legal and social order”. The most important art of economic policy, its basic rule is “the preparation and design of general economic conditions in relation to the economy as a whole” 14. When making a decision, “one should select the dominant forms of order from a limited number of the latter” 15.

Eucken worked in an environment when the Nazi regime dominated in Germany. As an opponent, he pondered how to rebuild a highly centralized system of comprehensive regulation when the Nazi dictatorship was finally ended. Theoretical developments and conclusions of Eucken, along with the provisions and recommendations of other

Some German economists formed the basis for post-war reforms.

Eucken saw the main problem in curbing monopolies and eliminating the rigid system of state regulation. In his works, he criticizes the policy of centralized management and justifies the policy of the “middle path”, the economic policy of experimentation; examines in detail the politics of the “competitive order”, “the forces that establish order”. The final chapter is devoted to the problem of combining individual and general interest.

Eucken and other Freiburg School economists distinguish two spheres of economic policy: the policy of order and the policy of regulation. The first is the sphere of creating and improving the economic order and its organization; the second is the actual policy of influencing the process economic development and economic growth.

Most economic orders have historically emerged without any pre-determined plans. They generally corresponded to the requirements of economic progress, in contrast to the “established” orders, which were rather opposed to historical development 16.

The competitive order justified by Eucken is “derived” from historically established trends. In the Appendix to his book “Basic Principles of Economic Policy,” he writes: “We do not invent a competitive order, but find its elements in concrete reality. We do not force anyone to do anything, but rather contribute to the revelation of what, along with other forms, takes place in reality. We are trying to develop the unusually strong tendencies towards complete competition that we find in everyday life itself. In a limited number of forms of order, we select those that turn out to be acceptable” 17.

The significance of the theory of economic orders is that it helps to reveal the connections between economic forms, social structure and political power. Understanding this relationship allows us to more clearly understand the goals and possibilities of economic policy.

Political functionaries and reformers must clearly understand what kind of economic order they are creating and by what methods; what conditions and prerequisites are required for the successful implementation of economic processes. The theory of economic orders puts on the agenda the problem of forms and limits of state intervention in the economy.

As the author of the introductory article to Eucken’s work “Basic principles of the national economy” rightly notes, individual chapters of which were published in the Russian Economic Journal 18, the concept of a social market economy and ordoliberalism (“ordo” - system, order) is important not only as a direct tool of transformation, but and as a powerful means of shaping a new worldview focused on a free and organized market.

(1891-01-17 )

Studied at the University of Bonn. He taught in Tübingen and Freiburg.

Freiburg studies the creativity and development of Walter Eucken's ideas.

Major works

• "Fundamentals of National Economy" ( Die Grundlagen der Nationalokonomie, 1940);
• "Basic principles of economic policy" ( Grundsätze der Wirtschaftspolitik, 1952).

See also

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Excerpt characterizing Eucken, Walter

“Oh yes, terribly stupid...” said Pierre.
“So let me convey your regret, and I am sure that our opponents will agree to accept your apology,” said Nesvitsky (like other participants in the case and like everyone else in similar cases, not yet believing that it would come to an actual duel) . “You know, Count, it is much nobler to admit your mistake than to bring matters to an irreparable point.” There was no resentment on either side. Let me talk...
- No, what to talk about! - said Pierre, - all the same... So it’s ready? - he added. - Just tell me where to go and where to shoot? – he said, smiling unnaturally meekly. “He picked up the pistol and began asking about the method of release, since he had not yet held a pistol in his hands, which he did not want to admit. “Oh yes, that’s it, I know, I just forgot,” he said.
“No apologies, nothing decisive,” Dolokhov said to Denisov, who, for his part, also made an attempt at reconciliation, and also approached the appointed place.
The place for the duel was chosen 80 steps from the road where the sleigh remained, in a small clearing of a pine forest, covered with melted snow from standing last days thaws with snow. The opponents stood 40 paces from each other, at the edges of the clearing. The seconds, measuring their steps, laid traces, imprinted in the wet, deep snow, from the place where they stood to the sabers of Nesvitsky and Denisov, which meant a barrier and were stuck 10 steps from each other. The thaw and fog continued; for 40 steps nothing was visible. For about three minutes everything was ready, and yet they hesitated to start, everyone was silent.

