West Germany: A Little Planning

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As the postwar director of West Germany's shell-shocked economy, Ludwig Erhard rejected the remedy that a great many experts recommended for such a situation—a rigidly planned economy. With the rubble all around him, he began extolling the virtues of free enterprise and launched what has since come to be known as the Wirtschaftswunder (economic miracle). As recently as 1961, Erhard publicly deplored the fact that "there are still traces of the economic planner's mentality in our economy."

Now Erhard is Chancellor, and with some of the Wunder gone out of the Wirtschaft, he has turned toward the kind of planning that he used to say could cause only "friction and disturbance." It still amounts to far less control than the French system, which has government-set production goals, but it is much more than the Erhard of only a few years ago would have tolerated.

Presently before the Bundestag is an Erhard-backed bill that will tighten credit controls by allowing the federal government and West Germany's central bank to decree one-year restrictions on the amount of public and private borrowing. Beyond that, both the federal and state governments will be freed from constitutional obligations to balance their budgets; instead, they will be able to run surpluses or deficits, depending on whether the economy needs to be speeded up or slowed down. Both federal and state governments will be required to present long-term (probably five years), coordinated investment plans; at present, the Bonn government is not able to even get information from the states about their spending prospects, much less influence them. Also under the new legislation, the government will be able to vary tax-depreciation allowances in order to stimulate or soothe the economy.

All this comes as bitter medicine to Erhard, but he has little choice. The cost of living went up 4.5% during the twelve months that ended in April. Spending by government, both federal and state, was bloated by 12% in 1965, much more than the still substantial growth of 8.4% in the gross national product. Erhard himself has been booed by coal miners in the Ruhr, whose industry is threatened by the Europe-wide revolution in oil, natural gas and atomic energy. The coal malaise has spread to steel—partly because the steel companies themselves produce 40% of West German coal—with the result that Krupp and other producers have begun to cut back working hours. And so, Free Enterpriser Erhard has clearly come to decide that a little government planning is better than none.