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WILLIAM S. STOKES, Economic Liberalism in Post-War Germany - Ralph Raico, New Individualist Review [1961]

Edition used:

New Individualist Review, editor-in-chief Ralph Raico, introduction by Milton Friedman (Indianapolis: Liberty Fund, 1981).

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Economic Liberalism in Post-War Germany

WILLIAM S. STOKES*

. . . I do not believe that the idea of a “German mircle” should be allowed to establish itself. What has taken place in Germany during the past nine years 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. If this German example has any value beyond the frontiers of the country it can only be that of proving to the world at large the blessings of both personal and economic freedom.

—Ludwig Erhard1

DR. THEODOR HEUSS, the distinguished first president of the West German Federal Republic, once addressed himself to the question as to why the German has worked hard in recent times. He concluded: “he has had to; there has been no other way for him to earn his living in a country so restricted in area.”2 On the other hand, Professor Louis L. Snyder advances the thesis that German history and social, economic, and political institutions have conditioned the German to an acceptance of authoritarianism. When the elite members of society order the German to work hard, he responds instantly by working hard.3

The German people are indeed hardworking in the West German Federal Republic. They are also imaginative, inventive, efficient, affluent, and humane. In a major policy address delivered by Dr. Gerhard Schröder, Federal Minister of Foreign Affairs, on April 3, 1964, certain facts were revealed which demonstrate clearly that economic progress is continuing in West Germany. Dr. Schröder said, among other things:

With a gross national produce of some 380,000 million Deutschmarks we are at the head of all Common Market countries. Our share in the overall GNP of the EEC comes to almost 40 per cent. Our industrial production has increased by more than 180 per cent between 1950 and 1963, which means that, together with Japan and Italy, we top the list of all industrialized countries of the free world. As regards automobile production we are second only to the United States. The volume of our external trade amounts to 111,000 million Deutschmarks, which makes us today the world’s second trading nation. In recent years, Germany alone has provided roughly twice as much development aid as all the Communist countries taken together.4

Although the explanations for German effectiveness in producing and distributing goods and services provided by Dr. Heuss and Professor Snyder are interesting and perhaps useful, they do not quite cover the situation. One can stand on the border between East and West Germany and, bereft of all of the quantification devices of behavioralists, observe the obvious differences in productivity in the two systems.5 East Germany has the better agricultural land, yet weeds compete with the corn for nutrients in the soil. Even the very young and the very old willingly contribute to agricultural production in West Germany. Workers in the urban centers of East Germany are apathetic and careless, whereas standards of individual performance are high in West Germany. Although repeated so frequently that the whole world must know, it is nevertheless worth saying once more that the contrast between East and West Berlin proves strikingly the superiority of capitalism over socialism. The people in East Germany, of course, are just as German as those in the Federal Republic. If Dr. Heuss’ thesis were valid, they should buzz with economic activity. On the other hand, if Professor Snyder’s thesis were valid, they should respond with great zeal to the admonitions of their Communist leaders: They certainly live under one of the most authoritarian systems the world has ever known. But the fact is that the People’s Democracy in East Germany lags far behind the West German Federal Republic in economic development.

This paper will attempt to show that economic reforms in the direction of a private enterprise, market-oriented economy were primarily responsible for the rapid economic development which has taken place in West Germany in recent years. Special attention must be given to Ludwig Erhard and to Wilhelm Röpke, since Erhard provided the leadership and the policies and Röpke many of the principles of classical liberalism which were embraced by the government of West Germany. Other men in public life in Western Europe have shared the views of Erhard and Röpke. Where they have been able to persuade their governments to move from the planned state (dirigisme) to economic liberalism, the results in terms of economic development have been similar. Such men include Reinhard Kamitz in Austria, Luigi Einaudi in Italy, Jacques Rueff of France, Walter Eucken, and Per Jacobsson.6 It is not merely that economic liberalism has produced a dynamic and creative economic system, important as this fact is, but that the value implications of classical liberalism have extended to social and political life as well.

