May 23, 2005


Nazism and the German economic miracle (Henry C K Liu, 5/23/05, Asia Times)

The term "social market economy" was coined by one of German chancellor Ludwig Erhard's close associates, economist Alfred Mueller-Armack, who served as secretary of state at the Economics Ministry in Bonn from 1958-63. Mueller-Armack defined social market economy as combining market freedom with social equity, with a vigilant regulatory regime to create an equitable framework for free market processes. The success of the social market economy made the Federal Republic of Germany the dominant component in the European Union. Focusing on the social aspect, Erhard himself shied away from praising free markets. He felt that social rules of the market-economy game must be adhered to as a precondition in order to prevent unbridled pursuit of profit from gaining the upper hand.

Erhard's concept of a socially responsive regulated market economy was based on a fusion of the Bismarck legacy of social welfare and US New Deal ideology of demand management through full employment, price control, state subsidies, anti-trust regulations, state control of monetary stability, etc. It was aided by the infusion of foreign capital through the Marshall Plan. It proved to be effective for rapid and strong recovery of the West German economy via guaranteed access to the huge US market during the Cold War, culminating in the postwar economic miracle (Wirtschaftswunder).

Yet Erhard's program bore a close resemblance to the early economic strategy of the Third Reich.

The unintentional genius of the Marshall Plan was that it prevented Europe from undergoing the kind of economic reforms that would have made it viable in the long run and instead left it with the social welfare system that has helped destroy it.

Posted by Orrin Judd at May 23, 2005 8:33 AM

They're not mentally prepared for the reforms and I really don't think they ever were.

They're still peasants/children and prefer the king/daddy to take care of them.

Monarchy, OJ, 1000 years of it.

Posted by: Sandy P. at May 23, 2005 12:00 PM


Yes, if we'd been serious about saving them we'd have restored the monarchy.

Posted by: oj at May 23, 2005 12:04 PM

I usually don't see equivalent comparisons of Erhard's Social-Market economy with the Nazi economy. However, after clicking the link I did not see much evidence, only an assertion.

To my mind, the salient aspects of the Nazi economy were:

Import substitution
Capital controls
Expropriation of Jewish wealth
Abolition of labor unions
and later theft of conquered nations' wealth

The Nazis attempted to create autarky where Germany alone produced everything it needed. For those necessary foreign trades (like oil which Germany did not posses) the Nazis used direct commodities because they did not want specie to leave the country.

None of these were elements of the social-market economy.

In fact, the founder of the social-market economy, Ludwig Erhardt, was a disciple of the Freiburg School of economics which was essentially free market economics (but within a structure and not completely laissez faire) and opposed to Nazi economics. Perhaps now it may be considered somewhat lefty, but in the 1940's it was definitely right wing.

Posted by: Chris Durnell at May 23, 2005 12:10 PM

Sandy - Germany's legacy of monarchy was much shorter; it had a long run of independent city-states and, though Prussia was monarchical for a long time, Germany as a whole was unified under a strong central government only by 1870. I think the lesson is that it only takes a few generations for a welfare state to corrupt the citizenry.

Posted by: pj at May 23, 2005 12:22 PM

I thought it's CW that the death of FDR allowed Truman to do post-Yalta damage control by using the Marshall Plan to stymie the Communist Party's plan to take control of all of Europe.

Without our offering the stability of the Marshal Plan, what would have prevented all of Europe from voting in the Communists who, once in control, would have done away with free elections as they did elsewhere in the world.

There is some truth to those who say democracy isn't for every country. Countries where is no informed and empowered electorate have a hard time adjusting to individual responsibility. Iraqi's seemed to have handled being in charge of their own destiny very well.

I don't know the answer, but it bears thinking about.

Posted by: erp at May 23, 2005 1:02 PM


The elections.

Posted by: oj at May 23, 2005 2:16 PM