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Chris Trotter argues the version of West Germany's post-war economic miracle presented by the NZ Initiative's Oliver Hartwich was misleading, as it involved a more hands-on and less laissez faire government than he touted

Chris Trotter argues the version of West Germany's post-war economic miracle presented by the NZ Initiative's Oliver Hartwich was misleading, as it involved a more hands-on and less laissez faire government than he touted
Berlin's Brandenburg Gate.

By Chris Trotter*

Was it patriotism or something else that drove Dr Oliver Hartwich’s peculiar submission to the Epidemic Response Committee?

As a child of the Federal Republic of Germany’s post-war “Economic Miracle”, it is hardly surprising that the Chief Executive of the New Zealand Initiative should turn for inspiration to his own people’s remarkable come-back from catastrophe. If the German people could climb out of abyss into which their faith in the Fuhrer had cast them, then why not New Zealanders? All they need do is follow the example of West Germany’s post-war economic messiah, Ludwig Erhard.

Dr Hartwich has been in New Zealand long enough to know that this bold claim would have a high chance of being accepted. Most New Zealanders are woefully ignorant of history (not least their own!) so the chances of even one of the politicians and bureaucrats participating in last Thursday’s Epidemic Response Committee (ERC) Zoom meeting seriously challenging his interpretation of Germany’s Economic Miracle were minimal. Especially when what was then referred to as West Germany’s rapid transformation – from bombed-out ruin to Europe’s economic powerhouse – is one of those “facts” that every well-informed person accepts without demur.

“So, you may now wonder what was Erhard’s miracle recipe?”, Dr Hartwich suggested rhetorically. “What did he do to turn the ruins of an economy into an economic powerhouse? And what can we, in New Zealand, learn from this?” Answering his own questions, Dr Hartwich declared: “The truth is: there was no miracle formula. Erhard did not micro-manage the economy. He did not control individual industries. He did not print money to finance his projects. Nor did he pay favours to any businesses.”

This was, of course, music to the ears of the National Party majority on the ERC, many of whom are growing increasingly alarmed at the rapidly-forming consensus that New Zealand’s way out of the Covid-19 economic crisis will require a judicious mix of all the remedies that Erhard did not favour. Their eagerness to hear what Erhard did prescribe is readily imagined.

Dr Hartwich was only too happy to oblige. “Erhard followed a principles-based approach, which he called the ‘Social Market Economy’. And that is the approach I recommend to New Zealand today. Erhard’s friend and economist colleague Walter Eucken distilled seven principles of the ‘Social Market Economy’:

  • A functioning price system
  • Monetary stability
  • Open markets
  • Secure private property rights
  • Freedom of contract
  • Liability for one’s actions and commitments
  • Steadiness of economic policy

“Each of these seven principles is as relevant to us today as it was in 1945. If we follow these principles, we can build New Zealand’s recovery and bring prosperity to all New Zealanders.”

For those New Zealanders who have followed the contentious economic debates of the past 35 years, Dr Hartwich’s bullet-points will have a very familiar ring to them. As he has framed them, Erhard’s seven principles sound uncannily like the core elements of the neoliberal economic order under which New Zealanders have Laboured and Nationaled since 1984. Hartwich, himself, acknowledged as much when he told the ERC:

“On many of these principles, New Zealand has done well in the past. But in the face of this crisis, we must do even better now.”

It was at this point in Dr Hartwich’s presentation that his own – and the NZ Initiative’s – true purposes were revealed. Under no circumstances must the crippling economic effects of the Covid-19 Lockdown be permitted to justify a turning-away from the hard-won “gains” of New Zealand’s neoliberal experiment.

The problem confronting Dr Hartwich and his sponsors was how to defend a neoliberal order which an increasing number of New Zealanders now perceive as a cruel and unjust failure. The answer which the NZI’s CEO has come up with is to re-brand this discredited ideology by tricking it out in the colourful lederhosen of Germany’s social market economy. It’s a pretty cynical ploy but, as noted above, the average Kiwi politician’s grasp of economic history is so weak that there’s a better-than-even chance of the NZI getting away with it.

