Freeman

ARTICLE

Germans Vote for Economic Freedom

DECEMBER 01, 1965 by WILLIAM HENRY CHAMBERLAIN

Mr. Chamberlin is a skilled observer and re­porter of economic and political conditions at home and abroad. His recent writings include The German Phoenix (New York: Duell, Sloan & Pearce, 1963).

For Ludwig Erhard, principal au­thor of the German economic mir­acle, the result of the recent Ger­man national election must have been one of his finer hours. It had long been clear that his bold wager on freedom from state con­trols as the surest road to eco­nomic and social recovery had paid off in perhaps the most stunning national success story of the postwar period. The rotund, cigar-smoking Prime Minister, who succeeded Konrad Adenauer as Chancellor, or head of the ad­ministration, in 1962, had every right to consider the outcome of the election as a striking personal victory and a national endorse­ment of the economic principles with which his name will always be associated.

Prominent among these are the rule of the free market, maximum freedom in international trade re­lations, wider diffusion of private property, and prosperity through competition. The people of a Euro­pean country of key political, eco­nomic, and military importance have shown conclusively in a free election that they know when they are well off, that they reject all forms of extremism (procommu­nists got about 1.3 per cent of the vote, ultranationalists about 2.6 per cent), and that they are prepared to contribute their full share to the political stability and economic prosperity of the West­ern world.

At first sight, to be sure, the election figures may seem to indi­cate little change. Erhard’s party, the CDU (Christian Democratic Union), increased its percentage of the total vote from 45.5 to 47.5, falling just short of possessing an absolute majority in the new Bundestag (Parliament). The So­cial Democrats, the principal op­position party, also increased their share of the vote, falling just short of 40 per cent. But, when one considers five appreci­able political and psychological handicaps which Erhard faced in the campaign, the magnitude of his success is impressive. These may be listed as follows, not neces­sarily in the order of their im­portance.

Various Handicaps Faced and Overcome

1.         The CDU, alone or in com­bination with a much smaller mod­erate conservative group, the Free Democrats (FDP), has been in power for sixteen years, a much longer period than is usually re­quired for an administration to wear out its welcome. Almost in­evitably a government in power does some unpopular things and makes more opponents than sup­porters. Hence, the normal swing of the pendulum between two main parties in free countries.

2.         On some issues, especially in foreign policy, the CDU leader­ship has not been speaking with a united voice. Virtually all Ger­mans in the Federal Republic rec­ognize their debt to America for defense against the now latent but ever-present threat of Soviet ag­gression. There is similar unan­imity of sentiment in favor of burying forever the old hatchet with France. But when American and French ideas about the neces­sities of European defense are sharply divergent, as they have been during the last few years, some delicate footwork on Ger­many‘s part is required to avoid offending either country.

And this leads to differences of emphasis and priorities. Foreign Minister Schroeder, for instance, has been less sympathetic to de Gaulle, more attached to the Amer­ican orientation. Some influential CDU leaders, including former Chancellor Adenauer and the Christian Social Union leader, Franz Josef Strauss, of the Ba­varian wing of the CDU, have stressed the necessity for keeping on the best possible terms with General de Gaulle. To be sure, de Gaulle has made it difficult for his would-be German friends. As a shrewd German journalist re­marked to me recently: "Adenauer, Strauss, and others thought de Gaulle would be another John Fos­ter Dulles, with a harder line to­ward Moscow. But he is nothing of the kind."

However, such actions of the French President as his diplo­matic flirtation with the Soviet Union, his abandonment in ad­vance of the German legal claim to territory east of the Oder­Neisse frontier, his refusal to give Germany any say in a possible European nuclear deterrent, his suggestion that only Germany’s continental neighbors should de­cide the terms of a German peace settlement, have produced a disil­lusioning effect in Germany. Still, the hope for some form of closer West European union, with France and Germany as the nucleus, dies hard. This explains in part Aden­auer’s sharp attack on the ne­gotiations in Geneva looking to a ban on proliferation of nuclear weapons. This attack somewhat embarrassed Erhard during the campaign.

There have also been differences of opinion within the CDU about the desirability of creating a so-called "big coalition" of the CDU and the Social Democrats, the type of political set-up that ex­ists in neighboring Austria. Er­hard set his face like flint against any such arrangement. The elec­tion, he insisted, offered the voters a choice between his principles and those of his socialist opponent. A hybrid coalition government would obscure the issues and dam­age the whole idea of representa­tive democracy.

