21 March 2017

Germany must rediscover what made it great

By Bill Wirtz

Nothing is really changing politically in Berlin. Germany’s socialists are currently in a coalition with the conservatives, forming an immense majority in parliament. The coalition has slowed down public spending cuts and reforms enacted by the previous government. The German Left is at risk of fading into irrelevance as its choices regarding coalitions are limited: it’s either Merkel once again or going down the road of a three-party coalition.

In this post-crisis economy, Berlin shouldn’t be interested in who organises a government reshuffle in September, but should instead be concerned with how a freer economy can liberate the potential of hard-working Germans.

Germany’s historic free-market champion, former conservative politician Ludwig Erhard, should serve as a role model to counter the ideological emptiness of contemporary German politics. Erhard is known to be responsible for the most extensive period of economic deregulation in modern times. Instead of following the temptation of slowly moving towards more economically interventionist policies, Berlin should follow Erhard’s example who believed that, instead of central planners, individuals should decide a country’s future.

Erhard, a German conservative contentious for his free-market stance as economics minister in chancellor Konrad Adenauer’s government from 1949 to 1963, is known as the “Architect of a Miracle”. In a West Germany ravaged by World War II, Erhard believed that only individuals could design the future of the country. As a result, he buried the Allied price controls which had significantly lowered food production, rescinded tariffs, and cut income taxes by 15 per cent. Erhard unleashed a wave of deregulation that made savings skyrocket and tripled industrial output in only two years.

But Erhard insisted that none of the German Economic Miracle was to his credit. In fact, in his 1958 book Prosperity through Competition, he lays out an outstanding definition of free-market capitalism:

“What has taken place in Germany … is anything but a miracle. It is the result of the honest efforts of a whole people who, in keeping with the principles of liberty, were given the opportunity of using personal initiative and human energy.”

Even though Germany might not be in the same economic situation it was at the end of World War II, the creeping economic interventionism of past years still burdens its economy. Germany’s public debt is currently at 78 per cent of GDP, far off from the 60 per cent criteria of the Maastricht Treaty.

Berlin might live off the advantage of low expectations when compared with countries such as neighbouring France, but its attractiveness to foreign industries has been down in recent years, especially because of its electricity prices – the highest in Europe, created by the government’s decision to phase out nuclear energy – and the 2015 introduction of a national minimum wage.

Germany needs to regain a vision for the future through free-market principles. It is time for German free marketers to provide the country with the ideological diversity it needs.

This article was originally published on FEE.org. Read the original article

Bill Wirtz is a political commentator