The reform and its consequences
The “law on the principles of control and pricing policy after monetary reform“ granted Ludwig Erhard, in his function as Director of Economic Administration, the right to determine which products and services were to be exempted from pricing regulations. Erhard, without further ado, abolished all compulsory pricing, which earned him a severe reprimand from the American and English controllers. The supervision of prices by the control authorities was lifted. This was followed by monetary reform on 20 June, 1948. At first sight, this appeared to be a triumphal success, but soon it was back to earth with a bump. Prices rose, and an impending general strike and other attempts to topple the market economy again threatened Erhard’s policy. Towards the end of 1948, however, prices eased, the Marshall Plan provided an improvement in the supply of commodities. The publication of price comparison lists and the “law against profiteering ” created major points of reference. There was a further important step in the direction of a market economy with the easing of prices and the realisation that the customer was king. Suddenly the customer could expect to obtain even more favourable prices and consequently he became more careful about how and on what he spent his money. The market changed from the seller’s market where the customer bought everything he could because there was not enough to go round to the buyer’s market where the customer is king. The result was that investments for plant modernisation rose, as did unemployment rates, too – unfortunately! However, the government was forced to accept the latter in order to establish a market economy which would remain stable in the long term.