Ludwig Erhard

For more information on Ludwig Erhard, visit Britannica.com.

(b. Fürth, 4 Feb. 1897; d. 5 May 1977) German; Chancellor of the Federal Republic of Germany 1963 – 6 Perhaps no other figure is more closely associated with West Germany's post-war economic recovery than Erhard. He returned from the First World War badly wounded and decided to study economics and sociology, achieving his doctorate in 1925. From 1928 to 1942 he worked in market research in Nuremberg, after which he founded his own institute with money from private industry. Intellectually he was thinking about the possible consequences of Germany's coming defeat. From 1945 on he was encouraged by the Americans, working first as Economics Minister in Bavaria, and then in Frankfurt am Main on the currency reform. However Erhard was kept in the dark about the date and conditions of the new mark's introduction (1948). He thought of resigning but was allowed to announce its coming on the radio. With it came the market economy which swept away many of the wartime controls still in place. Prices were high but the shop windows were full again. Long hours of work brought rewards. The German miracle was greatly helped by the outbreak of the Korean War in 1950 which gave West Germany its chance in world markets. The well-trained labour force was ready to be deployed. High unemployment helped to keep wages low.

Erhard was never really a party man and would have been at home in the Liberal FDP but Adenauer persuaded him to join his CDU. He served as Minister of Economics from 1949 to 1963. By the mid-1950s the German economy had recovered far more rapidly than anyone had foreseen, and Adenauer and Erhard were popular — but not with each other!

The public saw Erhard as the "crown prince" and felt he should succeed Adenauer. By 1959 Adenauer was 83 but was only willing to give up as Chancellor if he could be President and Erhard, then 62, was restless. The two had other differences. Adenauer was far more political and was looking for a united, Catholic Western Europe whereas Erhard was more pragmatic. Adenauer had his power house in the party, Erhard did not. The losses at the election of 1961 decided the issue of Adenauer's departure in 1963. Erhard seemed to be the man who could steer the CDU/CSU back to popularity. In the election of 1965 he led his forces to an unexpectedly good result against Brandt's SPD.

As Chancellor of a CDU/CSU and FDP coalition Erhard could not deal with the manœuvring of the different factions. He attempted to stand aside between the quarrels of the so-called Gaullists and the Atlanticists. But he backed the USA against de Gaulle on defence issues, thus offending German Gaullists. Remarkably, it was not foreign policy but more economic policy which brought him down. In the summer of 1966 West Germany was suffering a mini-recession. Germany's neighbours would have shrugged it off, but the Germans felt insecure with any hint of an economic downturn. The government lost popularity, was defeated in the Hesse regional elections on 6 November 1966, and Erhard resigned on 1 December.

The German statesman Ludwig Erhard (1897-1977) is credited with the decisions that resulted in West Germany's (now part of Germany) spectacular economic recovery following World War II. He served as chancellor of the Federal Republic of Germany from 1963 to 1966.

Ludwig Erhard was born in the northern Bavarian city of Fürth on Feb. 4, 1897. After serving in World War I, during which he advanced to the rank of sergeant and was badly wounded, Erhard resumed his business training. He continued his studies in economics and sociology at the progressive University of Frankfurt. After he received a doctorate, Erhard decided to devote his career to research rather than to business. He joined the staff of the Nürnberg Business School. From 1928 to 1942 he advanced from research assistant to director of the institution. The Nazis removed him from this position, however, after he refused to join the party. Erhard spent the remaining war years as a consultant to business enterprises.

Erhard's lack of compromising political ties and his reputation as an economic expert made him a likely candidate for the administrative posts set up by the Western Allied governments that occupied Germany after 1945. First Erhard was charged with the reconstruction of the war-ravaged industries of his native Fürth-Nürnberg area. Late in 1945 he was named economics minister in the Bavarian state government. After losing this post in 1947, Erhard was named to key positions in the council set up jointly by the British and American occupation authorities to coordinate economic activities in their zones.

Pushed Social Market Economy

Erhard's economic views were summarized in his advocacy of a "social market economy," which one author has called a "free economy with a social conscience." Erhard wished to use private initiative to rebuild the shattered German economy but to check it when it tended toward monopoly, cartelization, or extreme labor union demands.

Erhard well understood the inefficiencies that come with price controls. He had authored a memorandum during the war outlining his vision for a market economy in Germany. In 1947, the Allies, who wanted Germans with no ties to the fallen Nazi regime for the new German government, named Erhard the main economic adviser to U.S. General Lucius D. Clay, military governor of the U.S. zone. Erhard advocated a quick reform of the currency system and the decontrol of prices.

