Social Justice Arises from Ludwig Erhard’s Economic Policies

May 10, 1945 is sometimes called Stunde Null — “zero hour” — in German history. The war had officially ended at midnight. The German people finally had peace and were freed from the tyrannical oppression of Adolf Hitler. Yet it was the most difficult of times.

In German cities, bombs had destroyed homes and workplaces. Rubble filled and blocked streets and sidewalks. Many people had no access to electricity or running water. Subway, streetcar, bus, and railroad transportation were nearly nonexistent. Food supplies were insufficient, and people actually died of starvation.

Those who use the phrase “zero hour” to describe this moment in history see it as a moment when the German people were starting over. The past had been destroyed and they had nothing. They had to rebuild not only physical infrastructure, but the society itself, out of the emptiness.

Other historians argue against using the term Stunde Null, pointing out that the Germans were greatly burdened by the past. They were not starting with a clean slate. The past was real and was inflicting further suffering on them.

From mid-May 1945 onward, Germany was under the military governorship of the four victorious Allies — The United States, Britain, France, and the USSR. Paradoxically, these governors, having defeated the Nazis, left Nazi policies in place. These policies cruelly oppressed the Germans after the war. For twelve years, from 1933 to 1945, the National Socialist government had brutalized the German people. With the Nazis defeated and gone, the vicious policies were left in place.

The people had hoped that the war’s end would bring an end to the persecution, but the Allies continued the same practices. The abusive practices of the Nazi government grew from its name: National Socialism. The Nazis had “nationalized” various industries, confiscating people’s property, and placing businesses under the control of the government. They had introduced aspects of socialism — eliminating the freedom of the marketplace — by controlling wages and prices, by dictating the quantity of products to be manufactured, and by crushing the people with high rates of taxation.

The Nazis occasionally violated their own principles — they presented themselves as saving people from the evils of communism and socialism, while implementing socialist policies — they occasionally privatized industries when it served their purposes, violating their own broad trend of nationalizing industries. But the net effect and overall trend of Nazi policy was to eliminate personal economic freedom and to eliminate political liberty, which amounted to eliminating social justice.

Those National Socialist policies were foundational to fascism, and to be expected from the Nazi party. It was, however, unexpected that the American, British, and French would continue those policies — the same genocidal policies against which they had waged a long and painful war.

Along with the Allied military governors, one German political party, the SPD, also sought the continuation of National Socialist economic policies. These policies were driving Germany down at accelerating rates into misery. Observers inside and outside of Germany feared that the nation would be consigned permanently to a third-world status, or that it would take more than a century to rebuild the country.

The great surprise began in an area known as the Bizone. At the war’s end, most German territory was divided and occupied by four victorious Allies. The Americans and the British coordinated their governance of their respective occupational zones, and so the name Bizone arose. The French, whose occupational zone was defined somewhat later, also joined, and sometimes the area is called the Trizone.

In the Bizone, an innovative economist named Ludwig Erhard saw the problem and proposed a solution. To be anti-Nazi and anti-fascist, he argued, one must do the opposite of what the National Socialists had done, as Lawrence White explains:

Fortunately for ordinary Germans, Erhard — who became director of the economic administration for the U.K.-U.S. occupation Bizone in April 1948 — thought otherwise. A currency reform that he helped to design was slated to replace the feeble old Reichsmark with the new Deutsche mark in all three Western zones on June 20. Without approval from the Allied military command, Erhard used the occasion to issue a sweeping decree abolishing most of the price controls and rationing directives. He later told friends that the American commander, Gen. Lucius Clay, phoned him when he heard about the decree and said: “Professor Erhard, my advisers tell me that you are making a big mistake.” Erhard replied, “So my advisers also tell me.”

Erhard’s mission was to undo what the Nazis had done. His conceptual program included lowering taxes, removing wage and price controls, privatizing industry, and the end of the “command economy.” A command economy is one in which the government dictates how many of each type of product will be manufactured.

The Soviets criticized Erhard’s views. The SPD criticized Erhard’s views. Some American economists criticized Erhard’s views. But Ludwig Erhard had been, prior to his job as economic advisor in the postwar era, a researcher in an economic think-tank, and had been an assertive member of the anti-Hitler underground resistance movement. He was unmoved by his critics. The policy he proposed was not in error, as Lawrence White reports:

It was not a big mistake. In the following weeks Erhard removed most of the Bizone’s remaining price controls, wage controls, allocation edicts and rationing directives. The effects of decontrol were dramatic.

