Chapter VI MINISTER FOR ECONOMIC AFFAIRS NOT THE REPRESENTATIVE OF PRIVATE INTERESTS

I HAVE IN FRONT OF ME newspaper clippings from those first years of my work as Director of Economic Administration in Frankfurt and as Minister for Economic Affairs in Bonn. I was then called ‘Minister for Economic Affairs—Enemy of the Consumer’, ‘Erhard—Minister for Heavy Industry’, ‘The Patron Saint of Hoarders and Profiteers’, and variations of similar titles were given to me.

The accusations have, of course, long since vanished from all serious discussion, and even the most malevolent of my opponents have ceased calling me such names. After my long efforts, and many battles with the representatives of important interests in the German economy, they have had to recognize the unworthiness of their views.

However that may be, the theme of the relationship of the Minister for Economic Affairs to the citizen, the link between Government leadership of the economy and the economy itself, and, above all, the question of the place of the economy within the whole life of the State and the social order, create such interesting and important problems that they should be examined more closely. This is all the more so because the fundamental principle of market economy shares those same maxims which should be followed by a modern social and freedom-loving democracy.

I should like to put at the beginning of these reflections a sentence which I have often repeated: the yardstick and criterion of what is good or bad in economic policy are not dogmas or the points of view of pressure groups, but exclusively the human being, the consumer, the people. Economic policy can only be regarded as good if and as long as it is regarded simply as useful and welcomed by the individual.

Whoever takes these reflections to their logical conclusion must agree with me that in every national economy vested interests exist. But these must not be allowed to determine economic policy, and no useful synthesis can be derived from a conflict between these interests. Any fragmentation of the national economy into vested interests cannot therefore be allowed. We must not take the path of dissolution; we must not withdraw from that real comprehensive order of economic society which alone can guarantee the social harmony of the nation. Our most serious purpose must be to meet this danger.

Employers Must be Responsible

I have never allowed any doubts to arise about my fundamental beliefs. At the C.D.U. Party meeting at Recklinghausen on August 29, 1948, I explained:

‘I do not regard myself as the representative of special interests, and certainly not as the representative of the interests of industry or trade. It would be quite wrong to assume that. To be responsible for economic policy means to be responsible to the people as a whole. I am deeply convinced that the difficult problems facing us can only be solved if in using the market economy we manage not to favour groups, but rather to secure a decent standard of living for all our people and continually increase it through hard work and higher output. It is quite wrong to brand me as a man who is only interested in defending certain interests. The contrary is true. In the last analysis I demand not only great sacrifices from those responsible businessmen who have power over the production and distribution network of the economy, but also their understanding and sense of responsibility as well.’

I cite these examples from the early stages of the market economy to document once more that all those who later believed themselves able to assert their special interests and were then disappointed could not justify their actions by reference to my fundamental moral beliefs. I have always insisted that any sectional interest can only justify itself if it serves the interests of the whole community.

No group within the economy can demand special rights. That statement, however, does not contradict the fact that, when looked at by individuals, the economy is essentially made of parts. It is a question of striking a balance between those interests which brings about a general well-being.

In this connection I have on a former occasion pointed to the role of the State as supreme judge. I should like here to use the perhaps somewhat banal picture of a game of football, if I may. I believe that, as the referee is not allowed to take part in the game, so the State must not participate. In a good game of football it is to be noted that the game follows definite rules; these are decided in advance. What I am aiming at with a market economy policy is—to continue with the same illustration—to lay down the order and the rules of the game.

Freedom as the Main Aim

In a football eleven, for example, it is not customary to put all eleven men at the goal. If that were done, the spectators would rightly begin to whistle, since they would regard this as unfair and contrary to the rules. We demand from ‘forwards’ that they should go forward. If they believed that they should ‘pack the goal’ or even stand in it, we should consider this inappropriate and disturbing, and would not tolerate it. The economic order has to take into account similar functions. I believe that it is thanks to this economic model of our economic order which is behind all my actions that we have been successful. This model remains valid even if on occasion we have had to be prepared, and shall have to be prepared, to abandon it.

