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Tuesday, March 21, 2017

Make Germany Miraculous Again

Ludwig Erhard freed the post-war German economy and is justly renowned as "the Architect of a Miracle."

Nothing is really changing politically in Berlin. To begin with, Germany’s socialists are currently in a coalition with the conservatives, forming an immense majority in parliament. The coalition has slowed down public spending cuts and reforms enacted by the previous government. The German Left is at risk of fading into irrelevance as its choices regarding coalitions are limited: it’s either Merkel once again or going down the road of a three-party coalition.

Berlin should be concerned with how a freer economy can unleash the potential of hard-working Germans.In this post-crisis economy, Berlin shouldn’t be interested in who organizes a government reshuffle in September, but should instead be concerned with how a freer economy can unleash the potential of hard-working Germans.

Germany’s historic free-market champion, former conservative politician Ludwig Erhard, should serve as a role model for the ideological emptiness of contemporary German politics. Erhard is known to be responsible for the most extensive period of economic deregulation in modern times. Instead of following the temptation of slowly moving towards more economically interventionist policies, Berlin should follow Erhard’s example who believed that, instead of central planners, individuals should decide a country’s future.

Building the Economy on Individuals

Erhard, a German conservative contentious for his free-market stance under chancellor Konrad Adenauer’s government from 1949 to 1963, is known as the “Architect of a Miracle.” In a West Germany ravaged by World War II, Erhard believed that only individuals could design the future of the country. As a result, he buried the Allied price controls which had significantly lowered food production, rescinded tariffs, and cut income taxes by 15 percent. Erhard unleashed a wave of deregulation that made savings skyrocket and tripled industrial output in only two years.

But Erhard insisted that none of the German Economic Miracle was of his credit. In fact, in his 1958 book Prosperity through Competition, he lays out an outstanding definition of free market capitalism:

What has taken place in Germany … is anything but a miracle. It is the result of the honest efforts of a whole people who, in keeping with the principles of liberty, were given the opportunity of using personal initiative and human energy.

Even though Germany might not be in the same economic situation it was at the end of World War II, the creeping economic interventionism of past years still burdens its economy. Germany’s public debt is currently at 78 percent of GDP, far off from the 60 percent criteria of the Maastricht Treaty. Berlin might live off the advantage of low expectations when compared to countries like neighbouring France, but its attractiveness to foreign industries has been down in recent years, especially because of its electricity prices – the highest in Europe, created by the government’s decision to phase out nuclear energy – and the 2015 introduction of a national minimum wage.

Germany needs to regain a vision for the future through free market principles. If Thatcherism has managed to prevail in the United Kingdom, then the legacy of Ludwig Erhard shouldn’t be forgotten either. It is time for German free marketers to provide the country with the ideological diversity it needs.

  • Bill Wirtz is a Young Voices Advocate and a FEE Eugene S. Thorpe Fellow. His work has been featured in several outlets, including Newsweek, Rare, RealClear, CityAM, Le Monde and Le Figaro. He also works as a Policy Analyst for the Consumer Choice Center.

    Learn more about him at his website