THE SPIRIT OF the White-Morgenthau Plan permeated the military occupation of Germany in its early years. It was planned that by 1949 Germany’s overall industrial capacity would be reduced to about 50 to 55 per cent of the prewar 1938 level (excluding the construction and building materials industries). The “planned reduction in Germany’s resources” would result in “a 30 per cent cut in the standard of living” as compared with the average standard of living before the war (1930-38).7 About 6.6 million Germans were killed during the war, 3.5 million were disabled, and more than 15 million lost their homes.8 Many parts of Germany were literally flattened. Although the initial policy was to disable rather than rebuild, the United States never intended to starve Germans to death. Between July 1, 1945, and March 31, 1950, total United States aid to West Germany was $3,801 million. As of July 31, 1952, the figure was somewhat greater. The United States claimed officially that the economic aid was used for purposes of achieving recovery in Germany. “In one form or another some 4 billions of dollars of United States aid have been applied to the economic recovery of West Germany in accordance with a policy of assistance to a defeated foe unduplicated in history and in violent contrast to the treatment accorded the areas of Germany under Soviet domination.”9 In a very broad sense, this statement may be accurate. However, the economic aid was not used to construct new industries or activate agriculture. “Nearly all of this aid represents the cost of procuring and shipping food, industrial raw materials and like commodities to Germany.”10 An official report of the Military Government describes United States policy as of 1946: “No attempt has been made to do extensive rebuilding while new construction has been absolutely prohibited.”11

Although the United States government spent billions of dollars in Germany, policies of rationing, price control, centralized direction, restriction, and restraint—coupled with a failure to stabilize the monetary situation and manage the inflation—resulted in a virtually stagnated economy: “by the end of 1945 industrial output was no more than 25 per cent of 1936 and perhaps as little as 15 per cent of the highest wartime level.”12 The plants operating by the end of 1945 represented about 15 per cent of the total industrial establishments in the United States zone. However, such plants were operating at no more than 5 per cent of capacity.13 About 20 per cent of the German population in the United States zone was receiving public assistance in some form or other.14 Little improvement could be claimed in 1946. The official report for the period stated: “Industrial production is estimated at only 10-12 per cent of current capacity in the United States Zone.”15 As of late 1949, the economic situation in Berlin could only be described as deplorable. About 25 per cent of the residents were unemployed. The Soviets looted to a point of reducing industrial capacity about 80 per cent. By the end of 1949, 800,000 of the 2.1 million total population or 38 per cent were being subsidized by some form of public aid.16

Despite the heavy expenditures of United States dollars, few Germans ate well. In the first 21 months of the occupation, rations were as low as 1,180 calories per person per day; and in only 8 out of the 21 months did the rations reach 1,550 calories per day in the American zone.17 Average weight continued to decline from sub-standard figures in June 1946, resulting in a nutritional status so low “as to entail excessive morbidity and mortality from infectious diseases in general and respiratory diseases in particular.” The increased incidence of tuberculosis is explained by weight deficiency and overcrowding.18

In a speech delivered at Antwerp, Ludwig Erhard described the character of the German economy just prior to the currency reform:

It was a time when most people did not want to believe that this experiment in currency and economic reform could succeed. It was a time when it was calculated that for every German there would be one plate every five years; a pair of shoes every twelve years; a suit every fifty years; that only every fifth infant would lie in its own napkins; and that only every third German would have a chance of being buried in his own coffin. That seemed to be the only life before us. This demonstrated the boundless delusion of planners that, on the basis of raw material stocks and other statistical data, the fate of a people could be determined for a long period in advance. These mechanists and dirigstes had absolutely no conception that, if a people were allowed once more to become aware of the value and worth of freedom, dynamic forces would be released.19

LUDWIG ERHARD, who was elected director of economic administration of the bi-zonal economic area on March 2, 1948, before becoming Minister of Economic Affairs in the new government and Chancellor in 1964, made clear in party circles and in the Military Government that he sought the destruction of planning and the institution of a market oriented economy. He found some opposition within his own party (the Christian Democratic Union or CDU-CSU). The Social Democratic Party (SPD), Marxist influenced and socialist in a formal, official fashion, naturally despised everything Erhard stood for in the field of economics. In addition, there was apparently a preponderance of economic planners, mostly United States university professors, acting as advisers in the Military Government. Although Erhard is a friend and supporter of the United States, various statements in one of his books suggest that he had a difficult time with the economists in the Military Government. For example, he says: “It was strictly laid down by the British and American control authorities that permission had to be obtained before any definite price changes could be made. The Allies never seemed to have thought it possible that someone could have the idea, not to alter price controls, but simply to remove them.”20

