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Schiller, Karl

Article — Digitized Version An optimistic look at the year 1968

Intereconomics

Suggested Citation: Schiller, Karl (1968) : An optimistic look at the year 1968, Intereconomics, ISSN 0020-5346, Verlag Weltarchiv, , Vol. 03, Iss. 1, pp. 6-8, http://dx.doi.org/10.1007/BF02930418

This Version is available at: http://hdl.handle.net/10419/137850

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THE GERMAN ECONOMY An Optimistic Look at the Year 1968

Interview with Prof. Karl Schiller, Federal Minister for Economic Affairs, Bonn

After almost twenty years of unparalleled economic growth, the Federal Republic of has experienced e setback in 1967. The Federal Republic's Government Is at- tempting to overcome this crisis with purposive economic policies. INTERECONOMICS had the opportunity of speaking to the Federal Minister for Economic Affairs, Professor 5chiller, about development prospects for the German economy for 1968.

QUESTION: "Homogenous Eco- of all production factors. Under (for example in the public authori- nomic Policy", "Concerted Action", present and future conditions, the ties' Council for Economic Trends) "Controlled Expansion",--such are efficiency of the free market sys- and with autonomous groups (for the catch phrases that have been tem can only be guaranteed if example in the "Concerted Ac- used to describe the purpose of the Government's policy of regula- tion"). The aim of this economic the Federal Government to in- tion can be supplemented by a policy is to achieve, within the fluence the economic process in a policy of process, in the sense of framework of the market economy, different way than up to now. the global control of the total eco- stability of the price level, a high What guiding principle is German nomic aggregates. This overall employment ratio and a balance economic policy pursuing with control of economic forces and of foreign trade and payments, as these slogans? resources does not imply direct well as a continuing and adequate interventions in the economy. growth of the national economy. ANSWER :The basis of the Federal It is restricted to a systematic in- Government's economic policy is QUESTION:Do you believe that fluence on the prerequisites and and remains the market economy, the German economy has passed conditions on which individual de- for which the State must pro- the bottom of recession in 1967, cisions are based, and thus the vide aRd guarantee the organi- and that 1968 will be a year of indirect steering of the major ag- expansion? sational framework. There is no gregates of the total economic cir- better way of directing the econ- culation, such as investment, con- ANSWER: German business ac- omy. Pricing in the market and sumption, the volume of employ- tivities have improved again after competition not only ensure a high ment, etc. A workable global con- a year of recession. Markedly degree of freedom but also per- trol therefore demands close co- livelier incoming orders in industry manently enforce an optimum use operation among State authorities since the beginning of autumn business, slight stimulations in production and a clear improve- ment in the labour market are KARL SCHILLER significant pointers towards a is professor of economics and as scientist launched into politics. continuation of the period of re- The political , today 56 years old, who since 1945 has covery, just as they also point to been member of the Social Democratic Party, habilitated at the the growing faith which German University of in 1939. In 1946, he accepted a professor's chair businessmen have in positive further at Hamburg University and from 1948 to 1953 simultaneously was development. The improvement is Senator for Economics and Transport of this City. In 1961 Professor not yet, however, so far advanced Schiller became Senator for Economics and Credit in . He that one can speak of a secured resigned office when he was elected to the in 1965. and lasting upswing. The new In the course of the formation of a new government in the frame- Federal Government's anti-cycli- work of a great coalition on December 1, 1966, Professor Schiller cal economic policy, and especial- was appointed Federal Minister for Economic Affairs. ly the two programmes which are designed to increase investment, the clear improvement in the over-

