Germany adopted the social market system of economic rules separated from political democracy, known as ordoliberalism, after 1945; it was later used as the ideological basis of Europe Union economic policy.

“If we needed any more proof that referendums present a risk to the proper functioning of modern democracies, this is it,” said Der Spiegel on 6 July. The shock that Germans felt at Greece’s loud referendum no was the result of a collision between two approaches to economics — and public affairs in general.

The Greek approach reflects a strictly political mode of government. Popular suffrage takes precedence over accounting principles, and an elected government can choose to change the rules. The German approach subordinates government actions to strict observance of an established order. Politicians can do what they like, as long as they follow the rules (which are effectively excluded from democratic discussion). The finance minister, Wolfgang Schäuble, personifies this view. “To him, the rules are God-given,” says his former Greek counterpart Yanis Varoufakis (see The defeat of Europe).

This little-known German ideology is ordoliberalism. Ordoliberals, like the Anglo-Saxon advocates of laissez-faire, believe the state should not distort the workings of the markets, but they also believe that free competition does not develop spontaneously. The state should establish a legal, technical, social, moral and cultural framework for the markets, and make sure everyone follows the rules.

The history of this free-market interventionism goes back to the turmoil between the two world wars. In 2012 Schäuble said: “I was born in Freiburg, where there’s something called the Freiburg School. It has to do with ordoliberalism, and Walter Eucken”. Freiburg is a prosperous city in the Black Forest foothills, close to Strasbourg with its cathedral, and Switzerland with its banks. In this centre of conservatism and Catholicism, the 1929 economic crisis had the same effect as elsewhere in Germany: the Nazis won the 1933 elections with nearly 36% of the vote.

In the last days of the Weimar Republic, three Freiburg academics pondered the future. The economist (...)