Ludwig Erhard

Ludwig Erhard was born in Fürth, then in the Kingdom of Bavaria, on 4 February 1897. His father Wilhelm Erhard (born 1859) was a Catholic clothing store proprietor, while his mother Augusta adhered to Protestantism. Ludwig had two brothers and a sister, all of whom were raised as Protestants. Ludwig suffered from polio in his third year, resulting in a deformed right foot and forcing him to wear orthopedic shoes for the remainder of his life.

Erhard entered primary school in Fürth at the age of six in 1903 and performed poorly. In 1907, he entered Fürth's Royal Bavarian Vocational High School, where his grades were average. He received his secondary school certificate in 1913. In the following years, he was a commercial apprentice at the Georg Eisenbach textile company in Nuremberg until 1916 and worked thereafter as a retail salesman in his father's draper's shop.

In 1916, Erhard volunteered for the German military. During World War I he was transferred to the 22nd Royal Bavarian Artillery Regiment and trained as a gunner. He first served in the quiet Vosges sector on the Western Front. The regiment was then deployed in the Romanian Campaign on the Eastern Front. He personally saw little combat, but contracted typhus and was sent back to Germany. After he managed a recovery, Erhard returned to his unit. He was badly wounded on his left shoulder, side and leg by an Allied artillery shell on 28 September 1918 during the Fifth Battle of Ypres. Erhard was committed to a military hospital in Recklinghausen, where he underwent seven operations until June 1919. His left arm ended up permanently shorter than his right one.

Due to his injury, he could no longer work as a draper, so Erhard started learning economics in late 1919 at a business college in Nuremberg. He passed the school's exit examination on 22 March 1922 and received a degree in business administration. During his time at school, he developed a friendship with the economist and professor Wilhelm Rieger, to whom Erhard owed much of his convictions of economic liberalism. Thanks to Rieger's intervention, Erhard was able to enroll at the Goethe University Frankfurt in the autumn of 1922. He received his PhD from the university on 12 December 1925 for a dissertation finished in the summer of 1924 under Franz Oppenheimer. Oppenheimer's liberal socialist ideology had a heavy influence on Erhard, especially Oppenheimer's opposition to monopolies. In Frankfurt, he married Luise Schuster, a fellow economist, on 11 December 1923. They had known each other since childhood.

After his graduation, they moved to Fürth and he became an executive in his father's company in 1925. Erhard spent the next three years as a mostly unemployed academic. His father retired in 1928. The same year, thanks to the help of Rieger and Oppenheimer, Erhard became a part-time research assistant at the Institut für Wirtschaftsbeobachtung der deutschen Fertigware (Economic Observation of the German Finished Goods Industry), a marketing research institute founded by Wilhelm Rudolf Mann and de:Wilhelm Vershofen. Later he became deputy director of the institute.

During World War II he worked on concepts for a postwar peace; however, officially 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 by order of the Reichsgruppe Industrie. He wrote War Finances and Debt Consolidation (orig: Kriegsfinanzierung und Schuldenkonsolidierung) in 1944; 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 to Nazism, who recommended Erhard to his comrades. Erhard also discussed his concept with Otto Ohlendorf, deputy secretary of state in the Reichsministerium für Wirtschaft. Ohlendorf himself spoke out for "active and courageous entrepreneurship (aktives und wagemutiges Unternehmertum)", which was intended to replace bureaucratic state planning of the economy after the war.

When the war had finished, Erhard became an economic consultant. Under the Bizone established by the American and British administration in 1947, he led the Sonderstelle Geld und Kredit ("Special Office for Money and Credit"), an expert commission preparing the currency reform in Germany's western zones of occupation. The commission began its deliberations in October 1947, and the following April produced the so-called Homburg plan, elements of which were adopted by the Allies in the currency reform that set the stage for the recovery of the economy.

In April 1948, Erhard 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 step. In July 1948, a group of southwest German businessmen attacked the restrictive credit policy of Erhard as Economic Director. While Erhard had designed this policy to assure currency stability and stimulate the economy via consumption, businesses feared the scarcity of investment capital would hinder economic recovery.

In the first free elections of the federal parliament in September 1949, Erhard was elected in a Baden-Württemberg district as candidate of the Christian Democratic Union. He was appointed Federal Minister for Economic Affairs, a position he would hold for the next 14 years; from 1957 to 1963 he was also the vice-chancellor of Germany. Erhard's financial and economic policies soon proved widely popular as the German economy made a miracle recovery to rapid growth and widespread prosperity in the 1950s, overcoming wartime destruction and successfully integrating millions of refugees from the east.

A staunch believer in economic liberalism, Erhard joined the Mont Pelerin Society in 1950, and used this influential body of liberal economic and political thinkers to test his ideas for the reorganisation of the West German economy. Some of the society's members were members of the Allied High Commission and Erhard was able to make his case directly to them. The Mont Pélerin Society welcomed Erhard because this gave its members a welcome opportunity to have their ideas tested in real life. Alfred Müller-Armack, the secretary of state of Erhard's ministry, helped him guide German economy with theories until the beginning of the 1960s.

Late in the 1950s, Erhard's ministry became involved in the struggle within the society between the European and the Anglo-American factions, and sided with the former. Erhard viewed the market itself as social and supported only a minimum of welfare legislation. However, Erhard suffered a series of decisive defeats in his effort to create a free, competitive economy in 1957; he had to compromise on such key issues as the anti-cartel legislation. Thereafter, the West German economy evolved into a conventional welfare state from the basis that had already been laid in the 1880s by Bismarck. According to Alfred Mierzejewski, the generally accepted view is that Germany has a social market economy, that the post-war German economy has evolved since 1948, but the fundamental characteristics of that economic system have not changed, while in his opinion, the social market economy had begun to fade in 1957, disappearing entirely by the late 1960s.

Erhard was also deeply critical of a bureaucratic-institutional integration of Europe on the model of the European Coal and Steel Community.