Access to this full-text is provided by Duncker & Humblot GmbH.
Content available from Journal of Contextual Economics – Schmollers Jahrbuch
This content is subject to copyright. Terms and conditions apply.
The Colloque Walter Lippmann:
How to Rebuild the Foundations of Liberalism?
By Arnaud Diemer*
Abstract
While the re-foundation of liberalism is generally attributed to the Colloque Walter Lipp-
mann, it should be recalled that the supporters of this renewed liberalism intended to stand
together in the face of the advance of planism, the problem of industrial concentration, and the
rise of the limited liability company. This paper focuses on the groups known today under the
captions of French neoliberalism and German ordoliberalism who, at the Colloque and in the
following decades, sought to bring together ideas and people with the objective of defining the
foundations of a liberal society and state interventions compatible with the market.
JEL Codes: A11, B20, B31, D4, H11
1. Introduction
It is customary to recall that the Colloque Walter Lippmann (CWL) (Reinhoudt and
Audier 2018; Audier 2012; Denord 2016, 2007), held in Paris between August 26–
30, 1938, was an important moment in the renewal of liberalism. The organization of
the CWL was suggested by Louis Rougier after the success of Lippmann’s book The
Good Society, and its French translation (La Cité libre) published by Librairie de
Médicis. The main ideas of this book overlapped with those formulated at the same
time by other authors whose works were also published (or even translated) by Li-
brairie de Médicis. These include books from Ludwig von Mises (Socialism),Louis
Rougier (Mystiques économiques), Bertrand Lavergne (La Crise et ses remèdes), and
Lionel Robbins (Economic Planning and International Order).1
According to Louis Rougier, Lippmann’s book delivers a triple message. First, it
underlines the common belief that socialism and Nazism proposed a more just and
prosperous society, in which the altruistic satisfaction of the collective needs of the
* Centre d’Études et de Recherches sur le Développement International, Université Cler-
mont Auvergne, 26 avenue Léon Blum, 63000 Clermont-Ferrand, France. The author can be
reached at arnaud.diemer@uca.fr.
1All translations from French are, unless noted otherwise, conducted by the author.
Journal of Contextual Economics 139 (2019), 225–242
Duncker & Humblot, Berlin
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
masses would replace the pursuit of individual profit. The market economy, based on
individual ownership and the price mechanism, would thus be replaced by a planned
economy, based on a partial or total nationalization of the means of production and
enacted through the decision-making of a bureaucratic body. Second, it shows that the
liberal regime is not the result of a spontaneous natural order as declared by the
classical authors of the 18th and 19th centuries. It is rather the result of a legal order,
which itself suggests the existence of legal interventionism by the state. Thus, eco-
nomic life is governed by a legal framework that sets out the property regime, con-
tracts, patents, company status, currency, etc. Third, it contributes to the reintegration
of economic problems into a broader political, sociological, and psychological context
(Röpke 1942). Those who supported the renewal of liberalism were well aware that
pure economics is based on simplified assumptions that are out of touch with reality. If
the homo oeconomicus acts in a purely rational way and in his own best interests, it is
necessary to find “the man of flesh, of passion, and of narrow mind who suffers from a
herd instinct, follows mystical beliefs and is never able to calculate the implications of
his actions”(Rougier in Reinhoudt and Audier 2018, 100).
This intellectual renaissance of liberalism finds two strong defenders in French
neoliberalism (Jacques Rueff, Louis Rougier, etc.) and German ordoliberalism
(Wilhelm Röpke, Walter Eucken, Alexander Rüstow, etc.). A minority of intellectuals
intended to defend the idea of a liberal order, considered in all its forms (economic,
political, social, moral, etc.), and thus to rebuild the foundations of a new liberalism.
This renewal was mainly based on the questioning of socialism and planism, but also
on the condemnation of 19th century liberalism, which they suspected had compro-
mised liberal principles and ideals:
I am of the opinion that we will not accomplish anything if we let ourselves think, and if we
give the impression, that our goal is only to reaffirm and to resuscitate the formulas of the
nineteenth-century liberalism. It is clear, to me at least, that freedom would not have been
annihilated in half of the civilized world, so seriously compromised in the other half, if the old
liberalism had not possessed critical defects. This old liberalism, let us not forget, had been
embraced by the classes in power of all great nations of Western civilization”(Lippmann in
Reinhoudt and Audier 2018, 103).
Lippmann’s indictment is uncompromising, as it is both a question of fighting the
thesis of laissez-faire (associated with Cobden and Spencer) for him as well as
condemning industrial concentration, with the latter having become commonplace in
modern capitalism and whose origin he linked to the history of large companies in
France and Germany, and in particular to the creation of the limited liability company
at the end of the 19th century.
In this article, we propose to return to the three debates that led to the CWL.
Specifically, (1) the delimitation of state intervention in a market economy; (2) the
condemnation of laissez-faire and industrial concentration; and (3) the emergence of a
capitalism dominated by special interests (especially those of large groups). These
three debates reflect the will of the elites to renew the foundations of liberalism, as
Arnaud Diemer226
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
liberalism’s proponents had experienced a real trauma with the economic crisis post-
1929. The lack of unity in the ranks of the liberals attending the conference makes it
possible to understand the trajectories of French neoliberalism (institutionalization of
the State) and German ordoliberalism (ethical and moral re-foundation of liberalism).
Thus, as early as 1938 the idea of a third way (between central planning and laissez-
faire) emerged explicitly, which would be embodied in the 1950s and 1960s by
competitive planning in France and the Social Market Economy in Germany
(Commun 2003; 2009; 2016). This third way is still relevant today, particularly in the
context of the crisis post-2008 and the new criticisms of the liberal system (e. g. the
rejection of financial globalization).