By every metric, the German economy — i.e., the economy in the Bizone and Trizone — began to recover, and it recovered quicker than anyone thought possible. Wages rose. The standard of living rose. Unemployment fell. German industries rebuilt and modernized.

In mid-1945, Germany was starving, had no resources, and was living in primitive squalor. Within a decade, it had the largest, healthiest, and most powerful economy in Europe, and the second most powerful economy in the world.

The free market was the path to social justice. The laissez-faire policies which Erhard introduced opened the path to true democracy: a government of freely-elected representatives.

The Economics of Ludwig Erhard: Applying Simple Principles in Complicated Situations

After May 1945, when WW2 ended, Germany was a physically and economically devastated country. Infrastructure was nonexistent in many places: electricity, running water, and telephone service were rare. Bombs had destroyed both residential and commercial structures. Railroads, highways, streets, and bridges had been wrecked.

Around the world, many economists, historians, and political leaders expressed the view that Germany might find it impossible to rebuild. Many thought that Germany would be permanently relegated to a third-world status. Some observers believed that, if Germany could rebuild, it would take more than 100 years. The country had taken such a terrible beating that recovery seemed impossible.

Yet within a single decade, Germany would be the most powerful economy in Europe, and by many metrics, the second most powerful economy in the world. Commentators from other nations were amazed, as Lawrence White writes:

Germany became a role model for recovery from a very different crisis. In the aftermath of World War II, Germany’s cities, factories and railroads lay in ruins. Severe shortages of food, fuel, water and housing posed challenges to sheer survival.

In 1945, the situation was so desperate that many Germans starved to death. Millions of young German men had died in the war, and now their families were dying from a lack of food at home.

In the immediate postwar situation, the armies of the winning countries (The United States, France, Britain, and the USSR) had political and civil control over Germany. The Germans were not allowed to have their own government until late 1949.

At first, the postwar military occupational powers enforced the economic policies which were on the books at the end of the war — the Nazi policies. The word “Nazi” is short for “National Socialist,” and the Nazis lived up to that name.

The Nazis nationalized industries — the government seizing an individual’s property. This was the case, e.g., for two major aircraft companies, Junkers and Arado, and for two railroad systems, the Lübeck-Büchener Railway and the Brunswick Landes railway. The Nazi government also created the massive Reichswerke Hermann Göring, a government-owned and -operated industrial conglomerate. State-owned companies were a central part of the fascist control of Germany.

The other part of “National Socialist” is the socialist economic programs which the Nazis implemented. Although in their propaganda, the Nazis portrayed themselves as rescuing the German people from the evils of communism and socialism, the reality was that the Nazis imposed regulations which choked the free functioning of markets. Opposing laissez-faire economic systems is a cornerstone of socialist economics.

Accordingly, the Nazis imposed wage and price regulations. Only the government could set prices for merchandise, and only the government could determine how much workers would be paid. In this way, the Nazis controlled nearly every aspect of the economy.

The Nazis also imposed significant taxes on all Germans, which amounted simply to the confiscation of the property of ordinary working-class people.

Finally, the Nazis engaged in a “command economy.” They dictated how much of each product might be manufactured — no more, and no less, was allowed.

As strange as it may be, the four powers who controlled Germany after the war initially decided to keep the genocidal Nazi economic policies in place. After fighting a war to defeat National Socialism, the victorious Allies kept Nazi economic regulations in effect, as Lawrence White reports:

Unfortunately, occupation policy makers actually perpetuated the shortages by retaining the price controls the Nazi government had imposed before and during the war. Consumers and businessmen battled against the bureaucratic regime of controls and rationing in what the German economist Ludwig Erhard described as Der Papierkrieg — the paper war. Black markets were pervasive.

The downward death spiral of the German economy continued to worsen. The great recovery began only when Ludwig Erhard persuaded the military governors to allow the dismantling of Nazi policies. Erhard worked systematically to undo fascism: his policies reduced regulations, reduced taxes, and reduced government ownership of industries. People could freely negotiate wages and prices, and could decide for themselves how much of any given product they wanted to manufacture.