Again, when Erhard put currency stability in the forefront of his objectives, the Allies “in a heated ‘war of memoranda,’ preferred full employment . . . [to] the stability of our currency . . . . nearly all forces joined for a general attack on the market economy, forgetting that only through greater productivity and free competition, on the basis of the stability of our money, could we secure our position in the world markets.”21 When Erhard wanted to lower certain taxes and to remit others in order to step up consumption and lighten the burden on the economy, the Allies “at first refused permission for this tax reform.”22 Other words and phrases in his book further indicate the reluctance of the American authorities to accept economic reform: “interventions from the Americans”; the Income Tax Law of April 23, 1950 “was finally sanctioned by the Allies”; etc.23 The head of the E.C.A. mission in Germany expressed his distaste for what Erhard was doing by describing the German tax system as the most “anti-social in the world.” Erhard says that “there was constant pressure from the U.S.A. to introduce controls . . . .”24

The first great reform which Erhard achieved was the Tripartite Currency Reform, officially promulgated June 18, 1948 (Military Government Law No. 61), effective June 20. The reform retired the Reichsmark and established the Deutsche Mark. There would be DM 10 billion in the western zones (DM 11 billion on agreement of at least three-fourths of the Boards of Directors of the Bank Deutscher Länder of at least six of the Länder).25

From 1935 to 1945, the currency in circulation had increased from about RM 5 billion to over RM 50 billion. Bank deposits grew from about RM 30 billion to over RM 150 billion. Reich debt increased from RM 15 billion to RM 400 billion, “excluding war damage and other war-connected claims of RM 300 to 400 billion . . . . By 1946 the national income had been reduced from RM 60 billion to about RM 25 billion to 30 billion in 1936 prices.” It was estimated that the black market controlled 50 to 60 per cent of production, with prices often fifty to several hundred times the official prices.26

Erhard quotes Jacques Rueff and Andre Piettre as to the immediate effect of the currency reform in West Germany, and the paragraph is worth quoting here:

The black market suddenly disappeared. Shop windows were full of goods; factory chimneys were smoking; and the streets swarmed with lorries. Everywhere the noise of new buildings going up replaced the deathly silence of the ruins. If the state recovery was a surprise, its swiftness was even more so. In all sectors of economic life it began as the clocks struck on the day of currency reform. Only an eye-witness can give an account of the sudden effect currency reform had on the size of stocks and the wealth of goods on display. Shops filled up with goods from one day to the next; the factories began to work. On the eve of currency reform the Germans were aimlessly wandering about their towns in search of a few additional items of food. A day later they thought of nothing but producing them. One day apathy was mirrored on their faces while on the next a whole nation looked hopefully into the future.27

The bi-zonal index of industrial production increased from about 47 per cent of 1936 in May 1948 to 75 per cent in November28 and to 140 per cent by mid-1952.29 Lutz, Sohmen, Wright, and Röpke agree that currency reform was the beginning of the general policy of freedom of economic opportunity (Gewerbefreiheit) which, year after year, has continued to produce highly satisfactory results.30

Wilhelm Röpke has provided the best description of the nature of the economic reforms:

The essence of the German economic reform corresponds to the sickness which it was intended to cure. If the sickness was that combination of collectivism and inflation which we have designated as repressed inflation, the therapy for it had to consist, on the one hand, in the elimination of inflationary pressure and, on the other hand, in the elimination of the apparatus of repression (maximum prices, rationing, controls, and other interferences with free prices) and the restoration of market freedom, free prices, competition, and entrepreneurial incentives. Freedom in the realm of goods, discipline in the realm of money—those were the two principles upon which rested the German economic revival from 1948 onwards, and they have remained the foundation of German prosperity in spite of all the many concessions made to interventionism and the welfare state.