2. What Are the Limits of State Interventionism?
Walter Lippmann’s book was the origin of the CWL, and the basis on which
proposals for the renovation of liberalism were grounded: “The idea of the Collo-
quium that gathers us today arose, among the friends of Walter Lippmann, from a
common sentiment of the extreme importance, the decisive importance, of his book
The Good Society”(Rougier in Reinhoudt and Audier 2018, 96). This agenda of
liberalism was first proposed by Lippmann in his book The Good Society (1938, 204 –
238), then put on the agenda of the CWL, and finally included in the resolutions
related to the creation of the International Center of Studies for the Renovation of
Liberalism. These resolutions consist of six points:
1. Economic liberalism recognizes as a fundamental premise that only the price
mechanism operating on free markets makes it possible to obtain an organization of
production likely to make the best use of the means of production and to lead to the
maximum satisfaction of human desires.
2. The equilibrium positions that are established in markets are affected, and can be
determined, in a decisive way by laws on property, contracts, groups, associations and
collective legal persons, patents, bankruptcy, currency, banks, and the tax system. As
these laws are the creation of the state, it is the responsibility of the state to determine
the legal regime that provides the framework for the free development of economic
activities.
3. Political liberalism holds as an essential premise that the legal regime must be
decided by virtue of a pre-established procedure involving the elaboration of the law at
the heart of the democratic debate. Solutions applied to particular cases must result
from general standards, which are themselves established in advance.
4. The determination of the legal regime constitutes the liberal method of social
control. The objective of the legal regime is to ensure the maximum utility of pro-
duction under the conditions that may be determined by other social purposes. These
How to Rebuild the Foundations of Liberalism? 227
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
purposes must be chosen by democratic procedure, and if they are not of maximum
use, the liberal system requires that the choice of other purposes be taken consciously.
5. The organization of production in accordance with liberal principles does not
exclude the possibility of the allocation of part of the national income for collective
purposes. A liberal state can and must collect part of its national income through
taxation and use it to finance national defense, social insurance, social services, ed-
ucation, scientific research, etc.
6. Although liberalism has as its fundamental premise the regularization of pro-
duction through the mechanism of market prices, the regime recognizes: (a) that
market prices are affected by the property and contract regime; (b) that maximum
utility is a social good, but is not necessarily the only one that must be sought; and (c)
that even when production is governed by the price mechanism, the sacrifices in-
volved in the operation of the system can be charged to the community. In this case, the
transfer must be made using transparent methods, and the sacrifice requested from the
community must be expressly and conscientiously made. The intervention must
address the causes of the situation to be corrected and not give the state the means to
modify individual situations arbitrarily.
All CWL participants approved this agenda. Almost everybody strongly opposed
both the doctrine of centralized planism (whether associated with Socialism or
Nazism) and the Manchesterian doctrine of laissez-faire, two doctrines which place
the delimitation of state interventions at the heart of the debate. Indeed, the question of
the possibilities and limits of interventionism appeared at every session of the CWL. It
was even discussed at the closing session of the CWL. Louis Rougier integrates this
question into the liberalism agenda by prioritizing cases:
(i) Forms of public intervention compatible with the price mechanism. Jacques
Rueff talks about the delimitation of eligible interventions and considers that a regime
based on authoritarian dirigisme is not likely to last.
(ii) Does the war economy exclude the liberal economy? Does total war involve the
totalitarian state? According to Rueff, these two questions can be rephrased as follows:
“In the preparation of war, is the directed regime better than the liberal regime? Are
totalitarian methods more effective than liberal methods”(Session “Liberalism and
the War Economy,”Reinhoudt and Audier 2018, 129).
(iii) The conditions that a liberal state must meet. What structural reforms are
needed in existing democracies to transform them into truly liberal states? Rüstow
points out that the market economy is based on precise institutional conditions, created
voluntarily by men. As a result, “it can function without friction and effectively only if
a strong and independent State ensures the precise observance of these conditions”
(Session “Psychological and Sociological Causes, Political and Ideological Causes of
the Decline of Liberalism,”Reinhoudt and Audier 2018, 160). It would be this
fundamental concept, as well as its consequences, that would be at the root of the
degeneration of the economy.
Arnaud Diemer228
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
(iv) The relationship of economic policy of liberal states towards each other. The
establishment of a League of Nations based on a liberal economy model.
(v) The problems of coexistence of liberal and totalitarian economies.
(vi) The problems of the transition from a world dominated by war to a world
devoted to peace.
(vii) The question of liberal education of elites and the masses.
The delimitation of the interventions of the state, and more broadly of a liberal
state, requires respect for a legal order which permits the coexistence of the freedoms
of all individuals in a society. As a result, the renewal of liberalism required the
condemnation of the dogma of laissez-faire, which had been advocated for and
promulgated by Manchesterism, and a thorough analysis of the causes of its decline
(i.e. principally a tendency towards industrial concentration).
3. The Condemnation of Laissez-Faire
From 1840s to 1880s, the United Kingdom experienced an irresistible rise of
liberals (Dicey 1905, Bariot 2016). The successive deaths of David Ricardo (1823),
Jeremy Bentham (1832), and James Mill (1836) did not leave an intellectual void.
New faces, more energetic, and more politically invested, embodied an uncomplicated
liberalism. The Manchester School, represented by Richard Cobden, William Johnson
Fox, John Bright, Thomas Perronet Thompson, and Harriet Martineau (Logan 2004),
differed from its Smithian and Ricardian precursors by its strong taste for verbal
jousting, sacred speech, and persuasion techniques (Barnes 1930; Grampp 1960).
Pacifists and anti-colonialists, these liberals were fierce activists of free markets and
free trade (Laurent 2016). Their parliamentary battles, which were reinforced by
public meetings, led to the repeal of the Corn Laws and the liberalization of the English
wheat market. According to William Johnson Fox, Richard Cobden’s right-hand man,
in a speech to the British Parliament in 1845, the free trade movement had passed
through at least two stages.