Ludwig Erhard was simply the anti-Nazi and anti-fascist economist. Whatever the Nazis had done to the economy, Erhard would do the opposite.

Within a year, the growth of the German economy was significant. Unemployment fell, wages rose, and the standard of living rose. German companies became more innovative than their European competitors. Economists coined the word Wirtschaftswunder — “economic miracle” — to describe the turnaround.

Erhard commented that there was no miracle, but rather merely the consistent and sound application of economic policies and principles. He explained that prosperity and freedom were coextensive. The undoing of the fascist control of the economy was simultaneously the introduction of social justice and the beginning of an economic rebirth. He wrote:

Das, was sich in Deutschland in den letzten neun Jahren vollzogen hat, war alles andere als ein Wunder. Es war nur die Konsequenz der ehrlichen Anstrengung eines ganzen Volkes, das nach freiheitlichen Prinzipien die Möglichkeit eingeräumt erhalten hat, menschliche Initiative, menschliche Energien wieder anwenden zu dürfen. Wenn darum dieses deutsche Beispiel über das eigene Land hinaus einen Sinn haben soll, dann kann es nur der sein, aller Welt den Segen der menschlichen Freiheit und der ökonomischen Freizügigkeit deutlich zu machen.

The rebirth of the German economy was also the rebirth of a truly democratic society. Justice demanded the undoing of Nazi policies, which brought about personal freedom and political liberty, as well as prosperity.

Frida Kahlo: German or Mexican?

Great fame has come to the name Frida Kahlo. In the name itself is a key to the mystery of her self-concept. Around the age of thirty, she changed her name from “Frieda” to “Frida” in an act of protest: It was the 1930s, and she was not timid in saying, “Hitler’s a pig. He’s mistreating the Jews and and wants to wreak havoc across Europe!”

This incident is recorded by Marc Petitjean, whose father, Michel Petitjean, was a friend of Frida.

She changed the spelling of her name to distance herself from the brutality of the National Socialist government. Her disdain was for the Nazis. For the oppressed and suffering Germans, who were the victims of the Nazis, she felt kinship. After the war, she was enthusiastic in establishing a connection with her extended family members who lived in Germany.

Frida’s relationship to her own name is therefore already complex.

Long before changing her name, Frida’s heritage was established as a mixture of German and Mexican, as Marc Petitjean writes:

Frida’s father, Wilhelm Kahlo, was the son of a jeweler who lived in Baden-Baden in Germany and whom Frida maintained was of Hungarian descent. At twenty-one he emigrated to Mexico and Hispanicized his first name to Guillermo. He worked in the German community as a cashier in a glassware shop, as a salesman in a bookshop, and for a jeweler.

Wilhelm played important roles in Frida’s life: he transmitted her family’s German heritage to her, he taught her the German language, and he introduced her to the visual arts and encouraged her to pursue them. Wilhelm was himself an artist, working mainly in photography and graphic design.

The Kahlo home was a cultural enclave, and Wilhelm felt at home in Mexico’s small community of German immigrants. He did not, however, isolate: he learned to speak Spanish well, and more importantly, to read and write it. He developed significant business connections among Mexican business and government leaders.

Marc Petitjean describes Wilhelm’s personality, and his influence on Frida:

Guillermo was a Germanophile who read Schopenhauer and played Beethoven sonatas on the piano alone in his study. He taught Frida to speak German, to paint, and to take photographs.

Frida’s mother was a widow named Maria. Her first husband had also been a German. Wilhelm Kahlo was a widower; Maria was his second wife and the mother of Frida. Marc Petitjean records that Maria was “illiterate.” Maria died a decade before Wilhelm died. In sum, Wilhelm had more time and more intellectual resources to shape Frida’s thinking about art and culture.

Two cultures lived inside Frida: the Mexican which surrounded her, and the German which shaped her home life. Marc Petitjean recounts his father’s analysis of Frida:

My father was particularly aware of the two cultures within Frida: “a degree of rationalism, due to her German heritage, grew more complex when it was combined with Mexican exuberance, Mexican generosity, and Mexico’s colorful religious fervor. Frida was all this rolled into one.” She was completely Mexican and German. It fascinated him.