Dr Hartwich’s cynicism does not, however, deserve to succeed. As a highly educated German economist, the good doctor knows that Germany’s social market economy has always represented a sensible Teutonic compromise between the injustices of laissez-faire capitalism and the inefficiencies of Soviet-style socialism. His supposed hero, Ludwig Erhard, was implementing his own version of the “Third Way” long before Tony Blair was wearing nappies!

Far from being the “Look Mutti – no hands!” economic system characterised by Dr Hartwich, the social market economy has always been a very “hands-on” affair. There is a very good reason why Erhard called his 1957 economic manifesto “Prosperity For All”. He knew from bitter personal experience that the suite of policies we now call “neoliberalism” generate the massive social inequalities that lead, ultimately, to economic fragility and catastrophe. More importantly, Erhard and his fellow social market economists understood that the economic crises generated by laissez-faire capitalism will, in their turn, generate the very totalitarian horrors its defenders purport to abhor.

Not that Erhard was at all impressed by the extreme statist solutions proffered by the socialists and communists. To this highly principled Christian Democrat, the sanctity of private property mattered; the Rule of Law mattered; price signals and economic incentives mattered; and, as every member of his generation knew, monetary stability mattered. But, the ordinary German’s access to high quality housing, education, healthcare, and social security; the rights of workers to a fair wage, safe working conditions, and a voice in how the enterprise employing them is run; these things mattered too. Making sure the economy’s largest industrial and financial institutions were not permitted to exercise undue influence over the nation’s economic, political and social policies also mattered – a lot. Effective social market economies do not require weak states, they require states ready, willing and able to intervene to make damn sure that “prosperity for all” amounts to something more than an empty slogan.

Germany’s post-war recovery wasn’t the work of one man, it was the work of millions of Germans determined to make the world think better of them. Western Germany recovered because the alternative to recovery was national dissolution.

Between 1945 and the creation of the Federal Republic in 1949* millions of Germans, ethnically cleansed from the nation’s easternmost territories, crowded into the houses and apartments of their western compatriots. Few in what had been the Allied Powers knew or cared: Germany had sowed the wind, and it had reaped the whirlwind. No one was going to lift Germany back up except the German people themselves.

Erhard knew that. He also knew that unless the German people could be convinced that they would receive a fair share of the wealth they were being asked to re-create, then the effort required to make it would fall short. Yes Marshall Aid helped. Yes, the spending of the United States’ army of occupation helped. But, they weren’t crucial. In the end, the German “economic miracle” was proof of what can be achieved when everyone joins together and nobody is left behind.

The truly ironic thing about the NZ Initiative’s presentation is that the social market economy its CEO is urging this country to embrace was, in its actual historical disposition, not so very different from the New Zealand which existed before people like Dr Hartwich and his sponsors tore it down.

*This date was corrected from an earlier version.

*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. His work may be found at He writes a fortnightly column for

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One should remember that because of past action of each government and fed - the only economy specially now is Fiscal and Monetary policy.

Stock Market is prime example of the stupidity as was rising without any Market/Economy but on announcement of fiscal and monetary policy -alone.

Going future everything will depend on announcement by governments/ fed and a time will come when they realize what the f@$# have we done, may be it would have been better to allow economy to take its own course with little support instead of trying to dictate it.

Short term pain for long term gain.

Echos my sentiments on our reaction to the virus. We have set our selves up for the longest term of pain in our short history.

One should remember that because of past action of each government and fed - the only economy specially now is Fiscal and Monetary policy.
A US experience - The same 12-year itch: Will banks loan down QE money this time?

t’s the question upon which Western “real” economies have hinged since 2008: will banks actually loan downward taxpayer bailout money – i.e. computer-generated QE dollars/euros – or will they keep hoarding it among themselves and the asset classes frequented by the 1%?

However, this concept goes back much further: since 1980 tax cuts for corporations and the richest tax bracket – essentially giving money to the 1% by never taking it – were supposed to “trickle down” to the lower classes.

Both actions are constructed on the same revolutionary ideology: that the wealthy are benevolent and patriotic, and not (as previously thought throughout human history) greedy, stingy and sanctimonious. It’s a drastic leap of faith but ¡Hasta la victoria, siempre!