The reform of 1948 was constituted, then, of two parts: the overcoming of inflation and the dismantling of the apparatus of repression. The first was accomplished by the monetary reform, the second by the economic reform represented in the restoration of the market economy. Thus were the twin pillars of genuine economic order reconstructed from the chaos and the paralysis of the inflationary planned economy: the steering and motive power of free prices and the stability of the value of money.31

It is hard not to agree with Röpke when he says that “here is to be found the most convincing case in all history against collectivism and inflationism and for market economy and monetary discipline.”32

In my opinion, the most important result of currency reform was that human beings became important again. Individual dignity and self-respect were restored. It was the economic success of the early reforms, however, which provided the government with the means to behave in a humane manner. In order to assist some 13,090,000 expellees and refugees to find new homes and jobs and become a part of the West German community, more than $14.3 billion had been spent by January 1961. About 12.5 per cent of the total national product is devoted to social welfare functions (although Erhard makes crystal-clear his opposition to the concept of the paternalistic state). Restitution payments to the victims of the Nazi tyranny have been recognized to the extent of $7.8 billion, half of which has already been paid. The Federal Government has met its defense obligations through expenditures of $19,223 million ($21,823 million if aid to Berlin is included) in the period 1950-1960.33

No one knows or can measure the creative potentialities of human beings. The best way to discover who is capable of achievement is to permit all to try, each in accordance with his own inclinations and ideals. In Germany since 1949, talent has burst to the surface where none was ever suspected of existing. The tremendous increase in vertical mobility has already changed attitudes and perhaps values as well in the direction of representational government. With freedom, individuals have experimented with many kinds of social and economic activities. Inevitably, the like-minded have formed voluntary organizations to discuss and, more recently, scrutinize government to see that no one in authority jeopardizes the new-found liberty.

The achievements of the “social market economy” and republican government under federalism should not be exaggerated, however. West Germany is not rich in natural resources, except for coal. No matter how inventive, ingenious, and hard-working Germans may be, relatively full employment and a high level of prosperity depend to an important degree upon an international climate that permits free, fair access to raw materials and markets. The CDU-CSU Government has succeeded in bringing about agreements liberalizing trade in the European area, but a reversal of this trend would have a negative effect. Although about 5.5 million homes were built in the period 1950-1960, construction techniques are less advanced than in the United States. Retail merchandising, especially in food, must be improved if people are to obtain high quality products at low cost.

One reform which Erhard hoped to accomplish early in his administration was the modernization of agriculture and the elimination of subsidies. When the Bonn government assumed power in 1949, the many small farms were divided into about 25 million tiny scattered strips, resulting in “an enormous waste of time, labor and land resources and seriously handicapping mechanization.”34 The “Green Plan,” which is the term used to designate the program of government subsidies, distorts the market and delays the fundamental solution to the problem of producing inexpensive fruits, vegetables, meat, and dairy products. The elimination of subsidies, tariff reform, and consolidation (by voluntary means, not by government coercion) of the small plots represent goals which Erhard has not yet been able to realize.

ERHARD AND THE FOUNDING Fathers of the Bonn system believed that a private enterprise, market-organized economic order was essential for political liberty and freedom. When the White-Morgenthau policy was abandoned and West Germany was permitted to attempt national regeneration in the political realm, the Germans advanced their views to the military authorities.35 After much deliberation, the three Military Governors submitted an Aide-Memoire to the Parliamentary Council meeting at Bonn on November 22, 1948, outlining the constitutional principles which the occupation authorities believed should be incorporated into the new “basic law” (Grundgesetz rather than Verfassung because the Founding Fathers at Bonn wanted to reserve the term “constitution” for the organic statute of a reunited Germany). The Aide-Memoire is a remarkable document, because its recommendations are the result of searching analysis of why the representational system failed in the Weimar Republic, culminating in the Nazi tyranny. As the Aide-Memoire does not seem to be well-known, or, at least, is not often mentioned in scholarly studies of Germany, it is perhaps worthwhile to insert the provisions here:

“They [the Military Governors] believe that the Basic Law should, to the maximum extent possible, provide:

“a. For a bicameral legislative system in which one of the houses must represent the individual states and must have sufficient power to safeguard the interests of the states;