First, the ideas of Adam Smith and his disciples outlined the plan for an entire
policy, without, however, providing the means to achieve it. These philosophers’
talents were used to make a science with what was until then a chaos of isolated facts.
This was the work of the scientists, but in doing so they failed to give the country
freedom of trade because legislators are not chosen for their scholarship in the science
of wealth (Fox cited in Taquey 1939, 121).
Second, the Anti-Corn Law League’s supporters turned a science into politics
(Galpin 1931). Free trade was no longer to appear only desirable in theory, but in-
dispensable in practice, not only in the general interest of all peoples, but adapted to
the particular needs of the British nation (ibid.). Speeches in Parliament and public
meetings replaced doctrinal statements, blew a wind of liberal reforms (Huskisson’s
How to Rebuild the Foundations of Liberalism? 229
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
customs reform, Parnell’s financial reform, etc.), and popularized the principles of
trade:
Let us observe here that it is surprising that little progress has been made in the study of
science of which Adam Smith was the great visionary more than half a century ago. We regret
that no company has been created to disseminate knowledge of the true principles of
commerce […] We do not have a society of traders, united together for the common purpose
of enlightening the world on an issue as poorly understood and slandered as free trade
(Cobden 1835, 30).
Frédéric Bastiat, admirer of Cobden and author of the book Cobden and the League
(1845), does not hesitate to attribute this success (Diemer 2014), not to the power of
doctrine but to the art of agitation:
I now have in mind the constitutional tactics to arrive at a solution to a major national issue, in
other words the art of agitation. We are still new to this kind of strategy. I am not afraid to
offend national self-esteem by saying that a long experience has given the English the
knowledge, which we lack, of the means by which a principle can be triumphed over, not by a
one-day scuffle, but by a slow, patient, persistent struggle; by in-depth discussion, by the
education of public opinion (Bastiat 1845, 74).
A feeling shared by Jacques Rueff, almost a century later: “for a thought to become
a policy, it must be shared by a large number of people. For this, a true apostle is
essential. Cobden has developed a technique of economic unrest. Tomorrow, as
yesterday, if it is applied by a few convinced and determined men, it will be effective”
(Rueff 1939, 11).
It should be noted that this economic turmoil is not limited to simple speeches, the
arguments mobilized by the speakers are both general (aimed at any audience), and
specific (aimed at the classes who live off industry), as well as moral and economic.
Several fundamental principles of free trade emerged (Taquey 1939, 126–128): (1)
Protection does not protect anyone. In Britain, farmers are starving to death behind
customs barriers. (2) The high cost of living makes foreign competition particularly
attractive. (3) It is exporters who support the state. Public debt is paid to a large extent
by industry, in particular through import duties on raw materials. (4) Free trade is good
for the consumer. The freedom to buy abroad benefits the consumer above all, i.e.
mass society. (5) Free trade is the natural consequence of the right of ownership and
individual freedom. (6) Free trade leads to peace. The multiplication of trade ex-
changes as the consequence of England’s specialization in industry offers nations a
significant guarantee of peace. (7) A growing population without the development of
wealth is poverty for all. (8) Products and commodities are exchanged for products
and commodities. (9) Progress regulates trade. Freedom allows for the organization
and continuity of international exchange. (10) Protection is immobility, and im-
mobility is death. (11) When the vital emergency disappears, the initiative fades away.
(12) In a liberal regime, one job lost often coincides with ten created jobs. (13) While
an inflow of foreign goods seems good for the consumer, it is above all a utopia.
(14) Goods and services are the only entities which constitute wealth, not cash. This
Arnaud Diemer230
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
refutes the balance of trade theory. These principles form the main framework of the
Free Trade Agreement signed between France and the United Kingdom, after close
cooperation between Richard Cobden and the French liberal Michel Chevalier.
All participants of the CWL among the later supporters of French neoliberalism
and German ordoliberalism condemned laissez-faire. In his book, Walter Lippmann
did not hesitate to associate the debacle of liberalism with a mistake committed by
liberals, namely their self-proclaimed faith in laissez-faire and classical economics.
The post-1929 depression should have reminded us that real markets on which the
economy is based are far from ideal: “Not all buyers and sellers of goods and services
are equally aware of the actual state of the market, and are not equally capable of
dealing freely and knowingly”(Lippmann 1938, 220) and “[u]topian laissez-faire
supporters have assumed that perfect markets would somehow organize themselves,
or at least that markets are as perfect as they can be. This is not true”(1938, 221).
In his book Les Mystiques économiques (1938), Rougier associates collectivism
and Manchesterian liberalism with mystification of the mind. A doctrine becomes
mystical “when it is removed from the control of experience and the test of discussion,
to treat it as an intangible dogma, or when it is based on a basis that has no empirical or
rational meaning and only expresses a passionate conviction”(Rougier 1938, 12). By
the term mystical, Louis Rougier meant to dissociate economics, based on experience
and reason, and the laws that govern economic phenomena (laws that govern eco-
nomic equilibrium in a system of free competition), from the economic doctrines
themselves, which “simply explain certain mental attitudes by colouring them with
pseudo-scientific demonstrations; in short, certain passionate biases”(Rougier 1938,
7). Like the religious values of the past, economic and political ideologies play the role
of beliefs that are blindly accepted. The directed economy, corporatism, Man-
chesterian liberalism and Marxism could be considered illustrations of these mystical
concepts. The renewal of liberalism can therefore only be achieved by reversing
public opinion and demystifying pseudo-truths.