Oddly, while socialism’s trial period is finished and cannot possibly be extended one more day, despite 40 years of failure neoliberalism still encourages us to throw more money at the rich and assume that this will fix everything. Socialist-inspired nations choose to throw their money – along with an army of auditors – at humble-living public servants, instead.

And Germany did have something of a helping hand! We'll never know if they could have done it all by themselves. But history suggests not.

The Marshall Plan, also known as the European Recovery Program, was a U.S. program providing aid to Western Europe following the devastation of World War II. It was enacted in 1948 and provided more than $15 billion to help finance rebuilding efforts on the continent.

So, "Marshall aid helped" might be more than a throw-way comment.

Exactly, it was no small influence by any means. Also looking at the map, where else then was the Iron Curtain going to finish up. Western powers knew West Germany had to get to be strong and fast. For example Ford established, General Motors got Opel going, Americanisation poured in.

The “teutonic” approach is often mocked but it nonetheless has its attributes, oh yes indeed it does. Just about everything is pretty methodical and the hierarchical layers in society and business still exist, are still respected and largely still work as necessary and efficiently. The nation centuries old, was transformed by Bismarck into the dominant continental powerhouse and foremost industrial country in Europe. Hard to imagine anything more completely different than New Zealand.

We have German neighbours; youngish; active cyclists and runners etc, and over the last 4 weeks, we haven't seen them once!
They were told to 'stay inside' and they have, unlike the mass of people who hit the roads; parks and beaches from last Friday on. Apparently The Rules apply to everyone - except them.

Perhaps they had family connections to life under the Stazi and knew what the consequences were for going against the State.

You may well be right but your point goes far beyond that and is seated even before that of the predecessor, the Gestapo. Bismarck established a network of both civil and military (Feldgendarmerie) secret police, that the Kaiser inherited and enhanced, remorseless and ruthless, in the same manner as his cousin the Tsar. Germans are well accustomed to the history of the iron boot so to speak. Wander round Berlin for example, you can sense it, and the history of it only too well. Worth the visit if only to realise the gritty reality of it.

From our friends in Cologne today ...
“i’m horrified by how quickly we gave up all the rights we fought so hard for since 1945.
the world will never be the same again. ”

I lived in Germany. The rules are EVERYTHING to them.....

No, I think this new generation will question them.

Just stay at home as much as you can Homer.

Nobody benefits from this situation.

With regard to "dobbing in" culture. I don't recall many condemning this sort of policy before - - Maybe because those who are now complaining weren't breaking those particular rules?

I lived there for a long time and speak the lingo. Following the rules is ingrained.

Which region KR? Hope Lowenbrau on tap!

Also, conveniently omits all the money USA gave them and Japan, whilst not letting off UK from "lend-lease debt that took til 1997 to repay. And all. money US corporations gave Hitler to build all his infrastructure too, in the 30s. Oh, and the EU is a "free-market" NOT. Abolition of DM favoured Germany massively and still does.

West Germany got considerably less under the Marshall Plan than the UK and France after the war. A lot of their factories and patents had been looted as well.

Agreed. It was a surprise to me to learn that Britain had taken the Marshall plan money but mainly spent it on a welfare state while Germany rebuilt industries. I'm not sure many Brits realise it. In my lifetime I've gone from being a kid reading comics about the wicked hun to actually visiting Germany and liking what I saw - respect for their heritage, a decentralised country with medium sized highly liveable cities. Good beer too.

quote last paragraph "The social market economy Hartwich is urging this country to embrace was, is not so very different from the NZ which existed before people like Dr Hartwich and his sponsors tore it down".


Hartwich has only been in NZ since 2012

Can anyone point to a paper that articulates what is meant by "people like Dr Hartwich and his sponsors tore it down"

I gather he means the NZ ruled by Muldoon. I don’t have any good memories of those times. It had an entrenched elite who held the people to a form of collective subjugation with distorted markets and lots of bureaucracy. Good riddance.

I assume Trotter is referring to Hartwich's organisation being the ideological spawn of the Business Round Table.

The New Zealand Initiative is a pro-free-market public-policy think tank and business membership organisation in New Zealand It was formed in 2012 by merger of the New Zealand Business Roundtable (NZBR) and the New Zealand Institute
they did ask a question about how germany has a strong social welfare system which he brushed off as a new thing that started later than it did
for balance they should have heard from the CTU economist but that was never going to happen on a committee led by national as it did not fit the narrative

The neoliberal trail is a sad wee tale, from start to ........

