History Highlights

Ludwig Erhard crafted West Germany’s post-World War II economic recovery, the German “economic miracle.”

Erhard shepherded the new West German economy through a recovery that outpaced the growth of all the European countries that had won the war.

Some credit for European recovery is due to the Marshall Plan, which provided assistance of $12 billion (equivalent to $120 billion today) but it was spread among 18 countries…for example, Britain received 26%, France 18% and Germany 11%). So you could say it helped but it was not the reason that Germany’s recovery outpaced the growth of the other European countries that had won the war. And it should be kept in mind that the Marshall Plan benefits were offset by the Morgenthau Plan that shut down German industry after the war, intending to convert Germany into an exclusively agricultural economy. After 2 years that plan was dropped when the US realized that Europe would not recover without a free German economy.

Erhard was put in charge of Germany’s economy under the direction of the Allies who controlled the western part of Germany after WWII. But Erhard proved to be fiercely independent and decisive when he defied allied supreme commander Gen. Lucius Clay in the darkest days of the postwar economic crisis. He abolished price controls at the same moment that he introduced the new German currency. This decision, considered by many a disastrous mistake, became instead the foundation of Germany’s economic rebirth. The black market disappeared, shortages ended, inflation halted, and the population’s strong commercial instincts took hold once again.

In 1949, when the Federal Republic of (West) Germany was established, Erhard was appointed Economics Minister by Germany’s new Chancellor Konrad Adenauer. For the succeeding 14 years Erhard shepherded the new West German economy through a recovery that outpaced the growth of the European countries that had won the war.

Erhard’s goal was for Germany to be a social market economy, combining open market competition with a strong central bank and a social safety net to protect the disadvantaged. His decisiveness and conviction that markets could work even in the darkest hour, provided inspiration to many politicians and economists caught in economic crises in other countries.

In 1963 Erhard himself became Chancellor, but in 1966 his own Cabinet opposed his proposed economic reforms to cope with a budget deficit and recession, and he resigned. Subsequently he was appointed honorary chairman of the Christian Democratic Union, even though he was not even a member of the political party. 

Erhard died in Bonn, West Germany, in 1977.

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