The Atlantic and Its Enemies

9. Europe 1958

General de Gaulle is supposed to have said, when Algeria left, that the moment had come for ‘Europe’. There, France would be remade. It mattered that French self-confidence had taken a battering in the middle of the 1950s. French post-war aims, of taking over German resources, had been frustrated, and the Monnet Plan had not worked, at least not in the intended sense. There was a constant shortage of dollars for imports, and the franc was devalued again and again. This all became much worse because of the political system. It reflected the concerns of the old France, and the politicians of 1945 were scared enough by the authoritarian ways of the Vichy regime — and the potential authoritarianism of de Gaulle — not to want a strong executive. The parliamentarians kept decisive powers in their own hands, and arranged for a powerless presidency. This was made worse because the party that held the balance of power — the Radicals — had not been solid. Even their constitution said that they were in effect allowed to split, and they reflected local realities that often had little to do with national matters. Snap votes could destroy a government’s majority, if a prime minister were inept, and a government crisis would duly follow. Then the politicians failed to agree, and governments kept changing in a way that might have been harmless if times were easy, but now appeared ridiculous. There was one government after another — when the final crisis of the Fourth Republic began on 15 April 1958 it was the seventeenth or the twenty-second, depending upon how you define ‘crisis’. Five weeks went by before a Félix Gaillard assembled a thin majority to replace a Maurice Bourgès-Maunoury on 5 November 1957, and the crisis that began with Gaillard’s overthrow on 15 April 1958 had still not been resolved when the final act of the Fourth Republic began on 13 May. As the historian René Rémond comments, there was a sort of liturgy involved as each of the participants — president, party leaders, etc. — knew how the ceremonial went, and it developed its own vocabulary: lifting the mortgage, wiping the slate, testing the slopes, sending back the lift, etc. Karl Marx, asked why it was that the non-socialists produced so many divisions, answered, thunderously, ‘It is in the nature of the petty bourgeoisie to be subjective. ’ The Algerian affair brought about change, at last (as, curiously enough, the beginnings of French rule there, in 1830, had coincided with a domestic half-revolution).

The chief beneficiary of Gaullism was generally the bourgeoisie. This expression covered much more than its nearest equivalent, ‘middle class’, could possibly do in English. It had been the dominant class of the earlier Third Republic, had supplanted the aristocracy, and had been more different from it than had the English middle classes. Alain Besançon’s Une génération manages to paint that world in brief sketches: there is a great deal of property, with a very large private house in Paris, grandmothers in grand flats, on the rue du Faubourg-Saint-Honoré and the boulevard de La-Tour-Maubourg, driven in a Hispano-Suiza; and there are two country properties, one with hundreds of acres of grounds, well laid out by devoted gardeners. There is a whole familia of servants; and young Besançon gets to know the endless varieties of pears (Williams, beurres Hardy, beurres Lebrun, the doyennes du Comice, etc.). As he says, though he is not quite clear what ‘bourgeoisie’ means, it is simply not present in any literature other than French. He describes it as a matter of language and dress; it was a matter of family, too, the aristocracy being much more distant with each other. It was also a happy business, with much to do. Richard Cobb remembers the same phenomenon though he encountered it in a different form. He was sent at fifteen in the mid-thirties to a family that looked after him devotedly, and fell in love with France; then, after the war, he fell in with two eccentric brothers bizarrely occupying a house near the Lycée Saint-Louis (‘grimmest of Paris schools’). Bourgeois France went through a bad time: the killing fields of 1914, the interwar Depression (which gave France negative growth rates longer than in any other major country), and then the years of Occupation and Vichy, which led almost to its collapse. Besançon remembered the period of the fifties as ‘sale et pauvre’; the house yards uneven, plaster falling off, the porters’ kitchen foul-smelling, of cabbage and urine; 40-watt bulbs were used in the cafés, hanging from a wire, and their lavatories were of the Turkish type, with thick newspaper on a string; even the coffee was muddy and the wine was vinegary. It had been the end of a period of disaster when the bourgeois certainties had gone by the board. But with de Gaulle these returned in a peculiar way: there was a distinct bourgeois revival, partly based on glossy state institutions, and partly on the newly successful world-class economic activities. The new Citroën DS, majestically inflating as it was started up, was as much a symbol of sixties Paris as had been the canvas-and-tin deux chevaux of the fifties.

