Another student, taking a superficial economics class — fewer charts, graphs, and equations, but more focus on policy and politics — will quickly see the connection to “social justice,” but will justifiably wonder if economics has any claim to academic rigor or intellectual respectability.
Ludwig Erhard showed that market economies lead to social justice, and that property rights lead to civil rights. He showed that when suppliers are free to creatively meet demands and consumers are free to choose, all parties in the marketplace benefit.
Alexander Kluy, writing in the Frankfurter Rundschau, summarizes Erhard’s thought with the slogan je freier, desto gerechter, roughly “more freedom means more justice.”
Who was Ludwig Erhard? A researcher, an academic, and a professor of economics, he was associated with two groups — the Freiburger Kreis and the Freiburger Schule — both of which opposed Hitler’s National Socialism. If free markets and property rights create social justice and civil rights, then Hitler embodied the opposite principle: regulated markets, price controls, govern-owned industries, and high rates of taxation led to war, genocide, oppression, and death.
The word ‘Nazi’ is an abbreviation of ‘National Socialism.’
Members of these two resistance groups — the Freiburger Kreis and the Freiburger Schule — took serious risks in opposing National Socialism, and some were in fact rounded up by the Gestapo and later executed.
At the war’s end, Germany was in a situation called Stunde Null: the “zero hour” of a massive economic reset. The nation’s infrastructure was almost entirely gone: roads, bridges, running water, sewage systems, telephone lines, electrical service, etc. Civilian Germans had died during air raids, Jewish Germans had died in concentration camps, and young Germans had died on battlefields. This devastation was the result of National Socialism.
Some observers speculated the Germany would be permanently relegated to a third world status.
After the war ended in May 1945, Ludwig Erhard and others worked to undo Nazi policies. They worked to deregulate the economy, reduce tax rates, and privatize industries previously owned by the National Socialist government.
In 1949, when control of West Germany moved from occupational armies to a freely-elected government, Konrad Adenauer became the country’s first chancellor, and he appointed Ludwig Erhard as Bundesminister für Wirtschaft, the federal minister for economics.
From the late 1940s to the early 1960s, Erhard was largely responsible for the Wirtschaftswunder — the “economic miracle” which lifted Germany to the status of the strongest economy in Europe, and the leading manufacturer in Europe.
As Alexander Kluy writes, Erhard was associated with prosperity in the public imagination. He had given the nation hope, and he had given it the vision and opportunity to rebuild through hard work:
Der dicke Mann mit der Zigarre war zum Monument geworden in einer fragmentierten Gesellschaft. Kaum jemand verkörperte das Wirtschaftswunder-Deutschland so wie Erhard (1897-1977). Der exponentiell ansteigende Wohlstand der 1950er und 1960er Jahre in der Bundesrepublik ist auf das Engste mit dem Namen des Kaufmannssohns aus Fürth verbunden. Wohlstand für Alle, Titel seines erfolgreichsten Buches, wurde zum Signum einer Ära, zum Schlachtruf der Christdemokratischen Parteien, die in vielen Wahlkämpfen auf Erhards rhetorische Begabung, seine Reputation als Ökonom setzten und in den Fünfzigern mit dem bestechenden Satz »Erhard hält, was er verspricht« auf Wahlplakaten warben.
For Erhard, creating economic justice in the wake of Nazi oppression was a central task. From his Freiburg days, he used the concept of der sozialen Marktwirtschaft. The German language contrasts sozial, meaning something like “socially conscious,” with sozialistisch, meaning socialist.
The postwar government rejected the national-sozialistische government of Hitler, and instead implemented Erhard’s soziale Marktwirtschaft.
Erhard explained that a market economy is socially conscious because, as suppliers seek to sell to every demand, then every consumer benefits from the competition to offer better products at a lower price. Everyone is a consumer, and everyone is part of the economy’s aggregate demand. In a competitive market economy, every supplier wants to meet as many demands as possible, and suppliers will lower their prices and raise quality in order to sell to those demands.
A market economy creates social justice because it improves the standards of living for everyone in the nation, as Alexander Kluy writes:
Sie sei sozial gewesen, weil sie den Verbrauchern und somit allen nützte. »Die Lösung liegt nicht in der Division, sondern in der Multiplikation des Sozialprodukts«, so Erhard. Bedürftigkeit werde durch Wachstum beseitigt, Ungleichheit durch Wachstum irrelevant. Der Markt sei sozial, weil er die Bedürfnisse der Menschen befriedige und ihren Lebensstandard anhebe.
In 1963, Konrad Adenauer stepped down, and Ludwig Erhard became Chancellor of West Germany. But Erhard’s most significant work was already done by that time. His chancellorship was an afterthought. Between early 1947 and October 1963, Erhard was the brilliant economist who created postwar Germany.