Introduction

Main part

2. Relevance of Walter Eucken's work today

3. Theory and politics of order

4. Competitive order

5. What should be a “good” economic order?

6. Personal freedom and individualism

Conclusion

Bibliography
INTRODUCTION

In the course work devoted to the basic principles of Walter Eucken's economic policy, we tried to analyze the most, in our opinion, pressing issues of his economic policy, which are especially important for us now, at the stage of transition from a centrally regulated economy to a free market economy (more precise definition it is not possible to give). We certainly do not pretend to be a comprehensive analysis of the views and concepts of Walter Eucken, which still await their understanding and research.

The works of Walter Eucken, which served as sources for this work, are: “Basic principles of economic policy” and “Fundamentals national economy”, published in 1995 and 1996 respectively. There are practically no works in Russian devoted to the theoretical heritage, with the exception of a small article by V.P. Gutnik, who announced the publication of excerpts from the work “Main Problems of Economic Policy” in the “Russian Economic Journal” for 1993 (NN2, 4, 7, 8 , 11), as well as articles by V. Avtonomov and K. Gutnik in the preface to the Russian edition of the monograph “Fundamentals of National Economy”.

So, the issues that this course work is devoted to analyzing are V. Euken’s attitude to a centrally regulated economy and planning, as well as his attitude to the free market, all varieties of which were subjected to detailed analysis by Euken. An extremely important place in his work is occupied by the understanding of personal freedom and individual freedom in the modern world.

In our work, we also tried to isolate those forms and elements of the economic system that have analogies in our Russian reality.

1. Walter Eucken and the “Freiburg School”

Walter Eucken belongs to the ordoliberal “Freiburg school”, the main product of which is the theory of economic order. But this theory failed to conquer the world of economic science. Although Eucken and his associates have always been and are revered as the “spiritual fathers” of the social market economy, in reality, politicians in Germany considered this theory to be too academic, unfinished and generally not suitable for direct practical implementation. Eucken also did not remain in debt, sharply criticizing the inconsistency and numerous mistakes of the policies of the Adenauer-Erhard government.

Economists in the post-war period, even in Germany itself, not to mention other countries, were increasingly oriented toward the neoclassical direction. In the 60-70s, discussions focused on the problems of market regulation, fiscal stabilization, social policy, i.e. mainly on process regulation. They began to forget about regulation. It seemed that the ideas of Eucken and his colleagues F. Boehm, W. Repke and others now have only historical value. The thesis that Eucken is completely outdated has been strengthened throughout the last 30 years. And even now many are ready to sign up for it.

However, at the end of the 80s and especially at the beginning of the 90s, the work of the theorists of the “Freiburg School” surfaced from oblivion. Moreover, interest in them is growing not only in Germany, but also in other countries, including those where even experts had not heard of these names 10–15 years ago.

The renaissance of ordoliberalism was facilitated by certain formal circumstances: the 50th anniversary of the first publication of “Fundamentals of National Economy” in 1989, the 40th anniversary of the death and the 100th anniversary of the birth of V. Eucken, respectively, in 1990 and 1991. During this period, new editions of Eucken’s main works were published in Germany (including the 9th edition of “Fundamentals of National Economy,” which we will discuss in more detail below), and symposiums were held dedicated to the “Freiburg School” and its founders.

But many (if not most) German economists today consider the methodology of ordoliberalism to be outdated, not having the power of a cognitive tool that the “neoclassical synthesis” supposedly has. Ordoliberalism as a current of economic thought was pushed aside by neoclassicism and evolutionary liberalism of the Hayekian type even at the University of Freiburg and at the Walter Eucken Institute.

It is very important to dwell on some methodological and conceptual issues of the terminology used by Walter Eucken. Some questions will be clarified as we go. We will now focus on the most important ones, in our opinion.