6 INTERECONOMICS, No. 1, 1968 all political and economic climate fiscal sector--safeguarding of the ANSWER: The systematic ad- in the Federal Republic, but also budget--or more on business ac- vantages of the added value tax in the development of business con- tivities? comparison with the old turnover ditions in other countries--all these tax consist above all in that a ANSWER: Because of the great factors combine to make me opti- new taxation non-discriminatory importance of public budget in the mistic that a return to prosperity as to competition is introduced, development of business in our will soon be reached. which affects domestic products country--its share in the appro- just as much as export goods. The QUESTION: Are the stated aims priation of the gross national prod- cumulative effect of the gross turn- of the Federal Government's me- uct is about 35 per cent--the one over tax has had one great dis- dium-term budgetary accounting-- is inextricably bound up with the advantage, in that the rate of taxa- namely annual rise in national in- other. The decisive advance which tion on sold goods and services come in real terms of around 4 we have made with the medium- was completely different according per cent, the restriction of increase ,term budgetary accounting in the to the number of previously passed of the price level to 1 per cent Federal Republic has come about stages of production. The actual p.a., and full employment--a realis- precisely because we have over- charge on any given product in tic projection or "merely" a polit- come a budgetary policy limited any particular set of circumstances ical programme? to one year and determined by could not be assessed with any day-to-day economic contingencies. degree of certainty. This led, on ANSWER: The medium-term pro- Instead of this the development of the one hand, to manifold distor- jection is the result of a careful revenues and expenditures is now tions of ~he price structure and analysis of the presumable devel- planned in advance over a period with that of competition, and on opment of the individual produc- of five years. It is an intrinsic the other, stimulated generally the tion factors in our economy up to part of the overall economic pro- concentration of enterprises. These 1971. It is, indeed, not only a jection. Clearly the actual devel- disadvantages will be removed by realistic forward appraisal of the opment of aspects of the business possible total economic develop- cycle will be carefully watched the new added value tax. ment, but a political programme as by the executive. It is the de- Of course there will be a number well. This programme envisages a clared aim of the Federal Govern- of .difficulties in the short term, fair and continual yearly growth of ment, and also a bounden duty of when we change from a tax which 4 per cent in real terms~ the re- the Law on Stability and Growth, has been in force for decades to striction of the annual price in- to adjust the budgetary activiti.es a completely different system, and crease to 1 per cent till 1971~ a of the Federation to the needs of these difficulties will not only be rapid restoration of full employ- actual cyclical development. psychological. One cannot work out ment; the balance of international in detail these developments be- trade and payments; and a more QUESTION: Will the crisis in forehand, but one must give them equitable distribution of income the public authorities' budgets, the free play of the market. I am, which will show big deficits for the and wealth. This can only be however, confident that all ad- next years, necessitate restrictive achieved as a result of individual ministrative and other difficulties measures, higher taxes, etc, which decisions made both by Govern- of adjustment will be overcome will absorb the business impulses? ment and by the autonomous without undue frictions and that groups of our economy. This calls ANSWER: The Federation's me- the introduction of this tax will for uncomfortable resolutions not dium-term budgetary accounting is have a very positive effect on the only of the Government, but balanced in receipts and ex- further development of the econ- also of the industries and the penditure up to 1971. To achieve omy. trade unions. The time of a high this, drastic reductions in expendi- The supplementary levy of 3 per selfsustained growth of the econ- ture and higher rates of taxa- cent on the income tax will bring omy hiding all our problems is tion were necessary. At the pres- to those in the higher income over, In the future we must cal- ent time the Deutsche Bundestag groups a less pleasant additional culate more accurately, and is discussing this. Apart from these, burden. This was, however, neces- promptly adjust our economic pol- no further restrictiv.e measures will sary on the grounds of a better icies. I am certain, however, that be taken. There can be no talk distribution of the tax burden ac- the success of our economic and of a medium-term crisis in the cording to capacity. I do not ex- financial policies will not be left budgets of public authorities. pect it to have any overwhelming wanting, all the more since co- QUESTION: Are the conse- clamping-down effect on business, operation between the Government all the more since the State has set and the autonomous economic quences clear of the introduction on 1st January, 1968, of the added in motion a new impetus, partic- groups in concerted action is a ularly for the entrepreneurs, be- good one. value tax, as well as of the in- crease in the rate of the added cause of the measures it has taken QUESTION: Ought the main em- value tax due in the middle of to stimulate business trends. phasis of the Government's medium- 1968, and of the collection of a QUESTION: In the power field, term budgetary accounting up to supplementary levy additional to particularly in coal-mining, struc- 1971 to concentrate more on the the income tax? tural problems (such as marketing

