A furtive free market
The Germans launched the war arrogantly, and finally failed shamefully, and the German economy collapsed.
Germany's monetary system has completely collapsed. Officially issued currency is actually worthless, and people prefer to use cigarettes as a trading tool. Cigarettes can buy almost everything. 1947, one cigarette is equal to one month's salary of German workers.
Walter Oygen, a representative of German order liberalism and former economic adviser to Ehud, once recalled that many times, when you pay for farmers' food, farmers simply ignore you. If you live in a city and need food, you'd better pack your furniture and transport it to a farm to see if you can get potatoes.
However, the wrong economic concept made the American and British military occupation authorities implement the wrong economic policy. Most of the economic advisers of General Clay, the supreme commander of the allied occupation authorities, were Keynesians. They are keen on economic aid and macro policies, but they have not issued a sound currency in West Germany, and they are not allowed to freely float prices and wages to rebuild market order. Instead, they tried to manage the whole country through ubiquitous written instructions and indicators distribution, which Oygen called "the war of paperwork".
Money and price are the two pillars of economic operation, but these two pillars have not been established in time. As a result, more than a year after the end of the war, the economy has not improved. By 1947 10, the production level in Germany was only 3 1% of that in 1936, and then it dropped to 29% in February. Germans still live in the cellar under the ruins, relying only on rations including four eggs a year.
At this moment, Ludwig Erhard appeared. 65438-0948 served as the Minister of Economic Management Department of the Unified Economic Zone, and was almost 50 years old at this time. He majored in national economics and enterprise economics in college and served as Bavarian minister of industry and commerce after the war.
It was Saturday, June 20th when Erhard rang the bell of German economic recovery. 1948. Germans call it "X Day", that is, the new currency reform day. Ehud announced on the radio that he would exchange the old currency for a new currency, which is called "Deutsche Mark".
The occupation authorities expressed their support for this reform. However, Erhard's ambition does not stop there. He also wants to abolish price controls and let the free market decide the allocation of resources. Because real money can only play a role in the real market, and the real market should not have price control and rationing. But for the free market, General Clay's advisers are not interested at all. They never believe in the free market.
Therefore, Erhard decided to do it in secret. On the first Sunday after the German mark entered circulation, Erhard took advantage of the rest of allied officials to announce the cancellation of the rationing system for most commodities and the liberalization of wage and price control through radio without authorization. He said: "From now on, the only rationing system is the German mark."
After hearing the news on the radio, General Clay was furious and called Erhard and threatened to put him in prison. Erhard replied, "Yes, General, you can put me in jail, but you can't put Price in jail."
Social market economy
It is said that General Clay also said to Erhard at that time: "Professor Erhard, my advisers told me that you are making a big mistake." Ehud said, "This is what my consultant told me."
At first, it really looked like a big mistake: prices soared, unemployment soared, trade unions organized demonstrations to restore the rationing system, and put forward the slogan: hang Ahad. But Stalin instinctively realized Erhard's new symbol and the power of the free market, and a few days later he blocked Berlin.
The market economy in West Germany took off rapidly after the initial pain. From 65438 to 0949, the price began to stabilize. Three years later, Germany's national production returned to the pre-war level.
At the same time, Achad has taken tax reduction measures. Erhard firmly believes that the key to a free market economic system is to stimulate individual initiative and let more resources be dominated by individuals. To this end, he even put forward the slogan of "tax-free self-improvement" and abolished the high tax rate system implemented when the Allied Control Committee took over Germany.
Then there was the rapid economic development throughout the 1950s. With the support of Chancellor Angela Adenauer, Erhard, who never leaves his cigar, has been the Minister of Economy and has become the "father of German economic miracle". 1957 On Erhard's 60th birthday, people lined up outside the Ministry of Economic Affairs for more than ten hours, waiting to express their birthday wishes to Erhard. The store also specially sent a cigar named "Professor Erhard".
The system created by Erhard is called "social market economy system" and is written into the Federal Republic of Germany Constitution. 1957, at the peak of his career, Erhard himself wrote a book, and his inclination can be seen from the title: Prosperity through Competition. Only through free competition afterwards can economic prosperity be achieved. In his view, "social market economy" is basically a market economy, although an adjective has been added in front. In such a system, the market price mechanism spontaneously regulates economic activities, which is the most perfect embodiment of the free market economic model. Therefore, as a government, we should give up centralized management of the economy and restore the freedom of production and consumption. The goal of social market economy is indeed "national prosperity", but the means to achieve this goal is not the redistribution of wealth by the government, but the free economy, supplemented by state intervention. The government should try not to interfere in market activities, even if it does, it is to encourage competition, crack down on monopoly and create a competitive order.
Betraying Ahmed
Ehud himself explained to Hayek that he used the term "social market economy" to make it easier for some people to accept the market economy, but his focus was always on the market economy. He did the same when he was in charge of the German economy. Ehud once strongly opposed the economic proposition of high wages and high welfare. In his view, the social Democrats in northern Europe and western Europe advocate that the welfare state is a "modern fantasy", which is not only incompatible with economic freedom, but also affects the foundation of economic development. He concluded that the greater the achievements of economic policies, the less necessary social welfare policies are.
This seems to be the knowledge of the Germans at that time. In Germany in 1950s and 1960s, people really tried to maintain the free market economy with a more determined attitude and conscious efforts. Meanwhile, other countries, such as Britain and France, are keen on government intervention and Keynesianism. This is the fundamental reason why Germany can quickly catch up with these countries and become a world economic power.
However, after the end of 1960s, German rulers put more emphasis on the "social" side, and as a result, Germany became the "chief representative" of the welfare state. Social welfare expenditure in Germany is higher than the European average and far higher than that in the United States. The government's intervention in the market has intensified and the price system has been seriously disrupted. The power of trade unions has expanded rapidly, and labor costs have risen sharply. Since 1970s, structural unemployment in Germany has been increasing, from 0.7% at that time to 8.5% today.
Two years ago, someone talked about the so-called "Rhine model". However, Germany under this model, which has been ranked last in the European economic growth list for many years, ranks first in the social welfare tax list, so that Schroeder had to find prostitutes to collect taxes. In contrast, Germany's global competitiveness has been slowly declining since the mid-1970s, and the speed is getting faster and faster.
Since 1990s, Germany has changed from the "locomotive" of European economic growth to the "tail". Instead of becoming the driving force for the growth of the euro zone, the German economy has become a problem for Europe. In the wave of information technology, the performance of German companies is also lacking.
In fact, the German solution to the problem is ready-made: reviewing Erhard's thoughts and policies. However, in the current political atmosphere, no politician has such courage, and people who are used to state control are not easy to accept the concept of free market. Therefore, it can be expected that Germany will become a pioneer in pushing the EU towards trade protectionism after France, and will be farther and farther away from Ahead and the free market.