6 - The Social Market Economy and Competition

Summary

Ludwig Erhard claimed that the social market economy represented a decisive break with Germany's past. But his political opponents in the SPD and the new trade union federation, the Deutsche Gewerkschaftsbund (DGB), despaired the return of a capitalist economic system they held responsible for the rise of Nazism. The West German left had hoped to transform German industrial culture through the socialization of key industries and the introduction of an “economic democracy.” In response, Erhard and his supporters argued repeatedly that the defining characteristic of Germany's economic and industrial past had been its highly developed and rigid organization. The economist Wilhelm Röpke, for example, wrote that Germany's organized and, he would add, collectivist economy contributed to a “cult of the colossal,” which had contributed to an alienation favorable both to Nazism and, in the future, socialism. As an alternative, Erhard championed free competition as a means both to solve the immediate problem of increasing productivity and to dismantle Germany's still highly organized and, thus, stifling industrial culture. To backers of the social market economy who rallied to Erhard in 1948–49, this emphasis on competition, this belief in the ability of a competitive framework to achieve essential social ends, distinguished the social market economy from the laissez-faire capitalism they agreed had led to Nazism.

The efforts of Erhard and his supporters to elevate free competition to the core of the social market economy resulted in the much criticized anticartel law of 1957.