Now that de Gaulle had united the historically divided Right enough to establish a durable government, quite soon France was going to overtake England, for the first time since the French Revolution itself. Charles de Gaulle was truly the man of the decade. As he said in his memoirs, in one of the great first lines of literature, all his life he had had a certain idea of France, and now, in his late sixties, he would restore her greatness. He had gone through the First World War, had been wounded and taken prisoner, had lived through the humiliations of the thirties, when Paris became, in George Orwell’s words, half brothel, half museum. Then had come defeat in 1940, and the German occupation. De Gaulle, going to London with a few companions, had kept the idea of France going, and had become in 1944 the man of the hour. He had repeated the feat in 1958, and, by 1962, a great man known around the globe, he would give France the self-confidence and influence which in his opinion his country deserved. This was very far from being fanciful. France was one of very few European countries from which people did not emigrate: quite the contrary, many foreigners wanted to move there, whether Italians and Spaniards in search of employment, or Englishmen anxious to escape from the taxes and the weather and the babyish restrictions back home. Literature, film, wine, history — everything spoke for France. There had been one long-term problem, again a uniquely French experience, in that her people since the great Revolution had made fewer and fewer babies. In the seventeenth century there had been more Frenchmen than Russians, but by 1914 there were almost five times as many Russians (or subjects of the Tsar). Why, is a good question: the answer is probably to be found in the French Revolution, which gave land to the peasant, and the Code Napoléon which forcibly divided inheritances among children. There was enough to keep one child, and the size of the farm meant that only one extra pair of hands was needed, while only one extra mouth could be fed. In the slump of the thirties, as everywhere else, parents stopped producing babies, and the French population hardly went up, except through immigration, after 1870. The war, and the Occupation, changed this, for mysterious reasons: in 1949 there were almost a million births, one third more than in 1939, which was itself one of the better years for births, and by 1960 the young in France once more outnumbered the old. Families now produced three children, not one. De Gaulle, though himself elderly, spoke for a new generation, and French self-confidence began to recover.

De Gaulle’s prestige ran very high because, since 1958, France had flourished, and this was shown in the very considerable power of his new presidential office. In the summer, there had been consultation over a new constitution, which was supposed to do away with the political swings-and-roundabouts of the Third and Fourth Republics. Then, because the politicians did not want an authoritarian figure as head of state, the presidency was a mainly ceremonial office. Now, the president had much greater power (the historian Jean Lacouture remarked that the executive had such power that ‘this republic’ tends to be ‘on the frontiers of the democratic world’). The prime minister in the Matignon Palace also had power, though less of it, and there was a potential for conflict, but in 1958 this did not matter. De Gaulle had the constitution approved by an enormous majority with a referendum. On 21 December 1958 he got nearly 80 per cent of the vote, as president. On the whole he chose resistance men for his team, and Georges Pompidou, though now at the Rothschild Bank, was marked with great favour as he did as he was told.

Once in office, de Gaulle ran affairs in grand style (he once terminated an interview when the woman journalist crossed her legs), though often with a human touch, like a good commander-in-chief keeping up with his men. He also disciplined his time: curiously enough he used to read Le Monde cover to cover, though he did not regard it as ‘national’ and generally disliked the press. He loved the James Bond films and television in the evening but also kept up with his reading, always punctiliously thanking in his own hand authors who sent their books. Someone said of him that in moments of idleness he was like a Henry Moore statue. Twice a year was the press conference, when de Gaulle would speak for up to one and a half hours, very well-rehearsed beforehand, and exhausting, like a theatrical performance or, as his press secretary said, like a woman giving birth. On television he had ‘the eyes of an elephant’ and a face like Rodin’s Balzac. His courage was not in dispute, and at Kennedy’s funeral he behaved characteristically — waving aside the insistent offer of an armour-plated limousine so that he could walk at the side of Kennedy’s widow and son, when other statesmen behaved with self-preserving prudence. At any rate, an indisputable charisma.

