In This Review

Freedom with Responsibility: The Social Market Economy in Germany, 1918-1963
Freedom with Responsibility: The Social Market Economy in Germany, 1918-1963
By A. J. Nicholls
Oxford University Press, 1994, 422 pp

Nicholls, an experienced English historian of Germany, examines here the critical influence of Ludwig Erhard, who as federal minister of economic affairs presided over Germany's postwar rebound. This fine study recounts the intellectual origins of Erhard's social market principles and the manner in which this stubborn man translated ideas into practice against a great deal of German and Allied skepticism and opposition. The author shows how Erhard, appalled by Hitler's coercive economy and the strict controls imposed by the Allies, sought not only a currency reform but the liberalization of trade. He opposed both command economies and pure laissez-faire, or complete disregard for social justice. Nicholls argues that Germany's spectacular recovery in the 1950s was the fruit of Erhard's policies. Erhard gradually persuaded opponents, including the Social Democrats, to consider his approach and ultimately won a far-reaching consensus in favor of the policies of the market but including codetermination and great social benefits. Nicholls started his work as a study in the construction of a new political culture in postwar Germany -- only to find that the study has acquired a new topicality in the years after the collapse of communism and the search for alternatives. This work is simultaneously a study in economic thought and practice, a major contribution to the early history of the Federal Republic, and an excellent synthesis of the vast literature surrounding all these subjects. It is churlish to wish for more, but even a brief comparison with the experience of dirigiste France in the 1950s would have been especially valuable.