The concept of “full competition”, which Eucken used, is often unjustifiably associated by economists with the neoclassical model of “perfect competition”. But the latter does not describe either the conditions of individual economic freedom or the conditions of unfreedom. This is just a mathematical construction, which a priori has nothing to do with the problems of freedom and power, since its prerequisites, in principle, cannot exist in reality (for example, complete transparency of the market, absolute homogeneity of products, etc.). The obligatory conditions of the real economy are absent here.

To identify the “interdependence of orders” and “to think in orders” - this was the task of the “Freiburg School”, founded by Walter Euken together with the lawyer Franz Boehm. They wanted to overcome the isolated thinking of economic sciences and carry out an interdisciplinary analysis of social reality. However, they were not the first. The now largely forgotten “old institutionalism” of J. Commons, T. Veblen and W. Mitchell derived from the fundamental criticism of neoclassical theory the need for a comprehensive social analysis. But a broader formulation of questions was associated in institutionalism with the loss of a general theory.

The main works of Walter Eucken are the lectures “Fundamentals of Political Economy” published in 1939, the monograph “Fundamentals of National Economy” published in 1940, as well as the main work of his life, published after his death in 1950, “Basic Principles economic policy". He also wrote numerous articles in scientific journals on history and economics. It is not without interest to know that Eucken was a historian by training, and this was reflected in his works by the presence of historical excursions, as well as a deep understanding of the economic process as a complex historical evolutionary process.

2. Relevance of Walter Eucken's work today

Today, after the collapse of the centrally controlled economy, countries in Eastern Europe and China are showing great interest in the theoretical legacy of Walter Eucken. In Western European countries, he is considered the spiritual father of the “market economy.” All West German governments since 1945 have constantly appealed to Walter Eucken as an “authoritative champion of the market economy.”

But everything that Walter Euken said throughout his life is not only and not so much about developing a successful market... economic policy that would be adapted to the conditions prevailing in Western European countries and in Germany. Since he dealt with specific political economic problems and worked all his life in this direction, his real creative contribution was much more fundamental, and for this reason this contribution has not yet lost its relevance for the countries of Eastern Europe.

On the basis of his theory of orders, he developed a systematics and methodology that have become classic, which make it possible to study all economic orders, regardless of those historical conditions, in which they take place.

Having developed his policy of order, Eucken put forward the concept of economic constitution. Thus, he formulated the principles of economic policy, which are broadly and actively oriented towards the creation of a “competitive order”. The establishment of a rational system of economic regulation should prevent impoverishment and ensure freedom.

The theory of orders, like the concept of the politics of order, arose through a process of directed work that lasted decades and within the framework of numerous debates and polemics. Created for the most part during the period of the dominance of National Socialism, they are a response to the disasters of the 20th century.

The work “Basic principles of economic policy” is the main work of Walter Eucken’s life. While working on his Fundamental Principles of Economic Policy, he lived in a country that was threatened with complete impoverishment. The centrally controlled economy fell into disrepair. The extent of the black market and subsistence farming expanded. And although the dictatorship was a thing of the past, economic freedom still remained negligible. Often it consisted only of the possibility of choosing between hunger and corruption. During this period, Walter Eucken and his colleagues collected materials and digital information regarding the state of health and nutrition of the population from doctors, hospitals and various institutions in order to motivate the Allied military administration to act quickly. True, at the same time, Eucken warned that one cannot believe that only money coming to Germany from the United States under the Marshall Plan can help. The reasons for the country's plight lay very deep.

The country was one of poverty, with little economic freedom for most people and much economic power in the hands of a few. The basis for this situation was laid in the then structure of society, which was the remnants of a dictatorship.

That system in Germany reminds us of our own situation today.

3. Theory and politics of order

As the main goal of his activity, Eucken saw the understanding and finding of those suitable economic orders where people can exist not as some dumb and weak-willed creatures, but where they can realize their capabilities for the benefit of society in conditions of complete internal freedom.

In this work, Eucken formulates and provides a solution to two main problems of the national economy: how management is carried out in a complex system of economic relationships based on the division of labor and at the same time ensuring the normal existence of each individual; how a complex economic system is organized, what its order is and how it is established.