“b. that the executive must only have those powers which are definitely prescribed by the constitution and that emergency powers, if any, of the executive must be so limited as to require prompt legislative or judicial review;

“c. that the powers of the federal government shall be limited to those expressly enumerated in the constitution, and, in any case, shall not include education, culture, health (except, in this last case, to secure such coordination as essential to safeguard the health of the people in the several states); and that its powers in the field of public welfare be limited to those necessary for the coordination of social security measures; and that its powers in the police field be limited to those especially approved by the Military Governors during the occupation period;

“d. that the powers of the federal government in the field of public finance shall be limited to the disposal of monies, including the raising of revenue for purposes for which it is responsible; that the federal government may set rates and legislate on the general principles of assessment with regard to other taxes for which uniformity is essential, the collection and utilization of such taxes being left to the individual states; and that it may appropriate funds only for the purpose for which it is responsible under the constitution;

“e. that the constitution should provide for an independent judiciary to review federal legislation, to review the exercise of federal executive power, and to adjudicate conflicts between federal and Land authorities as well as between Land authorities, and to protect the civil rights and freedom of the individual;

“f. that the powers of the federal government to establish federal agencies for the execution and administration of its responsibilities should be clearly defined and should be limited to those fields in which it is clear that state implementation is impracticable;

“g. that each citizen have access to public office, with appointment and promotion being based solely on his fitness to discharge the responsibility of the position, and that Civil Service should be non-political in character; and

“h. that a public servant, if elected to the federal legislature, shall resign his office with the agency where he is employed before he accepts election.”36

How unnerving and even galling the provisions of the Aide-Memoire and, indeed, the Bonn Basic Law must be to the modern-day “liberal.” Both sources prove that one can “turn the clock back” to the principles of classical liberalism, such as individualism, voluntarism, genuine division of powers, states’ rights, and most important of all, limited government.

BUT WHAT ABOUT the Social Democrats? What has been the impact of the return to classical liberalism insofar as their ideological and policy posture is concerned? Are they sincere in rejecting socialism in favor of the “social market economy” now in force?

Although the SPD until very recently opposed every major foreign and domestic policy of the Bonn Government, it is possible to argue that the party has now shifted fundamentally in the direction of strong, if not militant anti-Communism, and that it now supports the private enterprise economic system. It is difficult to conceive how a party could so radically change its position in so short a period of time, but there is evidence that this is what has happened.

The left-right conflict in the SPD over socialism and capitalism was resolved in a draft program published in the SPD paper Vorwärts on September 10, 1959. The program eliminated the term “class struggle” and included only one reference to the “privileges of the ruling class.” It moved away from socialism and endorsed private enterprise in such phrases as “prosperity for all”; “freedom of choice for consumer goods”; and “free initiative for entrepreneurs.” However, other phrases in the program indicated that the Party intended to remain at least partly leftist: “democratic socialism”; “just socialist order”; and “competition as far as possible and planning as far as necessary.”

The program called for nationalization of coal and power, control of the management of large industries, cartel regulation, investment supervision, and competition by public enterprises. It preferred respect for religious institutions and endorsed their protection by law and accepted the principle of national defense. The convention of the SPD held at Bad Godesberg approved the major provisions of the draft program on November 16, 1959. Thus, the Bad Godesberg program replaced the Heidelberg program of 1925 and committed the SPD to new policies of private property, a free economy, and national defense. The Bad Godesberg program clearly rejects Marxism and denies that socialism can be made a substitute for religion. The orthodox Marxists at the convention remained almost completely silent, and only 16 out of 340 delegates voted against the program. The public press made clear that the wing of the party which supported the anti-Communist and moderate economic views of Willy Brandt had triumphed over the leftists who had dominated the party in recent years.37

IT IS THE ATTITUDES and values which individuals hold and cherish which determine the character of a state, regardless of the forms, structures, laws, or constitutions which may be in force at any given time. It is true that political and governmental institutions contribute to the value pattern of a society, but the family, Church, education, social classes, and the economic system also play important roles. If one seeks a society of free men organized in an independent state, it is logical to assume that the possibilities for success are maximized by creating as complete a climate of freedom as possible. If I interpret the evidence correctly, this has been the position of the leaders of the new German state since the inception of the Federal Republic in 1949 and even before, since the currency reform was in 1948. By honoring the concept of the worth and dignity of the individual Erhard and his supporters have unleashed talent and ability which almost overnight produce a dynamic economic system which in turn made values of voluntarism, fluidity and mobility in the class system meaningful. Since freedom is indivisible, it is only logical to insist on the establishment of a government limited to a range of functions compatible with personal liberty.