He himself was such a figure as to conceal the possible problems — that power would be transferred from a fractious and difficult assembly to a presidential court, far less visible from the outside, and therefore likely to be very corrupt; and there was a further problem that, without formal opposition, informal opposition in the streets would grow — as was to happen, within a few years. But de Gaulle himself was utterly incorruptible (in the fifties his wife had discreetly made ends meet by selling heirloom silver as she otherwise had to make do on a colonel’s pension). A. J. P. Taylor rightly noted that only one man in French politics had emerged from office significantly poorer, de Gaulle, and one man in English politics significantly richer, Lloyd George (since then, Blair has joined the little list). Even then there were complaints that the State dominated the media, especially television, and at one ceremony foreign journalists — hated figures, given the Algerian problem — were kicked and manhandled. In the event, even Communists voted ‘yes’: the total ‘no’ vote being a million short of their own 5,500,000 in the elections. There followed the lengthy effort at peace in Algeria together with self-assertion in matters European, and this marked the whole presidency.

The November elections of 1958 proceeded in a two-stage form that greatly damaged the Left — though even now a problem emerged, that there were two conservative or right-of-centre parties, de Gaulle’s UNR with almost 200 seats, and a second group with 132. They had won under two fifths of the vote, but had two thirds of the new assembly, and were therefore not forced into unity of action. In time, this was to become a problem. The French Right was given to splitting, as some would-be stalwart, feeling slighted, would round up the out-ins against the loyalists, and even launch a new party which, by making a nuisance of itself, could menace the government’s existence. Such was the basis of the career of Valéry Giscard d’Estaing and of several others since. However, de Gaulle commanded by his presence, and there was also a distinct strategy: in effect, the old résistants stepped into the shoes of the unlovely Vichy technocrats. The first prime minister, Michel Debré, was an old résistant who in the end could not follow de Gaulle’s policy in Algeria, but who loyally carried through the first measures. It had been obvious since 1945 that inflation and protectionism went together with institutional trade union power, itself heavily under Communist influence, and the new government, installed in the summer of 1958, had a priority to change matters radically. Georges Pompidou, who had started life as a French teacher, had moved into banking and was now Debré’s chief of staff, had as much in mind, and the new finance minister was the rigid Antoine Pinay (de Gaulle did not much care for him but he did have the confidence of the financial world). His chief idea was to make the franc stable, and to dismantle the protectionism that allowed such inefficiency in French industry.

De Gaulle had little time for economics, and saw it in terms of national confidence. Pinay was dry and prudent (he even objected to the plan being launched in his name, but was overruled by the General); the real architect of the reform was the perennially right-but-repulsive Jacques Rueff, and his priority was to stop inflation. An immediate loan was launched, successfully, and a team of experts set about the problem of the franc, recognizing that no country with self-respect could tolerate more than two zeroes on the notes. But that meant far deeper changes: the Bank of France (and the nationalized banks in general) must not go on giving preferential medium-term credit at low interest rates for industry and housing; the Treasury should just take money from the market, now that one existed. The Rueff reform took a line in financial stabilization that has been familiar since 1923, when Dr Hjalmar Schacht took it in Germany; budget decreases, tax increases, a liberalization of foreign trade and a devaluation of 15.45 per cent. It is political arithmetic, dressed up, and is currently called the ‘Washington consensus’. But the whole was accompanied by a measure that caught the world’s attention — introduction of the ‘heavy franc’, at 100 to one. Now, with a money that could be converted at will, producers were to be stimulated by competition, and this indeed was to happen: France created some world-class industrial concerns in a short time. The five socialists wanted to resign, but de Gaulle browbeat Guy Mollet into staying on patriotic grounds. The General was by now a master of television performance: he understood that ham acting was his stock-in-trade but he ‘sold’ the plans: without them, he said, ‘we would remain a backward country, perpetually between crisis and second-rateness’.