This new approach, described by Rougier as “constructive liberalism,”criticizes
the theory of the Manchesterian laissez-faire, labelling it laissez-passer which would
lead to the suppression of freedom through excess freedom. While competition is the
foundation of the liberal economic system, this competition tends to disappear on its
own because it leads to the triumph of monopoly. Liberalism must be progressive and
constructive –it claims the authority of economics (Walrasian solution to exchange)
when it says that free competition ensures maximum satisfaction; it implies a whole
system of laws on contracts, public limited companies, employers’agreements, trade
unions, professional guarantees, inheritance, property status, etc. So, monopolies,
holding companies, trade union power, etc. cannot be established:
What I call constructive liberalism is not identifiable with the Manchesterian theory of
laissez-faire, laissez-passer, because such liberalism destroys itself by leading, through
competition and natural selection alone, to a monopoly economy corresponding to a plu-
tocratic regime. Constructive liberalism implies a positive legal order such that the possibility
How to Rebuild the Foundations of Liberalism? 231
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
of free competition is always safeguarded, i. e. a legal order such that the formation of trusts,
holding companies, etc. becomes impossible, as well as union tyranny, imposing wage and
employment conditions contrary to the balance of the labour market (Rougier 1938, 34).
This opposition to laissez-faire was shared by Wilhelm Röpke, one of the figures of
German ordoliberalism. In 1937, in his book Die Lehre von der Wirtschaft (forbidden
in Germany but translated into French in 1940 with the title Explications économiques
du monde moderne), Röpke insisted on political economy’s failure to explain reality
and identify the real problems. This responsibility falls to economists who have not
always been able to make their science accessible. To understand society as a whole,
and the crisis it is facing, the economist must not only focus on economic problems,
but also on the legal, sociological, anthropological, political, moral and theological
foundations of society. Indeed, the post-1929 crisis showed the limits and in-
adequacies of laissez-faire (uncontrolled urbanization, monopolization, excessive
regulation, domination of class interests, etc). Economic freedom is a necessary but
not sufficient condition for the “free city,”it must be linked to a social state in which
individuals lead a life based on private property, a life which ensures internal and
external independence. Wilhelm Röpke (1940) thus proposes to build an economic
and social order based on freedom, justice and human dignity, taking into account
human nature.
4. The Evils: Industrial Concentration
and Limited Liability Company
According to the laissez-faire critics, the creation of the public limited company, as
well as cartels and agreements are the two other targets of the new liberalism. The
CWL devoted its first meeting to this topic: “The question on the agenda is as follows:
is the decline of liberalism inevitable as a result of the trends towards corporate
concentration, the concentration of capital, and the formation of the corporations; of
the replacement of atomistic capitalism by the capitalism of large unit?”(Rougier in
Reinhoudt and Audier 2018, 119). It must be said that this subject occupies an im-
portant place in Lippmann’s book The Good Society, in which he devotes a whole
chapter, entitled “The Gods of the Machine,”to this issue. While there is a link be-
tween mechanization (the mechanization of industry) and industrial concentration,
Lippmann points out that the causal link must be sought elsewhere. The concentration
does not originate in the mechanization of industry, it comes from the state, namely
that “[i]t was the State that, about a hundred years ago, began to grant to anyone who
paid a small royalty to it a privilege that had hitherto been very rare and exceptional:
the privilege of incorporating companies in which liabilities are limited to con-
tributions and whose securities are transferable in perpetuity by succession”(1938,
26), through the recognition of new legal forms of companies. In this case, it is the
public limited company. Nicholas Murray Butler speaks of a real legal revolution,
Arnaud Diemer232
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
which was very important in his view, in that it would even surpass all the great human
discoveries:
I am weighing my words when I say that, in my opinion, the joint-stock company is the
greatest discovery of modern times, if we judge it by its social, ethical, industrial or political
effects, in the long term, we will know how to understand it and how to use it. Even steam and
electricity are less important than the corporation, they would be reduced to a relative
helplessness without it (1912, 82).
He argues that it is thanks to the law and the power of the state that corporate
concentration has developed in the United States and in most European countries.
Claude Ducouloux-Favard recalls that the history of public limited companies has
been marked “by a constant oscillation between a liberalism sufficient for the de-
velopment of commercial enterprises and between a dirigisme ensuring the protection
of the general interests of the national economy”(1992, 851). As a result, while the
laws of European countries differ considerably from one another, the construction and
evolution of these laws follow the same trends in legal thought and philosophy.
The first public limited companies were created by a state act, the grant (Verleihung
in German and riconoscimento in Italian). For the public authorities, the grant con-
sisted of ratifying a specific professional activity and delegating it to a large company
which, as a result of this delegation of power, enjoyed part of the sovereignty of the
state. In such a system, the will of the actors or the drafting of the statutes of a company
were not sufficient for it to exist; it required the intervention of the sovereign will of the
state to obtain this grant. It was not until the 19th century that the idea of regulating
public limited companies appeared as possible and replaced government authority. In
France, it became law on July 24, 1867 (five years after the signing of the Free Trade
Agreement) which stipulated in article 21, paragraph 1: “In the future, public limited
companies may be formed without government authorization.”The system of
regulated freedom, which was already used by limited partnerships (limited by
shares), was thus generalized. In Germany, it became law on June 2, 1870, which
generalized the free formation of all public limited companies. Ducouloux-Favard
(1992, 859) points out that German legislation brought some interesting innovations:
(i) the regulatory requirements included registration in a commercial register, after
judicial verification; (ii) the implementation of the rule of commerciality by the form
of joint-stock companies; (iii) the establishment of a supervisory board (Aufsichtsrat),
hitherto an optional body, which became the advisory body for the dual management
of large German companies; (iv) regulation of contributions in kind and special
benefits (sanctions in the event of fictitious contributions). In Italy, the revision of the
Commercial Code took place in 1882 (a strong movement of ideas inspired by German
law) and entered into force in January 1883 (Droulers 1982). While government
intervention is not allowed, there is always ex-post control when the public limited
company is established. Moreover, the Italian legal system “required that the intrinsic
regularity of the constituent instrument of public limited liability companies be rec-
ognized by the judicial authority so that the constituent formalities could be entered in
a register open to the public”(ibid., 861).