Since man is fallible and his institutions necessarily imperfect, one should not overestimate the achievement of the renewed application of principles of classical liberalism in a single country. In West Germany over three-fourths of the adult population had only eight years or less of schooling in 1949. Educational opportunities have increased since that time, of course. However, children are still separated at about age ten into the small group preparing for university or professional education and the large majority who face early terminal education and employment. Good as the system is in many respects, it may deny the country the skills and leadership which a longer and more flexible education might produce. The present system probably reduces mobility, makes the class structure more rigid, and aggravates individual and group conflict. The retention of the old division (almost a caste system) of the Beamten, civil service officials with a formal certificate of appointment, and the Angestellte, or employees, has a similar effect in the public service.

In the political and governmental field, the partial use of proportional representation permits fragmented, “functionary” parties, although West Germany is practically a two-party country in national elections. Single member constituencies and majority voting may replace proportional representation completely in time, thus compelling party leadership to behave more considerately and responsibly toward party members. Although the right-wing movements have declined in influence since about 1951-1952 and the major parties are committed to the principle of representation, there does not seem to exist any large degree of popular enthusiasm for the mechanical aspects of the Bonn system. Many Germans do not regard it wholly as their own creation. I was told many times: “It’s all right, but when we achieve reunification, we will put our heads to the task and come up with something better.” Perhaps so, but in the meantime it is possible to conclude that the German experience proves once more that some ideas are better than others, and that sometimes those which have prevailed in the past serve the needs and idealistic aspirations of man better than those which happen to be popular at present.

It has seemed to me that the achievements of Bonn have contributed to the defeat of socialism in the Western European countries. In a trip to the major countries of the Far East in 1963, a research experience which permitted me to talk to heads of state, men in public life, scholars, and businessmen, I found that there was widespread awareness of the German case study. I seemed to detect an awareness of the fact that those countries in the Far East which have taken steps to free their economy (Japan, Taiwan, and the Philippines for example) were regarded as having achieved a more impressive economic and political experience than those which have moved in the direction of state interventionism and planning (such as Indonesia, Ceylon, Burma, or India). As a Latin Americanist, I have many times called attention to the strong penchant for left or right-wing collectivism among both large and small countries in the Western Hemisphere. In the last ten years, however, and especially in the past several years, much evidence has appeared to suggest that people with power and influence in the community are re-examining the principles of classical liberalism, particularly in the economic realm. The case study of Germany in particular, Western Europe in general, and most recently, Spain, which is in the process of dismantling state controls, appears in the literature and in the discourse of knowledgeable people. Even in the United States itself it might be said that some change of direction can be discerned.

[* ] William S. Stokes is Senior Professor of Comparative Political Institutions at Claremont Men’s College. He is a leading authority on international relations and a leading specialist in Latin American affairs.

[1 ] L. Erhard, Prosperity Through Competition (New York: Praeger, 1958), p. 116.

[2 ] T. Heuss, “German Character and History,” Perspective of Germany, Atlantic Monthly, March 1957, p. 103.

[3 ] L. Snyder, German Nationalism: The Tragedy of a People (Harrisburg, Pa.: Stackpole, 1952), pp. 521, passim.

[4 ] G. Schröder, “Germany’s Position and Germany’s Future,” The Bulletin (Bonn: Press and Information Office of the German Federal Government), April 7, 1964.

[5 ] My statements here are based on personal observations in East and West Germany, East and West Berlin, summer, 1960.

[6 ] W. H. Chamberlin, “The Twilight of the Planners,” The Freeman, May, 1964, pp. 23-24.