In a descant on similar German debates as to Marshall and Erhard, the economic recovery of France divides opinion. Was it caused by the Monnet Plan, and the devastating omniscience of the great and good? Certainly, there were institutions to give a strategy to the new self-confidence. In 1962 the reputation of the Plan stood high. Intelligent technocrats had, it appeared, waved a wand, and French backwardness was no more; nuclear energy heated and lit, where coal had once been too poor in quantity and quality to do anything of the kind; there was a French bomb as well. The specialist ‘great schools’ took the best and the brightest, and trained them for the job of managing the State — the Polytechnic, a military institution, to produce engineers; the National School of Administration to produce civil servants who understood town planning or transport or energy, whereas in England their equivalents behaved with terrible obtuseness. The standards of education were still extremely high, and French technocrats of that generation were clever, sure of themselves and their mission. In 1960 they got rid of many of the clogging obstacles that dated back to the post-war experiments in socialism: France was set for a boom, for the creation of modern industries in automobiles or chemicals or food-processing. Anti-Americans might scoff at the space programme and claim that it only resulted in an unforeseen spin-off in the shape of ‘Teflon’, a new plastic used to make frying-pans ‘non-stick’. This had in fact been invented by DuPont in 1938 but was picked up by a French company, Tefal (‘aluminium’) in 1956; by 1961 that company was selling a million frying pans per month in the USA alone. There were many other such French successes: motor cars, aircraft, nuclear energy and even, at last, steel. There is an imponderable in such things: how far did the sheer matter of national morale play its part in the business recovery? To be French in de Gaulle’s early years was no longer to be part of a picturesquely backward country, and French businessmen could travel the world with a certain pride. Even the French peasants ceased to be the figures of grim fun, ‘Robespierre with twenty million heads’, as Balzac had said, a remark echoed in their own ways by Zola and Flaubert (whose parody of a minister of agriculture’s speech at a rural fete in Madame Bovary is timelessly exact).

‘Europe’ helped, was even ruthlessly exploited in the interests of French agriculture. The spirit of the Treaty of Rome was one thing; but from lofty considerations to economic arrangements meant months and months of detailed haggling over tariff rates on various goods. The presiding spirit was not that of Napoleon or Bismarck, who, anyway, when asked as to Europe’s identity, just said, ‘Many great nations.’ Rather, it was that of a Baron von Itzenplitz who, in the 1830s and 1840s, had led the customs union in Germany, the Zollverein , which had allowed the industry of the northern and north-western, Prussian, parts of the country to dominate the rest. Especially, agriculture was very difficult to handle. Some regions were go-ahead and mechanized, not needing anything more than a sensibly run bank with credit to offer. Others were very backward, their inhabitants only needing to go away. A policy was not agreed until 1962. A Dutchman led negotiations that produced the principles, and two further years were needed to work out the details for ‘commodity regimes’ governing grain, cattle, milk and the rest. For over three weeks at the very end, there was ‘non-stop haggling’, with two heart attacks and one nervous breakdown, until finally a crenellated machinery whirred and flailed its way off the ground, in 1962. It was called the Common Agricultural Policy (CAP), and was designed to meet the problems of the 1930s, preventing food prices from collapsing: the CAP, with most of the European Economic Community’s budget, would buy up ‘surplus’ stocks at an agreed price above the world level, and store them somewhere. There were complicated arrangements to subsidize exports and to hinder imports of cheaper food and wine.