How to Rebuild the Foundations of Liberalism? 233
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
The 19th century thus ended with a new orientation: commercial companies were
now an exchange between private individuals, so their nature was contractual. The
freedom to contract now faces only one limit: public order. It is this concept of the
company as contract that is found in most liberal theses. Indeed, it is the agreement
between future shareholders that gives birth to the company. However, at the be-
ginning of the 20th century, another approach emerged, namely that of the company as
an institution (Gierke 1902). This German-inspired approach is based on the principle
that when public authorities attribute to a legal entity the status of legal subject (by a
law or a normative act), they are simply led to recognize the existence of a group of
individuals. As a result, the concept of the contract company would not be sufficient to
understand the emergence and evolution of public limited companies at the end of the
19th century and throughout the 20th century. If the legal personhood of limited liability
companies is based on the will of the future shareholders, this will cannot be expressed
in the form of a simple contract, it also constitutes a collective act (i. e. recognition by
the state):
Most authors, after Gierke, will insist on the transition from contractual to institutional. They
will affirm that before the intervention of the public authorities, the legal regime of the
company is contractual, that its personification is not complete and that the company, at this
stage, is only a Substrate, an essence of society. On the other hand, as soon as the public
authority has recognized the company by a particular act, it becomes legally distinct from its
members and at the same time acquires its legally organized structure (Ducouloux-Favard
1992, 863).
The company is thus elevated to the rank of an institution, it includes bodies and
managers instituted in legally defined functions. The organization of management
powers, such as the distribution of powers between the various organs of the company,
are provided for by law.
This institutionalist philosophy was gradually introduced into all European leg-
islation (particularly in Germany between 1931 and 1937, in Italy in 1942). This was
at a time following World War I when the capitalist system was characterized by
numerous experiments in directed economy, significant industrial concentrations
(Hardy-Hémery 2001) and a strong internationalization of activity by capital-in-
tensive companies (Bosserelle 2008).
This situation posed a delicate problem for liberal economists, i. e. the balance
between entrepreneurial freedom and the safeguarding of general interests. Indeed,
large companies do not only serve private interests, they are also constitutive elements
of the national economy. Bouvier, Furet, and Gillet (1975, 126) remark that on the eve
of World War I, the coal mines of Nord-Pas-de-Calais (France) had as many share-
holders as employees. It was thus becoming important to improve the legal rights of
large companies (the right to information, etc.). From this point of view, the post-1929
crisis is an important event, as it makes many people aware of the scope of action of
large companies, the legal regime that must be put in place to better organize public
Arnaud Diemer234
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
limited liability companies, and the role of the state in regulating the concentration of
companies.
This last point was widely discussed at the CWL. Various participants sought in
particular to know whether the concentration of companies and capital was an un-
avoidable consequence of economic development (a kind of Darwinian law) or the
result of the privilege granted by the state to certain companies or economic sectors.
While the economic consequences of mergers (mainly the emergence of monopolies)
were unanimously condemned (the question of competitive pricing), the presence of
cartels was the subject of numerous statements (Bigot 1927; Benni 1931; Cortat
2010). The feedback on the debates that accompanied the treatment of this question is
particularly interesting, as it makes it possible to identify a big difference (a kind of
cleavage) between French neoliberalism and German ordoliberalism.
From the point of view of German ordoliberalism, economic concentration arising
due to technological and organizational progress in companies can be an immanent
and legitimate feature of the competitive system. This contrasts with the situation
where the emergence of monopolies is the result of state intervention, the enactment of
laws, and court decisions. Röpke dissociates the natural tendency towards concen-
tration (via technology and mechanization) from the long march towards state control:
“Technology develops as fixed capital increases, that is as the general cost increases
each day; it is a development that excludes the mechanism on which the philosophy of
liberalism has been built. Companies become larger, the number of competitors be-
comes smaller, and the price calculation becomes increasingly arbitrary […] This
tendency toward large companies brings about the monopoly”(Röpke in Reinhoudt
and Audier 2018, 119).
The natural tendency towards concentration is inevitable (the monopoly is not a
creation of man, but of the technology employed), the long march towards State
control is more artificial (the monopoly is an arbitrary creation of men in the form of
laws or customs). A few years later, Röpke explored this question in four books: Die
Lehre von der Wirtschaft (1937) (Economics of the Free Society 1963), Die Gesell-
schaftskrisis der Gegenwart (1942) (The Social Crisis of Our Time 1950), Civitas
Humana: Grundfragen der Gesellschafts- und Wirtschaftsreform (1944) (Civitas
Humana: A Humane Order of Society 1948) and Jenseits von Angebot und Nachfrage
(1958) (A Humane Economy: The Social Framework of the Free Market 1960). Röpke
insisted that “nothing more prejudices the general ideal that the market economy is
linked to a larger order, both moral and ethical, appropriate to human nature than the
following two things: the proletarianization of the masses and concentration”(1960,
7). Indeed, concentration had destroyed the middle class, made up of small in-
dependent owners with civic virtues, by replacing it with an army of workers and
employees, subject to the working conditions (and wages) of large companies. This
proletarianization of the masses constitutes a form of degeneration of capitalism, to be
put at the disposal of the state:
How to Rebuild the Foundations of Liberalism? 235
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
It will always be necessary to consider a country as highly proletarianized, when large farms
and the concentration of ownership have transformed a large part of the population into
dependent employees, urban dwellers and integrated into the administrative hierarchy, in-
dustrial and commercial […] An increasingly powerful centralization and bureaucratism have
mechanized the State at the expense of its vertical and organic structure, based on federalism
or communal autonomy, thus precipitating the levelling movement of gregarianism, so
characteristic for the whole society, and then transposing it into the field of constitution and
administration (Röpke 1960, 27 –28).