The spectators of a game of football would deeply resent the players coming to an agreement about the number of goals this or that side was to be credited with, and then not playing a fair and interesting game as expected and paid for with gate money. In the same manner I conceive it to be the basis of any market economy to retain freedom of competition. This can only exist where nothing is permitted to suppress freedom, but where freedom is guaranteed by statute and is one of the most prized things in the community.

It is my firm conviction that we shall retain a free enterprise economy only for as long as the State protects freedom. If, on the other hand, free enterprise complains that that would be an unfair limitation of freedom by the State, then I can only reply that this is to misunderstand freedom, if in the name of freedom and with the dogma of freedom it is believed that freedom itself can be suppressed.

As there is in the State, that is, in the political social structure, an order based on basic constitutional law which regulates the life of man and his relations with others, so there is for the economy. Here responsibilities are clearly divided. The businessman is responsible for his own business; there he can rightly demand that his activities should remain free from all State intervention, in fact, that he may enjoy and exercise real freedom of enterprise and freedom of manoeuvre. I am at the head of those supporting the businessman in this demand. But the State alone must carry responsibility for economic policy. We know where it leads to if these two functions are confused.

These short explanations are meant to clarify how, according to my conception, the basis of market economic policy should be formed, and where I should like the dividing lines to be drawn between the individual and the State.

It has to be explained why I consider these questions of such decisive importance, and why I consider the economy to have such vital importance. But I do not in any way wish to give the impression of believing that a patent medicine can be found in the economy for all our social troubles. Far from it! As the individual needs his physical life to be a human being in the transcendent sense, to be able to unfold his soul and spirit, so does a people. The economy is perhaps the most primitive aspect, but it is also the most essential; only on the basis of a healthy economy can society fulfil its true and final aims.

This basis must be sound, if tensions and splits are not to be fostered. To give a spiritual and material direction is in the final instance the task of politics. If my views allow suspicions to arise that I overvalue the material side, I wish to declare that I believe, on the contrary, that, except perhaps for the genius, man can only become conscious of his personality and dignity if he is not plagued by material worries, and by the petty troubles of everyday life. That is, when, thanks to circumstance, the material side no longer plays a dominating role.

Division of Work Between the State and the Economy

It is, I repeat, not the task of the State to intervene directly in the economy, in any case not before the economy asks for such intervention. It does not fit into the picture of an economy based on the spirit of adventure if the State takes a hand in production. Such a position in the nature of things means that the economy must not call upon the State to represent its interests. It is essential that this be made clear.

It is impossible to ask the State on the one hand that it should refrain from economic activity, and then, at a given moment, to call on it for help. A division of work already exists between business undertakings in the sphere of operations and economic policy as the task of the State, and particularly of the Ministry for Economic Affairs. Sometimes I get the impression that, in view of these functions, mistakes are made or some uncertainties exist. I repeat that the State is exclusively responsible for economic policy within the framework of its democratic parliamentary competence and rights. Although the interest of the businessman in economic policy is legitimate, as is his demand to be heard, he and his associates must not practise economic policy.

If it is established that for the Federal Republic the liberal economy of former days, as well as the directed economy, are things of the past, then it is clearly a duty to clarify what is new in our economic policy. What is new is that the State these days no longer wishes to deal with the individual, and among other things the Minister for Economic Affairs no longer issues orders to businessmen; he has freed them from rubber stamps, permits, concessions and licences. This principle is applied: the businessman, as well as the worker and every other citizen, must be free in his personal activities.

This naturally does not imply uninhibited behaviour or licentiousness. Instead of the State’s direct command or—and this second is as important as the first—instead of renouncing all intervention, modern economic policy aims to utilize all available instruments granted by economic policy in order to free new energies continuously and open up new possibilities, but also to block all ineffectual paths. In other words, it aims, through a choice and combination of means, to urge the economy forward to progress and further expansion.

The Register of Sins

It must be admitted that much is still lacking in the conception mentioned here. In this connection I have once spoken of the extensive register of sins which are the signs of the erroneous wants and demands of the German economy and the shortcomings of economic policy in general. I then added that, regrettably, we had little reason to be particularly proud of the progress of the market economy so far.