Critics pointed out that this would impoverish would-be sellers in poor countries with nothing else to offer. They were answered by the Lomé Convention of 1963, which offered the governments of these poor countries — essentially the old French empire — development aid. These arrangements turned out fairly badly, the development money being mainly wasted or stolen (or, on a later occasion, presented to a successor of de Gaulle’s, Giscard d’Estaing, in the form of diamonds, by a beneficiary of the Lomé loot named Jean-Bédel Bokassa, by now emperor of Central Africa). Still, the Common Agricultural Policy became one of the wheels and levers by which France, in weight second class, became a great power again. Europe was pouring money into French agriculture, and if there were protests, de Gaulle just had his people boycott European Economic Community affairs until (by the ‘Luxemburg Compromise’ of 1966) a national veto as to important matters was built into Community dealings, in place of the compromises that had been the rule up to that point. For many years, little progress was made towards unity, ever closer and closer, as the makers of the Treaty of Rome had intended, and even the attempt to put the Economic Community together with the two obsolete other communities, defence and nuclear, took years of negotiation (until 1967, when the EEC became the EC).

De Gaulle had not originally been at all enthusiastic about the Common Market, and preferred a ‘Europe of the states’. In his time the ‘construction of Europe’ was a painfully slow business, which took the absurd form of setting standards for each and every product marketed across borders (cucumbers, for instance, had to be straight so that you could fit an identical number of them into identical packages, and such matters were solemnly passed from in-tray to out-tray in Brussels). But France could not go alone. If she had seriously to offer a way forward between the world powers, she had to have allies, and Germany was the obvious candidate. This was not just a matter of political strategy. Over the Common Agricultural Policy de Gaulle had Chancellor Adenauer’s support. The German peasant also grasped. He had been an even more baneful figure in the country’s modern history: he had even torpedoed democracy. To buy his support, politicians of the Centre and Right had agreed upon tariffs that would keep out cheap foreign food, and agreed such devices as making whale-oil margarine so repulsive in colour — that of the Reichstag skirting board — that it would deter buyers and cause them to choose dearer peasant-made butter instead.

Gaullist France profited hugely from the new partnership with West Germany. The outstanding feature of post-war Europe was of course the ‘German economic miracle’: the moonscape of 1945 had been utterly transformed. As the Treaty of Rome took effect on 1 January 1958, the various restrictions on money exchange were dismantled, and the dollar could invade any market that its owners chose. Now, the institutions that had been thought up towards the end of the war came into their own: ‘Bretton Woods’ to run world trade and foreign exchange, through the World Bank, the International Monetary Fund and the General Agreement on Tariffs and Trade (GATT), which regularly assembled to discuss the liberation of commercial exchange. The European Payments Union lost its function, though the Bank for International Settlements at Basle in Switzerland carried on as a sort of catch-all institution.

Here was an enormous and essential difference with the post-war of 1919. Then, the American banking system was simply not up to a world role. But all other advanced countries had been wrecked by the Great War, and the British — with huge debts — were in no position to finance world trade as they had done in the previous century. The United States’ banking system did not even include a central bank with much power: the ‘Fed’ — or ‘Federal Reserve System’ — had been set up only in 1913, did not spread to more than a dozen of the states, and was not by any means under government control. American lending was essential but irresponsible — huge outflows one year, huge inflows another — and foreign countries had no way of responding short of putting up the barriers, as happened in the early 1930s, when world trade shrank by two thirds and strict exchange controls were brought in. But that same waywardness in the American system had also provoked a great slump in the United States, where thousands of banks went bankrupt (the trigger for the entire Depression had come when marshland in Florida, with alligators, had collapsed in price). A further pernicious element had been the exposure of Congress to lobbies, often corrupt. In 1930 these had insisted on a new tariff to make it difficult for foreign goods to enter the American market and thus be used to pay off debts. All of the then noteworthy economists had protested. They were waved aside by the Congress majority. That majority, what with the ensuing Slump and the disasters of 1945, had learned: as the Turkish proverb has it, ‘One disaster is better than a thousand pieces of advice.’ In the later 1940s, US intervention was very positive and largely logical. The golden fifties resulted.

