Preface

THE PUBLICATION of an English-language edition of Wohlstand für Alle, which since its first appearance nine months ago has run through six editions, gives me a welcome opportunity to make a few prefatory remarks.

As readers of the book will readily appreciate, conditions in West Germany were quite abnormal when I took over the direction of its economic affairs at the beginning of 1948. Therefore we must step warily when drawing international comparisons. For the success of one country does not necessarily bear a direct relation to the progress made by its neighbour. I would remind my readers, for example, of the 12 million refugees and stateless persons who poured into a geographically restricted West Germany during the twelve years following the end of hostilities, which means that 23% of its present population did not inhabit this territory prior to the war; of the lessening of output-potential resulting from dismantling and proscriptions applied to production, of the factories and dwellings that had been destroyed, and the dividing up of what was formerly a single economic area.

Nevertheless, as is so often the case in the life of individuals and of all peoples, all these factors have not had merely adverse effects. For example, the countless refugees who during the first post-war years exacerbated the terrible plight of our people, now in a time of full employment have become an asset. Demolitions and dismantlings fostered an urge to build anew, and what is more, it afforded an opportunity to introduce the most up-to-date machines and tools.

Notwithstanding the many differences between nations, which must always be borne in mind, the success which attended German economic policy has a bearing outside German frontiers; this is particularly the case at a time when all progressive politicians are striving to contribute towards breaking down the barriers that still separate the various countries. The principle and application of what I have called ‘die soziale Marktwirtschaft’—i.e. a social market economy—was given renewed support by a vast majority of the people at the Bundestag elections of 15th September, 1957. Its success can be traced in every department of the country’s economy and in every grade of society. I need only mention that our production today is nearly two and a half times that of the best pre-war year. Our industrial potential has multiplied six times since the currency reform. Our exports, estimated at DM 36 milliard for the current year, put us in third place in world trade. Gold and foreign currency reserves have risen from nil in 1948 to today’s total of DM 23 milliard. It is especially gratifying to record that in the same period it was possible to treble the social services, as well as to build more than 4 million houses since 1949, the year when the first Federal Government came into operation.

In outlining these events my sole concern is to demonstrate that we in West Germany have resorted to anything but a secret science. That, in fact, I have merely attempted to apply in practice the principles of modern national economics which all the countries of the West have evolved, with a view to overcoming the age-old antithesis of an unbridled liberalism and a soulless State control, to finding a sound middle way between out-and-out freedom and totalitarianism. It is these endeavours that form the subject of this book.

The appearance of an English edition at this juncture is of particular significance, since it is more necessary than ever to bring the national economies of the free Western world closer together. The suggestion first mooted by the British Government that the Common Market should be supplemented by an extensive free trade zone was immediately welcomed by me. In this I was guided by the conviction that the various national economies had to be orientated farther and farther away from the narrow paths into which the misfortunes of war had led them; nor was this to apply only to small territories. For this reason I emphasized from the outset, and again at the ministerial meeting of O.E.E.C. in Paris on 16th October, 1957, that the transition from a Common Market to a Free Trade zone was an essential element of wise European statesmanship. I believe that such a plan would be in the interests not only of the six countries of the European Common Market, but also of the II other members of O.E.E.C. A combination of Free Trade zone and Common Market would give rise to new and beneficial factors. It is not, then, a question of simple addition. Here, as so often, it is a question of the whole being greater than the sum of its parts. Europe will, both in the economic and in the social sphere, benefit incalculably from such a development. The quantitative aspect, that is, the knitting together of Common Market and Free Trade zone, will, I feel absolutely convinced, be converted into a qualitative aspect—a more intensive European collaboration, which will profit all the partners.

If the desire for greater economic integration is today one of the overriding issues, there are other questions and problems that actively concern every government and every people. A generous, international exchange of ideas will therefore be of the greatest benefit all round. Of late, the Federal Government has had to fight, like the governments of other countries, to keep up the value of its currency, to stabilize prices and at the same time to maintain economic progress. There are many echoes in this book of such struggles, and this seems to call for further comment. The Germans are perhaps more concerned about the success of these endeavours than anyone else. Within a single generation they experienced two periods of inflation that were more or less unprecedented in the economic history of the world. So far German economic policy has succeeded on the whole in maintaining the desired stability ever since the currency reform of 1948—a success which is due in equal measure to the implementation of such a policy and the disciplined behaviour of both worker and employer, which fortunately has at the same time been coupled with a continued trade expansion.

If this policy is to continue to be successful, if the slight falling-off in purchasing power that has recently manifested itself is to be remedied, then it will be more than ever necessary to have recourse to unconventional methods. As responsible Minister for Economic Affairs in the Federal Republic, I am therefore determined not to countenance any further price increases without keeping the people fully informed about the causes and effects of such harmful moves. An end must be put to the all-too-familiar and absurd game of wage increases following rises in prices and of price increases following rises in pay. A stage must be reached when individual sections are ashamed to put forward demands that are contrary to the welfare of the community as a whole. My endeavours in this direction are the subject of this book, which also aims to convey to the reader a knowledge of practical economics. But the success of this, perhaps the most important, assignment of every minister of economics in the West depends to a large extent upon whether international co-operation is directed towards these ends.

In my opinion, the historic task of the Federal Republic in the second half of the 20th century that we have just entered upon is to underpin, to strengthen and to defend the free economic order of Europe with the full weight of German trade. The successful rehabilitation of my country must serve as clear documentary evidence to put before the still vacillating and doubting peoples, of the fact that only by firmly rejecting socialist dogmas, of whatever complexion, and by affirming a free economic order can mounting prosperity and genuine security be achieved. In a Europe which allowed the life of the individual to be dragooned into ever more regimented collectives, the intellectual and spiritual powers would atrophy—powers that are vitally necessary in order to combat the infiltration, and also the many enticements, of the East.

LUDWIG ERHARD

Bonn, November 1957