Chapter XIV POLICY THROUGH DIRECT CONTACTS

‘IN WHICH PART OF THE WORLD is the Minister for Economic Affairs now?’ has been asked several times during the past few years, when I thought it useful to leave my desk at the Ministry in Bonn, to avoid the mistake of thinking Bonn to be the centre of the world. The fact that I repeatedly felt the need to talk with persons both at home and abroad, to explain German economic policy, and to find supporters for this system, has frequently led to misunderstandings and to many critical remarks. But I regard these activities outside Bonn as an important and indispensable part of my work, and I should like to believe that the positive results prove me right. This attitude becomes all the more understandable, since elsewhere in this book I have clearly stated how essential it is to keep in mind and, where necessary, to influence the formation of opinion of those participating in the economy.

Out of this grows the desire to keep people within the economy as well informed as possible, be they industrialists, workers, employees or consumers. It is for the purpose of cultivating such direct contacts that I have delivered dozens, even hundreds of speeches since I became ‘Director for Economic Administration’ in March 1948.

There were several occasions when I paid particular attention to maintaining close contacts because of the economic situation of the moment. There were even months when all depended on finding among the whole population real understanding of the economic situation and of economic policies. I am thinking here especially of that turbulent period after currency and economic reform when success depended on getting people to face the economic facts in a sober manner. Another such phase was the time after the outbreak of the Korean conflict, when everything depended on keeping everyone in the market—producers, traders and consumers—informed of the actual economic position to prevent them from going astray. Finally the third period of this kind was the boom within recent memory. Here it was still more important to demonstrate to what an extent our own economic fate depended on the understanding or the lack of it of all economic men.

The danger arising in every boom of overestimating what is economically possible had to be countered by repeated appeals to be reasonable. Even now it seems urgent to bring to the attention of every individual the immediate connection between the stability of the currency and his own attitude. This is essential partly to prevent wages from rising too far and in turn pushing up prices, and partly to prevent a thoughtless exploitation of the boom. Without this carefully cultivated and almost continuous contact it would have been almost impossible to explain the philosophy of the social market economy to the broad masses of the population. The reader might be interested to know how extensive these effects have been in the past few years.

This work, based on an appreciation of the great role played by the formation of public opinion in any modern State, was not limited to Germany only. In many trips abroad I have tried to address those people who were interested in our economic policy and in the successes we had gained in West Germany, and also to cultivate personal contacts.

Trade Policy in a New Style

This aim of making direct contacts reflects the changing importance of economic policy in forming relations between Government and Government and people and people. These changes of emphasis are also expressed in the novel position and importance of trade policy. I believe that to regard trade policy as a servant of foreign policy, or even as an instrument of Government power policy, is a thing of the past.

Unfortunately it has to be admitted that some, not fully comprehending the conception of a free economic policy, even today often think of trade policy as the sum of those measures which, in different ways, are expressed in bilateral agreements, dealing case by case, commodity by commodity, and country by country. This policy, which to me seems almost undignified in its arbitrariness and lack of consistency, is certainly not suited to the conduct of peaceful economic relations between the peoples and countries of the free world. It can only be disturbing. Though it is important and valuable that there should also exist bilateral relationships between peoples, and though it must be very much the task of foreign policy to achieve and establish such relationships, it would nevertheless be a fundamental misunderstanding to consider bilateral economic agreements as useful in building up or establishing relationships.

Economically, this method inevitably means to discriminate against third countries—which is certainly not desired by its defenders. It produces uncertainty and mistrust and also in every case reduces the potentially useful consequence from interchange between Governments. The fact that, following the destruction after the last world war of a free economic order, the world has been using this form of trade policy so far does not sanction it; at best it must be regarded as expedient in difficult phases of transition, and perhaps in the case of a special structure of linked economies as existed, for example, for a considerable time in South America.

As a result of the economic crisis of 1929 this form of trade policy spread its net of bilateral agreements across the world, and increasingly divided the world into different camps. It lacked, however, all basis for a unified economic policy and pushed national economies into isolation and atomization. The economic policy and practice introduced since the second World War, which I have defended almost passionately, is on the other hand distinguished by the striving for an all-embracing free world market, for multilateral agreements and non-discrimination, after overcoming protectionist and nationalist narrowness and doing away with counterfeit competition of every kind.

If the tasks and aims of economic policy are understood in this way, then there remains as little room for an independent trade policy as for a trade policy subordinate to foreign policy. Trade policy regarded as an arm of foreign policy will be misused. When bilateral trade could be exploited with the principle of ‘the carrot and the stick’ it inevitably led to the formation of sides and conflicts. This branch of economic policy did not then serve to link peoples, to overcome frontiers, or to bridge differences. The advantages of a market economic policy lie just in the way in which these things can be achieved.

Overcoming the Past

Wherever I have seen any chance of doing so, all my aims have been directed to ensure that countries should forgo a separate trade policy which differs from country to country. The less the exchange of goods and services between countries is an instrument of State policy, the smaller will be the danger of poisoning the international atmosphere. Only this attitude can free foreign trade policy from the curse of the past. Sober businesslike reflections then take first place; honest competition is able to develop between national economies. The realization of this demand leads Governments to agree to forgo the right of one-sided intervention in a free world economic order.

Here the Federal Republic in particular should be increasingly obliged to prefer such reflections to purely political considerations. Quite apart from questions of principle, this demand is supported politically by the heavy dependence of the German national economy on imports and exports. It should be remembered that the importance of foreign trade as part of the gross national income has steadily grown in recent years. Year by year an increasing part of the goods and services produced in the Federal Republic crosses our borders in exchange for equivalent services from other national economies. In this way foreign trade and, in particular, the ideal of the social market economy, without which the growth in foreign trade would be unthinkable, becomes increasingly important.

In the long run this state of affairs cannot be ignored even by those who still believe that trade policy should not be determined by the needs of economic policy, but should be used for other aims and purposes. It would thus be ridiculous to rob a visibly successful economic policy of its unity by splitting off trade policy. As it is, we are suffering from a splintering of economic policy into differing areas of competence.

Year	Gross national income	Imports	Exports	Foreign trade turnover
1949	100	9.9	5.2	15.2
1950	100	12.7	9.3	22.0
1952	100	12.9	13.4	26.3
1954	100	13.3	15.2	28.5
1955	100	14.9	15.7	30.6
1st half-year 1956	100	15.3	16.9	32.2

The development of the turnover in foreign trade (shown above) as part of West German gross national income urgently underlines what has been said here.

The reader would deceive himself if he concluded that the principles outlined here were being recognized everywhere without dispute. In Germany, too, in the recent past, passionate discussions took place about the realization of these principles, needing every ounce of my energy to prevent a handing over of trade policy in its entirety to the realm of the foreign policy makers. Much explanatory work remains to be done. This decisive question does not face Germany alone; it is important that all forces which support the idea of a world-wide and free economic policy make every effort to turn these ideas into facts in every single country.

The meetings of responsible political economists may here contribute much that is valuable. Thus I believe that negotiations for the creation of a ‘Common Market’—an important problem of economic policy—fall under the jurisdiction of the Minister for Economic Affairs.