I discuss elsewhere the tendency of German industry towards monopolies. High in the register of sins, too, is the demand to extend collective compulsory insurance. To all this belongs the false idea that the economic fate of individual economic or professional groups can be reduced to equality or improved. I am thinking of the demand for special adjustable tariffs which would eliminate competition from abroad. Added to it are certain attempts to liberalize our foreign trade with care, or, as it is customary to put it, to act responsibly (meaning to move as slowly and timidly as possible). The German public knows about the strong resistance to lower tariffs and of the objections to a complete return to free convertibility. All these examples demonstrate the flaws that still disfigure the free market economic system.

These points may suffice to show how little we have succeeded in disciplining vested interests within the State. We have not so far found a final solution, and it may be asked whether it will ever be possible to complete such a task.

The various attempts of these groups to influence parliamentary and Government views must be admitted. This is true not only of Germany, but of other parts of the world. But it is high time to agree that this problem is a real ill, or, at least, a critical problem of our time.

As a rule this all-in wrestling takes place between groups representing certain interests on the one hand and the State entities on the other. The final decision naturally can only rest with the latter. But the dividing line between the two is not definite enough to allow me to speak with a good conscience of any such thing as a socio-economic or Government political order.

Arising from the economic-political conception which I have outlined above, I believe it to be our duty during a time of reconstruction to oppose everything looking remotely like protection or favouritism for certain groups. We must act as a unit, and thus keep different interests in the background. A suspicious and destructive tendency which has recently been noted is to think in terms of group interests and to obtain special privileges for them. This is an evil which I want kept within bounds.

Dangerous Special Interests

My opposition to the demands of these groups is based on my conviction that, from the economic and political points of view, it is simply impossible for the State to dole out a little more or less here or there in the way of gifts or favours. Such actions would lead to an untenable situation for the State and especially for the Ministry of Economic Affairs. Where would be the yardstick by which it could be decided that this or that branch, this group or that profession shall be favoured by the State, while others, for some reason, must stand back? Such action is fundamentally wrong.

The solution can never, or only rarely, be found by striving for single targets, but lies in controlling the entire economic system, from which eventually all will profit. If the national economy as such flourishes—and here it should be understood that I consider the economy as an indivisible whole of our socio-economic life—then all the branches and sections of the economy will also flourish.

My scepticism as regards all special demands has been reinforced by experience. For example, it is generally known that I have supported the law concerning skilled craftsmen,⁷ but in the years since it was passed I have had to fight attempts aimed at an imitation of this special regulation, where conditions differed radically, both materially and sociologically. Sometimes I gained the impression that we were moving towards a co-operative State based on the old guilds. No one can resent my energetic opposition of such tendencies. It would be absolutely disastrous for West Germany to take this path. What has brought us world-wide praise is the dynamic which we have developed, the will to expand, the courage to produce competitively and to carry responsibility.

To take into account special interests, to give in to individual demands of certain economic circles is impossible because of the inter-dependence of all economic activity. Every single economic measure reacts even on those sectors which are not directly included in the action, and which, seen superficially, appear unlikely to be affected.

The Fairy Tale of Classification

Human, all too human, factors play their part. What is sauce for the goose is sauce for the gander. Envy, which particularly afflicts us Germans, plays its important part. An advantage granted to one does not allow his neighbour to rest quietly. It must be remembered here what a big part officials play in our social life. The ‘success’ of one group quickly animates the members of another group to goad their official, their spokesman or their leader to similar ‘achievements’. But it is precisely this which leads to fragmentation and forces us off the path leading to the welfare of all. If I remain sceptical as regards these efforts, I do so because I like to look further than this particular phase. If the background is brought into the light, then as a rule little more remains than a desire to be a bit more comfortable, to attempt to escape from tough competition and to acquire for the group concerned an undeservedly large part of the economic cake.

No one is prepared to accept that in the nature of things a lesser performance is essentially expressed in a lower return. All sorts of demands can be made, but certainly not one which expects that, with a lower performance, less effort and paralysing restraints, more can be done, and that every individual will be better off.