[7 ] Military Government of Germany, Monthly Report of the Military Governor U. S. Zone: Reparations and Restitutions, No. 9 (April 20, 1946), p. 1.

[8 ]Die Welt (Hamburg), Aug. 24, 1959.

[9 ] Office of the U. S. High Commissioner for Germany, Report on Germany, Sept. 21, 1949-July 31, 1952 (Washington, D. C.: U. S. Government Printing Office, 1952), p. v.

[10 ]Ibid., p. 49.

[11 ] Military Government of Germany, Monthly Report of the Military Governor, U. S. Zone: Manpower, Trade Unions and Working Conditions, No. 8 (March 20, 1946), p. 8.

[12 ] Office of Military Government for Germany (U. S.), Economic Developments Since Currency Reform, Special Report of the Military Governor, November, 1948, p. 2.

[13 ] Military Government of Germany, Monthly Report of the Military Governor, U. S. Zone: Report of the Military Governor, No. 2 (Sept. 20, 1945), p. 10.

[14 ] Military Government of Germany, Monthtly Report of the Military Governor, U. S. Zone: Public Welfare, No. 2 (Sept. 20, 1945), p. 3.

[15 ] Military Government of Germany, Monthly Report of the Military Governor, U. S. Zone: Report of the Military Governor, No. 6, (Jan. 20, 1946), p. 5.

[16 ] Office of the U. S. High Commissioner for Germany, 1st Quarterly Report on Germany, Sept. 21-Dec. 31, 1949 (Washington, D. C.: U. S. Government Printing Office, 1950), p. 34.

[17 ] Military Government of Germany, Monthly Report of the Military Governor, U. S. Zone: Food and Agriculture, No. 20 (March 1, 1946-Feb. 28, 1947), p. 1.

[18 ] Military Government of Germany, Monthly Report of the Military Governor, U. S. Zone: Report of the Military Governor, No. 13 (Aug. 20, 1946), p. 16.

[19 ] Erhard, op. cit., p. 10.

[20 ]Ibid., p. 14.

[21 ]Ibid., pp. 32-33.

[22 ]Ibid., p. 35.

[23 ]Ibid., pp. 39, 41.

[24 ]Ibid., p. 39.

[25 ] Office of Military Government for Germany (U. S.), Economic Developments since Currency Reform, pp. 3-4.

[26 ] Office of Military Government for Germany (U. S.), Monthly Report of the Military Governor: Report of the Military Governor, No. 36 (June, 1948), p. 6.

[27 ] Erhard, op. cit., p. 13.

[28 ] Office of Military Government for Germany (U. S.), Economic Developments since Currency Reform, p. 3.

[29 ] Office of the U. S. High Commissioner for Germany, Report on Germany, Sept. 21, 1949-July 31, 1952, p. 233.

[30 ] F. A. Lutz, “The German Currency Reform and the Revival of the German Economy,” Economica, XVI (May, 1949), 122-42; E. Sohmen, “Competition and Growth: West Germany,” American Economic Review, XLIX (December, 1959), 986-1003; D. M. Wright, Post-War West German and United Kingdom Recovery (Washington, D. C.: American Enterprise Association, 1957); W. Röpke, Economics of the Free Society (Chicago: Henry Regnery Co., 1963), esp. pp. 246-50.

[31 ] Röpke, op. cit., p. 248.

[32 ]Ibid.

[33 ]The Bulletin (Bonn), Jan. 17, 1961, pp. 1-2.

[34 ] Office of the U. S. High Commissioner for Germany, 7th Quarterly Report on Germany, April 1-June 30, 1951 (Washington, D. C.: U. S. Government Printing Office, 1951), p. 80.

[35 ] For an account of the drafting of the Bonn Grundgesetz from the German point of view, see P. H. Merkl, The Origin of the West German Republic (New York: Oxford University Press, 1963), p. 269.

[36 ] Office of Military Government for Germany (U. S.), Monthly Report of the Military Governor: Report of the Military Governor, No. 41 (November, 1948), pp. 87-88.

[37 ] See W. Brandt, The Ordeal of Co-existence (Cambridge, Mass.: Harvard University Press, 1963), p. 112, passim.