Walter Eucken proceeded from the position of the individual in the economic arena. “How is the everyday economic process regulated?” He established that there are two main forms of economic regulation, which are characterized by opposing conditions of economic power. On one end of the spectrum of possible economic orders is the centrally controlled economy. The individual is maximally deprived of civil rights and has no influence. The central administration has the greatest possible power and at the same time creates an economic plan for those who are economically dependent on it. The direct opposite of a centrally controlled economy is complete competition, in which no one has the power to economically regulate the activities of another, but everyone constantly coordinates production problems through the price mechanism. Here everyone develops their own economic plan; non-hierarchical plans are connected with each other through coordination.

The system of greatest concentration of power is not only as unfree as possible, but also as efficient as possible. A system with the greatest possible freedom and minimum economic power is, from an economic point of view, the most efficient.

Between the system of full competition, in which all individuals regulate the economic process through prices, and the system of regulation of the economy by central administrative bodies, there is another type of regulation of the economy: regulation by power groups. This third “type of order” has its own economic patterns, which are determined by the power and distribution of power realized in the markets. Using a simple criterion, Walter Eucken shows that in fully competitive markets and markets in which there is a concentration of power, we are talking about two different types of economic regulation. In the first case, all market agents have a price as a fixed value in their plans. An individual enterprise, although it has very little influence on pricing, cannot pursue a market strategy. On the contrary, in markets where there is a concentration of power, there are several, or even many areas of market relations that, to a greater or lesser extent, treat price as a variable. Thus, they are able to pursue price policies, and thereby interfere with the plans of other market participants, contrary to the interests of the latter. If pricing policy in a market where there is a concentration of power is nevertheless set within certain limits, then in a centrally controlled economy it is not limited in any way. A private economy, in which there is a concentration of power, as an independent type of order, occupies an intermediate position between a centrally controlled economy and a market economy of full competition.

Euken's analysis of centrally controlled economies is a standard educational materials in Western European economics. True, another decisive, but not convenient, conclusion from Eucken’s theory of order has been ignored: the market systems existing in rich industrial countries are by no means, as is constantly said, a market economy of competition of results, and therefore are also not perfect the opposite of a centrally controlled economy. They are increasingly determined by a third type of order: the regulation of the economy by powerful economic groups. “It is in the interests of powerful economic groups to blur the distinction between competition and monopoly. This increases the seriousness of the effectiveness of monopolies. Science should all the more avoid blurring differences.” So, establishing order is the task of the state’s economic policy.

4. Competitive order

Thus, the state organizes the market, pursuing a policy of order, and it is this area that should be a priority for state economic policy, while the policy of regulating processes should be secondary and of an auxiliary nature, since economic processes are directly regulated by independent market subjects. The separation of these two spheres of economic policy was of fundamental importance for the formation of a regulatory system in the social market economy of post-war Germany. In Soviet economic literature this fact was clearly underestimated and not entirely correctly interpreted. The sphere of order organization, where specific indicators were not established, but only the “rules of the game” were determined, was considered not worthy of attention; The most important thing is that the question of the relationship between “economic understanding” and “economic processes” was not even raised.

The policy of a “free economy” is considered a fundamentally alternative to a centrally controlled economy throughout the world. It includes a variety of economic policies of the market economy. Their common basic principle is that economic power state should be minimized as much as possible. The individual should be given the opportunity to take control of his own economic interests. An individual, as a consumer, knows best what he needs. An individual as a producer, if he knows through the price mechanism what is being consumed, will optimally use his labor power in his own interests for the sake of the interests of others.

This idea has its roots in classical political economy and liberalism. It assumes that the price mechanism as a “natural order” is formed spontaneously, on its own. If the individual’s egoism were given freedom – subject to the norms of criminal and civil law – then the problem of limitation itself would be solved. One should only note the state's compulsory regulation and at the same time the legalization of private property and the freedom to enter into contracts.

In fact, the implementation of the “free economy” policy marked the beginning of the revolutionary development of the industrialization process. But ultimately, as Eucken shows in “Basic Principles of Economic Policy,” it leads to lack of freedom and failure of the economic regulation mechanism.