After the Soviet withdrawal from the Allied Control Authority, General Clay, along with his French and British counterparts, undertook a currency reform on Sunday, June 20, 1948. The amount of currency in circulation was dramatically reduced (by a factor of slightly more than 90 percent). Under the reform mapped by Erhard, the new legal currency, the Deutschemark, was substituted for the old Reichsmark. With the sharp contraction in the German money supply, he reasoned, there would be far fewer shortages because the controlled prices would now be stated in Deutschemarks. On the same day, over the strong objections of its Social Democratic members, Germany's Bizonal Economic Council adopted a price decontrol law that gave Erhard the authority to eliminate price controls. Between June and August of 1948, Erhard decontrolled the prices of vegetables, fruits, eggs, and almost all manufactured goods. He substantially relaxed, or simply suspended enforcement of, other price ceilings.

At the same time, the government, following Erhard's advice, cut taxes sharply. Walter Heller, a young economist with the U.S. occupation forces who was later to become chairman of President Kennedy's Council of Economic Advisers, wrote in 1949 that to "remove the repressive effect of extremely high rates, Military Government Law No. 64 cut a wide swath across the German tax system at the time of the currency reform." Individual income tax rates, in particular, fell dramatically. Previously the tax rate on any income over 6,000 Deutschemarks had been 95 percent. After tax reform, this 95 percent rate applied only to annual incomes above 250,000 Deutschemarks. For the German with an annual income of about 2,400 Deutschemarks in 1950, the marginal tax rate fell from 85 percent to 18 percent.

Economy Surged

The immediate effects of these Erhard-designed reforms on the German economy were dramatic. Another U.S. economist with occupation forces wrote that the "spirit of the country changed overnight. The gray, hungry, dead-looking figures wandering about the streets in their everlasting search for food came to life." On Monday, June 21, only a day after the announcement of currency reform, shops filled with goods as people realized that the money they sold them for would be worth much more than the old money. The reforms, wrote Heller, "quickly re-established money as the preferred medium of exchange and monetary incentives as the prime mover of economic activity."

Another phenomenon was observed in the wake of the reforms: Absenteeism, which only a month earlier was averaging more than nine hours a week, was reduced significantly. Workers who had stayed off the job to forage and barter for life's necessities found that it was no longer imperative for them to do so. By the fall of 1948, the absenteeism rate had dropped to about four hours. In the second half of 1948, Germany's industrial output rose by more than 50 percent. This growth continued to be extremely strong over the next ten years, with industrial production per capita in 1958 measuring three times its level in the six months preceding the June 1948 reforms. What looked like a miracle in reality was not. Erhard expected these results because he knew full well the damage that had been wrought by inflation, coupled with price controls and high tax rates. In turn, he also was well aware of the large productivity gains that could be unleashed by ending inflation, removing price controls, and slashing high marginal tax rates.

Named Economics Minister

Immensely popular with the German people as a result of the economic reforms, Erhard joined Konrad Adenauer's Christian Democratic Union (CDU) only shortly before the first West German parliamentary election in 1949. When the party was victorious in those elections, Erhard became economics minister in the Adenauer government, in which post he remained until he succeeded the aging and increasingly unpopular Adenauer as chancellor in 1963. Erhard led his coalition government (CDU/CSU and Free Democrats) to victory in the 1965 election, after which he actively supported a normalization of relations with the countries of the Warsaw Pact. On March 25, 1966, his government sent a peace overture to the Warsaw Pact, proposing a renunciation of force. The failure to include East Germany in this initiative resulted ultimately in its failure. Erhard and his foreign minister, Gerhard Schröder, were labeled "Atlanticists" for their support of stronger ties with the United States and the North Atlantic Treaty Organization (NATO). This focus on West Germany's relationship with NATO and the United States weakened the country's ties with France, which Adenauer had worked so hard to build up during his years as chancellor. Erhard soon found his position untenable as recession wiped away memories of the economic miracle and those he once had considered his friends, including Adenauer, sniping at him whenever possible. He was accused of both indecision and lack of experience in foreign affairs. He resigned in 1966 and was succeeded as chancellor by Kurt-Georg Kiesinger. Erhard later confided that "soon after I took office in 1963, I had the feeling that my party friends were no friends." A year after his resignation, he was named honorary chairman of the CDU.

Erhard spent the final decade of his life as a dignified elder statesman. He displayed no bitterness at what many felt was betrayal by his fellow members of the CDU. He wrote and consulted extensively in the area of his traditional expertise - the social market economy. When he died on May 5, 1977, he was lauded by his countrymen as "the father of the economic miracle." He was 80.

Further Reading

There is no biography in English of Erhard and no major scholarly work in any language. There are informative discussions of Erhard in Arnold J. Heidenheimer, The Governments of Germany (1961; 2d ed. 1966). See also Michael Balfour, West Germany (1968), and Henry Walton, Germany (1969). Further information on Erhard may be found in Wayne C. Thompson et al., Historical Dictionary of Germany (1994); James A. Moncure, editor, Research Guide to European Historical Biography: 1450-Present (1992); and in the entry on Ludwig Erhard on Britannica Online at http://www.eb.com.

Quotes:

"A compromise is the art of dividing a cake in such a way that everyone believes that he has got the biggest piece."