In summary, Erhard’s political position was more vulnerable be­cause of fissions and cleavages in the ranks of his own party.

3.         This was the first German national election in which the CDU standard-bearer was not the legen­dary Konrad Adenauer, the leader of the new Germany, based on political and personal freedom and private enterprise, which emerged from the wreckage left by the Nazis and the crushing military defeat. Erhard’s life experience had been in economics, not in politics; after three years in office as Chancellor he had to stand on his own political record. And in this record there was some fum­bling and bumbling, notably in dealing with Egyptian dictator Nasser’s attempts at blackmail in connection with the visit to Cairo of Walther Ulbricht, head of the Soviet puppet regime in the So­viet Zone of Germany. Adenauer, with the bluntness of age and long tenure of power, had never made any secret of his distaste for Er­hard as a successor; he only ac­quiesced reluctantly when it be­came clear that no other candidate commanded an equal measure of popularity. So Erhard faced the double handicap of being the first CDU standard bearer after the in­vincible Adenauer and of not re­ceiving the cordial support of his mighty predecessor.

4.         Erhard was not the choice of the German intellectual commun­ity; he probably ran second in the "egghead" vote. Some leading German novelists, such as Gunther Gras and Heinrich Boll, went on speaking tours for his opponent, Willy Brandt. Erhard was the butt of derogatory articles and car­toons ridiculing his type of cam­paigning, which was to hammer in a few basic ideas and principles with a supporting foundation of facts and figures.

5. The Social Democrats put on a tremendous drive to prove their respectability, their fitness to gov­ern, at least in a coalition. Since 1959 they had deleted from their party program the former de­mands for nationalization of the coal, iron, and steel industries and for comprehensive state planning of the economy. Pictures of Karl Marx and red flags vanished from their conventions. So did appeals to class struggle and class hatred. In an atmosphere of booming pros­perity and full employment the old Marxist dogma had lost all sense, all relevance to reality.

They had put up as their can­didate Willy Brandt, Mayor of West Berlin, who had never been a doctrinaire Marxist and who might be expected to possess some of the glamor attached to the de­fense of the freedom of West Ber­lin. And Brandt ran a very care­ful, cautious campaign which seemed designed to convince the German voters that the Social Democrats had evolved from a class party, committed to state control of the economy, into a progressive "people’s party," al­most indistinguishable from the CDU, except for the infusion of a few new ideas on internal re­forms.

Free Market Preferred

Given this background of handi­caps for Erhard, the pre-election polls indicating a neck-and-neck race—even the Social Democratic predictions that they would emerge from the polls as the strongest party—did not seem altogether un­reasonable. But, when the votes were counted, the people had de­cided otherwise. They preferred the tried and true champion of the free market economy to those who professed a late conversion to the idea that might have been dic­tated by electoral opportunism. They preferred the proved achieve­ments of the past to promises for the future. They placed the seal of a national plebiscite on a com­mitment to free private enterprise which has been of inestimable ben­efit to the German people them­selves, and to the whole free world.

The proved, observable experi­ence of Germany since the end of the war remains the shining exam­ple to which those who believe in the creative value of economic freedom may point. It is hard to imagine less favorable circumstances than those in which Er­hard, as German director of eco­nomic affairs under the occupation military government which ex­isted in 1948, made his historic wager on freedom of economic en­terprise. The German cities were in ruins. Hunger was widespread. The new currency, introduced after the increasingly worthless marks of the war and first post­war years had been removed from circulation, was a large question mark. The country was flooded with penniless refugees, Germans and people of German origin driven from their homes in the eastern provinces of Germany and from various countries in eastern and southeastern Europe.

Price Controls Abandoned

The Germans had not been ac­customed to a free economy for fifteen years: for one Nazi institu­tion the occupation powers took over was a rigid system of wage and price controls, which may have been admirable on paper, but produced no consumer goods. The favored method of trade was bar­ter, the preferred medium of cur­rency was cigarettes.

The German authorities at that time did not possess the right to change a single fixed price or wage. But there was a loophole, of which Erhard was quick to take advantage. The cumbersome, un­workable system could be dis­carded as a whole. And this is what Erhard did, in July, 1948. When the American military gov­ernor, General Lucius Clay, called up Erhard to inform him that all the American economic advisers were gravely concerned by this step, Erhard replied: "So are mine." But General Clay, himself a believer in free enterprise, let the experiment stick and, after some initial difficulties, the suc­cess was beyond the most opti­mistic expectations.