Already at its initial stage, “strict property law, contract law, a set of legal rules relating to partnerships, companies or associations, and mortgage law were created.” However, past and present market-oriented states have made only one thing possible: market freedom can be used to eliminate market freedom. At the same time, freedom was provided through unfair competition - through the creation of cartels, mergers in the name of establishing market dominance, blockades of markets, refusal to supply, dumping - to violate fair competition and thereby contribute to the formation of economic power.

In the history of industrial states with market economies, Eucken, in addition to what has been said, analyzed the second step towards the concentration of power: power in the market left to itself can become political power. Industrial unions and banks are able to force governments to change laws, provide subsidies, and isolate markets from each other. The success of economic activity is determined not so much by the results of work on the market, but by the ability directly on the market and with the help of the state as an instrument to eliminate competition in results.

Thus, the policy of non-intervention provokes the implementation of a policy of interventionism. The state continues to expand its intervention in the economic process, as a result of which its dependence on powerful economic groups increases.

What was intended to be a clear separation of state and economy systematically results in the intertwining of private economic power with state power. The economic policy of a free economy, regardless of its greater or lesser orientation towards interventionism, leads to a certain type of economic order: to the regulation of the economy by power groups.

Thus, Eucken’s conclusion, arising from the theory of interdependence of orders, is as follows: the dominant type of economic order in rich industrialized countries is not effective competition, but increasingly the regulation of the economy by power groups. However, market economies with the dominance of power groups, which we find in Western Europe, Japan and the USA, are also incompatible with democracy and the rule of law in the long term. Economic power in modern democracies represents legitimate but freedom-destroying political power. It can transform a legal democratic state into a paralyzed democracy and ultimately into an authoritarian state or into a regime of group anarchy. The blocking of reforms in all major industrialized countries is a result of the rise of power. At the same time, the concentration of economic power is not an economic law, but becomes possible only under certain political conditions. Knowledge of the conditions conducive to the strengthening of power allows political decisions to be made regarding the establishment of a competitive order.

5. What should a “good” economic order be like?

Walter Eucken argued that after the collapse of Nazism, disaster could only be avoided through a radical turn of finding the lost elements at a new level and shaping them into the desired order. What are the decisive elements in this? Of course, Eucken believes, this is, first of all, free competition. He sets out this concept in great detail in book five of “Basic Principles of Economic Policy.” The author believes that it is free competition that ensures the efficiency of the market economic system and guarantees personal rights and freedoms of a person, and therefore is the greatest invention of mankind. Competition is realized only as freedom of choice for economic entities in conditions of multivariate development. At the same time, the degree of competition can be different, depending on the form of the market - from complete or perfect competition to a monopoly market. The actual regulatory instrument in a competitive environment is prices - a kind of device that measures the level of limitation (scarcity) of resources and products, and signals this to all participants in the market process. The absence of such a tool in a centrally managed economy is regarded as its main drawback.

In the fifth book of his main work, Eucken sketched the building of a competitive order. “Organizational principles” range from monetary policy and private property issues to open market issues. However, Eucken simultaneously saw that even when these market conditions of “competition of results” were created, unacceptable social and environmental consequences could arise. For this reason, he developed “regulatory principles” that were supposed to protect society from negative consequences. These principles are regulated, according to the author, by state policy, as well as by the entire legal system of a civilized society.

This comprehensive concept stands in contrast to the punctual prescriptions that economic policymakers currently follow and which economists widely offer to countries in Eastern Europe and the South. It is often said that freedom of contract and private property make economic freedom and prosperity possible for all.

“Thinking in terms of order” shows that this premise is false, since it alone is not enough. Private property in competitive conditions, or private property in monopolized markets, or even private property within a private capitalist centrally controlled economy (say, during the period of National Socialism in Germany) are to a certain extent so different that the use of the same legal concept “private property” in all three orders can be practically misleading. Eiken gives an example, considering the situation in the village, which is extremely relevant for Russia now. What does the privatization of former state estates give to an individual peasant if, ultimately, there is no freedom in the market? Millions of farmers and small industrialists in poor countries, for example, can sell their products at prices below the cost of production because competition in results is prevented by subsidized products coming from rich industrial countries, the trade monopoly of their own country, or the private trade monopolies that dominate the world markets. markets. This is nothing more than partial expropriation, for which there is no need for a qualified legal act. For most people, private property and freedom to contract exist only formally, until they are realized under conditions of full competition.
The situation described above reminds us of the current conditions in the agricultural markets in our country. Thus, the question arises: Is competition in our country today a blessing or a direct path to impoverishment for the direct producer who is already constrained by the lack of an appropriate legal system? According to Eucken, it turns out that such competition, not protected by the state and law, is the path to the collapse of the country’s economy.