And the Business Roundtable were our version of it - more vicious than almost anywhere. But it was a mantra that rose out of 1970's bewilderment, coupled with the Hayek nonsense and compounded by the blind teaching that goes by the name of Economics.

Adding the CTU misses the point, and would do nothing for balance. They are just as keen to be unsustainable as the believers and the elite. Tey just want the benefit to end up in different pockets.

Both the Left and the Right are history now, both on the same end of the see-saw, both going down. Time Trotter did a piece on real sustainability, and out trajectory in relation to same.


i remember when i started working and my CEO was only paid three times my wage when i was at the bottom, my boss CEO now earns seven times my pay and that is normal across our industry now, i am in the middle so just of my example you clearly see the divide that has happened over the last thirty years.
the part that makes me sad is when i was in my twenties i could buy a house (nothing flash) even being a low paid worker, now people i work with whom you would class as middle class will never get that chance as the DTI is out of balance

And when your lowest paid worker earns similar wages to the senior managers they can and do frequent similar bars and restaurants which encorages good communication in a company. Working as a manager in the 3rd world the single biggest problem was getting staff to pass on bad news.

Both Dr Hartwich and C Trotter haven't mentioned the role of the unions in post war Germany. Totally different from the British and British inherited NZ Unions who would strike at the drop of a hat and hold the businesses and country to ransom.
I understand that very few Germans own their own homes. When your house has been flattened and there is no insurance to pay out, the landlord option is preferable. No housing crisis, before the refugees, as in NZ which is manipulated by govts. policy over the last 30-40 years or so.

I understand that very few Germans own their own homes.

Over half of all the outstanding bank loans to domestic households and enterprises are loans for house purchase. Furthermore, at 80%, real estate makes up the lion’s share of fixed assets in Germany. Prices in the German housing market continued to grow sharply last year at around 8%. The Bundesbank estimates that house prices in German towns and cities were overvalued by between 15% and 30% in 2018. Since prices began to surge in 2010, banks have issued more loans for house purchase. In some cases, this has been accompanied by looser lending standards. Source page 9 PDF - Bundesbank Financial Stability Review 2019

Thanks but not sure if the answer is complete. Home ownership % would give a better idea. Perhaps the rental side was pre 2000 or earlier. I'm not sure.

This is a good link. NZ isn't far off Germany...

You're right Chris, we don't know that much about the finer details of the post war boom times, but one of the things I do remember them putting in place was that the workers had a seat at the board table. Indeed, if my memory serves me, the workers had a 10% (thereabouts) share of the profits as well, which none of the English speaking nations seemed to have. This single POD gave everyone in the German manufacturing system a say in what was going to happen, even if was minor, unlike our own systems which were adversarial to say the least. I believe this single difference was the key difference between the German economic post war miracle & the rest of the west, to the point where today Germany still has today at least some semblance of manufacturing left in-house, whilst the English cultures have been stripped for profit by their privateering/profiteering leaders, by outsourcing the real work to the Chinese minions at slave wages, whilst their (the Chinese) leaders became fat & rich on their own peoples forced labours, whilst our western business leaders grew very rich indeed. In other words they (our business leaders) gutted our own working class cultures in the name of a bigger profit. Greed indeed!

the problem with ideology is you get pulled in one direction with limited ability to change adapt of embrace what you can see is something better.
a classic example is selling our houses to people offshore
national are open market anyone can buy from anywhere,
labour/greens NZ only
surely a balance is the best of both worlds, offshore buyers can only build new properties and must hold for ten years otherwise if they sell early pay tax of 40% on any profit.
existing properties no can not buy, but can lease for as long as they wish

Foreign ownership is a huge reason our real estate is out of control and that includes farms.
If all the capitalists want that then fine. Absolutely NO subsidies for anyone, no bail outs, nothing. Let the market sort it out.

Brilliant. Really appreciated, Chris and for hosting you. I hadn't viewed that Committee meeting so would have been none the wiser about the tentacles of the octopus trying to slime us right back into the abyss.