The cities were rebuilt and bloomed again. What had been bare shop windows filled up, as if by magic, not only with neces­sities, but with luxury goods that served as incentives. The currency, backed by ever larger gold re­serves, became probably the hard­est in Europe, after the Swiss franc. The refugees, who at first seemed a cruel, almost hopeless social burden, proved a tremen­dous economic asset. On this point, in various trips to Germany, I found a multitude of concrete ex­amples.

In Düsseldorf, capital of the in­dustrial state, North Rhine-West­phalia, I met a prominent busi­nessman, Mr. Schroeder, owner of a flourishing cosmetics factory. He had owned a similar plant in Dresden, in the Soviet Zone. Real­izing that private business in the Soviet Zone was doomed, he packed up his business blueprints, took with him a few trained specialists, and moved to Düsseldorf. (This, of course, occurred before the Berlin Wall was built.) His new factory is returning a good profit; his plant in Dresden is declining, as he hears from some of his old workers, for lack of efficient man­agement and technical know-how. As in countless similar cases, the loss of the Soviet Zone has been the gain of the Federal Republic.

Another example of the "brain drain" that led to the erection of the Wall was given by a German young woman whom I met in an Austrian mountain resort. She spoke excellent English and spent part of her vacation time reading American and British authors. She remarked that, of her entire high-school graduating class in a town in East Germany, all but one, who felt the obligation to care for an invalid mother, had gone to West Germany in search of more attractive opportunities. Multiply the experience of this girl and of businessman Schroeder many thousand times and one has found not the least of the reasons why the Federal Republic is a good ten or fifteen years ahead of the Soviet Zone in the pace of recovery and expansion, even though the people on the two sides of the zonal boundary are Ger­mans, with the same language and educational standards.

Some Problems Remain

It would be misleading exag­geration to represent the economic history of the Federal Republic as an unbroken series of successes. As Minister of Economics and as Chancellor, Erhard has been obliged at times to make conces­sions to pressure groups, to busi­ness groups, farmers, trade-un­ions. And the very success of the German "economic miracle," para­doxically enough, has created some unforeseen difficulties and prob­lems.

Letting people alone to make as much money as they honestly can has proved a marvelous formula for eliminating unemployment. It is accurate to say that in West Germany today there are no un­employed, only unemployables. Not only has all the normal unemploy­ment in West Germany been ab­sorbed; some 12 million refugees who arrived penniless and desti­tute from East Germany, from the Soviet Zone, the Sudeten area of Czechoslovakia, and other for­eign lands have been swallowed up in the demand for manpower of expanding industry and foreign trade. More than that, about 1.2 million foreign immigrant work­ers, Italians, Spaniards, Portu­guese, Greeks, Turks, and others, have come to Germany. And there is still a labor shortage.

Despite a tradition of hard work, Germans are only human. They are apt to slack off a little when they know that they can­not be fired or, if they are, can easily find another job around the corner. And the shortage of labor has helped to slow down the phen­omenally fast growth rates of the nineteen fifties.

Freedom a Powerful Tonic

But on balance, and in compari­son with neighboring countries, Dr. Erhard’s special brand of four-freedoms-medicine (free markets, free trade, free consum­er choice, freedom of currency ex­change) has been a most stimulat­ing tonic for his countrymen. Foreign correspondents and other observers may have found a little dull Erhard’s reiterated listing of statistics illustrating the enor­mous growth of German output and foreign trade to a point when Federal Republic has a far big foreign trade than the whole of the United Germany of pre-war times and has passed Great Brit­ain to become the second largest trading nation of the world.

But the German voters were not bored at all, because those of them who were old enough to re­member the dark drab years of war and early postwar occupation could relate this account of na­tional well-being to their own im­provement in individual well-be­ing: first motor-cycles, then cars, travel in foreign countries on an unsurpassed scale, more educa­tional possibilities for their chil­dren. They gave Erhard a re­sounding vote of confidence; and this vote, in the outside world, should inspire satisfaction as a proof of German political matur­ity and resolution to continue on a path that has led to political stability and economic prosperity.

 

***

On Law and Freedom

The end of law is not to abolish or restrain, but to preserve and enlarge freedom. For in all states of created beings capable of laws, where there is no law there is no freedom. For liberty is to be free from restraint and violence from others, which cannot be where there is not law….

John Locke, Two Treatises on Civil Government (1690)

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December 1965

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