"Erhard" redirects here. For the saint of this name, see Saint Erhard. For the founder of est see Werner Erhard.

Ludwig Erhard
Chancellor of Germany
In office 16 October 1963 – 1 December 1966
President	Heinrich Lübke
Deputy	Erich Mende
Preceded by	Konrad Adenauer
Succeeded by	Kurt Georg Kiesinger
Vice-Chancellor of Germany
In office 29 October 1957 – 15 October 1963
Chancellor	Konrad Adenauer
Preceded by	Franz Blücher
Succeeded by	Erich Mende
Born	4 February 1897 Fürth, Germany
Died	5 May 1977 (aged 80) Bonn, West Germany
Political party	CDU
Occupation	Businessman
Religion	Evangelical Church in Germany

Ludwig Wilhelm Erhard (4 February 1897–5 May 1977) was a German politician (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, particularly in his role as Minister of Economics under Chancellor Konrad Adenauer after 1949.

Contents 1 Life and work 2 Erhard's First Ministry (16 October 1963 - 26 October 1965) 3 Erhard's Second Ministry (26 October 1965 - 1 December 1966) 4 Bibliography

Life and work

Born in Fürth, Germany, from 1913 to 1916 Erhard was a commercial apprentice. 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.

Due to his injuries, Erhard did not have to join the German military forces during World War II. Instead, he worked on concepts for a postwar peace; however, 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 privately. 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.

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.

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. Former U.S. Chairman of the Federal Reserve Bank Alan Greenspan gives much credit to Erhard's contributions to freeing of product and financial markets in Europe in 1948. Greenspan states in The Age of Turbulence that Erhard's economic policy contributions were far more valuable to postwar Western Europe recovery than the Marshall Plan.

In 1949 he stood for election in a constituency in Baden-Württemberg for the first West German parliament after the war and gained a direct mandate. Later in the year he is alleged to have joined the Christian Democratic Union (CDU), though this fact cannot be established by any of Erhard's biographers. In September, Erhard was appointed Minister of Economics in the first cabinet of Konrad Adenauer. His party made his concept of social market economy part of the party platform.

After the resignation of Adenauer in 1963, Erhard was elected Chancellor with 279 against 180 votes on 16 October. In 1965 he was re-elected. From 1965 to 1967, he also headed the Christian Democratic Union.

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 led a grand coalition.

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 (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 (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.

Bibliography

Wikimedia Commons has media related to: Ludwig Erhard

• Hentschel, Volker (1996) Ludwig Erhard: Ein Politikerleben. Berlin: Ullstein. ISBN 3-548-26536-7
• Mierzejewski, Alfred C. (2004) Ludwig Erhard: a biography. Chapel Hill, London: University of North Carolina Press. ISBN 0-8078-2863-7

Political offices
Preceded by Konrad Adenauer	Chancellor of Germany 1963–1966	Succeeded by Kurt Georg Kiesinger
Preceded by Franz Blücher	Vice Chancellor of Germany 1957–1963	Succeeded by Erich Mende

v • d • e Freiburg school Franz Böhm · Walter Eucken · Edith Eucken-Erdsieck · Hans Gestrich · Hans Großmann-Doerth · Friedrich Lutz · Karl Friedrich Maier · Fritz Meyer · Leonhard Miksch · Paul Hensel · Wilhelm Röpke · Alfred Müller-Armack · Alexander Rüstow · Ludwig Erhard · Juergen B. Donges · Wolfgang Kitterer · Bernd Raffelhüschen · Andreas Freytag · Michael Hüther

v • d • e Chancellors of Germany German Empire (1871–1918) Otto von Bismarck · Leo von Caprivi · Prince Chlodwig zu Hohenlohe-Schillingsfürst · Bernhard von Bülow · Theobald von Bethmann-Hollweg · Georg Michaelis · Georg von Hertling · Prince Maximilian of Baden Weimar Republic (1919–1933) Philipp Scheidemann · Gustav Bauer · Hermann Müller · Konstantin Fehrenbach · Joseph Wirth · Wilhelm Cuno · Gustav Stresemann · Wilhelm Marx · Hans Luther · Wilhelm Marx · Hermann Müller · Heinrich Brüning · Franz von Papen · Kurt von Schleicher Third Reich (1933–1945) Adolf Hitler · Joseph Goebbels Federal Republic (1949–) Konrad Adenauer · Ludwig Erhard · Kurt Georg Kiesinger · Willy Brandt · Helmut Schmidt · Helmut Kohl · Gerhard Schröder · Angela Merkel

Persondata
NAME	Erhard, Ludwig
ALTERNATIVE NAMES
SHORT DESCRIPTION	Chancellor of West Germany from 1963 until 1966
DATE OF BIRTH	4 February 1897
PLACE OF BIRTH	Fürth, Germany
DATE OF DEATH	5 May 1977, aged 80
PLACE OF DEATH	Bonn

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