Ludwig Erhard

Ludwig Wilhelm Erhard (4 February 1897 – 5 May 1977) was a German politician affiliated with the CDU and Chancellor of West Germany from 1963 until 1966. He is notable for his leading role in German postwar economic reform and economic recovery ("Wirtschaftswunder", German for "economic miracle"), particularly in his role as Minister of Economics under Chancellor Konrad Adenauer in 1949, prior to his own ascension to the Chancellorship in 1963.

Life and work
Born in Fürth, Kingdom of Bavaria, Erhard was a commercial apprentice from 1913 to 1916. After his apprenticeship he worked as retail salesman in his father's draper's shop.

He joined the German forces during World War I 1916 as an artilleryman, fought in Romania and was seriously injured near Ypres in 1918. Erhard could no longer work as a draper and began to study economics, first in Nuremberg, later in Frankfurt am Main. He received his PhD from Franz Oppenheimer in 1925.

During his time in Frankfurt he married Luise Lotter (1893–1975), widow Schuster, on 11 December 1923. After his graduation they moved to Fürth and he became executive in his parents' company in 1925. After three years he became assistant at the Institut für Wirtschaftsbeobachtung der deutschen Fertigware, a marketing research institute. Later, he became deputy director of the institute.

During World War II, he worked on concepts for a postwar peace; however, officially such studies were forbidden by the Nazis, who had declared total war. As a result, Erhard lost his job in 1942 but continued to work on the subject by order of the "Reichsgruppe Industrie". In 1944 he wrote War Finances and Debt Consolidation (orig: Kriegsfinanzierung und Schuldenkonsolidierung). In this study he assumed that Germany had already lost the war. He sent his thoughts to Carl Friedrich Goerdeler, a central figure in the German resistance against the Nazi government, who recommended Erhard to his comrades. Erhard discussed his concept with Otto Ohlendorf, deputy secretary of state in the Reichsministerium für Wirtschaft, as well. Ohlendorf himself spoke out for "active and courageous entrepreneurship (aktives und wagemutiges Unternehmertum)", which was intended to replace bureaucratic state planning of the economy after the war. Erhard was an outsider who supported the resistance, who personally and professionally rejected Nazism, and who endorsed efforts to effect a sensitive, intelligent approach to economic revival during the approaching postwar period.

Postwar
After the war, Erhard became economic consultant for the American military administration of Bavaria who made him Minister of Economics in the Bavarian cabinet of Wilhelm Hoegner. After the American and British administration had created the Bizone, Erhard became chairman of the Sonderstelle Geld und Kredit in 1947, an expert commission preparing the currency reform. The newly created Special Department for Money and Credit in Germany's western zones of occupation in September 1947, under Erhard, focused attention immediately upon the general theme of monetary and financial recovery, resulting in the adoption of the so-called Homburg plan in April 1948 that set the stage for the recovery of the economy.

In 1948 he was elected Director of Economics by the Bizonal Economic Council. On 20 June 1948, the Deutsche Mark was introduced. Erhard abolished the price-fixing and production controls that had been enacted by the military administration. This exceeded his authority, but he succeeded with this courageous step.

Minister of Economics
In the first free elections following the Nazi era, Erhard stood for election in a Baden-Württemberg district and was elected. In September, he was appointed Minister of Economics in the first cabinet of Konrad Adenauer, and kept the post for all 14 years of Adenauer's tenure. His party made his concept of social market economy part of the party platform.

A staunch believer in economic liberalism, Erhard joined the Mont Pelerin Society in 1950 and used this influential body of liberal economic and political thinkers to test his ideas for the reorganization of the West German economy. Some of the society's members were members of the Allied High Commission and Erhard was able to make his case directly to them. The Mont Pélerin Society welcomed Erhard because this gave its members a welcome opportunity to have their ideas tested in real life. Late in the 1950s, Erhard's ministry became involved in the struggle within the society between the European and the Anglo-American factions, and sided with the former. Erhard viewed the market itself as social and supported only a minimum of welfare legislation. However Erhard suffered a series of decisive defeats in his effort to create a free, competitive economy in 1957; he had to compromise on such key issues as the anti-cartel legislation. Thereafter, the West German economy evolved into a conventional welfare state from the basis that had been already laid in the 1880s by Bismarck. According to Alfred Mierzejewski the generally accepted view is that Germany has a Social Market Economy, that the post-war German economy has evolved since 1948, but the fundamental characteristics of that economic system have not changed, while in his opinion the Social Market Economy had begun to fade in 1957, disappearing entirely by the late 1960s.