INTERECONOMICS, No. I, 19~ 7 difficulties, closure of pits, re- Second Industrial and Structural export surplus as much as neces- dundancy of workers) together Change Programme the Federation, sary ". How can we put this phrase with the decline in the economy the Lands and municipalities con- into real terms? tributed DM 5,300 million and apart seem to have become more acute. ANSWER. The importance of from this additional funds of DM What role will the adjustment of foreign trade for the growth of 4,000 million for investments, a.o. the coal-mining industry to the an economy is well recognised, in the shape of interest subsidy, changed marketing structure in the thus the attempt to go after as i.e. a total of about DM 9,300 mil- energy sector play in the economic much external trade as possible lion have been mobilised. Besides development? cannot be disputed. The neces- this,--as recommended--the old ANSWER: Even a large industrial sity to limit the export surplus stocks were relieved with the country like Germany cannot tol- is not quite so understandable. change over to the added value erate continued structural difficul- Many people, in accordance with tax. Finally we have followed the ties at its main source of energy the rules of individual enterprise, direction urgently recommended without suffering adverse effects would say: "Surely the greater the by the EEC with our medium-term on the economy. Therefore the export surplus the better." When budgetary accounting, i.e. by en- Federal Government sees, as one one has before one, however, the deavouring structural restoration of of its prime responsibilities, the picture of upsets and disad- the public authorities' budgets. necessity to adapt and improve vantages, this part of the phrase the coal miaingindustry--whichhas QUESTION: Abroad, the rebuke which you have mentioned becomes been adversely affected by the is occasionally made that the clear, too. Surplus in exports as changed sales situation of hard Federal Republic, as the main much as necessary, refers to the coal--in such a way as to prevent creditor country in the world, be- structure of our balance of pay- any great difficulty either for the cause of its bad economic policies ments. We need a surplus in our industry or for the economy as a exported its own recession to other export trade, in order to pay off whole. With this in mind, already countries. How do you see this the deficit of several billion Marks on the 24th May, 1967, the Govern- reproach that the Federal Republic in the balance of service trans- ment agreed on a bill for the has taken no real steps to improve actions and to even out our transfer adaption and rehabilitation of its economic policies, and may be account. German coal mining and coal min- pushing the rest of the world to The demand for maintaining the ing areas and in addition intro- the edge of an economic recession? balance of foreign trade and pay- duced a four-point programme on ments does not mean, however, the 8th November, 1967. With that ANSWER:This reproach is not that equalisation of the balance of a liberal, advanced and social justified. The large surplus in the payments has to be striven for energy policy has been started. trade balance, which critics abroad every year. Occasional moderate New industrial perspectives will be have seized hold of, is above all surpluses or deficits in the balance opened to the Ruhr and Saar with the result of retained imports, as of payments and with them inflows a healthy coal mining industry. a consequence of the internal re- and outflows of foreign exchange cession. Together with a rather QUESTION: Do you think, the are by all means compatible with normal growth in export trade-- Government's economic considera- the concept of balanced foreign 1966 plus 12.5 per cent and from tions, as they touch on reactivation trade and payments. What is January to October, 1967, plus of the business trend and balancing decisive is that in the long run 8.5 per cent--imports rose only by the Federal budget, take sufficient- they should even themselves out 3.2 per cent, and from January to ly into account the position of the over the period of the duration October, 1967, even dropped by Federal Republic in the Common of an economic cycle. 5.5 per cent as compared with the Market? same period in 1966. In these QUESTION: Do you think that ANSWER: Yes, I do. In its re- circumstances the Federal Govern- the high balance of payments commendation of the llth July, ment has applied just the adequate surpluses of the Federal Republic 1967, the Council of Ministers of therapy with its measures stimulat- could give weight to the demands the European Communities has ing business activities. With the of foreign countries for a re- called upon the Federal Republic internal economy normalised, the valuation of the Mark? of Germany--in the interest of import deficit should disappear. ANSWER: The speculation over satisfactory economic development Moreover the Federal Government the possibility of a revaluation of and to prevent the encroachment of has exported capital in the last the Mark ought to be over, since the weak economic trend in Ger- months. Therefore up to now in the devaluation of the pound many on the other Common Mar- 1967 there has been no balance of sterling. The Council o1 Experts on ket members--to introduce further payments surplus worth mention- Economic Development has worked measures to make use of the field ing, which could harm the foreign out that devaluation of other cur- of public investment, with empha- exchange position of our partners. sis on the individual Lands and rencies in the last few weeks has municipalities. The Federal Gov- QUESTION: At the beginning of added between 3-4 per cent to the ernment acted on this recommenda- 1967 you coined the phrase "For- value of the Mark in international tion on the 13th July. With the eign trade as much as possible, trade.

8 INTERECONOMICS, No. l, 1968