In 1958 the ending of exchange controls went with an extraordinary European boom; for this, the Americans could take credit. West Germany was in the lead. At the time, it was called the ‘German economic miracle’, and that was how it struck contemporaries, although the expression itself went back to a Swedish book published in 1936 about the success of Hitler’s reduction of mass unemployment in Germany. Then, too, the success was symbolized by motorways and motor cars. The ‘people’s car’, Volkswagen, had been designed then by Dr Ferdinand Porsche, who had made his reputation with a four-wheel drive that had carried artillery across mountain passes, in snow, on the Italian front. It was a small and serviceable family car, which Germans would have bought on credit if the war had not broken out. Porsche’s factories were still in existence in 1945, though the buildings had been damaged. Quite soon, they were put into service again, with the help of a British officer who expected them to turn out cars for British use. Instead, two thirds of the personnel were lengthily de-Nazified, and, when British automobile firms were asked whether they could use the design, they replied that no-one with any dignity would be seen dead in a car that looked like a large bug on wheels (an early model had been captured intact in North Africa and sent back home for comment). The British equivalent, the Morris Minor, attempted the sort of truncated grandness that characterized much of British doing in that era and cost twice as much; when they realized their mistake, in the 1960s, the designers attempted to be cute instead and were none too brilliant at that, either. They could not compete with the VW. Already in 1956 the Germans were making more cars than the British, and exporting more. The VW symbolized Germany’s recovery, with growth rates of 8 per cent and sometimes twice that figure, right into the 1960s. The Marshall Plan was widely given the credit, and certainly the atmosphere it generated — the United States to the rescue — was important in giving the Germans hope for the future (though the contribution now seems quite small: Germany had less than France or Britain, and the amount received was less than had flowed in in the early 1920s, when American bankers speculated in the then wildly inflationary Mark). The presence of energetic American businessmen backed by generals who understood something of engineering was no doubt also important, but the essential was their insistence upon intra-European trade. Already in 1952 the great German firms were back on the European scene — Mannesmann, Krupp, BASF, Hoechst, BMW, Siemens-Schuckert, their chemicals and engineered goods popular worldwide. The German recovery then rolled on, with hardly a break, for the next quarter-century, but it was only the most striking example of an overall phenomenon in Europe. France, then Italy, experienced similar ‘miracles’. With the USA and Japan, western European countries became the richest on the globe.

The growth in foreign trade — at 6 per cent after 1948 — went faster than that of the GDP. Later on, foreign direct investment and capital mobility also rose faster. In Germany, for instance, the economy grew by two thirds between 1950 and 1958, but foreign trade nearly tripled, and exports rose from a quarter to two fifths of total output. What caused this boom in trade? Financial security mattered, of course, because the pound and the dollar had fixed parities. So did technology — much cheaper and more efficient (and uglier) ships. A sales team could travel by aircraft, and petrol was very cheap, at not even one dollar per barrel. But an important factor was the willingness to trade, to get rid of the tariffs that got in the way. The GATT was another of the post-war institutions, and in 1947 its first and most important meeting was held at Geneva. In the context of the Marshall Plan the Americans recognized that they must not stop Europe from selling in their market, and reduced their own tariffs by 35 per cent, though the previous heights had been absurd and the tariffs still remained strangely high by other standards. Overall, there were 123 agreements between trading countries, covering 45,000 different items, which corresponded to about half of world trade. There were two further GATT ‘rounds’ up to 1951, but they were less important, and mainly just confirmed what had been done. The central institution of the Marshall Plan, the OEEC, was now adapted to follow this, and changed its name to the Organization for Economic Co-operation and Development (OECD, with us still). When the European Payments Union (EPU) started, it too was an engine for liberalization. At the time, currencies were quite strictly controlled — the British could take only £25 if they went abroad, the sum being marked in their passports — and the EPU existed to convert the one into the other in a closed system. The Marshall Plan provided a loan of $350m for the basic capital, and otherwise member countries contributed according to their resources and requirements. In the fifties it was a more than qualified success and the Code of Liberalization (for trade and investment) was the enduring monument to the Marshall Plan. It was proclaimed in September 1949, after the devaluations had set up manageable exchange rates. Overall OEEC countries’ exports increased by 1.7 times between 1948 and 1955, and trade within the OEEC bloc by 2.3 times. Countries were now competing, instead of sheltering themselves from more efficient producers, and the result was, apart from other benefits, low inflation.

