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29.04.2002, 21:51

Ludwig Erhard, We Need You / Artikel, engl

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http://www.mises.org/fullstory.asp?control=943
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Ludwig Erhard, We Need You
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by Frank Vogelgesang

[Posted April 29, 2002]

[img][/img] What
do the German soccer league, unemployment, and the price for ice cream have in
common? They, among assorted other topics, have been causes of grave concern in
Germany over the past few weeks. And the solution suggested for all three
usually is: let government take care of it!

In the case of soccer, the
league?s travails are caused by the insolvency of the media empire of Leo
Kirch, who had provided a steady flow of revenue to the clubs in exchange for TV
rights. That Kirch Media went broke following a number of bad management
decisions prompted Chancellor Schröder--not that surprisingly--to suggest that
state loan guarantees should save the day. After all, this is the number one
national pastime we are talking about, and general elections are only a few
months off.

Regarding unemployment, which by now
stands at an intimidating 4.3 million jobless (and probably around another 1.7
million in hidden unemployment), the sad tale goes like this: In a
well-publicized scandal in February, the Federal Labor Agency, or Bundesanstalt
für Arbeit--a bureaucracy with no less than some 90,000 employees in charge
of finding jobs for the unemployed and at the same time paying out unemployment
benefits--had to admit that it had been using creative statistics for years.

As it turns out, the institute had
long been overstating the number of people it brought back into jobs by a
whopping 70 percent! I assume that its success rate in spending the available
budget for unemployment benefits and other transfer payments, however, is closer
to 100 percent.

Finally, in the ice cream incident,
the media detected a significant hike in the price for a cone as compared to
last year. The instinctive reaction of the journalist reporting the news was to
ask which state minister was responsible for ice cream prices.

As inconsequential as the last
example may appear, like the others, it illustrates mainly one disconcerting
fact: how entrenched the mentality of reliance on the state still is, and how
woefully absent principles of classical liberalism usually remain in the actions
of government as well as in the mind of the public at large.

Germany today is a country marked by
often-suffocating regulation, a social security system that lies like a wet
blanket over the private sector, and a labor market in desperate need of
breathing room. Trying to run a business can easily be rendered a nightmarish
experience. Companies cannot adjust to downswings because often it is virtually
impossible to reduce the number of people working for you. There are still
incredibly powerful unions that mandate the wage level for entire industries
nationwide.

A whole class of
professionals--doctors, lawyers, tax consultants, and also pharmacists--are
shackled on one hand by all-encompassing legal provisions, right down to
how much they can charge for their services (and, until recently, where they can
set up shop); on the other hand, they are still shielded by privileges
reminiscent of medieval guilds and are benefiting handsomely from the
siphoning-off of economic rents.

On top of that, several de facto
public monopolies persist in an only de jure privatized environment, like
Deutsche Telekom AG?s exclusive rights over the"last mile," or the
exclusivity granted to the former public postal service, now Deutsche Post AG,
to carry all letters under 200 grams. Add to that a tax code which is widely
known to be the most complicated in the world and which admittedly nobody fully
understands anymore. Besides administrative reform and revamping the income tax,
scrapping fiscal beauties like the"ecology tax" or the"solidarity
surcharge" altogether, and reducing the heavy tax burden, is urgently
needed.

It would not be just to lay the
blame for this state of affairs squarely at the door of the current Social
Democratic/Green coalition government. The Christian Democrats previously in
power for many years hardly did much better. (The only party in Germany fighting
coherently for a society based on competition and markets is the Free Democrats,
or FDP.) To be fair, there have been improvements in the past. But the task
lying ahead is daunting. And it is hardly encouraging that quite a bit of the
legislation introduced over the past three years has made matters actually worse.

The list of overdue reforms is so
widely known that I will not repeat it here. The finer point of all this is that
the way things are today to an alarming degree go against the kind of market
economy envisioned by Ludwig Erhard after World War II, based largely on ideas
of the Freiburg School with its intellectual roots in the Austrian Eugen von Böhm-Bawerk,
in Wilhelm Röpke, in Walter Eucken, and in others.

Today, many still have not
understood that the days of the European cradle-to-grave welfare state are
numbered. And sometimes it is hard to see how Germany can turn back to what was
the good and solid foundation of the economic success it achieved in the postwar
years.

What I mean to suggest is that in
contemporaneous German society the mores, to use de Tocqueville?s term, are
such that the values of individualism as an organizing principle of society, of
free competition where economic activity is steered by prices and a wariness to
keep the size and power of the state in close check, are given little currency.
This is not to say that it is too late to turn back. In fact, lately there have
been some encouraging signs. But it is crucial to raise awareness of the marks
decades of the welfare state have left.

With that in mind it is worthwhile
to remember F.A. Hayek?s remarks (Individualism and Economic Order,
University of Chicago Press, 1980, p. 22) on the theory of individualism, where
the emphasis,

"(?) of course, is on the fact that the
part of our social order which can or ought to be made a conscious product of
human reason is only a small part of all the forces of society. In other words,
that the state, the embodiment of deliberately organized and consciously
directed power, ought to be only a small part of the much richer organism
which we call?society,? and that the former ought to provide merely a
framework within which free (and therefore not?consciously directed?)
collaboration of men has the maximum of scope."

2002 is an election year in Germany.
Given the catastrophic state of the labor market and the outrageous displays of
waste of billions of Euros of public money--like that of the Labor Agency--you
would expect people to be fed up with statist conceptions. At the moment,
however, the trend--as astounding as it is depressing--seems to be that the
Party of Democratic Socialism (PDS), the successor of the ruling SED of GDR days,
is gaining in popularity.

Meanwhile, as I write, Italy is
grinding to a halt due to a general strike orchestrated by the unions to
arm-wrestle the Berlusconi government supposedly over laws that make it all but
impossible to fire anyone in companies with over 15 employees. In this light,
the comparative position of the United States versus most of contemporary Europe
(France!) does not seem all that bad, does it?


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Frank Vogelgesang studied economics at the University of Freiburg,
worked in Chile for seven years, and returned to his native Germany last year.
Send him MAIL.
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