Enterprising economic undertakings should certainly show that kind of pride which is expressed by the urgent desire to be saved and freed from too much State interference.

From Citizen to Subject

I have written earlier of the ‘register of sins’ against the market economy. Here I want to discuss some other events which are relevant. Side by side with the demands of certain industrial circles for monopolies are requests of certain trades to be protected by special laws. I shall start with the simplest—the attempt to have trade designations⁸ legally protected. As regards these attempts I can only ask: is it the title and rank which is the sign of an individual’s ability, or is this not apparent from his work, his performance, his personality? Is it really essential to have trade designations to exercise a trade? I do not wish to dramatize the possible damage which might result from such rules. Nevertheless I consider such demands to be dangerous, for, after such a first step, a second would surely follow. It can be argued that someone with a definite trade designation would then have to fulfil definite fixed duties. He would not only have to offer proofs of qualification but also a moral guarantee to exercise that protected trade. Then there would be new categories of trades requiring combined abilities, and slowly the free citizen would return to the status of a subject who has to be servile in order to maintain himself.

It is, in fact, just as I once said: The privileged, who are inside, want to make life difficult for all those who want to join them. If I look for the spirit animating these efforts then I am forced to declare the ugly truth: it is pure egoism and nothing else which tries to combine such demands with sociological ideals and ethical principles. In fact protection is demanded, fences are requested to be built around trades, defences are sought to retain positions artificially.

Discussions with the Retail Trade

This seeking for titles or protection has found a clear expression in the requests made by several branches of the economy for its own trading laws. Here a discussion of the demands of retail trade is unavoidable. The battle for a trade law has gone on for some considerable time. It is fair to say that in these discussions there has been much coming and going, and some believe that my Ministry has not steered a clear course. Such an attitude overlooks the fact that there are two sides to this problem: one of principle and one of tactics. From the point of view of tactics I welcomed every month that went by without the passing of this freedom-limiting trade law. Up to the time of writing, in spite of pressure from other quarters, a trade law of this kind has not gone through.

If my Ministry had not bitterly opposed it, we would long ago have had a trade law which would have broken up trade into dozens of branches, and the entrance to any single one of these branches, as also the passage from one to the other, would have been protected by a hurdle of special knowledge. After all I have said on these pages I need hardly stress further that such a law would have constituted the absolute denial of all my conceptions of a free economic order.

This is a suitable moment for a short historical review. The law for the protection of the retail trade, which, it should be noted, came into force in 1933, the year Hitler came to power, provided first of all for the complete control of retail trade. When this embargo proved impossible to enforce, the law was in practice changed into a law to restrict entry. After the second World War the fate of this law differed greatly in the different zones and Länder of West Germany. According to the American directive of March 29, 1949, complete freedom of trade was introduced into the U.S. zone, while in the British and French zones the licence to trade under the 1933 law continued to be valid, serving as the basis for newer, but usually more generous, laws of admission. These differing legal situations resulted in the understandable wish for a unified control of trade, although justification for this wish should not be overvalued. Is it really a disaster if, when a retail business is opened in Flensburg, it is governed by a different ruling than in Munich?

Until the end of the first legislative period I successfully resisted pressure from the retail trade on the ground that a law discriminating against entry could not be combined with the spirit of market economy, and that it would not only have to correspond with the basic laws of the Federal Republic, but that this would have to be definitely affirmed.

Negotiations later on turned on the question of whether it was possible to formulate a law within this framework. Impatience with the length of these discussions led to a surprising manoeuvre behind my back in the Federal Parliament. Here, on June 11, 1953, shortly before the end of the first legislative period, the C.D.U./C.S.U. asked for a law for the temporary control of retail trade. This draft legislation failed to be passed, partly because the legislative period ended before it could be effected, but also because it aimed at splitting retail trade into several dozen branches, so attracting considerable public opposition.

With this situation in the Bonn Parliament I was forced to tell the Chancellor on June 20, 1953, that work on the law to control retail trade would be continued in the Federal Ministry for Economic Affairs, and that a positive attitude would be taken to the basic demand for a professional code ‘to raise performance and secure competitive efforts in the retail trade’. On July 14, 1954, the Wiesbaden draft was made public, which was much discussed in retail trade circles. This was for them the final, and, from their point of view, the only possible and acceptable draft.

