Ludwig Erhard played a major role in bringing about Germany’s so-called economic miracle (the Wirtschaftswunder) in the early years of the Federal Republic. The introduction of the deutschmark and the social market economy will always be seen as his legacy. In 1948, as economic director of the western occupation zones, Erhardt implemented the German monetary reform, putting an end to the controlled economic system of the past. In conjunction with the positive effects generated by the Marshall plan, his reforms led to an undreamt of economic recovery.
In the 1960s, combatting slow economic growth and unemployment through an active economic policy led to new challenges. Federal Minister for Economic Affairs Karl Schiller – a former professor of economic theory and Economics Senator of the Hanseatic City of Hamburg – played a leading role in passing the Act to Promote Economic Stability and Growth. Since then, the principle of the ‘economic equilibrium’ has become the basis for defining the Federal Government’s economic objectives. This means, in particular, that the government makes investments based on demand.
‘Prosperity for all’
Erhard’s and Schiller’s goal was to create an efficient economic system whilst at the same time promoting social mobility and creating ‘prosperity for all’. When it came to the question of what role the government should play, the two Ministers strongly disagreed. Ehrhardt leaned towards adopting a passive approach, whilst Schiller favoured taking on a more active role. This became very clear in his famous comment, where he said: “As much market as possible, as much state as necessary”. However, despite their different attitudes towards economic policy, both policymakers were united by their belief in the social market economy as the underlying principle of the German economy.