Here Röpke offers us a very broad acceptance of concentration; it is present in all
spheres. It is at the same time, the concentration of individuals in organizations, cities,
industrial centers, companies and firms; the concentration of the power of the state and
the administration; the concentration of the economic and social power of the state, the
concentration of power in terms of decisions and responsibilities. However, a rigorous
analysis makes it possible to distinguish between “the concentration of firms and that
of plants, i.e. between centralisation of legal financial and that of technical units”
(Röpke 1948, 169). Thus, it is not technological progress that drives business con-
glomeration, but government legislation and economic policy.
It is therefore easier to understand why Röpke considers the crisis of capitalism
after 1929 to be the very expression of a total crisis, whether spiritual, moral or so-
ciological:
As economists, we must not only concern ourselves exclusively with economic problems, but
also, to the extent of our strengths and knowledge, with the legal, sociological, anthro-
pological, political, moral and theological foundations of society (1940, 17).
At the CWL, this point of view was shared by Ludwig von Mises and Alexander
Rüstow, who attributed the emergence and proliferation of cartels, and even mo-
nopolies, to the interventionist policy of the state: “It is thus an error of logic to want to
justify the intervention of the State in the economic realm by the need to prevent the
formation of cartels, because it is precisely the State that, through its intervention has
brought about the creation of the latter”(Mises in Reinhoudt and Audier 2018, 120).
Rüstow does not hesitate to point out that the famous adage that competition kills
competition is unfounded and that the phenomenon of concentration should rather be
sought in “the intellectual and moral weakness of the State that, a first ignorant of and
negligent in its duties as policeman of the market, lets competition degenerate, then
lets its rights be abused by robber knights (chevaliers pillards) to deal the fatal blow to
this degenerate competition”(Rüstow in Reinhoudt and Audier 2018, 124).
The rise of cartels in Germany in the 1930s was a major problem for the ordo-
liberals, and the only way out was to move forward towards a new, competitive,
liberalism. For Rüstow, this consideration was already present in 1932 in a pre-
sentation entitled “Freie Wirtschaft, starker Staat”(“Free Economy, Strong State”),
during which he raised the idea of state interventionism aimed at “instituting and
monitoring market rules”(Audier 2012, 179). It is a state free from the problems of
private interests, lobbies, and cartels, all of which seek to use the power of the state to
Arnaud Diemer236
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
enjoy privileges. In 1940, Walter Eucken returned to this issue in his book Die
Grundlagen der Nationalökonomie (The Foundations of Economics). Denouncing the
proliferation of cartels in Germany, he remains very measured, even pessimistic about
the ability of economists to identify the main issues. On the one hand, economists try
to explain the origins of cartels, their effects and their consequences on consumer well-
being. On the other hand, economists have developed a general theory of monopoly.
The conclusion is bitter: As long as there is a division between theoretical economics
and economic history, the real problems are not solved and science gets lost in obscure
paths:
Both history and theory proceed independently, and only a few economists try to link them
together. Just because of this lack of co-operation the scientific treatment of actual cartel
problems is usually unsatisfactory. Only when history and theory are combined is it possible
to build up a scientific picture of the concrete effects of cartels and of the factors which bring
them into being, that is, of the real relationships concerned (Eucken 1951 [1940], 57).
If the German ordoliberals seem to condemn the omnipresence of the state and the
drift towards state interventionism, the supporters of French neoliberalism have a
more nuanced position. While they admit that the role of the state has been decisive in
the proliferation of concentrations, they argue at the same time that state interventions
have occurred when the state could not act otherwise. Thus, state interventionism must
not be linked to a political argument, but to the desire to establish a minimum level of
order:
Today, railways constitute, for all States, a very large burden. There where they belonged to
private enterprises, the State has been brought to support them in order to avoid the ruin of a
whole section of the population. The question, however, is knowing whether a modern State
can withstand a large part of the population finding itself [financially] ruined. If yes, inter-
ventionism is of political origin; if not, it is of natural origin: it is a spontaneous reaction of the
social organism (Detoeuf in Reinhoudt and Audier 2018, 121).
Louis Marlio (1930; 1935; 1947) even argues that there are some advantages to
corporate concentration: (1) the ability of cartels to file patents, whereas small
companies do not have the means to advance technological progress; (2) the colossal
sums invested in scientific research (e.g. the aluminium cartel), allowing great ad-
vances; (3) finally, contrary to what is believed, the industries with the highest
concentration are also those that have lowered their selling prices the most, and this is
good for consumers. In the end, Marlio seems to trust economics’general law, which
reminds us that a liberal system is a system where economic balance is established by
the price mechanism. Concentrations that do not respect this law can only survive in a
market economy at the price of a privilege granted by the state: “As long as the
concentration remains under the purview of freedom, it is good, but if it takes on the
sign of a privilege, it is bad”(Marlio in Reinhoudt and Audier 2018, 123).
The subsequent discussions, mainly between Rüstow and Mises on the one hand
and Detœuf, Marlio and Mantoux on the other, illustrate very well this gap between a
hard line defended by German ordoliberalism (the main origin of concentration is a
How to Rebuild the Foundations of Liberalism? 237
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
degeneration of the state) and the compromises resulting from French neoliberalism
(the state can play an important role in the economy, without calling into question the
functioning of the price mechanism). However, these positions must be placed in a
somewhat different historical and political context within the two countries. Germany
had entered a long period during which the totalitarian state was very favorable to
cartels and mergers (which also happened to be true for Japan and Italy). The or-
doliberals were thus the last bastion of the liberal fortress and their condemnation of
concentration (agreements and cartels) a necessity for survival. The French econo-
mists had an intermediate position on the subject of concentration and cartels. On the
one hand, the Colbertist heritage gave birth to the notion of industrial policy, by
developing the idea that the country’s production capacity could be increased tenfold
thanks to state aid (Bussière, Demoulin, and Schirmann 2007). On the other hand,
price fixing had long been considered illegal under Article 419 of the 1810 Criminal
Code. It was not until the years between the two world wars, and the debates around
the post-1929 economic crisis, that price fixing was discussed in the French Parlia-
ment, generating thinking about the role of the state and the law in regulation of the
economy (Chatriot 2008). In 1922, the Millerand project proposed action against price
increases. The Colrat-Dior project (Maurice Colrat was then Minister of Justice,
Lucien Dior was Minister of Trade and Industry) led to the law of December 3, 1926.