Here's a nice quote from Erhard;

The growth in social benefit payments in recent years has proven the correctness of this view. The increase in public social services in the Federal Republic from DM 9.6 billion in 1949 to nearly DM 21 billion in 1955, like the new pension reform, was possible only through economic progress. Only expansion has made it possible to let the poor, too, share increasingly in the rising prosperity. If, as I have said, the federal government can now afford further and substantial increases in social benefit payments, it can do so only because our economic policy gives us reason to believe that our national income will also grow in the future.

That Hartwich has used this champion of post-war reconstruction so deceptively is a real shame and a worry.

I watched Labyrinth of Lies on Māori TV last night - highly recommended. What struck me as very, very sad/disturbing was that none of those prosecuted during the Frankfurt Auschwitz trials expressed any remorse. Seems to me the die-hard proponents of neoliberalism fit into that category as well.

In the interests of balance Hartwich should have been approached for his reply. I can’t believe how left wing the comments on this site are. I read it to see what they are up to, but I feel like I need a wash afterwards.

You can be assured that he's read the article. Hence, if he wants to reply he can.

I agree Kate, a good thought provoking article. My perception of it is a call to take things back to the centre, not as Expat claims to the left. Although he openly admits to being a socialist, many of CTs articles seem to support a centrist view. My concern, expressed before, is that a swing leftward but only to the centre is decried as rank socialism and not recognised as being what is needed.

Especially when NZ is one flavour of fairly centrist social democracy vs. another. No one decrying socialism is out there trying to get the pension means tested or done away with.

...the ordinary German’s access to high quality housing, education, healthcare, and social security; the rights of workers to a fair wage, safe working conditions, and a voice in how the enterprise employing them is run; these things mattered too.

Very fair point. It's unbalanced if young generations are expected to pay for the upkeep of older generations' lifestyles while not getting the more or less the same opportunities they did in their turn.

You have made this point several times. Usually I reply pointing out us old codgers were effectively promised decent superannuation and when we were in our prime earning years we paid for the those older than us. I also point out that anyone living on NZ Super only cannot be described as having a 'lifestyle' - just a miserable existence. But this time I'll just agree with your last sentence and especially the 2nd half of it.

Lapun - did anyone ask future generations before they established the protocol?

If not, they have every right to be pis--d. They had every right to expect their lifestyle-support (energy and resources, lack of pollution) would be there in the same manner/level as those making the decision had.

They should have a formal representative, a Commissioner for Future Generations - with full veto rights in the Environment Coutts.

The last sentence is the key. Society requires a bit of back n forth, bit of balance. It makes no sense to be too focused on extraction of wealth from younger generations rather than the more balanced quid pro quo previous generations were able to get.

If affordable housing, education, reasonable wages vs. living costs etc...then what's to complain about funding old folks' pensions?

Celebrating unaffordable housing as a good problem to have and deliberately using policy to support and perpetuate it whilst expecting young to pay for old. Well, that's just abhorrently self-centred.

Rick, you seem to think that us older generation (ie Babyboomers ) had it all and contributed nothing. Well, let's look at what the babyboomers did achieve:
We contributed in a big way to removing French nuclear testing and the contamination of the Pacific Ocean.
We contributed towards ending the Vietnam war, which, if USA had had its way, would have increasingly drawn NZ into a war that was only about propping up a corrupt regime in South Vietnam.
We contributed in a big way to the abolition of apartheid (fascism) in South Africa.
We brought environmental concerns into the consciousness of the populace.
We brought Maori into the political and institutional mainstream.
We gave younger, following generations the computer and smart phone.

Sure, we have had it relatively good in many ways, but that's what our grandfathers and fathers fought in two world wars for.

Sure, we have had it relatively good in many ways, but that's what our grandfathers and fathers fought in two world wars for.

Agree, and that's the key point. In a society where generations are meant to contribute back and forth, pushing up costs of everything for the young generations through neglecting (for example) housing affordability etc. then expecting those young folk to keep paying the older generations' pensions shows a lack of reciprocity vs. previous generations. Who, for example, went to great efforts to foster affordable housing in NZ.

As someone else mentioned, we look forward to collective action and voting seeking affordable housing for more generations of NZers.