Detailed discussion within my own Ministry of this proposal, and also negotiations with other authorities, forced us to the conclusion that this draft, too, was not free from restrictive consequences, which could not be brought into accord with the basic principles of my economic policy. In turn, an altered draft was no longer acceptable to them. At this juncture, I took the opportunity in Hamburg on October 27, 1954, on the occasion of the meeting of delegates of the Association of the Retail Trade, to discuss once more this whole complex question. What I said then has been borne out, so that I have no reason to believe that these basic views are either changeable or wrong.

The Hamburg Declaration

I said in Hamburg:

‘It would have led to a bungled economic policy if I had allowed myself to grant special favours to this or that group, this or that occupation or this or that economic branch, so that in turn everyone got something. That is impossible. In our days of rapid change, it is all too easily forgotten what Germany looked like six years ago, or in what a desperate and regrettable condition German trade was, or rather stagnated. You had become nothing more than executives of the State, State commissioners in a soul-less apparatus of power. It is only as a result of economic policy that you have once again become responsible and free businessmen. …

‘Retail trade has now regained its status in the minds of the German public; it is valued more and regarded in a completely different light than it was six years ago. This is already one factor playing an important part in our problem of occupation classifications. … I am firmly convinced that with, and in spite of rearmament, we shall succeed in increasing the turnover in retail trade even further in the future. (In fact the retail trade turnover between 1954 and 1956 rose by DM 10 milliard.) Above all it is essential to continue to sell a rising volume of goods. My continuing battle to maintain competition directly favours the retail trade, since it guarantees a healthy relationship between purchasing power and prices. And it helps ever-widening circles of the population to buy and reach for more goods. Eventually all this flows into the retail trade.

‘For you, competition is the most essential element. All we do must in your very own interest spring from the intention of retaining competition. If this is so then the question of trade orders appears in a new light. … I admit that in recognition of the moral basis of retail trade I was inclined to examine the question of trade categories in the retail trade. … But right from the beginning I was not prepared to support a solution which was going to split the retail trade into—I don’t know how many—occupational and commodity groups, and which would have required special permission for admission to each. … You go and tell the man in the street that, as is well known, anyone wishing to manufacture stockings can do so without hindrance, as everyone can work freely in industry. But must the man who sells stockings across the counter know more about what he is doing, possess special knowledge and demonstrate it?

‘I doubt very much whether you can explain this to fifty million people; if you can, then I admire your powers of persuasion. … I do not wish to paint a black picture, but I do want to say that if retail trade shrinks, if the businessman in retail trade wants to rid himself of the responsibility of competition, if he denies the rationale of his activity, then matters will get hopelessly out of hand.’

I gained the impression at the Hamburg meeting that it would be possible to dissuade the representatives of the retail trade from their demand for a law to regulate entry and in its place to interest them in a law to further trade productivity, which would create the conception of the expert businessman and so lay the basis for an improvement in apprenticeships. A draft, worked out on this basis, was sent on March 15, 1955, to all interested associations. However, no serious discussions ever took place, since, in the meantime, retail trade had begun to look for support towards the Federal Parliament for its old favourite, a law to regulate entry. Unfortunately, they were not disappointed in this hope. On October 22, 1955, the C.D.U./C.S.U. parliamentary group submitted a draft measure about necessary qualifications in retail trade.

In the discussions which followed in the parliamentary committee on small and medium-sized shops, my Ministry, amongst others, reserved its position. In view of the decision of the Federal administrative court of November 3, 1955, which recognized the law of retail trade protection and made its enactment constitutional, it seemed inopportune to resist the draft too strongly. Nevertheless my Ministry strongly opposed all attempts to widen the area of application of this law.

