Lawrence W. Reed wrote an article titled Ludwig Erhard: Architect of a Miracle. Erhard was the first Minister of Economic Affairs of the Federal Republic of Germany, a position he held from 1949 to 1963.
« By every measure, Germany was a disaster in 1945—defeated, devastated, divided, and demoralized—and not only because of the war. The Nazis, of course, were socialist (the name derives from National Socialist German Workers Party), so for more than a decade the German economy had been “planned” from the top. It was tormented with price controls, rationing, bureaucracy, inflation, cronyism, cartels, misdirection of resources, and government command of important industries. Producers made what the planners ordered them to. Service to the state was the highest value.
Ludwig Erhard reversed those practices, and in doing so he gave birth to a miraculous economic recovery. »
« As a teenager, Ludwig heard his father argue for classical-liberal values in discussions with fellow businessmen. Young Ludwig resented the burdens that government imposed on honest, independent businessmen like his father. He developed a lifelong passion for free-market competition because he understood what F. A. Hayek would express so well in the 1940s: “The more the state ‘plans,’ the more difficult planning becomes for the individual.” »
« In 1947 he became chair of an important monetary commission. »
« Erhard advocated a fair field and no favors. His prescription for recovery? The state would set the rules of the game and otherwise leave people alone to restart the German economy. In June 1948 he “unilaterally and bravely issued a decree wiping out rationing and wage-price controls and introducing a new hard currency, the Deutsche-mark,” in the words of the economist William H. Peterson. Erhard did so “without the knowledge or approval of the Allied military occupation authorities” and made the decree “effective immediately.” »
« General Clay protested that Erhard had “altered” the Allied price-control program, but Erhard insisted he hadn’t altered price controls at all. He had simply abolished them. »
« In 1949 Erhard won a seat in the Bundestag (the German parliament) in the first free elections since 1933. In the subsequent government of Chancellor Konrad Adenauer, he was appointed the first economics minister of the newly constituted West German republic, a role he would hold until 1963. »
« The pace of growth dwarfed that of European countries that received far more Marshall Plan aid than Germany ever did… The incredible turnaround of the 1950s became widely known as the “German economic miracle,” »
Erhard succeeded Adenauer as Chancellor from 1963 to1966.
The article is excerpted from Reed’s book Real Heroes: Inspiring True Stories of Courage, Character, and Conviction (2016) and was republished by the American Institute for Economic Research (AIER) and the Intercollegiate Studies Institute. Reed is the President Emeritus of the Foundation for Economic Education (FEE).
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