This Act amended section 419 (see above) by seeking to determine the nature of the
earnings, whether they were normal or abnormal, and therefore unlawful, resulting
from a price fixing agreement. In 1932, the Reynaud-Rollin project aimed to protect
the good price fixing agreements which were seen as instruments to regulate pro-
duction and its flow. In 1935, the Flandin-Marchandeau bill proposed to permit the
state to make certain price fixing agreements mandatory, particularly if they had been
agreed by a majority of professionals in the sector. If none of the projects mentioned
above were adopted (with the exception of the 1926 law), and if France remained for a
long time under articles 419 and 420 of the Criminal Code, which refer to cartel
offences (Pasqualaggi 1952), it should be stressed that the debates generated a real
ideological shift. First, analysed from a technical and jurisprudential point of view, the
concentration of companies, via cartels, becomes an economic policy choice issue.
Louis Marlio writes in the Revue de Paris that “agreements between producers are
above all an element of stability, a means of combating anarchy in production”(1930,
835).
5. Conclusion
While the CWL has often been presented as a founding act of the renewal of
liberalism and rebellion against the rise of planism, it should be recalled that it also
made it possible to structure various national networks. At the last day of the meeting,
Louis Rougier proposed an agenda for liberalism, aimed on the one hand at estab-
lishing the list of theoretical and practical problems which needed to be studied
quickly to lay the foundations of renewed liberalism, and on the other hand at in-
Arnaud Diemer238
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
stitutionalizing liberal ideas within the International Center of Studies for the Reno-
vation of Liberalism, headed by Louis Marlio. Lippmann, Hayek, and Röpke were
entrusted with the task of organizing the American, English and Swiss sections of the
Center, while Baudin, Bourgeois, Mantoux, Marlio, Rougier, and Rueff were re-
sponsible for keeping the French section alive. While various protagonists of the CWL
continued to maintain close contact through their correspondence (Rougier –Röpke,
Rueff –Röpke, Hayek –Lippmann), it must be noted that two currents of thought were
more or less present on the national scenes from 1940 to 1960: French neoliberalism
and German ordoliberalism. These two movements based their doctrine on a rejection
of Manchesterian liberalism (i. e. laissez-faire) and a condemnation of economic
concentration. Their trajectories and visions of a renewed liberalism highlight some
differences. While ordoliberalism embodied Germany’s transition to the Social
Market Economy (Alcouffe and Diebolt 2009), neoliberalism had great difficulty
spreading its ideas effectively in France. While German ordoliberalism remained very
suspicious of state intervention, French neoliberalism promoted state interventions
compatible with the price mechanism. These two movements have had the merit of
engaging in constructive thinking about the content and scope of liberal discourse in
the difficult interwar period. In the aftermath of the crisis post-2008 and the new
attacks on liberalism, it would seem that questions about state intervention, the limited
liability company, and especially financial lobbies are still the subject of debates and
controversial issues. However, the analogy stops there. It is no longer a question of
renewing the foundations of liberalism but of breathing new life into society.
References
Alcouffe, A. and C. Diebolt. 2009. La pensée économique allemande. Paris: Economica.
Audier, S. 2012. Le Colloque Lippmann. Aux origines du néolibéralisme. Paris: Poch’BDL.
Barjot, D. 2016. L’Histoire de l’Europe Libérale. Paris: Nouveau Monde Editions.
Barnes, D. 1930. A History of the English Corns Laws from 1660 –1846. London: George
Routledge &Sons.
Bastiat, F. 1845. Cobden et la Ligue. Paris: Guillaumin.
Benni, A. S. 1931. Rapport général sur les aspects économiques des ententes industrielles
internationales, préparé pour le Comité économique. Geneva: Société des Nations.
Bigot, R. 1927. “Les ententes industrielles.”Les Cahiers du Redressement français 8: 179 –219.
Bosserelle, E. 2008. “Guerres, transformation du capitalisme et croissance économique.”
L’Homme et la société 2008/4–2009/1 (170–171): 219–50.
Bouvier, J., F. Furet, and M. Gillet. 1975. Le mouvement du profit en France au xixesiècle. Paris:
Mouton.
Bussière, E., M. Dumoulin, and S. Schirmann, eds. 2007. Europe organisée, Europe du Libre
Echange? Fin xixesiècle –années 1960. Brussels: PIE-Peter Lang.
How to Rebuild the Foundations of Liberalism? 239
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
Butler, N. M. 1912. Why Should We Change Our Form of Government? New York: Charles
Scribner’s Sons.
Chatriot, A. 2008. “Les ententes: débats juridiques et dispositifs législatifs (1923–1953). La
genèse de la politique de la concurrence en France.”Histoire, Economie et Société 27 (1): 7–
22.
Cobden, R. 1835. England, Irland and America, by a Manchester Manufacturer. Edinburgh:
William Tait.
Commun, P. 2003, ed. L’ordolibéralisme allemand: Aux sources de l’économie sociale de
marché. Cergy-Pontoise: CIRAC/CICC.
Commun, P. 2009. “Walter Eucken entre économie et politique (1891–1950).”In La pensée
économique allemande, edited by A. Alcouffe and C. Diebolt, 375 –98. Paris: Economica.
Commun, P. 2016. Les ordolibéraux: Histoire d’un libéralisme à l’allemande. Paris: Les Belles
Lettres.
