To develop effective responses to populism, it is essential to first understand its nature and underlying causes. Just as bait must appeal to the fish rather than the angler, a response to populism should persuade potential supporters by addressing its claims and causes directly.
One of the primary causes of populism is the growing alienation of large sections of society from political, cultural, economic, and media elites. The perceived concentration and abuse of power by these elites contribute to this sense of alienation. Over the past 130 years, the rise of concentrated power and cronyism has repeatedly sparked populist discontent, leading to the formation of new populist movements and parties.
The original populists of the American People’s Party were directed against monopolists in the railroad and financial industries at the end of the 1890s. The abuse of power by large landowners sparked the first populist wave in South America. Pierre Poujade protested against an overbearing central government in Paris in the 1950s. The Scandinavian tax populists in the 1970s took offense at excessive tax and duty burdens. The South American populists of the 1990s (Menem, Collor de Mello, and Fujimori) were offended by mismanagement and inflation. Umberto Bossi’s Lega Nord was activated by the perceived corruption of the Italian government. The Hungarian protest movement Fidesz initially rallied against the old socialist elites. The Tea Party was galvanized by Obama’s socialist economic and social policies, and the German AfD in its founding years by a redistribution supposedly controlled from Brussels in favor of the financial sector. Most recently, the Argentine Javier Milei rode to power on public exhaustion with a dysfunctional and bloated state.
Researchers like Cas Mudde, Karin Priester, and Paul Taggart have identified key elements of populist ideologies:
Friend-foe or people-elite thinking: a clear division between the virtuous people and corrupt elites.
Heartland idealization: a nostalgic view of a traditional, idealized past.
Productivism: the ideal of self-sufficiency and independence from state intervention.
The populist ideal of a self-reliant middle class often aligns with farmers, craftsmen, and independent retailers who sustain themselves and cooperate with fellow citizens.
Initially, populist movements often have a decentralized, anti-authoritarian character. When populists gain power, though, they tend to adopt collectivist and authoritarian tendencies. Once in office, they often seek to bypass constitutional constraints they once supported while in opposition.
Over time, populist parties typically narrow their focus to the people-elite conflict, sidelining ideals like heartland and productivism. Early liberal and conservative supporters are often marginalized or leave in frustration. Ordoliberals — who believe government should design rules to maximize the potential of free markets — helped found the populist Alternative for Germany (AfD) but have since left the party.
Nevertheless, many populist parties still adhere to liberal economic positions, at least programmatically. They see market-based competition as a means of limiting the power of the elites. However, with their pronounced friend-enemy thinking and their idealization of the people, populists overlook the fact that it is not only the supposedly evil elites who circumvent competition when it is in their interests to do so, but also the supposedly virtuous people. Good and evil are spread across all classes. Replacing the old elites with new elites therefore does not solve the fundamental problem. What populists lack is an idea of how economic and political power can be permanently limited, regardless of who is in power.
This is where ordoliberalism comes into play. Like many populists, the founding fathers of ordoliberalism (Wilhelm Röpke, Alexander Rüstow, and Walter Eucken) were driven by a deep aversion to the concentration of power and heteronomy. In their youth and student years, this aversion expressed itself in sympathies for socialist (Röpke, Rüstow) or nationalist (Eucken) ideas. On their way to becoming professors of economics, however, they recognized the emancipatory power of market competition. Based on this insight, they channeled their populist impulse into a research program that sought a competitive order that could permanently limit the concentration of power and heteronomy. They had to painfully experience how, without such an order in the Weimar Republic, hyperinflation, a command economy and a defenseless democracy paved the way for the National Socialists.
After the Second World War, in times of economic hardship and political disorientation, they filled the material and spiritual void with their concept. At the same time, Rüstow and Röpke criticized anti-market intellectuals and “theory manufacturers” and the ideologies of “utopianism, progressism, socialism, and egalitarianism” that they advocated. The sociological ordoliberals opposed the “modern mass society” with a decentralized view of society rooted in history, homeland and tradition. Both the populist and ordoliberal societies are based on a middle class that is aware of its vital function. When Rüstow and Röpke appeal to the self-determination instinct of this middle class and want to protect it from encroaching interventions by a central administration, the similarities to populists become clear, especially in their founding phase.
These similarities make ordoliberalism an alternative to populism. But only the following differences make ordoliberalism a compatible, anti-totalitarian response to populism:
Ordoliberalism shares some initial impulses with populism but diverges in crucial ways:
Collectivism vs. Diversity
Populists seek a homogeneous society governed by the will of the people. In contrast, ordoliberals envision a diverse society with a recognized, merit-based elite operating within a stable regulatory framework. Switzerland’s decentralized structure reflects this model.
Institutions vs. Elites
Populists target elites; ordoliberals seek to reform institutions. Eucken sought to rise above personal animosities, aiming instead to establish stable rules and frameworks that constrain power.
Tradition vs. Nationalism
Ordoliberals value tradition but reject nationalism. Röpke criticized “popular nationalism” and warned against flattering “the new sovereign, the people” at the expense of other nations.
Advisors vs. Representatives
Populists claim to embody the will of the people. Ordoliberals, while occasionally displaying elitism, seek to advise and influence democratic decision-making rather than bypass it.
Freedom and Law
Ordoliberal freedom is bounded by law and the rights of others. Populist freedom tends to be more absolute and undefined.
Pluralism vs. Division
Ordoliberals differentiate between healthy pluralism (shared constitutional and democratic power) and predatory pluralism (interest groups capturing the state).
Learning from Ordoliberalism
The first-generation ordoliberals found their way to liberalism in a roundabout way. As economists, they recognized the power of market-based competition as well as the need to develop this power through state-imposed framework conditions. As they always saw the economy in the context of society, they were not content to lament the crisis-ridden situation and the shortcomings of the inherited political and economic system of their time. They were looking for a humane order that would permanently secure freedom for society as a whole.
We should resume this search today in order to find answers to the rise of authoritarian populism. As the economist Luigi Zingales wrote back in 2014, it is not enough to simply reject populist movements. Rather, they must first be understood in order to direct their destructive power at individual disempowered and dysfunctional parts of our democratic, constitutional and market economy institutions, not at democracy, the market economy and the rule of law per se. The insights of the early ordoliberals can help to distinguish liberal criticism of institutions from populist criticism of elites. Consequently, Luigi Zingales said in an interview in 2022: “We urgently need more ordoliberalism.”
An ordoliberal-inspired policy adapted to the challenges of the twenty-first century treats sovereign citizens as such and offers them consistent rules without patronizing them. The changes driven by the market economy, globalization and technological developments have a power-limiting and emancipating effect rather than a threatening and power-fortifying one when citizens can influence the political framework and control political and economic power. Among the various principles that can guide responses to the populist challenge, the principle of subsidiarity stands out. If frustration is already being channeled at lower levels and leads to political reactions there, it will not be concentrated at the national or supranational level. Reforms based on ordoliberal principles toward competitive federalism can thus prevent the emergence and radicalization of populists.