I also agree that many great discoveries and movements have occurred over the last 50 years. Science, technology, etc. has not stalled during the boomer lifetime. No claim ever made there.

I am unsure which of Dr. Hartwich's 7 principles that Mr. Trotter disagrees with? I think the vast majority of people would agree with them. I guess for Mr. Trotter is that he wants to add to them but I think he has missed the mark on this.
First, inequality in NZ has not risen in the last 20 years. It definitely grew during the mid 1980s to late 1990s but then flatlined since then. But inequality is not the issue per se. The material standard for NZers today is significantly better today then it was 1945 or even 1984. Life is much better today for more NZers than ever before.
The biggest issue socially we are facing (ignoring the cornavirus for now as who knows the consequences yet) is housing. Solve that and probably 90% of our social issues reduce to zero or reduce significantly. However, the issue for housing is the same for any good or service - supply and demand. We have greater demand than supply and this pushes prices up. The question is what causes the supply issues. A big part of the answer is land use restrictions. If we had a free market places like Ponsonby would be much more built up. But we have restrictions in land use that the council have imposed. Remove these restrictions and the market will build what people want. Building costs such as council fees and the near monopoly on materials must be addressed.
Social welfare has failed in NZ for far too long now - I don't see too many people arguing the contrary. During this current crises no one saw the dole as a good safety net. Our current system ensures that a person doesn't starve to death and that's about it. What we don't do is get people to independence; if anything that's a by-product by accident in a few cases. Welfare has to be better at getting people back to work as soon as possible which probably means more money but for a shorter time. I believe Germany has a social insurance scheme that operates more like income protection insurance that is available in the private market here.
And if we are focusing on education the German system is significantly better than ours as they prepare their children for work. Our system almost assumes that every child should do a BA in English.

Sorry to tell you, but Thatcher is dead.

As is neoliberalism, along with it's mindless chants.

Like 'free market' - which was anything but, and 'land supply' - which is a total bollocks (HT Twain).

As always Powerdownkiwi I can trust you for insightful and thought provoking comments. I never said "land supply" I said "land use" i.e. what you can use land for rather than supply of land. I thought you would love a more compact city - more PT, walking, etc and, therefore, less power use. Power which seems to be your be all and end all.

"Neo-liberalism" is just a mindless accusation for anything you don't like and chant to shout down conversation. You also have made a fundamental error in regards to the free market and what I advocate. I think we have not had enough free market and I am not advocating status quo. We need less control and allow individuals and companies to take risks and grow and economy. What we have seen in the last 20 years is a growing unaccountability in our society - such as banks, governments, and academia. There is nothing free market about that!

Either we have a free market or the economy is planned. It might be planned to some degree or a lot. From what I have witness the more people are free, without wannabe commissars running their lives, the better people's lives. And maybe that's the difference between Powerdownkiwi and myself; I don't assume I can plan anyone else's life - I want people free.

Federal republic formed in 1949 as was GDR.

"The truly ironic thing about the NZ Initiative’s presentation is that the social market economy its CEO is urging this country to embrace was, in its actual historical disposition, not so very different from the New Zealand which existed before people like Dr Hartwich and his sponsors tore it down."

Agree with previous question from puketepapa. What dramatically changed after the Dr and his sponsors supposedly tore it (NZ) down? Who are the sponsors? Is this another movie in the making; Indiana Jones (Dr) and the sponsors of doom?

I like the Germans & they're not the easiest people to like. They're straight up. They work hard. They respect one another (mostly) & they've had to swallow another million people from the middle east who want the benefits of all that welfare, over the last few years, which has divided them once again. It's not been an easy assimilation. And it is not hard to see why they run Europe by just looking at them. They look the part & for the most part, they are the part. They deliver. And that's what separates them from the French, who tend to throw their arms about & shout a lot. The EU is now down to about 4 countries who contribute more to the EU than they get back from it, of which Germany is by far the biggest contributor. Most of the money is lost in translation in Brussels. But back to the article, it is good to see a mature-minded, hard liner from the left get back to the centre, which is where this all works, & some straight shooting from the 'krouts' amongst us will do us no harm either. A good dose of both is probably what we need just now.

My grandmother was German and I still have strong connections there. Hartwich's views are a distortion of the reality.

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