Cortat, A. 2010. Contribution à une histoire des cartels en Suisse. Neuchâtel: Éditions Alphil –
Presses Universitaires Suisses.
Denord, F. 2007. Néolibéralisme, version française. Histoire d’une idéologie politique. Paris:
Demopolis.
Denord, F. 2016. Néolibéralisme à la française. Marseille: Agone.
Dicey. A. 1905. Lectures on the Relation between Law and Public Opinion in England during the
Nineteenth Century. London: Macmillan.
Diemer, A. 2014. “Le néolibéralisme français ou comment penser le libéralisme au prisme des
institutions.”Économie et institutions 20 –21: 1–28.
Droulers, P. 1982. Cattolicesimo Sociale Nei Secoli xix E xx: Saggi di Storia E Sociologia. Rome:
Edizioni di Storia e Letteratura.
Ducouloux-Favard, C. 1992. “L’histoire des grandes sociétés en Allemagne, en France et en
Italie.”Revue Internationale de Droit Comparé 44 (4): 849–81.
Eucken, W. 1940. Die Grundlagen der Nationalökonomie. Jena: Gustav Fischer. Translated into
English: The Foundations of Economics. 1951. Chicago: University of Chicago Press.
Fox, W. J. 1845. “Free Trade.”In Richard Cobden, un révolutionnaire pacifique, edited by
C. Taquey. Paris: Gallimard.
Galpin, W. F. 1931. “Review of A History of the English Corn Laws.”American Economic
Review 21 (1): 109–11.
Gierke, O. F. 1902. Das Wesen der menschlichen Verbände. Leipzig: Duncker &Humblot.
Grampp, W. D. 1960. The Manchester School of Economics. Stanford: Stanford University
Press.
Hardy-Hemery, O. 2016. “Le pouvoir dans l’entreprise: actionnaires et dirigeants dans les so-
ciétés du Nord, 1880 –1960.”Revue d’histoire moderne et contemporaine 48 (4): 77–101.
Laurent, A. 2016. “Après Adam Smith, la grande divergence au sein du libéralisme anglais:
figures et évolutions.”In Histoire de l’Europe libérale, edited by D. Barjot, O. Dard, F. Fo-
gacci, and J. Grondeux, 63 –76. Paris: Nouveau Monde Editions.
Arnaud Diemer240
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
Lippmann, W.1937. The Good Society. Boston: Little, Brown and Co. Translated into French: La
Cité Libre. 1938. Paris: Librairie de Médicis.
Lippmann, W. 1938. Allocution au Colloque Lippmann. Reproduced in: Tendances modernes du
libéralisme économique (Les Essais 11 &12), edited by Jacques Rueff, Ludwig Erhard,
Wilhelm Röpke, Louis Rougier, and Pierre Lhoste-Lachaume, 16–31. Paris: Maison du Livre.
Marlio, L. 1930. “Les ententes industrielles.”Revue de Paris, February 15: 823 –52.
Marlio, L. 1935. Le sort du capitalisme. Paris: Librairie de Médicis.
Marlio, L. 1947. The Aluminium Cartel. Washington: The Brookings Institution.
Pasqualaggi, G. 1952. “Les ententes en France.”Revue économique 3 (1): 63 –82.
Reinhoudt, J. and S. Audier. 2018. The Walter Lippmann Colloquium: The Birth of Neo-Lib-
eralism. London: Palgrave Macmillan.
Röpke, W. 1937. Die Lehre von der Wirtschaft. Vienna: Julius Springer. Translated into English:
Economics of the Free Society. 1963. Chicago: Henry Regnery.
Röpke, W. 1940. Explication économique du monde moderne. Paris: Librairie de Médicis.
Röpke, W. 1942. Die Gesellschaftskrisis der Gegenwart. Erlenbach-Zurich: Eugen Rentsch.
Translated into English: The Social Crisis of Our Time. 1950. Chicago: University of Chicago
Press.
Röpke, W. 1946. Civitas Humana: Grundfragen der Gesellschafts- und Wirtschaftsreform.
Erlenbach-Zurich: Eugen Rentsch. Translated into English: Civitas Humana: A Humane
Order of Society. 1948. London: William Hodge.
Röpke, W. 1958. Jenseits von Angebot und Nachfrage. Erlenbach-Zurich: Eugen Rentsch.
Translated into English: A Humane Economy: The Social Framework of the Free Market.
1960. London: Oswald Wolff.
Rougier, L. 1938. Les mystiques économiques. Paris: Librairie Médicis.
Rueff, J. 1935. “La crise du capitalisme.”In Les fondements philosophiques des systèmes
économiques, edited by E. M. Claassen, 183 –90. Paris: Payot.
Rueff, J. 1939. Les formes d’intervention des pouvoirs publics compatibles avec le mécanisme
des prix. Centre International de Rénovation du Libéralisme (C.I.R.L.), March 13, Musée
Social. Reproduced in: Tendances modernes du libéralisme économique (Les Essais 11 &12),
edited by Jacques Rueff, Ludwig Erhard, Wilhelm Röpke, Louis Rougier, and Pierre Lhoste-
Lachaume, 67–108. Paris: Maison du Livre.
Rüstow, A. 1932. “Freie Wirtschaft, starker Staat.”In Deutschland und die Weltkrise, Schriften
des Vereins für Socialpolitik 187, edited by F. Boese, 62 –9. Munich: Duncker &Humblot.
How to Rebuild the Foundations of Liberalism? 241
Journal of Contextual Economics 139 (2019) 2 –4
OPEN ACCESS | Licensed under | https://creativecommons.org/about/cclicenses/
DOI https://doi.org/10.3790/schm.139.2-4.225 | Generated on 2023-01-16 13:38:24
Content uploaded by Arnaud Diemer
Author content
All content in this area was uploaded by Arnaud Diemer on Dec 03, 2020
Content may be subject to copyright.