Alienation and exploitation by “capitalism” are thus not the consequence of too much competition of results, as Marxists believed, but, among other things, the result of the fact that its volumes are too insignificant. Competition of results can make its way only when the state and society prevent all other types of competition. If criminal law and the culture of human relations are supposed to preclude competition on the basis of human superiority, then the competitive order further limits the competition for economic power, as well as the competition for the greatest influence on government.

Often, economic groups, the author continues, try to avoid the undesirable consequences of fair competition by portraying it as a phenomenon far from reality. At the same time, the concept of complete competition is often confused with the concept of perfect competition. The roots of the concept of perfect competition lie in the theory of neoclassical economics. IN high degree it represents an abstract model that cannot be found in real life, says Eucken.

On the contrary, complete competition actually exists. The presence of such in a wide variety of economies of the past and present day in many or not so many markets is proven using a simple criterion proposed by Eucken (no one can carry out a market strategy). Through economic constitution, full competition can be transformed into a form of market, defined by the economy as a whole.

So Eucken opposed planning. Although he emphasized its capabilities, and even the need for individual enterprises, where the entire process can be covered. At the same level national economy, Eucken argued, planning is fundamentally impossible. He also clearly showed that order does not interfere with economic freedom, but, on the contrary, ensures its implementation, that competition is not preserved or reproduced automatically, but is replaced by a monopoly if special measures are not taken to protect competition. The latter is generally realized under certain conditions, which also need to be created and maintained.

6. Personal freedom and individualism

Economic relations of all people should, according to Eucken, become the subject of analysis of economic science, regardless of their significance expressed in global economic values. The methodological individualism of university economics is insufficient, since it is always applied “functionally”, i.e. only in relation to super-individual phenomena, for example, the economic growth of a group of the richest countries, leaving without attention a significant part of world economic reality.

Special significance Eucken focused in his works on issues of personal freedom, individualism in conditions of capitalist relations. He devoted chapters of the third book of the work “Basic Principles of Economic Policy” to this problem, and also dwelled on this problem in detail in the monograph “Fundamentals of National Policy” already mentioned above. Let us see how Eucken understood individualism. He believed that functional individualism was rooted in the tradition of utilitarianism, on which orthodox economics was largely based. The consistent individualism of the Foundations, on the contrary, stems from the tradition of free enlightenment as a spiritual, artistic and political movement. This is individualism, which was represented in Germany by, for example, Lessing and Kant, as well as Goethe and Schiller. It means that each person should be considered as a value in itself. The weakness of this position has always been that it has been thought and applied in the spiritual, but not in the material sphere, theoretically, but not practically. Eucken belonged to the few who made this individualism methodologically and normatively applicable to the everyday material problems of people. In a sense, he stood Kant upside down.

Economic reality is characterized primarily by the extent to which each individual is free to implement his own economic plans. This is the central premise of Aiken's theory of economic order. Power in the market is determined by the ability of one of its participants to limit the economic freedom of other participants. Everyone has the same measure of economic freedom, but everyone is equally powerless in the market because they are forced to accept the market price. All economic orders can be characterized through various forms of distribution of power and freedom.

Thus, the theory of economic order made important step to develop the method social sciences. Rationalists, such as the neoclassicalists, ignored the existence of social power in order to obtain accurate conclusions. Anti-rationalists, like Nietzsche, on the contrary, argued that everything that exists is power. Eucken spoke out in “Fundamentals” against both statements, emphasizing: “Economic power is not something irrational, mystical; economic power is something rationally knowable. The same is true for the opposite of power – economic dependence and lack of freedom.”

