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A Tribute to Ludwig Erhard (December 1, 1966)

Stagnating economic growth and budget deficits were further indications of Chancellor Ludwig Erhard’s weak leadership skills and the crisis brewing within the coalition. When the Free Democrats left the governing coalition on October 27, 1966, and the 1967 budget failed to pass the Bundestag the next day, Erhard tendered his resignation.

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The End of a Chancellorship

He will go down in German history as the man who, acting out of solitary resolve against everyone, against his own officials and those of the Allies alike, ended, with a single stroke of the pen, production controls on industrial goods one Sunday in 1948. Ludwig Erhard will go down in history as the man who gave a people who were defeated, impoverished, and at rock bottom the opportunity to exercise their own strengths to attain prosperity once again.

As we say goodbye to Chancellor Ludwig Erhard, to this man at the forefront of political events, we need to ask ourselves what made our second chancellor fail after only three years. First, however, we must thank him for his exceptional achievements, from which we benefit today and will continue to benefit from tomorrow. In retrospect, we all know now that, in terms of economic policy, Ludwig Erhard was the man who shaped history in the years of reconstruction, just like Konrad Adenauer. Indeed, it was anything but a given that the era of planning, rationing, and state-paternalism would be halted so abruptly at zero hour [Stunde Null].

Exceptional Courage

Erhard did this out of his commitment to the economic theory of neoliberalism, which he adhered to, and still adheres to today, with fervor, even passion. He thus found himself in agreement with an unusual situation. The situation was characterized by the abuse of the communal spirit, by the corrosion not only of the state, but also the idea of the state, and by the sterility of the controlled economy. In those days, the only forces within the German population that could be mobilized to get people to pull themselves up by their bootstraps through pure effort were family and self-interest. Erhard cleared the way for those forces and thereby demonstrated exceptional courage. He was happy to be able to liberalize: foreign trade, competition, the capital market, the free convertibility of the Deutschmark. He was the man who called for courage in consumption, who promised prosperity for all, and who was proven right, again and again, in the process.

The Dynamite of Deficits

It is all the more surprising, then, that that same Ludwig Erhard failed on issues of economic and financial policy. It seems quite paradoxical, and some will assume that these issues were just used as a pretext. Surely, they were not the only reasons for the end of this chancellorship. But it is undeniable that, as times changed, what used to be Erhard’s strength turned into his weakness: the devotion with which the economics professor clung to his liberal theories. At the beginning of this year, this devotion even kept him from realizing that fast government action in the area of economic policy was needed to prevent unrest among our population. It caused him to approach the Law on Stability and Growth only tentatively and almost reluctantly. And it evidently also prevented him from recognizing the dynamite of growing budget deficits until it was too late.

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