West Germany was the locomotive. She became the largest market for the exports of all her western neighbours, and Italy. An export surplus might have led to inflation, as the profits returned to a domestic market, and the answer to that was to import so that domestic producers trying to increase their prices would face competition from abroad. Under Ludwig Erhard, Germany had a director pledged to liberalization there as well, even if in the short term it might harm some local producers. Erhard, like other prominent economists of that period, had learned from the Nazi era, when protection had been the rule, and Joseph Schumpeter (a brilliant economist who had once been Austrian finance minister before proceeding to a Chair at Harvard) even said that Germany in 1931 had ceased to be a capitalist country because so much was regulated by the State. An ex-NCO, thumbing through your underwear on a border, in search of paper money, said it all.

But, beyond that, there was a whole school of German historians and commentators who appreciated that what had gone wrong had something to do with the monopoly-capitalistic and protectionist ways of the last generation before the First World War. It had been called ‘The alliance of Iron and Rye’. Behind protectionist tariffs the great heavy-industrial works on the one side, and estate-agriculture on the other, had had a charmed life; finance capital, since the banks were part of the charmed circle, had joined in. Some crumbs from this table had been thrown to millions of peasants. Accordingly, there was a majority bloc in the Reichstag in favour of protection, and Germany had not been part of the world’s trading order on the same terms as, say, Britain or Belgium. Germany might have developed as a normal Western country, a sort of huge Netherlands, but instead, in politics, liberals and social democrats were in a large but hopeless minority; and some outstanding interpretative works on German history have been written in exposition of this (Lujo Brentano, Ralf Dahrendorf, Alexander Gerschenkron and, today, David Blackbourn). Now, with ‘Iron’ under a Ruhr Authority or an ECSC, and ‘Rye’ occupied by the Russians, there was a chance for a normal Germany, and Erhard well understood what he was doing. He had a strategy. Like so many other good financial managers, he was not a good politician, was happiest with businessmen, themselves generally none too good with politics, and was impatient with men less intelligent than himself. He needed Konrad Adenauer, who had the right and complementary gifts.

It was a measure of the change in Germany that Ludwig Erhard, a Bavarian Protestant, and Adenauer, a Rhineland Catholic, worked together, because the religious divide had been vastly important and even, in its way, a reason for the Nazis’ rise (the third of Bavaria that was Protestant had voted quite heavily Nazi, the Catholics, hardly at all). Erhard at least had a clean record, and had acted as an obscure adviser to some retailers. He emerged as executive director of the Economic Council for Bizonia, which the Allies set up in summer 1948 as a prototype for a West German government. His appointment was a fluke — one man’s resignation had been forced, and the politicians could not agree on anyone else. The fluke meant that Germans, at last, had a lucky break. All the other candidates were thinking only of more efficient rationing and some reduction of the tidal wave of paper money; then they would go over to a planned economy, such as the French and British were supposed to be doing. Erhard said no. He would ‘jump into the cold water’ of the market, would deregulate, would scrap much of the rationing, and would introduce a new currency altogether. The old one, with its endless noughts, would be abolished, and holders of these notes would get only limited compensation. That way, the entire wartime and pre-war debt would be wiped out; the tidal wave of paper money would become an orderly stream, and people who set prices would be free to do so without government dictation. After an uncomfortable moment or two, West Germany prospered, but there was another vital difference from the past. Erhard did not try to beggar his neighbours if they fell into deficit trouble because German competition undercut their goods and weakened their currency. By 1955 the EPU had become a machine for taking German money to pay for the trade deficits of other Western countries, and especially France. This was the financial base for the various meetings that led up to the Treaty of Rome. Erhard could have exchanged his winnings for dollars, and for a build-up of reserves. But Germany was now European — the solution that so many intelligent central Europeans had foreseen.