However, most economists, including representatives of the “new political economy”, turned out to be unable to think in terms of order. The main reason for this is that liberal economics- contrary to what she thinks about herself - she focuses too little on the freedom of the individual. Liberal economists have traditionally defined freedom as the absence of coercion. This means that a danger to freedom can only arise when one subject is able to give orders to another. Therefore, for liberal economists, state power itself poses a threat to freedom. The danger to freedom coming from large enterprises, like the whole problem of market power, is not considered at the methodological level at all. Even if the enterprises that dominate the market essentially block the way for others to enter the market, the freedom of the latter, according to Hayek, is not threatened by anything: after all, no one gives them direct instructions.

The concept of freedom as conceived by the “Chicago School” assumes that everything that happens in the absence of coercion is economically rational. It turns out that the most unreasonable way of allocating resources by an individual subject can be interpreted as “rational” or “effective” from a general economic point of view.

Institutionalism applies the methods of economic sciences to the study of all social processes. There is a danger, however, that this narrowed concept of freedom will extend to the analysis of all spheres of society and will impede the rational study of problems. One of the most prominent representatives of the theory of “institutional choice”, Nobel laureate J. Buchanan, criticizes primitive economism. But he, in his book “The Boundaries of Freedom,” states that an agreement on the formation of a slave state can be rational for all its participants, i.e. and for slaves, if the slaves “voluntarily” surrender to the power of their masters.

The theory of economic order considers rational only those market results that are a consequence of the activities of equally free individuals. The more the market is influenced by power forces, the more irrational (ineffective) its results as a whole (i.e. for all individuals).

For Euken the maximum economic efficiency achieved when all individuals have maximum economic freedom. Since each individual knows best what he needs, a necessary condition of economic rationality is that economic growth occurs as a result of the coordinated decisions of free individuals. Free decisions associated with choosing from alternative possibilities are realized only when two conditions are met. Firstly, no enterprise should have market power, i.e. No one should use pricing policies to distort the decisions of others. Secondly, no enterprise, by virtue of its size, should exercise political power. In other words, none of the market participants has such power that could change the political and legal framework conditions and thereby violate the rules of the game characteristic of equal market freedom.

Thus, full competition, i.e. the same market freedom of all consumers and producers is, according to Eucken, not an unreal model, but a form of economic management found in individual markets. Under appropriate political conditions, the principle of equality of market freedom can dominate on the scale of the world economy.

As a result, interdisciplinary analysis of problems remained spotty and random. The merit of the theory of economic order is that it was able to integrate the diversity of practical problems into general theory. Her research program consists of a rational analysis of individual freedom and power in various forms of activity (economic, political) and under different framework conditions (institutional, cultural, economic).

About 30 years ago, an attempt to raise issues of individual freedom in economics more broadly was made by representatives of neoclassical theory. Various research directions such as “new organizational economy” or “constitutional economy” have emerged. “New institutionalism,” in contrast to the “old” and like the “theory of economic order,” tries to build a general theory.

However, if the theory of economic order arose from an interdisciplinary consideration of problems, then some influential economists, including many “new institutionalists,” are striving to make a leap forward. Trying to radically expand the scope of economic science to all spheres of human life, they do not solve the problem of a narrow and alien methodology, but generalize it. Nobel Prize winner G. S. Becker argues, for example, that economics, with its concept of “homo oeconomicus” as the individual acting rationally and for his own benefit, has a universal method for explaining human actions, be it love, suicide, art or politics.

CONCLUSION

As a result of our research, in addition to the intermediate conclusions that are placed in the text of our course work, came to the following conclusion.

Criticizing planning, as well as methods of intervention in economic processes, Walter Eucken also opposed the free market of the 19th century model, which in the conditions of the 20th century could become destructive to the competitive order. But Eucken also denied the possibility of a “mixed” economy, where both elements of competition and elements of centralized regulation of economic processes would operate.

It should be emphasized that Eucken denied the possibility of combining competition with centralization, but not with planning, which does not necessarily have to be carried out from the center.

Walter Eucken was deeply convinced that freedom and human dignity would be ensured only by an economy based on competition, and that the success of the state's economic policy was possible only if all the principles he put forward were applied in a comprehensive manner.

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