Ludwig Erhard - Economics Minister

Economics Minister

In the first free elections following the Nazi era, Erhard stood for election in a Baden-Württemberg district and was elected. In September, he was appointed Minister of Economics in the first cabinet of Konrad Adenauer, and kept the post for all 14 years of Adenauer's tenure. His party made his concept of social market economy part of the party platform.

A staunch believer in economic liberalism, Erhard joined the Mont Pelerin Society in 1950 and used this influential body of neoliberal economic and political thinkers to test his ideas for the reorganization of the West German economy. Some of the society's members were members of the Allied High Commission and Erhard was able to make his case directly to them. The Mont Pélerin Society welcomed Erhard because this gave its members a welcome opportunity to have their ideas tested in real life. Late in the 1950s, Erhard's ministry became involved in the struggle within the society between the European and the Anglo-American factions, and sided with the former. Erhard viewed the market itself as social and supported only a minimum of welfare legislation. However Erhard suffered a series of decisive defeats in his effort to create a free, competitive economy in 1957; he had to compromise on such key issues as the anti-cartel legislation. Thereafter, the West German economy evolved into a conventional social market economy coupled with strong welfare state institutions in the spirit predominant in German society since the days of Bismarck.

In July 1948, a group of southwest German businessmen had attacked the restrictive credit policy of Erhard as Economic Director. While Erhard had designed this policy to assure currency stability and stimulate the economy via consumption, business feared the scarcity of investment capital would retard economic recovery. Erhard was also deeply critical of a bureaucratic-institutional integration of Europe on the model of the European Coal and Steel Community.

Erhard's decision, as Economic Director for the British and American occupation zones, to lift many price controls in 1948, despite opposition from both the social democratic opposition and Allied authorities, and his consistent advocacy of free markets, did help set the Federal Republic on its phenomenal growth path. Erhard's financial and economic policies soon proved widely popular as the German economy made a "miracle" recovery to rapid growth and widespread prosperity in the 1950s, overcoming wartime destruction and successfully integrating millions of refugees from the east.