“In order to” express her contempt for Hitler and the National Socialists and to “distance herself from Nazi” politics, “she even claims that her father’s family is Jewish,” according to Petitjean. Sometimes she added Hungarian to her heritage. Frida’s view of historical reality was rather fluid and fanciful. There is no evidence that the Kahlo family had Jewish or Hungarian roots. The family seems to have been long established in western and southwestern Germany.

Frida often rewrote history to make a symbolic point: she changed her date of birth to reflect events in Mexican history, sometimes citing it as 1910 instead of 1907.

There are distinctly Mexican features combined with distinctly German features in Frida’s thought and work. Her father’s artistic contributions and affectionate support of Frida’s work are integral to her achievements.

Frida Kahlo’s Father: How Wilhelm Became Guillermo

The fact that Frida Kahlo spelled her name “Frieda” for the first part of her life is symbolic of her heritage. Her father, Wilhelm Kahlo, was a significant artist in his own right.

Wilhelm’s main medium was photography, although he also worked in graphic design, as reported in Fridas Vater: Der Fotograf Guillermo Kahlo von Pforzheim bis Mexiko, a monumental biographical study of Wilhelm’s life and career, published in 2005.

In 1890, he emigrated, leaving Germany and settling in Mexico. He brought with him a good middle-class education, the ability to play the piano well, and a love for authors like Goether, Schiller, and Schopenhauer. His collection of German books was a prominent feature in the home in which Frida was raised.

He learned Spanish and became proficient in the language, but continued to use German professionally and at home. He began to call himself Guillermo, the Spanish equivalent of Wilhelm, in social and business situations.

With his first wife, Maria, Wilhelm had three children, two of whom lived to adulthood. Maria died young, and Wilhelm remarried. His second wife was Matilde, who bore five children, four of whom lived to adulthood. Frida was born in 1907.

Some details of Frida’s life, and her father’s life, cannot be precisely clarified. Wilhelm’s education in Germany was clearly a thorough one, allowing him to navigate complicated accounting procedures in the business world, while reading Schopenhauer in his freetime. He could play the piano well, and artistic training, but historians have been unable to determine which schools or universities he attended.

Other details about the family are known, but contradict the fanciful versions which Frida liked to tell. The Kahlos were a well-established German family, and not descendants of Hungarian immigrants into Germany. Frida also liked to vary her date of birth, adjusting it to link it symbolically with the history of Mexico.

While it is routinely reported that Frida studied at the “Colegio Aleman Alexander von Humboldt,” a German language school in Mexico, no documents have survived to prove this. It is known that at least one of Frida’s sisters studied there.

In any case, Frida spoke German at home with her father, who called her liebe Frieda (“dear Frieda”). In the 1930s, she changed the spelling of her name as a protest against the suffering which the National Socialist (“Nazi”) government was inflicting upon the Germans.

Frida’s mother died in 1932, and her father lived almost another decade afterward. It was her father who introduced Frida to painting. Whether she inherited some of his artistic ability, or whether he taught it to her, is an open question.

During Wilhelm’s last decade, Frida apparently absorbed an appreciation for her family’s history. Wilhelm died in 1941, during WW2. When the war was over, Frida was enthusiastic about making contact with distant relatives in Germany — people she’d never met. When she wrote to them, she was able to give a wealth of details about individuals in the Kahlo family, going back several generations. She and her father must have conversed in depth about the family history.

Frida could speak German comfortably with her father, but her ability to write German at an academic level was never strong. After her father’s death, she didn’t use her German much, and so in a 1949 letter to her German relatives, she apologizes for writing in English.

Wilhelm and Frida had an affectionate relationship. He influenced her approach to images, cared deeply and unconditionally for her, and imparted family history to her, so that long after his death, she was enthusiastic to correspond with the Kahlo family members in Germany. A substantial part of Frida’s self-concept was German.

Gaby Franger and Rainer Huhle co-edited Fridas Vater: Der Fotograf Guillermo Kahlo von Pforzheim bis Mexiko. The book was published in 2005 and includes essays by Juan Coronel Rivera, Cristina Kahlo Alcala, Helga Prignitz-Poda, and Raquel Tibol.