Planning the economy

An economy is a complex, interactive structure. On one side, it engages suppliers and providers of goods and services; intermediaries such as trading companies, the transport industry and the financial system; and, finally, on the other side, consumers. It is a matrix of collaboration involving millions of agents with differing interests and business models.

Competition and freedom of choice allow these interactions to find a balance. The shorthand for this system is the market. Markets underpin the interaction between individuals and businesses, and also between countries. This mechanism can only work with free exchange and individual freedom of contracts. It requires some rules to function smoothly – helping markets develop and forming a legal framework and a judicial system to secure the enforcement of contracts. Also, failures must be accepted.

Taken together, these elements provide the foundation of probably the most efficient and sustainable economic system in human history. It was this system, called ordoliberalism, that made possible the German economy’s rapid recovery and modernization (the so-called Wirtschaftswunder) after World War II. The essence of ordoliberalism is to reduce the state’s role to a provider of the economy’s supporting framework. As much as possible, the public authorities abstain from any attempt to intervene in the economy or plan its development …

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Planning the economy

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