In July 1948, a group of southwest German businessmen had attacked the restrictive credit policy of Erhard as Economic Director. While Erhard had designed this policy to assure currency stability and stimulate the economy via consumption, business feared the scarcity of investment capital would retard economic recovery. Erhard was also deeply critical of a bureaucratic-institutional integration of Europe on the model of the European Coal and Steel Community.

Erhard's decision, as Economic Director for the British and American occupation zones, to lift many price controls in 1948, despite opposition from both the social democratic opposition and Allied authorities, and his consistent advocacy of free markets, did help set the Federal Republic on its phenomenal growth path. Erhard's financial and economic policies soon proved widely popular as the German economy made a "miracle" recovery to rapid growth and widespread prosperity in the 1950s, overcoming wartime destruction and successfully integrating millions of refugees from the east.

Chancellor
After the resignation of Adenauer in 1963, Erhard was elected Chancellor with 279 against 180 votes in the Bundestag on 16 October. In 1965, he was re-elected. From 1966 to 1967, he also headed the Christian Democratic Union as de facto chairman, despite the fact that he was never a member of that party (which made his election to the chairmanship irregular and void de jure), as he never formally filed a membership application despite pressures from Chancellor Adenauer. The reasons for Erhard's reluctance are unknown, but it is probable that they stemmed from Erhard's general scepticism about party politics. However, Erhard was regarded and treated as a long-time CDU member and as the party chairman by almost everyone in Germany at the time, including the vast majority of the CDU itself. The fact that he was not a member was known only to a very small circle of party leaders at the time, and it did not become known to the public until the year 2007, when the silence was finally broken by Erhard's close advisor Horst Wünsche.

Foreign policy
Erhard explored using money to make possible reunification of Germany. Despite Washington's reluctance, Erhard envisaged offering Nikita Khrushchev, the leader in Moscow, massive economic aid in exchange for more political liberty in East Germany and eventually for reunification. Erhard believed that if West Germany were to offer a "loan" worth $25 billion US to the Soviet Union (which Erhard did not expect to be repaid), then the Soviet Union would permit German reunification. The acting American Secretary of State George Wildman Ball described Erhard's plan to essentially buy East Germany from the Soviet Union as "half-baked and unrealistic". Erhard's objective corresponded in time with Khrushchev rethinking his relations to West Germany. The Soviet leader secretly encouraged Erhard to present a realistic proposal for a 'modus vivendi' and officially accepted the chancellor's invitation to visit Bonn. However, Khrushchev fell from power in October 1964, and nothing developed. Perhaps more importantly, by late 1964, the Soviet Union had received a vast series of loans from the international money markets, and no longer felt the need for Erhard's money.

Erhard believed the major world problems were soluble through free trade and the economic unity of Europe (as a prerequisite for political unification); he alienated French president Charles de Gaulle, who wanted the opposite. Support for the American role in the Vietnam War proved fatal for Erhard's coalition. Through his endorsement of the American goal of military victory in Vietnam, Erhard sought closer collaboration with Washington and less with Paris. Erhard's policy complicated Allied initiatives toward German unification, a dilemma that the United States placed on the back burner as it focused on Southeast Asia. Erhard failed to understand that American global interests—not Europe's needs—dictated policy in Washington, D.C., and he rejected Adenauer's policy of fostering good relations with both the United States and France in the pursuit of West German national interest. Faced with a dangerous budget deficit in the 1966–1967 recession, Erhard fell from office in part because of concessions that he made during a visit to U.S. President Lyndon B. Johnson. In 1961, while vice president, Johnson had hosted Konrad Adenauer some two years before the German statesman vacated the chancellorship of the German Federal Republic. In December 1963, less than a month after he had assumed the American presidency upon the assassination of John F. Kennedy, Johnson staged the first ever presidential barbecue in Erhard's honor. The event was held in and about the Stonewall Elementary School gymnasium in Stonewall in the Texas Hill Country. Among the entertainers was the internationally known concert pianist Van Cliburn, who appeared in a business suit, rather than his usual formal wear. As a member of the Texas House of Representatives, Samuel Ealy Johnson, Jr., Johnson's father, been sensitive to his German-American constituency and had opposed the Creel Committee's attempt to disparage German culture and isolate German-Americans during World War I. Adenauer and Erhard had also stayed at Johnson's ranch in Gillespie County.

Erhard's fall suggested that progress on German unification required a broader approach and a more active foreign policy. Chancellor Willy Brandt in the late 1960s abandoned the Hallstein Doctrine of previous chancellors and employed a new "Ostpolitik", seeking improved relations with the Soviet Union and Eastern Europe and thereby laying the groundwork for détente and coexistence between East and West. In the 1980s Chancellor Helmut Kohl, however, reverted to Erhard's approach in collaborating with the Reagan administration in its hard-line anti-Soviet policy.

