A new “Economic Miracle” in Germany?

Once upon a time, an economic miracle happened in Germany. The Secretary of State for Trade and Industry was Ludwig Erhard. He was convinced, if the economy is free, it’s also social. Price fixing and state regulation was reduced, and the economy flourished. People didn’t realize that it was not a miracle at all. The Wirtschaftswunder happened because of the liberalization of the economy. Erhard did fight against more social insurance and liability limitations – and sometimes lost against the chancellor Konrad Adenauer. But still, a certain level of liberalism was successfully established. Some generations later, meanwhile, socialism failed in East Germany. The market economy seemed to have won the battle of economic ideas. But never halloo till you’re out of the wood!

Today, the German Minister for Economy and Energy is Peter Altmeier. On the 5th of February, his ministry published a National Industry Strategy 2030. Herein, Altmeier correctly analyzed: “some state interventions went wrong, because … the state generally is not the best entrepreneur.”

But further reading through the paper leads to some surprising testimonies by Altmeier which sound quite different. For one, he thinks that the capacity for innovation and competitive ability is not a task for the enterprises, but for the state, that the state should be the co-owner of enterprises to create champions, that higher-ranking political goals legitimate state subsidies, and that corporate mergers should be facilitated by the state.

But not only on the federal level has classical liberalism long lost its place. Some developments at the federal-state level go further in the wrong direction as well. Just take Berlin as an example, where the mayor wants to rebuy 50,000 apartments, where partners within the state coalition (left, social democrat, and green party) want to expropriate enterprises to enable public ownership, where a vice chairman of a parliamentary group wants to fix rents within Berlin, and where a Google Campus start-up and technology center couldn’t be built because of local resistance (instead it will be a “house for social engagement”).

The situation in Germany today reminds me of the Staatliche Plankommission der DDR, that is, the government planning commission of the German Democratic Republic – at one point back then, the government produced a medal on which it said “state planning for the well-being of the people.” A few years later, however, the DDR didn’t exist anymore.

If the current trajectory continues, Germany may go down a similar path. Instead, what the country needs is another economic miracle, one which liberates the economy once more from too-intrusive state interventionism.