Germany: Recovery's Steward

• Share

When the harried leaders of the free world's economies get to daydreaming, West Germany must seem to be something like Valhalla. It has virtually full employment with negligible inflation, and its gross national product is growing at a brisk rate of 5½% a year. In addition, its Economics Minister enjoys a political popularity that is unusual in his profession. From posters that went up all over Frankfurt last week in support of local Social Democratic Party candidates gazed the youthful, horn-rimmed visage of a man who was not even up for election. He was Karl Schiller, 57, who is considered the architect of West Germany's recent economic resurgence.

In 22 months under Schiller's stewardship, Germany has recovered from a severe recession and served as the U.S's and Britain's closest ally in defense of the dollar and the pound. Reflecting the strength of Schiller's mark, Germany is by far the largest lender ($1.57 billion) to the 111-nation International Monetary Fund. Such achievements won due recognition three weeks ago when Schiller traveled to Washington for the IMF's annual meeting. The moneymen representing the powerful Group of Ten elected him their next president.

No Planning. Schiller himself is an improbable hero. A self-assured former professor of political economics, he was virtually unknown outside West Germany when he joined New Chancellor Kurt Kiesinger's Cabinet in 1966. Nor was he a household word at home. As the first socialist in the top economic job since the war, he was automatically distrusted by German business. At the same time, he seemed suspiciously capitalistic to old-line Social Democrats. What West Germany needed, said Schiller, was a mix of "the competitive play of market forces" and as much government planning as necessary.

For years, West Germany had no real planning whatever. Former Chancellor Ludwig Erhard's Santa Claus approach to government spending was harmless as long as Germany's postwar boom continued. But in 1966, when inflationary pressures appeared, his refusal to cut spending and raise taxes proved catastrophic. Moving on its own to brake the boom, the Bundesbank squeezed credit too tightly, eventually causing mass unemployment and a deep recession.

Schiller wasted little time after he took over as Economics Minister. He joined Finance Minister Franz Josef Strauss in balancing Erhard's deficit-plagued budget, then ordered up a flock of measures to revive the economy—pump-priming expenditures, generous investment write-offs, a moratorium on major new taxes. He journeyed to Frankfurt for a showdown with Bundesbank President Karl Blessing, an old Erhard ally, and warned that the bank's continuing tight-money policy would only worsen the recession. Blessing reluctantly relented, has allowed the central bank rate to fall gradually from its 5% high to the current 3%.