Resignation and retirement
On 26 October 1966, Minister Walter Scheel (FDP) resigned, protesting against the budget released the day before. The other ministers who were members of the FDP followed his example — the coalition was broken. On 1 December, Erhard resigned. His successor was Kurt Georg Kiesinger (CDU), who formed a grand coalition with the SPD.

Erhard continued his political work by remaining a member of the West German parliament until his death in Bonn on 5 May 1977. He was buried in Gmund, near the Tegernsee. The Ludwig Erhard-Berufsschule (professional college) in Paderborn, Fürth and Münster are named in his honour.

Erhard's First Ministry
Erhard's first ministry was from 16 October 1963 – 26 October 1965.


 * Ludwig Erhard (CDU) – Chancellor
 * Erich Mende (FDP) – Vice Chancellor and Minister of All-German Affairs
 * Gerhard Schröder (CDU) – Minister of Foreign Affairs
 * Kai-Uwe von Hassel (CDU) – Minister of Defense
 * Hermann Höcherl (CSU) – Minister of the Interior
 * Rolf Dahlgrün (FDP) – Minister of Finance
 * Ewald Bucher (FDP) – Minister of Justice
 * Kurt Schmücker (CDU) – Minister of Economics
 * Theodor Blank (CDU) – Minister of Labour and Social Affairs
 * Werner Schwarz (CDU) – Minister of Food, Agriculture, and Forestry
 * Hans-Christoph Seebohm (CDU) – Minister of Transport
 * Paul Lücke (CDU) – Minister of Construction
 * Bruno Heck (CDU) – Minister of Family and Youth
 * Elisabeth Schwarzhaupt (CDU) – Minister of Health
 * Hans Lenz (FDP) – Minister of Scientific Research
 * Walter Scheel (FDP) – Minister of Economic Cooperation
 * Heinrich Krone (CDU) – Minister of Special Tasks
 * Richard Stücklen (CSU) – Minister of Posts and Communications
 * Ernst Lemmer (CDU) – Minister of Displaced Persons, Refugees, and War Victims
 * Alois Niederalt (CSU) – Minister of Bundesrat and State Affairs
 * Werner Dollinger (CSU) – Minister of Federal Treasure


 * Changes
 * 16 June 1964 – Ludger Westrick (CDU) succeeds Krone as Minister of Special Tasks.
 * 1 April 1965 – Karl Weber (CDU) succeeds Bucher as Minister of Justice.

Erhard's Second Ministry
Erhard's Second Ministry occurred from 26 October 1965 – 1 December 1966.


 * Ludwig Erhard (CDU) – Chancellor
 * Erich Mende (FDP) – Vice Chancellor and Minister of All-German Affairs
 * Gerhard Schröder (CDU) – Minister of Foreign Affairs
 * Kai-Uwe von Hassel (CDU) – Minister of Defense
 * Paul Lücke (CDU) – Minister of the Interior
 * Rolf Dahlgrün (FDP) – Minister of Finance
 * Richard Jaeger (CSU) – Minister of Justice
 * Kurt Schmücker (CDU) – Minister of Economics
 * Hans Katzer (CDU) – Minister of Labour and Social Affairs
 * Hermann Höcherl (CSU) – Minister of Food, Agriculture, and Forestry
 * Hans-Christoph Seebohm (CDU) – Minister of Transport
 * Ewald Bucher (FDP) – Minister of Construction
 * Bruno Heck (CDU) – Minister of Family and Youth
 * Elisabeth Schwarzhaupt (CDU) – Minister of Health
 * Gerhard Stoltenberg (CDU) – Minister of Scientific Research
 * Walter Scheel (FDP) – Minister of Economic Cooperation
 * Richard Stücklen (CSU) – Minister of Posts and Communications
 * Johann Baptist Gradl (CDU) – Minister of Displaced Persons, Refugees, and War Victims
 * Alois Niederalt (CSU) – Minister of Bundesrat and State Affairs
 * Werner Dollinger (CSU) – Minister of Federal Treasure


 * Changes
 * 28 October 1966 - Hans-Christoph Seebohm (CDU) succeeds Mende as Vice Chancellor, remaining also Minister of Transport. Johann Baptist Gradl (CDU) succeeds Mende as Minister of All-German Affairs.  The other FDP ministers, Dahlgrün and Scheel, also resign.
 * 8 November 1966 - Kurt Schmücker succeeds Dahlgrün as Minister of Finance. Werner Dollinger (CSU) succeeds Scheel as Minister of Economic Cooperation, remaining also Minister of Federal Treasure.