If a country were to be judged by its institutions, Germany was a nearly perfect place. The makers of the constitution were wise men of the Philadelphia class (some of whom had in any case been German). They had a truly dreadful precedent from which to learn. The republican constitution set up in 1919 at the historically enlightened town of Weimar had been designed to show the Americans how very democratic Germany had become. This was an effort at gaining American sympathy in Germany’s hour of defeat, and the men of Weimar proceeded with a literal-minded clumsiness that had a majority of Germans voting either for the Nazis or for the Communists within a dozen years of relentless elections, proportional representation, referenda, constitutional-court cases and the paraphernalia of self-destructive democracy. The method of decentralization had given the country seventeen different governmental spending and borrowing points, and finance soon became a headache: a hugely destructive inflation early on, an even more destructive deflation ten years later. Now, the wise men in Bonn composed a very sensible and even a model document. It was quite short, as these things go. There was decentralization of a sensible kind. States — eleven Länder, Bavaria the largest — were set up, and they competed in a healthy way over cultural matters and, as things turned out, decisively for the better over education. Bavaria and Baden remained conservative as regards this, and defied American attempts to set up comprehensive schools that would somehow be more democratic than the existing selective ones. In time, the south German Länder were thus to reverse the historic pattern, and become considerably better off than the northern ones.

The rules for politics were also sensible — a system of proportional representation, but not one that allowed tiny local parties to enter parliament. Rights of a basic kind were spelled out, and these included those of small children to be brought up by their mothers: tax was not to fall so heavily on the father that the mother would have to go out to work. Then again, Germany had the great benefit of not having a single capital, sucking in all of the wealth and talent of a country, as were London and Paris. Hamburg, Cologne, Munich were the chief cities, and Berlin was kept going, but the government was confined to little Rhineland Bonn: the assembly originally met, and it was a sign both of the weaknesses and of the strengths of the new Germany, in a schoolroom undamaged in the latter stages of the war. Giving government a city of its own is generally a good idea: it allows other cities to be more interesting. But the common sense attached to the German Basic Law — it was not called a ‘constitution’, because its makers were acting on behalf of all Germany, not just the Federal Republic — spread elsewhere. Knowing what had done so much damage in the days of Weimar, the trade unions accepted sensible reforms: there were only twelve unions, they had considerable privileges as regards management, and they built up a considerable interest of their own in the fortunes of ‘capitalism’. They therefore had every interest in making sure that the system worked, such that they would be flexible as regards the introduction of new machinery, even if it meant a loss of old-fashioned or obsolete jobs. True, the position of the trade unions was in a sense quite weak in the early years because of the huge numbers of hungry immigrants. Twelve million of them poured in from the east, latterly from the Communist-run Soviet zone (3.2 million of them, four fifths of them aged between eighteen and twenty-five, 20,000 of them engineers and 4,500 doctors). Finally there was the Federal Bank as it was soon called. It was independent, or at any rate as independent as human wisdom could make it in the circumstances. Its brief was to avoid the inflation that had twice shattered the country’s finances. It managed to do so quite successfully. One result was that the Germans saved: they saved and saved, at twice the British rate. There was therefore money for investment, and German business duly invested, taking a long-term view, which the lack of inflation again made possible. German business, much of it medium-sized and family-run, flourished, and, when it had to deal with exports, would behave quite sensibly, in establishing a chamber of commerce that knew the market. Germans of course had been determined never to repeat their past mistakes, and they were sometimes very literal-minded in applying the lessons. Nevertheless, a remarkable country emerged from the years of the Marshall Plan.

Broadly speaking, the country was twice as rich as in 1950, itself a year much better than its predecessors. By 1959 Germany was producing half of Europe’s steel (30.6 million tons) and 50 per cent more than Britain; it was then the vital element in a manufacturing economy. By 1957 Germany had become the chief producer of automobiles in Europe, with 1.5 million to Britain’s 1.4 million and France’s 1.1 million. The Volkswagen was economic in fuel, not expensive, had an air-cooled engine and could be parked in a small place: it was popular worldwide. The fifties saw a world in which stable families took a joy in the wave of consumer gadgets that were coming on the market, at more and more affordable prices, such that refrigerators or washing machines or telephones or typewriters or new electric coffee-machines marked the decade. By 1959 German exports overtook British.