No Trade Limitations

My reservations regarding this draft (which had certainly been weakened compared with earlier ones, and presupposed a certain expertise, and only exceptionally required examination in technical knowledge) rest on the belief that the hopes of many small and medium-sized traders that it would impose an effective embargo in respect of all new entry into retail trade would not be realized. And that quite apart from the impossibility, in principle, of combining a limitation of freedom to trade with a free economic order. It must be feared, therefore, that as soon as the law becomes effective, new restrictions will be called for to make the activities of all competitive undertakings more difficult.

I want to ask once more where it would have led to if I had not opposed these attempts? How could we have coped with the social and economic absorption of refugees in West Germany if—obsessed by group selfishness—we had given each group a special position?

At a time when we are trying to make the best of the limited space available to West Germany, there can be no room for erecting barriers in an economic area which has already become too narrow. This view cannot be reconciled with putting up barbed wire fences around individual categories of occupation.

Those holding different views should not forget that our economic policy has achieved a singular increase in turnover, which can be seen from the following table of retail trade turnover.

	Turnover in Mrd. DM	Index of Turnover adjusted for price
1950	30.8	100
1951	35.7	106
1952	38.8	116
1953	42.2	132
1954	46.1	144
1955	51.5	159

(These figures have been calculated on the basis of turnover
tax statistics for 1950 and 1954, and the current representative
statistics of the Federal Statistical Office)

In 1956 turnover rose appreciably, to DM 57 milliard at least.

Less Work—More Profit?

My opposition to laws about shop closing hours or the fixing or limiting of hours of work for the retail trade hardly needs further elaboration after all that I have said earlier. This, among other efforts, is aimed at a more comfortable life with a growing income and simultaneous security.

The magic formula is: less work and a better life for everyone. I do not hide my feelings about these aims. For such laws I have no sympathy, for in my economic policy I think, above all, of the consumer.

Trade must serve the consumer. I cannot imagine that the worker will welcome a Saturday afternoon in which he cannot shop, at least not until he himself is able to dispose of a completely free Saturday. It would be contrary to nature if on his only free afternoon the worker did not want to be able to go shopping in company with his family. No one holds the extraordinary view that on Saturday afternoon there should be no trains or postal deliveries or that no restaurants should be open. It is understood in a well-established economy that, in the public interest, some occupations have to reckon with special working conditions.

Certainly, everyone must have his free afternoon—this need not be discussed here. But fifty million consumers are interested in retaining the freedom to shop peacefully in their free time. It should be remembered that the German consumer does not go to sleep on Saturday afternoon; he goes out and spends his money. For that reason I have advocated the rotating Saturday.

I have discussed this subject, which interests me, with retail traders in the U.S.A. They had already heard of the German demand for a free Saturday afternoon. Their comment was something like this: ‘Your retail traders must be doing well if they are prepared to forgo Saturday afternoon.’

It is certainly wrong to suppose that Saturday afternoon closing would not lead to a drop in turnover. People here behave as if the wants of fifty million consumers were a fixed and immovable quantity worked out rationally. People standing ready to buy in front of closed shops will not return to do their shopping just when it suits the retail trader. For that reason we should not take any steps which would certainly lead to a reduction in retail trade business.

Quite another thing is the demand of retail trade workers for a free half-day and reasonable working hours. Naturally, I do not deny that, if this demand were met, the retail trade would face a difficult problem. But other branches of the economy had to adjust their schedules to meet the difference between the hours worked by the undertaking and the hours worked by the individual worker. There are many ways of solving the problem.

If this particular question has been dealt with in some detail here, this has been done not to criticize any particular branch but, by citing a good example, to illustrate the problems arising from it.

German Miracle?

The reflections outlined above will have made it clear that the idea of supporting particular interests is foreign to my mode of thinking; I want this firmly established, for in my vision of the universe and in my thoughts on economic policy it is the human being who is at the centre of all events. All my economic policy measures are based on the criterion of how human beings will react to them, and what the consequences of any changes in economic circumstances would be for them.

Since all the successes which would have been achieved as a result of my economic policy can be traced back to the activities of those actively taking part, I do not believe that the idea of ‘a German miracle’ should be allowed to establish itself. What has taken place in Germany during the past nine years 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. If this German example has any value beyond the frontiers of the country it can only be that of proving to the world at large the blessings of both personal and economic freedom.